Aura Minerals (NASDAQ:AUGO) reported third-quarter financial results on Friday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Aura Minerals reported a strong financial quarter with a 27% increase in production, reaching 96,000 gold equivalent ounces, and revenues of $386 million, marking a 15% improvement quarter-over-quarter.
The company announced a dividend of $0.72 per share and completed a $10 million buyback, resulting in a 4% yield over the past 12 months.
Aura Minerals is progressing well with its Heradorada project, achieving 13% physical progress and remaining on time and on budget.
The company raised a $200 million syndicated loan, bolstering its cash position to over $400 million, and maintains low leverage with a net debt to EBITDA ratio of 0.2x.
Operational improvements were highlighted, particularly at MSG, with a turnaround strategy in place to achieve higher production and lower costs.
Management emphasized strategic focus on M&A activities to reach 1 million ounces production, while continuing exploration to extend mine life.
Aura Minerals plans a zero-based budgeting approach for next year to further optimize costs and improve operational efficiency.
Full Transcript
OPERATOR
Good morning, ladies and gentlemen. Welcome to the third quarter 2026 earnings call. This conference is being recorded, and the replay will be available at the company’s website at auraminerals.com. The presentation will also be available for download. This call is also available in Portuguese. To access, you can press the globe icon on the lower right side of your Zoom screen and then choose to enter the Portuguese room. We would like to inform that all attendees will be only listening to the conference during the presentation, and then we will start the question-and-answer session when further instructions will be provided.
Before proceeding, we would like to clarify that any statements that may be made during this conference call regarding the company’s business prospects, operational and financial projections and goals are the beliefs and assumptions of Aura Executive Board and the current information available to the company. These statements may involve risks and uncertainties as they relate to future events and therefore depend on circumstances that may or may not occur.
Investors should be aware of events related to the macroeconomic scenario and industry and other factors that could cause results to differ materially from those expressed in the respective forward-looking statements. Present at this conference we have Rodrigo Barbosa, President; Santos Cardoso Joao Kleber Dos, CFO; and Glauber Luvizotto, COO. Now I turn the conference over. Rodrigo Barbosa, you may begin the conference.
Rodrigo Barbosa (President and CEO)
Thank you very much for all participating in this earnings call for the third quarter. Good morning all, and before I get started, just a quick reminder that you have here on your screen a QR code to scan. We have our Aura Day happening in New York at NASDAQ on October 30th, in the afternoon. We’ll have important updates about how we are running the operations. We’re going to have important updates about the turnaround on MSG, how we are developing Heradorada, and that we are also thinking and doing now this year a zero-based budget.
We’re going to walk you through how we are planning the budget also for next year. There’s also the transition of the mine fleetting sources that we recently announced. So there will be several updates, including important advancements in exploration, that we would like to share with the market on October 30th. So please put it in your agenda and, if you have availability, be there with us. That will be an important opportunity to have a broader and deeper conversation about how Aura Minerals is performing and how we will perform over the next three to five years.
So let’s get started. If I could put the first slide in terms of the production and results as a quick summary, and as we all do at the same time, same structure, I’m going to go through the main results and the major events that happened during the third quarter, and then Kleber is going to go more in detail about our results and cash flows. As we disclosed to the market, we had an important improvement in operations as I mentioned in the last quarter.
First and second quarter were the weaker of the year, and we could see that production was pushed towards the second semester. So this is an important improvement in Q3, and we project another improvement in Q4. So we should continue to grow in terms of production as we are now reaching higher grades or higher productivity in most of our mines. We’re reaching production of 96,000 gold equivalent now. This is a 27% increase compared to the last quarter.
And I’m going to walk you through mine by mine in the two slides ahead so we can understand what is going on and project what can happen in the fourth quarter. When we see the nine months, it’s 253,000 ounces gold equivalent; we reiterate our guidance to be between 340 and 391,000 ounces until the end of the year. This higher production also means the record high—slightly above the first quarter of this year—$386 million in revenues, another 15% improvement quarter by quarter. That also translated into an EBITDA of $237 million. When we see the last 12 months, the last nine months of EBITDA is $677 million. This is already above what we performed in the full year of 25. And if you look at the last 12 months, it’s $886 million, understanding that in the fourth quarter we should have an improvement in terms of production.
In terms of our all-in sustaining cash cost, we are now at $1,953. Now we start to have improvements on MSG and also improvements that I’m going to walk you through that are going to happen in the other operations. So although, if you compare to the guidance of this year, you’re going to see that we are above the guidance, the improvements that we see happening in the fourth quarter give us a comfortable zone to meet the guidance for the full year in terms of all-in sustaining cash cost.
Recurring free cash flow is strong, $124 million—enough to continue to be able to grow, develop projects, invest in exploration, and also pay the dividends. So we continue to be a low-leveraged company walking the talk. We always mentioned to the market that we would be able to develop greenfield projects, invest in exploration to extend life of mine, and do M&As while keeping an important dividend yield and low leverage. So this is another quarter that we show the market that this is possible due to the very high return and the strong cash flows we have from our operations.
We also declared another strong dividend, $0.72 per share. And when we add that with the $10 million of buyback that happened during Q3, it’s a yield of 4% on the last 12 months, which continues to be one of the highest dividend yields in the industry, while we are growing. Additional important events—and I’m going to have a slide about this, I don’t want to give details now—but Terradorada project is on time, on budget, developing according to the plan.
Kleber also, we raised an additional $200 million of syndicated loan that happened during this quarter and improved our cash position above $400 million. We also announced the mine fleetting sources that will provide us an important opportunity to continue to reduce our all-in sustaining cash cost and control inflation bravely. As we will walk you through, the industry all-in sustaining cash cost is going up. We are going up slightly, but yet way below the average of the industry, which put us in the first semester of this year in the first quartile in terms of all-in sustaining cash cost.
Important event also is Capital World Investors continued to buy more shares in Aura Minerals during the third quarter and reached recently above 10% of the capital structure of Aura. So now they have 10.2% of the Aura shares. Next slide, in terms of safety, we had no lost-time incident during the quarter—a very important, another quarter without any lost-time incident. I always mention that it’s important to combine—strong results come along with strong safety and low incidence levels. Important also that, as we are implementing artificial intelligence all over our company, there are important improvements that we are doing on safety standards through artificial intelligence so that we gather more information and start acting proactively, so we can predict when and where the next incident can happen and then prevent that.
So the team is working on advanced tools so that we can improve even further our safety standards. In terms of stability of structures, all of them have gone through due diligence and inspections, and all of them are under the safety levels and according to the Brazilian regulations and all the international regulations. On the left side of this slide, I will highlight the continuous growth that we’ve been showing since Q3 25th—actually since Q2 25th—on the last 12 months. So now we are performing 335,000 ounces of production on the last 12 months. As you can see, record high production in Q3, while we continue to see improvements happening in Q4 that will replace the Q4 last year with 82,000 ounces with a stronger quarter. So that will continue to be an important upward trend in terms of production for our mines.
And when we go mine by mine, going from the bottom to the top: important improvement in Aranzazu—we could see that the higher grades would come during the second semester. Management is also working on higher throughput, improving also the plant. The combination of higher grades and better performance led us to higher production. A small part of this is also, unfortunately, due to the lower gold prices and higher copper. So that conversion happens and is favorable.
Most of the improvement comes from productivity and grades. Apoena: we saw a slight improvement in Q3, and again Q4 is the quarter that we’re going to have a very strong production at Apoena. In Aranzazu, we should continue to see small improvements for Q4. Apoena will see a significant improvement in terms of production in Q4; this is just about grades that we are already reaching in the pit that we’re going to run through the plant. Minosa: as I mentioned to investors last quarter, we had some challenges on piling and stacking during Q2.
We know that the lag is a leaching pad, so the lag between when you stack and produce happens to be 30, 40, 60 days. So we knew that production would decrease during Q3, and now we know it’s going to increase during Q4 because all the challenges have been overcome, and now we are stacking as we projected, even a little bit above what we projected. So that will result in improved production in Q4. We knew also that we were hitting lower grades. The mine plan is not, as I mentioned, gold—we are now sometimes in very thin veins or straight veins, and grades go up, grades go down.
So it’s normal for you to have a stronger and weaker quarter. What cannot be is not predictable, right? So we knew that Q3 would be weaker, and now we know that Q4 can also be slightly better than Q3. Borborema: again, we hit strong grades now. We already implemented two new filters, debottlenecking the plant. So we should continue to see strong production in Borborema during Q4. MSG: the turnaround is still going on, but it’s important to see the first signs of what we were talking about—gains in productivity and gains in production once you invert the top-down to bottom-up and put more development underground. We are now starting to have a small percentage of ore coming from underground on the methodology bottom-up.
That improves the grades to the plant, and then Q4 will gradually improve because we mix low grade that is on the top as an open pit with higher grade underground. And as we advance on development of the underground tunnels, we will be able to more and more increase the underground ore, which will increase average grades to the plant. Also, management has been doing significant cost savings, cost restructurings, and debottlenecking the plant so that we can gain even more efficiency for next year, putting us in the position to be able to produce close to 80,000 ounces and close to $2,000 per ounce all-in sustaining cash cost.
So in terms of all-in sustaining cash costs, we had a slight decrease from Q2 to Q3 that came mostly from MSG, which showed significant improvements. Also Aranzazu going through higher grades. If it were not for MSG, our all-in sustaining cash cost would be at $1,616–$1,673, which is already the first quartile in the industry, although yet we see room to improve. When we look at the next quarter, we will have improvement in MSG; Aranzazu will continue to perform well; we will see a significant improvement in Apoena; good improvement in Minosa; and a slight improvement due to the higher grades in Borborema—stable to the fourth quarter, perhaps lower cash cost as well. So we will see fourth quarter coming down in terms of all-in sustaining cash cost, putting us in a comfortable position to meet the guidance, perhaps closer to the top end of the guidance, but yet within the guidance. And I would also highlight that when we projected the guidance, the exchange rate was different.
What happened during the nine months was—for Brazil, that’s more important—it was 5.5, while the performance was close to 5. Now we are back to 5.5, so that alone is $80 per ounce in terms of all-in sustaining cash cost if we were at the same exchange rate as the budget. So during the fourth quarter we have improvements in grades, improvements in performance, and also a better exchange rate in Brazil. At Heradorada, we already reached 13% of physical progress. The earth moving of the operational plateau is completed. We started the civil works and, as we can see in the picture in the middle, the CIL tanks have started to be built. On the right side, all the infrastructure for cooling the underground: as we are advancing underground, it will be more and more important gradually to improve the infrastructure and also cooling machines in order to keep the temperature low.
This is a geothermal area that has hot water, and we are pumping already water out of the underground while cooling so that we create the right environment for everybody to work. On the left side on the pictures, we continue to have very strong support from the community. It’s now over 1,500 hours of dialogue with the community members—constant dialogue, open table with each one of them. We have a Heradorada house at the main city where people can come and ask questions.
So it’s a full transparency project. We’re hiring local people, we’re motivating new suppliers to form very close to the operations, and we are investing in purified water to provide the municipality in Guatemala access to purified water, including the communities around Aradorada. Once we finish the investment along next year, we’ll be able to provide purified water to the communities. For the geothermal plant, we continue to advance on the engineering.
We are now looking for potential partners to invest in geothermal with us that can bring the know-how and operate and do it on the ship with Aura. So this project will be fully sustainable with renewable energy, renewable water, and also very strong community relations, focusing on hiring and training local people. We now have 795 people employed as of September—89% are Guatemalan—understanding that during the construction sometimes you need very specialized skills for underground development and also for building the plants, and we should gradually increase this percentage by hiring local people.
MSG: again, a very important first quarter with the beginning of the results of the turnaround. We already generated $24 million in EBITDA, and we continue to advance development in the underground activities so that we can gradually invert top-down to bottom-up and mix more high grade from underground instead of the low grade that is on the top. So we’ll see improvements going into Q4, and of course a major improvement is going to come during 2027.
We will go through more detail on Aura Day—please participate, go directly there in New York or see the video or see the live video—where we will walk you through major achievements happening also in safety standards. There will be important updates in exploration, so please attend and we can walk you through what’s going on in MSG that has the potential and will become a very important mine for Aura in 2027 and so on. With that, I turn the floor to Kleber to walk you through the financial results.
Santos Cardoso Joao Kleber Dos (Chief Financial Officer)
Thank you, Rodrigo. Good morning, everyone. We’re going to start, as we always do, with a summary of the main financial KPIs for the reporting quarter, for the previous quarters, and accumulated last 12 months at the end of each reporting period. Starting with the net revenues, we’re reporting net revenues of $306 million. It is a record high that we’re reporting for a single quarter; that’s driven by the increase of production that Rodrigo was showing.
And when we look into the last 12 months, our revenues are exceeding $1.4 billion, and we’ve seen has been a steady progress quarter over quarter, aligned with our growth story. When we go to adjusted EBITDA, similar story: we’re reporting a strong EBITDA, $237 million at this quarter, also driven by the increase in production. The last 12 months now it’s $886 million and is already the 13th increase in a row of our last 12 months EBITDA, again consistent with our growth story.
Moving to the bottom of the page in terms of net income, our net income this quarter $135 million, coming down from previous quarter. But that’s mainly because on the previous quarter we had a non-cash, non-recurring gain related to the gold hedges because of the decrease of gold prices during the second quarter. If we exclude that non-cash gain, which was much smaller this quarter I’m going to show later, we see also an increase in net income. On the bottom of the page we see we’re coming from a $97 million adjusted net income on Q2 to $120 million now on Q3, consistent with what we see increasing EBITDA.
And in terms of cash and net debt, we remain in a very comfortable position in terms of cash and balance sheet. Our net debt basically stable throughout the quarter and close to $180 million by the end of Q3. Our financial leverage also basically stable in a couple of quarters already at 0.2 times net debt over EBITDA. And we see a significant improvement in our cash balance and cash position, now close to $420 million at the end of the quarter, with the proceeds of the syndicated loan that we closed in September, $200 million.
And now we’re in a good position to continue funding the growth of the company, especially at Eldorada from now on. Now looking the main items that explain the adjusted EBITDA and adjusted net income. Between adjusted EBITDA and adjusted net income in the quarter, out of the $237 million adjusted EBITDA, Berborema was the highlight. We saw it was very strong in terms of production. Berborema is our lowest cash cost as well, so contributing with $7 million EBITDA. Aranzazu also a very strong performance in Q3 combined with favorable copper prices, adding another $60 million.
Also coming strong Minosa for $135 million. And we highlight as well, as Rodrigo mentioned, MSCG already reporting $24 million EBITDA in a quarter; it is still in the turnaround phase. Moving to the next items, we see depreciation, amortization, $30 million, basically consistent with our expectation. If we compare it to same period of last year, there is an important increase, but that’s mainly related to the growth of the company. So the same period of last year we didn’t have MSCG, Berborema was not in commercial production yet, so not depreciating. So that explains the increase in depreciation. Financial expenses we would highlight, as I mentioned before, the non-cash gain with the mark-to-market of the gold hedge; it was much smaller this quarter, was only $13 million, and we had realized losses with gold hedges. We paid $34 million for the gold collars that were settled and paid during Q3. From now on, if you take November, from November 2026 to June 2028, we still have about 141,000 ounces in gold collars that are going to expire monthly now until mid-2028. Income tax expense is pretty much consistent with the results of our operations. Then we had some smaller items, incoming provisions, bringing the net income to $135 million.
And then here on the right side of the page, the reconciliation that we always show, excluding some non-cash items, mainly the unrealized gain in this case with gold hedges, bringing our adjusted net income to $121 million at the end of the quarter. And now here we have all the details that explain the change in cash position throughout the quarter. So we see on the side of the page we start with $248 million in cash at the beginning of the quarter. On this left half of the page is what we call the recurring free cash flow to firm, which is the free cash flow to firm generated by the six mines’ production, not including the investment for growth, not including what we paid for the hedges. We show $158 million.
On the top of this page, those six mines generated $158 million in recurring free cash flow. Deducting $34 million that we paid in hedges comes to the $124 million recurring free cash flow that we’re reporting. Although the realized losses we have is including the recurring free cash flow, we remind you that it expires in the mid of ’28, so that’s going to go away after 2028. Then here in the middle of the page we see investment for growth $63 million, mainly expansion capex, and now mainly is catching up, ramping up the investments and cash investments in Eldorada. And to the right side is more the financial-like items, mainly the proceeds, net proceeds from debt. We received $200 million from the syndicated loan, hands-on debt amortization, so we had net proceeds of $182 million. Dividends and share repurchase $71 million in Q3.
And then Rodrigo highlighted at the beginning: if you take the $158 million recurring free cash flow that was generated for the quarter, that paid both for the losses with the hedges, also the dividend and share buybacks, and also paid entirely for the expansion capex we had in the quarter. So with this, we’ll end the presentation and open for questions. Thank you.
OPERATOR
We are going to start the question and answer section for investors and analysts. If you wish to ask a question, please press the button Reaction and then click on Raise hand. If your question has already been answered, you can leave the queue by clicking on Put hand down. Our first question comes from Mr. Marcelo Arazi from BTG Pactual. Mr. Marcelo, you may proceed.
Marcelo Arazi (Analyst)
Hi guys, thanks for the space here. Two questions on my side. So the first one on Eldorada. It was very nice to see that the project has been evolving on time and within budget and with 13% physical progress. But I would like to understand a little bit more: what are the main milestones and potential execution bottlenecks over the next 12 months, and especially regarding the geothermal side of the project, which remains a major concern for a few investors that we normally talk to.
And if I could make a second one about the fleet insourcing announcement. So a few questions here as well. So how quickly should these benefits materialize next year? What are the main risks associated with bringing those operations in house? And what was actually the final trigger for Aura Minerals to decide and make this change? Thank you guys.
Rodrigo Barbosa (President and CEO)
Thank you, Marcelo. I can start answering here real quick, and then I will ask Glauber that can give you more details about next steps in Eldorada and also how he sees the insource of the mine fleet upcoming on the next year, with the potential also savings. The geothermal plant, I’m not sure if you ask about the geothermal plant, is something that will come along the next few years. It will not start construction anytime soon. We still need to partner and find the right partner and do the right feasibility study engineering.
So that will probably go into production after two or three years of operations. In the meanwhile, we have other alternatives to supply the power. And if you were mentioning about the potential high temperature underground, Glauber can also walk you through. That’s not unusual conditions to have; there are a few other mines in the world that run actually even in the worst conditions. It’s a matter of calculating and doing the proper underground infrastructure, pumping hot water and also bringing cool air down. But Glauber can walk you through more on the detail of this situation, plus what he sees coming up in the next 12 months.
Luvizotto Glauber Rosa (Chief Operating Officer)
Hi. Good morning. Yes, as Rodrigo said, we are in terms of construction and preparation of the mining that we call the pre-operation. We are on track for that. So it’s a lot of challenge from the hydrothermal water, but we have the support from the specialists and also a very robust plan to offset that point. Right now everything that we found is as we expected, but we are just in the beginning. Also we are pumping the water, because the key point is we should pump the water in advance.
We should go down with the table water to make sure that the moment that we assess that region, there is no more hot water in that region and the rock has had time to refresh. So it’s what we are doing right now. The pumps are under construction and the wells are under preparation. We are using some old ones. We are being able to reduce the table water and doing all the mining development on time. But in parallel, all the infrastructure that we have, like the refrigeration plant and all the other stuff, it’s already on site under commissioning.
And I think that the main milestone in the next 12 months from the construction side: we have the main equipment to arrive on site, the mill and all the other equipment, and also put the mining development in the run-rate. We are considering right now we have a contractor doing the underground development. We are considering as well to have part of the work made by us. So we already bought some equipment that are on time to be delivered in the end of this month and beginning of the next month.
And we have also some contingency plan to bring to the region some experts, because the main point is find people with experience in the underground; there isn’t much in Guatemala. But we are considering; we are doing a task force to train and prepare people and have some experts to, mainly in this beginning, to put the mine on track. And the other question from the insource: the key point is that we are seeing a lot of adjustment in the cost. When we went to the market to make an assessment about the price and cost to do that primary, to do that by contractor, the costs are being significantly higher than we are practicing. And also we feel that we are prepared to, considering the maturity that we have in the operations, we are prepared to assume this another part of the work.
The process right now, we are in the transition to creating the company that will assume all the assets from the contractor. We have the gate to be approved on CAD. Once we have that, in the beginning of next year should be fully Aura. Right now we are in the transition phase. Everything is going well. We expect to be more efficient mainly doing the proper maintenance to make sure that we have the reliability in the fleet. So I think that we can increase productivity from the equipment and we can also see the impact in our cost.
So for next year, in terms of mining cost, we have seen some reduction in the three mines, but most part of this invoice for the equity that we are paying will be next year, once we phase it in accordance with how we are advancing in the contract that we did. So it’s going on track.
Marcelo Arazi (Analyst)
Thank you. Thank you, Glauber. Thank you, Rodrigo. Very complete answer.
OPERATOR
Our next question comes from Mr. Lawson Winder from Bank of America Securities. Mr. Lawson, you may proceed.
Lawson Winder (Analyst)
Thanks very much, Natasha, and hello Rodrigo and team. Thanks for the presentation today. Nice quarter. If I could ask about MSG, I think that would be a very helpful place to start, particularly in thinking about the growth trajectory into 2026. So what specifically changed underground at MSG during Q3 in development meters, stope availability, mining flexibility? And then what still needs to be completed before you consider the turnaround finished? And then all-in sustaining costs were, well, I mean, very high in the quarter. What’s your latest thinking on where all-in sustaining costs can go on a run-rate basis for MSG?
Rodrigo Barbosa (President and CEO)
Well, I’ll let Glauber answer. But we see all-in sustaining costs going close to $2,000 per ounce, and production at 80,000 ounces per year, probably next year. But Glauber can go into details on how he sees the progress in Q3 and project to you what we can expect in Q4, and most important, next year.
Luvizotto Glauber Rosa (Chief Operating Officer)
Yeah, the key point there is the performance in mining development. So we have a combination of two things. When we assumed MSG, there was a backlog in mining development and mining preparation, and we also decided to change the mining method. That requires much more development in advance to go to the bottom of the panel and start to mine bottom-up. We are still in preparation. We have some areas in production already, but not full capacity in the underground mining. It will take, I think, four or five months more to have the mine fully prepared and the reserve released in the time that is required. In parallel, a bunch of changes have been made. We are improving the quality in the method that we mine, reducing dilution, increasing mining recovery, and also reviewing all the contracts with significant reductions in our costs.
We cannot see right now the full reflection of how those changes will impact, because we are not at full capacity. I can say that we are spending more in development proportionally to what we are producing. Once we increase production, we will not keep the same level of mine development, because once we achieve stabilization in the mine, we can get back to the normal profile of mine development. We will be able to feed the plant with more ore from the underground.
Right now, almost 50% of the ore came from some lower-grade stockpiles on the surface because we are preparing the mine. But once we are putting much more run-of-mine in the plant with better grade, the production will increase, and we will be able to stabilize the mining development in the underground. The combination of those can give us production close to 80,000 ounces per year, and the cash cost, or the all-in sustaining cost, should reduce significantly.
Rodrigo Barbosa (President and CEO)
And again, Aura Day will provide full detail on what is being done in MSG, including all the physical measurements, the speed, how we are achieving the savings Glauber mentioned—important savings that can go 30–40%. I think it will be important. I invite everybody to be there and see. We will also bring the manager of MSG so that we can interact directly with him.
Lawson Winder (Analyst)
Yeah, fantastic. I mean it’s nice to see MSG improving substantially in Q3. If I could ask one more question, it would probably be on the reserve and resource update and your expectations around that globally for the entire firm—whether you anticipate replacing reserves this year mine-by-mine. But then just particularly with respect to Apoena and Minosa, your two really short mine lives—are you starting to see the potential to drive material expansion in mine life?
Rodrigo Barbosa (President and CEO)
We will share what we’ve been finding during the Aura Day. Apoena—yes, there are several. Now we are focusing a lot on the near-mine, and a little bit on 20 km, 30 km, and finding very interesting intercepts. We are finalizing all the results and will be able to publish them before the Aura Day. On Doras, it’s still an unknown. So this is where Minosa is where we are less optimistic about extending life of mine. But Apoena—yes, there will be important improvements, we believe.
Lawson Winder (Analyst)
Okay, that’s very helpful. Thank you, Rodrigo. And thank you, Glauber.
OPERATOR
Our next question comes from Mr. Rabi Nizami from National Bank of Canada. Mr. Rabi, you may proceed.
Rodrigo Barbosa (President and CEO)
Rabi, if you’re talking, I think you are on mute. Maybe he has some connection problems. Let’s go to the next one, and then we’ll still reserve a room for him.
OPERATOR
Our next question comes from Mr. Matus Moreira. Please, Mr. Matus, you may proceed.
Matus Moreira (Analyst)
Yeah, well, thank you. Good morning everyone. Thank you, Rodrigo and team, for taking my questions. Two on my side. First on capex—it caught our attention here that you’re tracking well below your growth capex guidance for this year with a little bit over $130 million disbursed year-to-date, while the low range of your guidance is $260 million, right? So I’m just wondering how should we think of the capex for the fourth quarter specifically? Do you still expect to reach your guidance, or should we see some spillout towards 2027?
And does this somehow impact your timeline for— that’s my first question, and then I’ll ask my second one.
Rodrigo Barbosa (President and CEO)
Okay. There’s nothing going different from the schedule, but Kleber can walk you through why you see this capex lower than the guidance of the year so far.
Santos Cardoso Joao Kleber Dos (Chief Financial Officer)
Yeah, Matus. We have the expansion capex, and we have opportunities to be closer to the low end of the guidance or even below. That’s mainly because—it’s actually good news—the negotiations we have been doing with providers, equipment for example, for the project. We are negotiating lower down payments, so that improves our cash position at the moment. But then in terms of whatever we don’t spend this year, to your question—yes, that would move to 2027.
The capex for the project itself wouldn’t change. It’s just a matter of having more working capital now in 2026 because of these negotiations that we’re doing.
Matus Moreira (Analyst)
Great. That’s very clear, Kleber. Thanks for that. Maybe if I may, a second quick question on MSG, actually a follow-up. It was encouraging to see the operational performance in the quarter, which was much better than we were expecting—still, I believe, far from operational conditions Aura wants to achieve, but definitely on track. I noticed that your production improved materially quarter-on-quarter also because of higher throughput rates, and this in turn was also benefited by some material you recovered from the east pile, right?
So I’m just wondering if you could provide more details on this stockpile—how big it is, what are the average grades, and when do you expect it to run out? I think you also mentioned at the beginning that as underground mining activities improve, you will rely less on these stockpiles. I just wanted to get a sense on how big and how relevant this stockpile can be. Thank you.
Rodrigo Barbosa (President and CEO)
Glauber, go ahead.
Luvizotto Glauber Rosa (Chief Operating Officer)
Well, the stockpile is not the most relevant part of the plan to recover the production. It’s just to complement or to keep the plant fully fed once we weren’t able to feed it with more ore from the underground mine. But the focus is mainly to put the mine in operation, de-bottleneck the mine, and get some reserves released in advance to make sure that we can feed the plant with run-of-mine. That is the highest grade that we have. The stockpile is a marginal ore that was left in the past by the other company.
We are using that as an opportunity once we have this spare capacity in the plant, but it’s not the base of the plan for growth.
Rodrigo Barbosa (President and CEO)
Yeah. The stockpile is just a buffer that we are using while we are doing the turnaround. The grades you asked can vary—0.5, 0.6, 0.7, 0.4—but it’ll be around this.
Matus Moreira (Analyst)
Great. Thank you very much, Rodrigo and Glauber.
OPERATOR
Our next question comes from Mr. Rabi Nizami from National Bank of Canada. Mr. Rabi, you may proceed.
Rabi Nizami (Analyst)
Thanks, Natasha. Can you hear me now?
OPERATOR
Yes, loud and clear.
Rabi Nizami (Analyst)
Okay, thanks team for taking my questions, and apologies for that audio earlier. So a couple of my questions have been answered, but I’ll move on to a few more. On the capex run rate, you already answered that, but specifically looking at Aura Dorada, how do you expect the cadence of capex spend of that asset to proceed into Q4 and into next year? I’ll let you answer that first and then—
Rodrigo Barbosa (President and CEO)
Yeah, Kleber, go ahead.
Santos Cardoso Joao Kleber Dos (Chief Financial Officer)
Sorry, Rabi, can we repeat the question?
Rodrigo Barbosa (President and CEO)
The capex for Aura Dorada—how you expect this to increase in Q4 and then next year?
Santos Cardoso Joao Kleber Dos (Chief Financial Officer)
Yeah, so in Q4 you should see an important increase. That’s normal. If you look into Borborema and Almas, it was the same—the first few months and first quarter are much lower, then ramping up as you start hiring people and capitalizing pre-operational expenses and also receiving the equipment. So in Q4 it’s expected to have a significant increase. We are expecting to move towards the low end of our expansion capex guidance for this year, and then for 2027 we expect to spend the amounts to complete the project.
We are expecting to complete on budget. If there is a saving in 2026, that’s going to become additional capex in 2027.
Rabi Nizami (Analyst)
Okay, thank you for that. And then on Borborema, should we still expect an expansion study and a board decision by year-end? What’s remaining there—on engineering, water supply—anything else there to talk about in terms of timing?
Rodrigo Barbosa (President and CEO)
If you want to answer, go ahead.
Luvizotto Glauber Rosa (Chief Operating Officer)
Yeah, we are finalizing the study, so we expect to publish it by the end of this year. The main points are making sure that we have the best arrangement for the plant, and how we can do the push and expansion without impacting the production that is in the run rate, and also the water. We have some alternatives. We are just finalizing the trade-offs that we have between the options, and the costs of each one, and the risks for each. We should be ready to publish it by the end of this year.
Rodrigo Barbosa (President and CEO)
And in the meanwhile, as we do with all our mines—if you see Almas, we built, then we started generating cash, then we started doing more exploration. We are doing the same with Borborema. We started generating cash last year, we started doing more investment in exploration, geophysics, ground drills, and there is important and interesting information that we will share during Aura Day in Borborema ahead of the feasibility study.
Rabi Nizami (Analyst)
Okay, thank you for that. Just in the short term, I’m looking at the strip pressure at Borborema in Q3 at 4.6. Is there any guidance you can give us at this point in time with respect to how that evolves into Q4 and into next year?
Luvizotto Glauber Rosa (Chief Operating Officer)
Yeah, we operated in the beginning once the mine was opened when we assumed. So, given the past work that they did, the strip ratio was lower. But we should run much closer to what was in Q3, but a little bit higher for next year, once we should achieve the average strip rate for the mine. So it shouldn’t be as low as it was in the first semester of this year, but it should be close to what we have in Q3 and what we expect for Q4 and next year forward.
Rabi Nizami (Analyst)
Thank you. Thank you, Glauber. I’ll just ask one quick one and then I’ll sign off. Kleber, you discussed FX rates a bit, with your guidance being set at 5.5 and recently that’s turned more in your favor. Could you just comment on fuel prices as well going forward? How does that affect your costs, and what should we think about going into Q4 and next year? And with that, I’ll sign off. Thank you.
Santos Cardoso Joao Kleber Dos (Chief Financial Officer)
Yeah, so fuel is impacting us like everyone else, you know, but it’s not a significant portion of our costs. Depending on the operation, it can be between 5% or 8% of the cost matrix. So it’s not negligible, but it’s not that high. FX, for example—Rodrigo was commenting also—the average for the year has been close to 5 reais and 10 cents, and our guidance was 5.50, for example, last year as well. So FX has been the main impact. But yes, we’re feeling some cost pressure, but that has not been the main impact in our numbers.
OPERATOR
Our next question comes from Mr. Guillermo Nipis from Shispe Inc.
Guillermo Nipis (Analyst)
Hi, guys, can you hear me? Yes. So thank you for the opportunity. I have two questions here as well. My first one is on capital allocation, now with the balance sheet now carrying very low leverage. And of course there are the investments on Herradorada. But how are you thinking about the next phase of capital allocation and potential new targets of investments? Are you guys still looking at copper and gold opportunities or for now you’re holding and seeing what happens next?
And how do you see the mix of M&A and cash returns for shareholders as well. And my second one is on the mining fleet insourcing. If you guys also see other potential initiatives to reduce costs and all-in, as you already did with the mining fleet at Apoena, Almas, Borborema. Those are my two questions. Thank you.
Rodrigo Barbosa (President and CEO)
In terms of M&A, we continue to see opportunities. We continue to invest time understanding what are the interesting M&A to do, invest time trying to do transactions. So M&A continues to be an important part of the story. We know very much how to get up to 600 or more thousand ounces of gold equivalent within the mines that we have, or the mines that we are going to develop. But we aim to be at 1 million ounces. And that will happen only if we continue to pursue M&A, and we will continue to see alternatives.
And then it’s gold and copper, right? We are not looking at other alternatives. Whoever invests in Aura Minerals wants to be exposed to gold and copper. And in the Americas, right? We are not looking at alternatives in Africa, Asia, or Australia. So we prefer Americas, gold and copper. And examples are projects at Borborema, Herradorada, greenfield that we can develop, or projects that are running like MSG that we see an angle to optimize operations.
And your second question was about the opportunity to reduce cost. We are always looking at how to reduce the cost. We are always looking at how to improve our operations. That’s one of the reasons that we came from a few years ago, third quartile in the industry; now we are first quartile in terms of our all-in sustaining cash costs. And we do see opportunities next year, yes, for the mine insource fleet. We are also doing what we call a zero-based budget this year, reviewing line by line each of the areas.
And we’re already finding some opportunities that then we will be able to include in the guidance for next year. So we see, yes, some opportunities for cost reduction along the next years.
Guillermo Nipis (Analyst)
Thank you, Rodrigo.
OPERATOR
Our next question comes from Mr. Enrique Marks from Goldman Sachs. You may proceed, Mr. Enrique.
Enrique Marks (Analyst)
Hi everyone. Thank you for taking my question. Just I wanted to understand, Rodrigo, what is your priorities as we enter 2027? I believe Herradorada will definitely be the top one for you, but I wanted to know how do you plan to spend your time in each one of your mines? I know each one of them has its own next stage, next phase. So just wanted to understand what really is the priority for you after Herradorada. And if I may add one more question, just regarding the all-in sustaining cash cost of Apoena. I mean, it was really high this quarter, and I think it was mostly related to the NASDAQ topic. So I just want to understand if this was more of a one-off or is something that we should still see for a while, and if this was already expected to happen at this moment. Thank you.
Rodrigo Barbosa (President and CEO)
Okay, so in terms of priorities, as you mentioned, first priority is construction of Herradorada on time, on budget, together with the turnaround of MSG to be able to produce 80,000 ounces at $2,000 of all-in sustaining cash costs. Then, of course, there’s always optimizations and improvements going to operations. But I would say highlight then is continue to invest in exploration, expand the life of mine so that we can increase resources and reserves.
That’s very interesting, significant potential for us to continue to do so. And then M&A, right? We know very much how to get to 600,000 ounces, and now we want to be able to achieve our 1 million ounces. So I invest a significant part of my time prospecting and talking, understanding what would be the potential M&A to do. We don’t have a target—I want to do an M&A next year—but we do want to continue to grow through M&As, right? So in the end it’s the same strategy that we had five years ago: investment in greenfield projects, increase production, increase investment in life of mine, increase resources and reserves, and continue to grow through M&A. That’s what we’ve been doing in the last five years and that’s what we’ll continue to do in the next three to five years.
And then you asked—the opex of this quarter was much higher than the last quarter, but within what we projected. What happened this quarter is that we significantly advanced at the Nassa/Nose depth while we didn’t reach the high grade for the full quarter, and now we are there already. So the strip ratio has mostly been done. So we’re going to see higher production and higher grades coming in on the fourth quarter. So we will see a reduction on the all-in sustaining cash cost for the fourth quarter, and for next year we will put on the guidance as we have it probably in January, February.
Enrique Marks (Analyst)
Awesome. Thank you so much.
OPERATOR
Our next question comes from Mr. Graham Tanaka, please. Mr. Tanaka from Tanaka Capital, please. Mr. Tanaka, you may proceed.
Rodrigo Barbosa (President and CEO)
Mr. Tanaka, if you’re talking, you are on mute. I don’t think we hear him. Very well, so with that I will conclude our earnings call. Just a quick wrap-up: Aura Minerals is walking the talk. We are growing production; we produced 95,000 ounces. This year we’ll be under target 340 and 390. So we are developing greenfield project at Herradorada that is moving according to the plan. We are doing also important investment in exploration, and I invite you again to be at Aura Day so that we can walk you through more in the details of what is going on in exploration.
We continue to look at alternatives for lowering our all-in sustaining cash costs, which—we are already in the first quartile—but we are not happy. We see opportunities to continue to decrease our all-in sustaining cash cost while we continue to see M&A. So again, thank you very much. Ah, and I didn’t say an important thing, right? Doing all of that, paying dividends—significant dividends to our shareholders—4% dividend yield, together with the share buyback, while we are doing all these investments in exploration, expansion, and improvements, maintaining the low net debt to EBITDA level. Again, important day: Aura Day on November 30th, New York, Nasdaq. Please be able to attend that there so we will be able to guide you in more detail what is going on in Aura Minerals.
I appreciate it. Thank you.
OPERATOR
Aura’s conference is now closed. We thank you for your participation and wish you a nice day.
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