Aura Minerals (NASDAQ:AUGO) held its second-quarter earnings conference call on Thursday. Below is the complete transcript from the call.
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Summary
Aura Minerals reported Q2 2026 revenues of $236 million, impacted by lower gold prices and production, with EBITDA close to $200 million, marking 12 consecutive quarters of EBITDA growth.
The company produced 158,000 ounces in H1 2026 and expects to produce between 182,000 and 232,000 ounces in H2, maintaining full-year guidance amid plans for stronger production due to mine sequencing and MSG ramp-up.
Record net income of $218 million was achieved, supported by non-cash gains on gold derivatives, while recurring cash flows reached $80 million, with significant investments made in expansion and shareholder returns.
Strategic initiatives include ongoing projects like Borborema debottlenecking, MSG turnaround, and Hera Dorada construction, along with a new $60 million dividend and a $200 million share buyback program.
Management is confident in achieving guidance for production and costs, focusing on sustainable growth through operational improvements and strategic M&A opportunities, with a positive long-term outlook for gold prices.
Full Transcript
OPERATOR
Good morning, ladies and gentlemen. Welcome to the Q2 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, press the globe icon on the lower right side of your Zoom screen and choose the Portuguese room. After that, select Mute Original Audio. We would like to inform that all attendees will only be listening to the conference during the presentation.
Then we will start the questions-and-answers 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 Minerals' 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, the 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 and CEO; Joao Kleber Cardoso, CFO; and Glauber Luvizotto, COO. Now I will turn the conference over to Rodrigo Barbosa.
Rodrigo Barbosa, Chief Executive Officer
Thank you very much, and welcome everybody. Thank you for attending this call again. I'll be happy to go through the major milestones of the company during the quarter, and as usual Kleber is going to go through the details of the results, and then we finally open to Q&A, where we also have here our COO, Glauber, who would also be happy to answer any more technical questions. Overall, the quarter we had weaker production than the first quarter. Nevertheless, all the necessary works, all the necessary milestones in the background that we need to achieve in order for us to have a much stronger production in Q3 and then Q4 are being achieved, as we have done in the past with a weaker production in the first semester and a stronger production in the second semester. Actually this year, as we're going to go through mine by mine, we'll see that this balance between first and second semester can be even bigger than what happened in the past. Overall, we produced in the first half of the year 158,000 ounces. And then, as I mentioned to you, we are strong enough to keep the guidance for the second semester, which means that we will produce a total of between 182,000 and 232,000 ounces during the second half, which means on average potentially one quarter below 100,000 ounces and the other quarter above 100,000 ounces. That means that we are very much on track to produce a very significant improvement during Q3 and Q4. That is a combination of mine sequencing and also the ramp-up of MSG. Revenues in the quarter reached $236 million. Of course, lower gold price and also lower production mean lower revenues. When we look at the EBITDA, on the other hand, we reached close to $200 million. I would also highlight that for 12 consecutive quarters, Aura Minerals has been increasing EBITDA.
In the last 12 months, we produced $800 million of EBITDA with the current gold price. The average gold price in the last 12 months is exactly what it is right now, and with total ounces of 313,000 ounces. Imagine if we achieve the production that we are promising for this third and fourth quarter, that EBITDA can be significantly pushed up once we continue to have at least stable to higher gold prices, while significantly higher production in our mine.
In terms of all-in sustaining cash costs, very much in line with what we planned. The first number that we see close to $2,000 per ounce seems high, but I would invite you, the investors and the analysts, to understand that this number has been pushed up because of the turnaround of MSG. If you take out the turnaround of MSG, we would have been at $1,600 per gold equivalent ounce. Understanding that we have significantly higher production coming in for MSG, significantly higher production for Apoena and Borborema, we still have improvements in all-in sustaining cash costs coming during the second semester due to mine sequencing and also expansion that is happening in Almas and also in Borborema. In terms of recurring cash flows, we reached $80 million. When you exclude the losses of the gold hedges, which is going to happen this year and also next year, we would have made close to $120 million of recurring cash flows before the gold losses. Out of this $120 million, we used $54 million for expansion CapEx and then an additional $68 million between share buybacks and dividends, which means that Aura Minerals continues to fund its own growth, and the dividends and the buybacks with our own cash flows from operations, despite, of course, that we leverage when we have expansion.
Kleber can also go through a little bit more detail by the end of the presentation. In terms of net income, a record high net income of $218 million. That's the quarter that gold price has depreciated, unfortunately, but the positive impact is that we have a mark-to-market on the net income that was positive by $126 million. We just announced, as we are producing significant cash flows from operations and being able to fund our growth with those cash flows, a new $60 million dividend, which means $0.72 per share that will be paid during the third quarter related to the second quarter.
Together with this dividend, we also approved a share buyback program of $200 million. From now on, investors should see a split between a dividend and share buyback coming in the next quarters, where we will continue to remunerate our shareholders significantly now also through a share buyback program. In terms of project Dorada, mostly on time and on budget. I have on the slide more details, and also the average daily traded volume is significantly higher, meaning that we have been achieving the objective when we listed on Nasdaq to push our daily trading volume significantly higher.
Reminding that a year ago we were trading $1 million–$2 million per day in the first semester, and now we are close to $100 million per day on average during the last quarter. In terms of safety, as we mentioned last quarter, unfortunately we had one lost-time incident in Borborema in March this year. The person recovered fast and is already fully recovered and working at site. Although there was a procedure not followed, we revised all the procedures.
We revised and made due diligence in all the operations in order to make sure that we avoid any single lost-time incident. If you look at the last two years we had only one lost-time incident. Our objective is to have zero lost-time incidents. That's why we are constantly monitoring our internal program to make sure that we have the highest safety standards in the industry and that everybody that works with us returns home safely. Also on the stability of the structures, again we have constant monitoring and external consultants that monitor our geotechnical structures—not only the tailings, then underground pits, pads—and all of that is at a satisfactory level. In terms of quarterly production, on the left side of this slide you see quarterly production, and on the line is the last 12 months production. As we can see, since Q2 2025, we've been gradually improving quarterly production and the last 12 months. That's because of the ramp-up of Borborema that continues to increase our production. From now on, after the first quarter and the second quarter of weaker production in MSG, although we are planning much higher production for next year, we'll see a gradual improvement in MSG in Q3 and in Q4, on top of other mines also improving.
So we will continue to see this last 12 months improving from the 313 and, of course, then reaching within our guidance from 340 to 390 by the end of this year. When we look on the right side, the production per quarter per mine, we see the first quarter MSG 9,000 ounces. Second quarter, as I already mentioned to the market, would be weaker than the first one due to infrastructure investments and infrastructure activities that we had to implement in MSG.
Part of that was planned, part was more challenging. When we started producing in MSG, we faced a more challenging situation in terms of infrastructure. When we diverted all the equipment, we had to make a choice between putting our attention and equipment to production or to the turnaround, to the underground development. We always chose underground development. That's what will structurally change the mine in order for us to be able to produce close to 80,000 ounces per year and all-in sustaining cash costs nearing down close to $2,000 per ounce.
All the background work in MSG has been done, and I will have here a slide also to mention that gives us strong confidence that we will not only improve in Q3 and Q4 but, by the end of the year, be prepared to, in 2027, be able to produce close to 80,000 ounces of gold, with the all-in sustaining cash cost nearing down close to $2,000–$2,200 per ounce. In terms of Borborema: first quarter 17,000 ounces; second quarter 14,000 ounces. This is super planned; it's a mine sequencing/grades effect. As we come to Q3 and Q4 we will see a combination of both. Number one, in Q3 we see higher grades coming into the plant. And in Q4, on top of the higher grades, we are debottlenecking the plant. Today the bottleneck is the filters, and we are implementing new filters that should be online by Q4—between Q3 and mostly Q4—so that we will also be able to increase production on top of higher grades. So we should see higher production at Borborema coming in the second semester.
Almas: a slight improvement in production. This mine we built at 1.3 million tons; we already finished last year running at 2 million tons, and now we are upgrading to 3 million tons. That will gradually improve capacity as we should finish the year close to 3 million tons per year, and that will also have an impact on the quarterly production. Minosa: we had a decrease from 17,000 to 14,000 ounces. We are in an area of the stacking pad that is more challenging.
We had to pile higher than we did in the last few years. That means the process of recovery takes more time, we have more money going to working capital, and perhaps we lose some recovery. As we piled all of these also during the second quarter, we should see Minosa with weaker production next quarter and then recovering more production in Q4 for the year, where we should be more towards the low end of the guidance for the year in Minosa. Despite this lower production from 7,000 to 6,000 ounces, all the background activities, all the opening of the pit, all the investment on the pushback and also mine development are very much in line with the forecast, which will allow us to have confidence that we will reach higher grades during Q3 and Q4 that will support significantly higher production during the next semester. In Aranzazu, we are also doing the mine sequencing: in the first semester lower grade, and in the second semester we should reach higher grade, which will also provide us an ability to produce a stronger second half of the year. So overall, as happened last year and this year, a combination of the MSG turnaround plus Borborema debottlenecking and higher grades, and also then Apoena with higher grades—a combination of these three mines gives us confidence that we will not only be within the guidance of the year, but not close to the lower end of the guidance. Next slide, in terms of all-in sustaining cash cost, as I mentioned to you, close to $2,000 per ounce. When you exclude MSG, then we'd be close to $1,500, understanding that also during the second semester we're going to have higher grades in Borborema, higher grade in Apoena, higher production in MSG, and also higher production—not that high, but continuing to slightly improve—at Almas as we are now upgrading the plant.
That gives us very good confidence that we also will meet the guidance for the year on the all-in sustaining cash cost. And understand that when we issued the guidance, the exchange rate in Brazil and also in Mexico was significantly more favorable—for example, in Brazil, close to 5.50 reals per dollar; now we are running at close to 5.00 reals per dollar. So that's 10% of losses in exchange rate, on top of higher oil prices and chemical prices. We believe that the team is working in order to be able to deliver results within the guidance that we gave to the market. As I was mentioning, Dorada is moving very much in line with the plan. We have recently approved in the third quarter the full investments. We already spent $15 million. Close to 60% of the groundwork has already been done, focusing a lot on hiring from local communities that don’t have expertise in mining. We are still training, but yet with 53% of the employees coming from Asunción de Mita and region, which is where we are located, and 93% from Guatemala.
That shows our commitment with the project to provide opportunities for the local labor. We also approved on the project a significant improvement in the water treatment, actually now taking a lot of the water to potable level, and we are in agreement with the local authority so that this water, once in production, can be distributed to the local communities. In that area, as happens also in many Central American countries, there's no treatment of water, no sewage treatment, and the water they have access to from the rivers is somehow contaminated, which means health problems, which is the major problem that they have, as we heard from them.
Just to open, as transparency, at a Dorada house, this means that we have a place in the city where we give full transparency and a person that can answer any question that people might raise. We are there to answer, to show the project, the impacts, and everything that is going to happen in the region so that people can have the confidence that this project will not have negative impact, but actually it will go beyond and have positive impact, once we are treating this water at potable level, and also with a geothermal project that we are now in final studies in order to have renewable energy supplying the energy of this project.
As we progress in the construction, we should expect negative news here and there. We've done a significant amount of work communicating with the local communities. We have majority approval from Cocodis—Cocodis are the persons elected by the local communities, recognized by law to represent them—and they are mostly in favor of this project and supporting us to move on. So we don't expect any hiccups in implementing this project up to commercial production, although of course some negative might happen.
Next, for MSG. Very happy to share that we are super in line with what we projected in terms of our productivity underground when we acquired this project, and actually we are above what we expected in terms of resources and reserves. Just a quick reminder: this project we acquired with 370,000 ounces of gold equivalent in proven and probable reserves; we are already at 753 in six months. We acquired this project with 1 million ounces of measured and indicated; we are already at 1.8 million ounces in measured and indicated. And we acquired this project with 1.4 million ounces in inferred; we are already above 2 million ounces of inferred. So this project, in the long term—despite doing exploration, which now we are going to do more of in order to significantly increase resources and reserves—most important is the underground mine development speed, because that's what's necessary in order to invert the mine sequencing from top-down to bottom-up.
We are 80% to 90% on average above what this mine was performing last year. So we are definitely able to improve underground development, and yet we still have room to continue to improve. That gives us a lot of confidence that by the end of the year we'll be able to completely invert the mining methodology in order to, in 2027, be able to produce close to 80,000 ounces and push down the all-in sustaining cash cost to close to $2,000 per ounce. Of course during this turnaround we compromised short-term production in order to have stronger long-term production, but actually now we are already at higher speed in production.
We should see improvements in Q3 and then Q4 another improvement, but most of the improvement in production will be in 2027. Now I turn the floor to Kleber so that he can present the results.
Joao Kleber Cardoso, Chief Financial Officer
Okay. Morning, everyone. We start with a summary of the main financial KPIs for the quarter, the last few reporting periods, and accumulated last 12 months. For each reporting period, we're reporting net revenues of $336 million in the second quarter, as anticipated by Rodrigo, as a combination of lower reduction due to mine sequencing and also a lower average price in Q2 compared to Q1. However, when we look into the accumulated last 12 months net revenues, we are reporting a record high close to $1.3 billion.
Now, in terms of adjusted EBITDA, it's a similar story: $190–197 million. But then, when we look at accumulated in the last 12 months, over $800 million already. As Rodrigo anticipated, we have been increasing our accumulated last 12 months EBITDA for now 12 quarters in a row, since Q2 2023. So now three years in which we are increasing our accumulated EBITDA, which shows the direction we are going in. When we look at our annual results in terms of net income, we're reporting strong net income of $218 million, as a combination of the results from the operations and also unrealized gains with the outstanding gold derivatives.
Because there was a reduction between the gold prices at the beginning of the quarter and end of the quarter, we recognized these non-cash gains. Excluding these non-cash impacts, our adjusted net income is slightly below last quarter. It's $97 million this quarter. And then, in terms of cash, equivalents, and net debt, we close our cash closer to $250 million. There was an expected increase in net debt to $168 million. However, that was compensated by the increase in the accumulated net debt over EBITDA, which then translated into our leverage ratio remaining stable between the quarters at 0.2x.
Now moving to understanding the main items impacting between adjusted EBITDA and adjusted net income: when we look at the breakdown for the adjusted EBITDA, we had four business units that came with strong results: Borborema, Aranzazu, Almas, and Hera Dorada all reporting adjusted EBITDA above $43 million, between $43 and $56 million. And as expected for this quarter, we expected a plan and MSG to be the weakest quarter in Q2 and then show stronger results from the second half of the year.
Depreciation and amortization at $26 million, expenses pretty much in line with our expectation. This quarter we're reporting a financial net income of $61 million, which is mainly driven by the non-cash gain related to the gold hedges which I mentioned previously, partially compensated by the realized losses with the gold hedges. This was the portion of gold collars that expired in the quarter, and we made the payments in which we paid the $37 million.
Income tax expenses of $20 million as well as expected. Other expenses we had again this quarter of close to $10 million, mainly related to the completion of the sale of the San Francisco mine, which was part of the Apoena complex. We had a nonrecurring provision for contingency liabilities required, $5 million, bringing the net income to $218 million as we saw and then, excluding the non-cash impacts, bringing our adjusted net income to $97 million this quarter.
And now, understanding the main items that changed our cash position between the beginning and the end of the quarter: we started the quarter with around $270 million. Then the six mines in production generated $170 million during the quarter, of which a portion was used to pay the hedges that were settled in the quarter. We paid $37 million for that purpose, invested $58 million for the growth of the company, mainly the expansion CapEx. We had $53 million mostly split between Hera Dorada, where we announced the board approval in April and invested already $15 million in the first quarter, and also expansion of plant capacity and underground developments in Almas, and also investments in— And then to the right side we see the financial-like items, and we highlight the capital return to the shareholders through dividends and share repurchases of $68 million, bringing the cash to the end of the period closer to $250 million. And this we end our presentation, open to questions. Thank you.
OPERATOR
We are going to start the questions and answers section for investors and analysts. If you wish to ask a question, please press the Reaction button 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. Matthews Moreira from Bradesco BBI. Please, you may proceed.
Matthews Moreira, Analyst at Bradesco BBI
Hello, good morning all, and thank you very much for taking my questions. My first question on capital allocation: I mean, we've seen overall, of course, a very volatile macro environment recently which has weighed on gold prices. I'm wondering whether these changes change your M&A appetite in any way. I mean, would you adopt a more conservative stance on M&A in the near term? And within your broader capital allocation framework, I mean, you've just announced a new buyback program of up to $200 million.
How is management thinking about balancing growth capex and growth—capex, buybacks, and dividends? What are the main priorities here for management going forward? That's my first question, and then I'll ask the second one.
Rodrigo Barbosa, Chief Executive Officer
Well, thank you, Matthias, for the questions. First, in terms of M&A appetite, we continue to have appetite independently from gold price. Actually, when gold price has a spike too high in the short-term period, as it happened when it reached 5,500, this is where the gap of the seller and the buyer widens. So it's difficult to do transactions when you have those kinds of volatility. And actually now, when gold price came back to 4,200–4,300, we see more converging expectations in terms of price from the buyer with the seller.
And we are always super conservative, and we don't play on gold price. We do our analysis, we put the market average projections for gold and also copper. So we don't see why we would change our M&A appetite because of this volatility. And it's a very important step for us in terms of value creation. Just a quick reminder for value creation in Aura Minerals: it's very clear, three avenues. Number one, execution on greenfield projects, which we are—we just implemented Borborema.
We are now doing the turnaround of MSG. We are now also implementing Hera Dorada. We are finalizing studies for Matupá. So we are very much in line to deliver the first avenue of value creation in projects that have significantly high returns. Number two is to continue to increase resources and reserves. As I mentioned in MSG, in six months of work with the numbers and also adjusting some cutoff grades, inverting the mine sequencing, we could increase—significant—double the reserves and significantly increase measured, indicated, and also inferred.
Actually, when we issued the report on resources and reserves this year, we could see that we doubled most of our resources and also our reserves. Then the third avenue, to complete the first question, is to continue to grow through M&A, as the sector tends to pay a better price as you grow. Companies that get next to a million ounces tend to have a more fair NAV multiple. Where we are today, we are significantly discounted where we feel we should be.
And part of this is also that we need to deliver the growth. We know very much how to get—and we are in the execution to get—the 600,000 ounces in the upcoming years. But we know that the best valuation starts when you get closer to a million ounces, and that will only happen through M&A. Then you also questioned about the dividends and also how you're going to invest the capital. If you look behind, Matheus, take a look at what happened in '21, '22, '23, '24, '25—you know what's happening that I highlight in '26.
We've been able to do both. This company has such a high payback, right? The payback of our projects is one or two years; on the equity it will be maybe sometimes less than one year. So once we sequence those projects, we've been able to, number one, implement the greenfield projects, which we did—Almas; we implemented also Borborema—then we acquired Borborema, we acquired Hera Dorada, we acquired MSG. We paid one of the highest dividend yields in this sector in the world, and yet we are 0.2x net debt to EBITDA.
So we have not been challenged in order to see—to split out—let's jeopardize growth, let's pay dividends, or the opposite. So we've been able to do a combination of both. This quarter, this semester, as Kleber was mentioning, we produced close to $120 million of recurring cash flows, and—ex the losses of the dividend. And then this cash was enough to support the development of greenfields projects, all the cash flow from all the investment expansion, and also the dividend.
And we continue to be unleveraged. We could even finance, and we should finance, at least 50% of greenfield projects. Aura is in a privileged position in order to have such a strong cash flow from operations that we can do these kinds of combinations and continue to grow and continue to pay strong dividends to our shareholder.
Matthews Moreira, Analyst at Bradesco BBI
Great, Rodrigo, that's very clear. And then maybe, if I may, a second question on MSG specifically. I mean, it was good to see the significant step-up you guys had on both P&P and M&I, right, over the past few months. I mean, the company of course continues to move forward with its turnaround at the asset. Production in the second quarter was impacted by significantly lower grades, right. I'm just wondering if you could give us an update on what are the key bottlenecks you have been addressing—be a bit more specific on the key bottlenecks—and what are the operational priorities at this point?
And also, how do you see grades and production evolving over the next few quarters? And for MSG specifically, I understand that the guidance was reinforced for the whole company, but for MSG specifically, do you see some risks to guidance on both production and cost? Thank you.
Rodrigo Barbosa, Chief Executive Officer
I will start the answer, then I'll pass to Glauber so he can go more in detail. We had a first and second quarter, I would say, in terms of production more challenging than we expected. But that doesn't mean— That means exactly that we pushed our attention to underground development and the mine preparation infrastructure in order to do the turnaround. So we chose to compromise production in order to maintain a very strong outlook for the medium- and long-term investment in this mine.
That means that perhaps we might be at the lower end of the guidance. Of course there's always a risk, we cannot ascertain, but we are very confident that all the groundwork that's been done will take us to produce close to 80,000 ounces and close to $2,000 per ounce. I'll let Glauber give a little bit more color on what is being done in the mine, and why we had a decrease in the grades in the second quarter, and why we believe that the third and fourth quarter will continue to improve and put this mine into very high standards next year.
Glauber Luvizotto, Chief Operating Officer
Yeah, of course. As Rodrigo commented, the year is much more for doing all the organization, housekeeping, and preparing operations to sustainably achieve the production around 80,000 ounces, and the all-in sustaining cost around $2,200 per ounce. So.
Rodrigo Barbosa, Chief Executive Officer
But straight to the point, the bottleneck is the mine. So the challenge is increase the production from the underground mine that we have much, much higher grade, even considering some contribution from the open pit. The reason for the lower grade in the second quarter is mainly because we pushed down. So once the priority in the underground is prepare, develop the mine, and release reserves for production in a stable way, we used a lot of ore from the old lower-grade stockpile on surface to keep the plant running, to keep producing, and, for sure, optimizing the result once in the mining.
The focus is mining development. So the great news is that we are being able to increase it between 80%–90%, the performance in the underground development, compared with the performance last year. The main reason for that is a combination of all the infrastructure that we did, the upgrade during the first semesters, and also the upgrade in the underground fleet. So if you remember when we did the acquisition, the reliability of the fleet was one constraint in that mine.
So we are using this lower production underground to make some upgrades in the equipment as well, and back to the operation in better levels. So we are getting much higher availability. It's much more reliable equipment, higher productivity. So we are growing this path to increase production. We will see quarter over quarter the production growing at MSCG in Q2, in Q3, in Q4, in Q1, and 2027. So we will be able to gradually increase grades and throughputs in the plant as well.
OPERATOR
Our next question comes from Mr. Lawson Winder from Bank of America, please. Mr. You may proceed.
Lawson Winder, Analyst at Bank of America
Thanks very much, Natasha, and hello, Rodrigo and team. Thank you for taking my question. I just wanted to say solid capital return again. It's really great to see you guys leading the pack on that. What I wanted to ask about though is more on costs, which is obviously critical in your ability to maintain that strong free cash flow and support those investments. And year to date, at what rate would you say your cost inflation is running and how does that compare to budget?
And then as we move into the budgeting season for 2027, what makes sense to you as a good inflation rate to assume for 2027 versus 2026?
Rodrigo Barbosa, Chief Executive Officer
No, thank you, Lawson, and I'll let Kleber—he can go in more detail. The team is, as you know, we have a very strong team locally fighting back inflation and trying to renegotiate, change specifications, and they've been able to do since 2022, and we continue to do that. Most of the impact that we have today that you saw comes from exchange rate. There's some from inflation. But I'll let then Kleber give a little bit more color on this and then perhaps give a little bit of view on 2027, although yet we don't have guidance for 27.
Joao Kleber Cardoso, Chief Financial Officer
Yes, yes. So, as Rodrigo commented, we of course do feel the impact, for example, of oil prices, although that's limited. If you take diesel, depending on our operations it's usually between 5% and 10% of our total costs. So there is some impact; it is limited. There is some indirect cost, of course, that comes from inflation of increased diesel prices. But we have been working on different initiatives to compensate and fight back this impact. So that's why Rodrigo mentioned this.
When we look at diesel and impact of FX, of course we feel the impacts, but we're confident that we're going to be in the guidance because of the initiatives that we're working internally. For 2027, I think it's still too early to give any perspective. We're just starting the budget process. We see on a structural basis some big upsides and opportunities when you look into what is expected for the company as a whole—mainly MSCG. Because MSCG bringing the all-in sustaining cash costs from where it is now, close to 2,000, as you might imagine, there will be a big positive impact for the AOE of the company as a whole.
In addition, the expansion of Almas, for example—that should play positively. But if you go then raw material for raw material, impact of inflation, it's a little bit early in our process to comment on that.
Lawson Winder, Analyst at Bank of America
Okay. Nevertheless helpful. And then if I could follow up on the discussion on M&A to put maybe a slightly finer point on it. I mean, when you look at your portfolio, you have a number of brownfield and greenfield projects already in the portfolio. Would it be fair to conclude that the preference might be for operating assets as opposed to greenfield projects? How do you think about that? And then playing into that as well, there's obviously just the time of your team, Rodrigo.
I mean, do you guys have the capacity to take on another project if you were to acquire something on that line?
Rodrigo Barbosa, Chief Executive Officer
Thanks, that's a good question. And we are very focused on being able to deliver in what we acquire. And if we look back, the last acquisition was MSCG, something that was running on the top of implementing Era Dorado. That's why we didn't—we don't want to build two projects at the same time because exactly because the team is the same, right, and we want to make sure that the team can deliver on the construction of Erradorada. On the other hand, the turnaround team is different.
So that's why we felt comfortable to put in MSCG. And now we are doing both: one team joined the construction and then working a lot on the turnaround, and then looking ahead. I think we would continue to look at both alternatives. But, for example, we would not probably buy anything that we have to start construction next year. So a greenfield project would be something that we could take one or two years redesigning or upgrading or downsizing what we do in order to be able to go to build not in parallel to Era Dorada and then see what would be the sequence together with Matopa.
On the other hand, if there is something that is operational, the turnaround of MSCG—most of the attention is the first year. So we would consider any acquisitions as long as then along by the end of the year or next year we can move the turnaround into some operational asset for next year so that we don't overlap. Right? And also we continue to look at alternatives in the Americas—we're not the Africa player or the west or the east side—and gold and copper, right, that's where we play.
And as I have been widely also mentioning, we've been growing a lot on gold. We like to also add more copper, but copper alternatives have been more scarce, and returns on gold have been higher. So that's why we've been choosing gold in the last years—not because we have a preference, just because the return has been significantly higher.
Lawson Winder, Analyst at Bank of America
Okay, very helpful. Thank you so much, Rodrigo.
OPERATOR
Our next question comes from Mr. Enrique Marques from Goldman Sachs, please. Mr. You may proceed.
Enrique Marques, Analyst at Goldman Sachs
Hey guys, thank you for taking my question. I just wanted to follow up a bit more in detail on the share buyback program you guys announced that is on top of the dividend that you've already paid above policy. The company has done an excellent work to keep the high level of trading volume, and it caught our attention that you've opted to announce the buyback program instead of just increasing further dividend payments. So I just wanted to understand.
The stock did suffer an important sell-off in recent months. Is there any key metric here that you saw that made you announce the buyback program? Is there any threshold of valuation, or even what is the perfect balance between dividend and share buyback going forward? And on top of that, just changing a bit gears here, sale of the San Francisco mine—good way to monetize a mine that was under care and maintenance. I know you guys have also Tolda Fria, which is also under care and maintenance.
So can we expect something similar to this mine, or is this an asset that you are also seeking to sell? Does the recent change in the Colombian government change anything? And how do you see this asset? Anything you guys can share with us would be great. Thank you.
Rodrigo Barbosa, Chief Executive Officer
Thank you so much. As you mentioned, we just announced share buyback again. We also made significant progress on daily trading volume. We don't think, when we analyze, that at this level the share buyback would significantly impact the daily trading volume. We do not want to negatively impact the trading volume, so we would perform share buyback as long as it's not jeopardizing the liquidity that most of our investors appreciate. And looking ahead, we should see a combination of share buyback and dividends.
We don't have exact numbers on how we're going to play. We, of course, have our internal strategy, but it will be a balance. It will be a split between share buybacks and dividends, and we've been able to pay above the policy in dividends. But from now on we should see it split. So don't expect dividends to be that high and then plus share buybacks. It will be a split—the total number will be a split of share buybacks and dividends.
Enrique Marques, Analyst at Goldman Sachs
Thank you, Rodrigo. Very clear. If you guys can just touch bases on the San Francisco mine question.
Rodrigo Barbosa, Chief Executive Officer
Okay. Yeah, no, I think San Francisco we announced. It took a while to approve and finally transfer. Tolda Fria is in Colombia. We just had a recent important change in government in Colombia. That project had been difficult to progress with the licensing. We expect now that potentially can change. So we are now monitoring and trying to understand what would be the change in Colombia in order for us to reassess if we should push more investments and foresee any licensing, or continue to do care and maintenance, or perhaps sell.
So that's one thing that we will only understand after Q3 and Q4, when we see what would be the impact of the change in government through the licensing project to mining.
Enrique Marques, Analyst at Goldman Sachs
Super clear. Thank you.
OPERATOR
Our next question comes from Mr. Lucas Lagi from Xispe Investimentos. Please. Mr. You may now proceed.
Lucas Lagi, Analyst at Xispe Investimentos
Hi, good morning everyone. Thank you for the space. I have two quick follow-ups, I guess. MSCG and cost inflation have been the most discussed topics with investors most recently, so just touching base on those two topics. On MSCG, you mentioned in the release that one of the reasons why the asset performed relatively weaker compared to other assets was regarding the evolution of production and sales throughout the quarter—lower sales in April and increasing production and sales throughout the quarter.
So, as one of the most concerns that we hear from investors is still related to the pace and to the turnaround process, could you provide us an idea of how production actually evolved throughout the quarter? Maybe a run-rate of production in June compared to April, and how you're seeing the run-rate output in July and August compared to what you saw by the end of the quarter? Just to maybe provide a more comfortable idea of this evolution that you guys were able to achieve over these past months.
And on the cost inflation topic, it's a discussion we have been hearing all over sectors that we cover, particularly considering the conflict between the U.S. and Iran. Rodrigo, you mentioned FX, chemicals, Brent, but any specific cost-mitigating initiatives that you guys have been implementing? I don't know if any changes in hedging policy, for example. Just trying to better understand if such impacts have been high enough to drive any particular initiative or hedging policy that you guys are doing.
So just to better understand this production evolution throughout the quarter on MSCG and any potential cost-mitigating initiatives on such cost inflation topic, particularly regarding the conflict. Thank you, guys.
Rodrigo Barbosa, Chief Executive Officer
Yeah, I'll give a quick view on MSG and then Glauber can comment in more detail, and then Kleber can talk a little bit on this hedging or cost inflation. It's not significant to the inflation that’s impacting us, but yes, there's some and we are fighting back MSG. Yet I have not found a formula to do a turnaround and increase production at the same time. So we need to improve maintenance, we need to improve infrastructure, we need to do all the underground development in order to improve production.
That means that when you're doing maintenance, when you're doing turnaround, you jeopardize production in the short term. Right? There's no single company, there's no single mine that will be able to both increase short term and also do the turnaround. But Glauber can give a little bit more detail on what's happening that gives us confidence that Q3, Q4, and much more significantly next year, will be higher production, which is in line with what he answered.
But perhaps we can expand a little bit more.
Glauber Luvizotto, Chief Operating Officer
Yeah. So what we expect, and we should see, is we will increase production in both lines. We will be able to increase the throughput in the plant considering that we will have more ore from the underground and also with higher grade. So what we expect is this increasing from Q3 — not slowly, but increasing quarter over quarter or month over month. It should be 50% more in throughput than 20–23% more in grade. That will be able to change significantly the profile of production.
And once we achieve those numbers, the costs should, as a consequence, reduce as well as a consequence of the higher production. And we’re still working for the future, in the next year. With these new reserves, the concept of the mining design, we are changing a little bit to make sure that we can recover much more ore, including in the previous areas that were already mined. We are on track. We are pretty confident to get the target that we put internally to achieve the 8,000 ounces, and the costs that we always comment we can see happen.
As Rodrigo commented, it took a little bit more time than we were considering, but we decided to do that and to organize everything to prepare the mine, to prepare the infrastructure in the mine, to make sure that this growth will be sustainable and we will not be surprised in the future.
Joao Kleber Cardoso, Chief Financial Officer
In terms of cost initiatives, we don't have a silver bullet — not one single cost initiative. But we have a program. For example, we have a big internal project regarding strategic sourcing that reviews mature agreements, finds synergies among the business units, and opportunities. We have also an internal challenge program to reduce costs across different lines that, when you sometimes look individually, are not material, but combined, yes, and with people internally in the organization with internal targets to achieve that.
This is not the first time we do it. We did this last year, produced good results. You might remember last year we were able to deliver our AISC and cash cost below our guidance. Those initiatives, small by small, when we put together again, they make the difference. So this year they are going to help as well. Unlike last year, we are not going to be that low — we’re not going to beat our lower guidance for sure this year for the other impacts — but our initiatives, as we mentioned, are going to help us deliver the guidance despite this impact of inflation and mainly the impact of FX in Brazil and Mexico.
So I would say it's more a program and pretty much aligned with our culture to be lean in all levels and cost cautious in our level and our business units.
UNKNOWN Analyst
Great. Thank you. Glauber, just a quick follow-up: you mentioned 50% on plant feed increase and 23% on grade increases. I just couldn’t get the number exactly. Which time frame were you referring — I mean, 3Q compared to 2Q, half over half? Perfect. Perfect. Thank you very much, guys. Thanks for the details. Have a great day.
Glauber Luvizotto, Chief Operating Officer
Oh, it's just roughly numbers compared with the performance that we had in the first semester and what we have in the second semester. We should increase around 50 to 60% in throughput. And we can see also some increase in grades once we have much more ore from the underground, instead of using the low-grade stockpile as we did in Q2. The grades should increase significantly — the average should be something between 25 and 35%. So that's our perfect numbers.
OPERATOR
Our next question comes from Mr. Marcelo Arazi from BTG Pactual, please. You may now proceed.
Marcelo Arazi, Analyst at BTG Pactual
Hi, guys. Two questions on my side as well. I think the first one, back on the M&A discussion: we saw over the past few years Aura purchasing single-asset names rather than companies with more than one asset under their operations. And given the new size of the company and the ambition to reach closer to 1 million ounces over the long term, is purchasing an entire company with more than one asset something under discussion? Is this something that you guys consider?
I can let you guys respond to that and I'll make the second one.
Rodrigo Barbosa, Chief Executive Officer
I think it's something that's not non-considered, right? We always look at alternatives. The alternatives that we found and also could be engaged and do a transaction were mostly in the single-asset space. But that doesn't mean that we did not consider in the past or do not consider today companies that have more than one asset.
Marcelo Arazi, Analyst at BTG Pactual
Thanks, Rodrigo. That's— That's very clear. I think the second one, on a different topic: Aura has been experiencing much higher volatility in share prices than normal. I think, of course, gold prices haven't been helping on that front. But just wanted to hear from you some thoughts on that and what may be the reason behind this, and if there's anything within your range to eventually reduce that.
Rodrigo Barbosa, Chief Executive Officer
No, I don't know if I have a specific answer for this. Of course we see what happens. If you look, Aura already has one of the strongest, if not the strongest, growth in the market, right? We are coming from, let's say this year, we put the last 12 months at 313,000 ounces. This year we are delivering between 340 and 390, and we have — not including that — MSG is going to be in full production next year; not including that Tolda — that is being built — and ’28 also in production; not including higher production for Borborema; not including Matupá; not including new acquisitions. So when you have that high-growth company that's been actually delivering, doubling the EBITDA in the last three years, normally we expect more volatility, because that means that we have such a higher upside compared to any other of our peers that the impact of the gold price on our future is way more important than for other companies that don't have this growth.
For companies that don't have this growth, most of the cash flow is already on the NAV. A lot of our NAV is on growth — on doubling, right? If you take the 313 and we understand that we can go above 600, with doubling production in the upcoming years, that means that normally a company that has this high growth has higher volatility.
Marcelo Arazi, Analyst at BTG Pactual
That's very clear. Just perhaps a quick follow-up. Is that something that bothers you, like as the CEO of the company? It's something that perhaps some shareholders might be concerned about. Do you feel that?
Rodrigo Barbosa, Chief Executive Officer
No, I think it's natural. And as long as we continue to deliver results and continue to deliver growth, you're going to continue to see volatility. And most of the volatility is going to happen on the upside. If you see, today we are significantly discounted compared to our peers. We are not only changing the peers, but we also widened this gap of price to NAV. Volatility might continue, but most of that will happen on the upside once the market starts to price in growth and starts to understand that this company is delivering on the projects that it promised, and then perhaps price to NAV can shorten the gap.
Marcelo Arazi, Analyst at BTG Pactual
That's very clear. Thank you, Rodrigo. Thank you. Thank you, Tim.
OPERATOR
Our next question comes from Mr. Graham Tanaka from Tanaka Capital Management. First question: please give us your outlook for gold prices and if you will adjust your hedging strategies. Two: can you give us your estimated ROI on internal expansion and mining investments versus ROI through M&A, and how much has the difference changed over the last three years? Three: how much have your ROI realized come in versus your expectations on each of your acquisitions?
Rodrigo Barbosa, Chief Executive Officer
There were a lot of questions, so I will let Kleber answer the ROI. And the first one was which one?
OPERATOR
Please give us your outlook for gold prices and if you will adjust your strategies.
Rodrigo Barbosa, Chief Executive Officer
Yeah, gold prices — first, thank you for attending and thank you for trusting us as a long-term investor. Gold prices, it's interesting, right? Because it got depressed at 4,000, 4,100. It seems that all the movements and all the situations that push gold price are just boiling, right? What is happening today is boiling gold price, and perhaps we can see, as we saw yesterday, we can continue to see a significant appreciation in gold price, although we do not know where it's going to go.
But I know that the fundamentals are just getting stronger and stronger. What are these fundamentals? Number one is the US deficit. The US deficit continues to be high, and that could be fixable, but we don't see any kind of discussion on how to address the deficit. Actually, this government tried to address this situation when it started but then was pushed back, and we don't see how to address the deficit, and the deficit is just increasing on the top also of some higher inflation.
And actually, when you see the war, Iran, there's higher oil price — it just gets the situation worse. And also more spending in military — that's happening in the US, and it's going to happen also in Europe. And in the meanwhile, China continues to record-high buy — record-high gold in the market. So I think the situation for gold — the environment for gold appreciation — is just improving. Yet it's uncertain when this is going to start to fly again.
But at 4,250, 100 price, it's not bad at all. But we continue to be super constructive that this gold price can go to 5, 6, if not more, thousand dollars per ounce in the medium term once the market starts to understand that this situation of the dollar is not sustainable. And actually, when we see now what is happening with the yen, right, this is decades of monetary testing of very low interest rates that's going downhill, right? And the US needs to support the yen in order to not dump Treasuries, which would put the yields to the market and will be difficult.
So they somehow are already managing interest rates to keep it low. And then when the market understands that this can happen in the medium term and the short term, then gold price will have a significant appreciation. So I would invite all investors to keep an eye on what is happening between the US and the yen, while China continues to have a very strong purchase in gold — very important variables that can push the gold price way beyond what it is today.
Kleber, perhaps you can give a call on what's happening with our IRR — internal rate of return — or return on investment on the project, which is outstanding. I had never seen those kinds of returns in my life, and we have no reason not to believe that they will continue to be like this. Yeah, yeah, some of you who follow the company might remember when we say our strategy is looking at least 20% internal rate of return and leverage and considering more conservative gold prices. This is a strategy minimum. But in reality, if you take the investments that have been made and the results of the feasibility studies, for example, Almas was above 50% of the expected IRR (internal rate of return). And the Borborema was also close to 40% at the time of feasibility study, the same year over 30% with Ferra Dorada.
So we have the minimal necessary. But what we have invested, when we make an investment decision, the expectation is already way above the minimum, and I would say has been significantly higher. Now, if you take not only for gold prices—gold prices has helped. If you take Almas and Borborema, for example, at the time we decided to make an investment and the expected returns we had at the time, the gold prices helped. But also the change in the projects and how we have unlocked value has unlocked a lot of upsides.
Again, in terms of examples, if you take Almas, we built on time and on budget. So the initial investment was according to expectations. But since then we have increased life of mine. We have increased plant capacity from 1.3 million tons and going to 3 million tons now, which means that the returns, not including gold prices—the returns only for the way we changed and unlocked the value—have been much higher. The same with Borborema. We invested; also we delivered on budget. So the initial capex outflow was expected. But when we look at the expected inflows going forward—when we announced to the market, we had 11 years left of mining, less than 800,000 ounces of reserves. Now we have 35 years left of mine and are already working also to expand the capacity. So the returns have been so far way above what we planned. Even if you don't consider more favorable gold prices, if you put on that, more favorable prices has been helping as well a lot.
UNKNOWN Analyst
No, I think you answered very well. I made a mistake here raising the hand.
Rodrigo Barbosa, Chief Executive Officer
Okay, yeah. I think one of the points was on internal versus M&A. So we have had these high returns on both. Of course, if you think about brownfield, usually the returns expected should be higher in the case of Almas, in the case of Borborema, because the structure is there. So that's why our two are some of the important projects. We are now expanding production capacity. The mines, because all the structure is there, then it is the marginal, the additional capex for the returns.
But we have been seeing and enjoying these very high returns on both—on both assets that we acquired and internal expansions as well.
OPERATOR
Our next question comes from Mr. Rafael Araujo from Itaú BBA. Please, Rafael, you may turn on your microphone.
Rafael Araujo, Analyst at Itaú BBA
Hi guys, can you hear me? All right. So I have a question here related to El Niño. There has been some discussion around potential climate-related impacts for U.S. and Latin America. Right. Could you comment on whether El Niño poses any relevant risks or operational challenge for Aura? Thank you.
Rodrigo Barbosa, Chief Executive Officer
El Niño can change the rainfall in Central America. That's where it probably can impact us. Most of the groundwork is advancing well, and we are already over 60% completed, and then a lot is building the plant and doing underground development that can be impacted. But we don't see any major impact that can jeopardize our construction. On the other hand, we need to monitor the amount of water that can go in Honduras. We have an open-pit operation with important production in Q3 and Q4.
So if we have a significant excess of water, that can have an impact on productivity. But when you put this on the overall Aura, it won't make much of a difference. It can impact Honduras, but on average for the company, we don't see other major impacts. All right, thank you very much. So I think we're finishing the time here. So with that I will conclude here the quick wrap-up as always. Again, thank you for participating in this call. Good to see important and difficult questions, which we are always happy to address.
It was a very important quarter, and I would invite again investors to take a look at what can happen in the company in Q3 and Q4, as we should continue to improve production in most of the mines in Q3 and Q4, and we're very comfortable, confident that the guidance will be met as we see today, either in production and also in sustaining cash cost. And more importantly, let's see that we looked at the EBITDA in the last 12 months—$800 million or 313,000 ounces of production.
We are now projecting between 340 and 390. And the gold price of the last 12 months is exactly what it is today. So in Q3 and Q4 we should see a continued significant improvement on EBITDA levels to finish the year again with a significant step compared to last year. Also as important as the very good results that we are foreseeing in Q3 and Q4 is all the groundwork, all the background work that is being done in the company in order to have a significantly better again 2027—number one, MSA turnaround going on time, on budget.
We understand what we are doing, and we see the projections of Q3 and Q4 improvements in production. But as important, we want to be prepared for 2027 and have a very stronger production compared to what we are today in MSA. Then we are debottlenecking in Borborema that by Q4 we will be able to operate at a higher capacity, higher capacity also in Almas, that we're going to finish the 3 million tons plus. And then while we continue to build Adorada—until then the production will be only on 2028, but we'll see improvement in 2027, then improvement in 2028.
And then we have Matupá implementation, and we have other alternatives to continue to expand our production. So Aura, we've been doubling the EBITDA in the last three years, and I have no reason to doubt that we cannot continue a high-speed growth in terms of production, high-speed growth in terms of revenues, with the cash cost controlled. Then this will have a very leveraged impact on EBITDA. So I thank you all again and see you next quarter.
OPERATOR
Thank you, Rodrigo, for your final remarks. Aura's conference is now closed. We thank you for your participation and wish you a very nice day.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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