Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Aura Minerals (TSX: ORA) shares gained as much as 4% to C$10.85 after reporting resource and reserve updates for its four operating mines and two development projects, growing all categories despite ongoing mine depletion.
The Central and South America-focused company says it added 2.4 million oz. gold, or 21%, to measured and indicated resources over the 2022 statement. Across its projects, it now holds 187.3 million tonnes averaging 1.05 grams gold per tonne for 6.3 million oz. of contained metal. The company also added 856,000 oz. to the proven and probable reserve base, now comprising 107.4 million tonnes grading 1.03 grams gold for 3.6 million oz. of metal.
“This achievement is a result of our clear strategy to increase production while we increase our resources and reserves,” president and CEO Rodrigo Barbosa said in a news release.
Shares traded at C$10.51 in the afternoon session, up nearly 21% over the past 30 trading days having touched C$8.09 and C$11.49 in the past 12 months. In comparison, the VanEck Junior Gold Miners ETF is up 20% while gold rose 6.35% in the same time.
The company has a market capitalization of C$759.2 million ($559.2m).
The company produced 236,000 oz. of gold-equivalent last year, down 2.7% over 2022, at all-in sustaining costs of $1,324 per ounce. Net revenues have climbed 164% to $417 million since 2018.
Aura spent about $24 million on exploration drilling last year for 114,074 metres completed across the portfolio, mainly to replace depleted ounces at the Aranzazu mine in Mexico, Apoena in Honduras, and Almas mine in Brazil, while expanding the mineralized envelopes at the Borborema and Matupá development projects, also in Brazil.
Among the most important additions were from the Aranzazu mine, where Aura drilled 24,840 metres last year to convert known inferred resources to indicated. The update pushed the proven and probable reserves 6% higher to 10.13 million tonnes grading 2.81 grams gold per tonne.
Aura says this resulted in a 7% increase in gold equivalent ounces, and a 7% uplift in the net smelter return royalty, effectively compensating the company for 40% of the tonnes depleted at the mine last year.
Aura says the new reserves extended the mine’s life to eight years.
“Another important example of our exploration success is Aranzazu, where we started production in the end 2018 with a five-year LOM, operated for more than five years, increased capacity by 30%, and now have an 8-year LOM,” Barbosa said.
In Honduras, work at Apoena resulted in the biggest reserve increase since 2017. Back then, Apoena was expected to operate for three more years. Since that time, it has operated for seven years and now is projected to run for another five years.
It has measured and indicated resources of 112.9 million tonnes grading 1.15 grams gold per tonne for 477,656 oz. of metal, and proven and probable reserves of 9 million tonnes grading 0.96 gram gold for 276,226 oz. of metal.
The Borborema project was the other significant contributor to resource growth last year. An August 2023 Borborema feasibility study added 83,000 oz. per year in potential production to the company’s profile during the first four years. It has proven and probable reserves of 22.5 million tonnes at 1.12 grams gold per tonne for 812,000 oz. of metal. Measured and indicated resource also grew to 63.7 million tonnes at 1.01 grams gold for 2 million ounces.
Barbosa says the probable relocation of a federal road at Borborema will potentially unlock another 1.3 million oz. for inclusion in the reserve categories.
“With these successes and the significant expansion potential remaining at all our assets, we remain committed to prioritizing increasing exploration to create value for shareholders in the years to come,” Barbosa said.
