管理層發言
Good morning, ladies and gentlemen. Welcome to First Quarter 2026 Earnings Call. This conference is being recorded, and the replay will be available at the company's website at auraminerals.com/investidores. The presentation will also be available for download. This call is also available in Portuguese. Operator Instructions. Foreign Language. 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, 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; and Kleber Cardoso, CFO. Now I will turn the conference over to Rodrigo Barbosa. You may begin your conference, sir.
Sure. Thank you. Thank you all for this first quarter of the year. As always, I'll be talking about summary of the results and strategic movements during this quarter, and then Kleber will follow with more detailed information about the financials and cash flows. Before I start, I think it would be good to recap that this was a very solid quarter for us where I can show to you that we move forward under the three avenues that we propose to deliver value to our shareholders, and this story has been shared with the market since 2020 and reinforced since the NASDAQ listing last year. We're going to build value to our shareholders by three different avenues. Number one, we're going to increase production. We're going to develop greenfield projects and reach over 600,000 ounces after all the projects are developed. Number two, we still have a significant area unexplored and room to increase life of mine. So we should also see together with the improvement and increase in production, a significant increase in resources and reserves over the next years. And number three, we should tackle also our price per NAV multiple through growth and also improving daily trading volume to the market. So what I'm going to share with you during the next few slides is that consolidates a quarter that consolidates solid steps towards these three avenues. So if I could jump into the first slide. So in summary, again, we reached a new record high production as we already disclosed to the market, of course, now including the MSG acquisition that was last year, included only in December, reaching 82,100 ounces of gold equivalent ounces. And then that together with the higher gold prices, summed $380 million in terms of revenues. Now when we add comparing to first quarter last year, Borborema that was still beginning to ramp up, then now full year of Borborema, stable production in our mines plus MSG, we're going to see higher gold prices. We see the EBITDA three times higher than the first quarter last year, now reaching $244 million, another record high EBITDA for the quarter. Together with our EBITDA, then we can see the all-in sustaining cash costs reaching $1,829. This is a significant increase compared to last quarter, mostly because of now we are consolidating MSG. And as we disclosed to the market since early stage with the acquisitions, we understand that MSG has a higher all-in sustaining cash cost and will be higher during this year once we are focused on the turnaround, preparing the mine and to put production levels above 80,000 or close to 80,000 ounces and all-in sustaining cash cost close to $2,000. But during this first quarter and actually during the second quarter also, we should see MSG with a high all-in sustaining cash cost when we are focusing on our underground preparation, underground safety standards, underground development so that we can prepare this mine for a better production throughout Q3 and then Q4 and actually even better than next year. And I will talk mine by mine in the following slides. So higher EBITDA also translated in a strong recurring free cash flow, now reaching $95 million, which is 109% higher compared to last quarter. This strong recurring cash flow of $95 million, stronger even after a payment of $33 million on hedges due to the Borborema, which is a nonrecurring, but should happen this year and should also happen next year and a temporary working capital consumption of $42 million, and Kleber is going to walk you through in more details about the translation from EBITDA to free cash flow. In terms of net debt, super stable despite the payment of $55 million during the quarter regarding the last quarter of last year investment also in production. We saw a company that has been able to grow and pay solid dividends while maintaining a very low net debt-to-EBITDA ratio. As we are stable in net debt and EBITDA continue to increase. We can see the leverage of the company actually being deleveraged after all the growth acquisitions, payment dividends and strong results from our mines. In terms of net income, as of now, we see, unfortunately, this quarter, there was not a significantly higher gold price as we were seeing in the last quarters along the year 2025. That translates in the lower mark-to-market losses in terms of the old hedges. So that translated into $95 million of net income. And Kleber also is going to walk you through in more detail how we got to the $95 million and also see what would be the adjusted net income without the nonrecurring events. As we continue to grow, as we continue to grow EBITDA, we have no leverage and margins continue to improve, we see room to maintain a high level of dividends to our shareholders, another record high dividends now reaching $65 million of dividends or $0.76 per share. And when you add the dividends we paid in Q2 last year, Q3, Q4 and now this quarter, we see that the last 12 months on the quarterly basis, reaching 4.6% of dividend yield. And as we progress in the production, as we progress during the second semester, we're going to see a higher production compared to the first semester, and we need to think that we can continue to distribute a significant amount of dividends to our shareholders without jeopardizing the growth plan that we have. As additional events and that we reinforce the three pillars that I was mentioning to you earlier in this call, we see that our growth plan continues to be super solid. Number one, we got the agreement signed by Denis to move a road that unlocks significant amount of resource and reserves in Borborema, increasing the life of mine to 36 years now. Of course, we don't want to — we prefer to have a lower life of mine and higher production. So that's why we've been disclosing to the market that we are now finalizing all the studies to increase significantly the production of Borborema so that can actually then stretch a little bit more and decrease the life of mine with increased production of Borborema and we are finalizing all the studies and should we have any news to the market between Q2 or Q3 this year. Very important milestone is that we updated our resources and reserves on the report 20-F. That was a significant addition of reserves, adding 3.8 million ounces of Proven and Probable and also reaching when you add Proven and Probable also with the Measured and Indicated, you're going to see that we can get close to 10 million ounces in our inventory for the year. That's a significant increase compared to what we had before, while we continue to do exploration investments and see also room for further improvement in our resource and reserves as we move along the next years. Very important project Era Dorada. Early this year, as we shared with the market, we got the license to initiate the construction. That was followed by a full board approval to initiate the construction of Era Dorada. We are in full force for the year. CapEx will be divided between this year and next year; I expect production to come now in 2028. We talked about how we increase production. Now go back to the other slide. We talked about that we increased production with last year we had the Borborema ramp up. Actually this quarter we continued to increase a little bit more in terms of production. That's the growth this year. We come from last year of 284,000 ounces of production. This year the guidance is between 340,000 and 390,000. We continue to grow by developing the project and doing acquisitions. Second, we increased significantly our resource and reserve. Third, to tackle the current NAV, we know that we had to address dedicated volume combined with a solid walking the talk and delivering on the projects and growth. We could see that Aura is narrowing a little bit the gap. Our price per NAV, while you still have a lot of room to continue to narrow this gap as we are maintaining a high daily trading volume and continue to grow. There is a very strong correlation between size and price per NAV in the gold sector as we come from, in the past 200,000 ounces of production, now on guidance 340,000 to 390,000. We know how to get close to 600,000. We should see this continue narrowing the gap of price per NAV. One of the factors as being well accepted by the market and widely amplified when we listed in Nasdaq is that we are now trading $94 million. That was the daily trading volume on the last average on last quarter. Compared to last quarter of last year, $31 million. If I remind investors that where we were one year ago, it was $2 million per day. Now we are on average $94 million per day, which is now attracting very large and more sophisticated investors that now pay attention to and now also invest in our portfolio. Next slide. In terms of safety, after a long time without any lost time incident, unfortunately, we had a lost time incident in Borborema, that was on a maintenance on the filter. We are reinforcing all the procedures. There was not followed some of the procedures, so we are reinforcing training, all the managers and all the maintenance team in order to follow the procedures and reinforcing the standards. This person is already back to work. There's no major injury. However, there was some lost time incident related to that accident. In terms of stability of structures, again, all geotechnical structures are in satisfactory level. On the left side of this slide, we can clearly see on the line, the left side shows the last 12 months of production as we are now increasing, getting, from the standard of between 60,000 to 70,000 ounces of production that happened during 2024 and 2025. Now with Borborema and then MSG, we are now increasing to levels above 80,000 ounces and perhaps reach close to 90,000, even above during the second semester, which is now the last 12 months, ramping up our production coming from 265,000 that was on Q3 2015, 280,000, 302,000. We should see these last 12 months continue to increase as we are very comfortable, in line with the guides that we set to the market to finish the year between 340,000 and 390,000 ounces of production. In terms of mine by mine, where we saw, which was expected and due to mine sequencing, due to the budget and the guidance that we sent to the market. Aranzazu, we will now be going to lower grades through this quarter. We should not expect a significant improvement through the second quarter and then some improvement during the second semester in Aranzazu. That's the same that happens in Apoena, that Apoena can relate to other years, where we start the year normally slower, and then production picks up during the third and fourth quarter. Minosa, super stable. It's just a rounding number here from 18 to 17, but it's actually 2% of decrease compared to Q4, and we should continue to see stable production in Minosa and perhaps some improvement during the second semester. Almas, we continue to have a strong production at 15,000 to 16,000 production and implementing an investment where we are increasing the capacity of Almas to reach up to 3 million tons per year by the end of the year. While we are doing underground development so that we can, along the next year, continue to improve efficiency and also production in the project, while exploration efforts on the near mine and on the regional continue to give us strong indicators that this mine is not only going to have a very extended life of mine, but be able to even expand above the 3 million tons per year. Borborema, we had a stronger quarter compared to last quarter, mainly due to a higher throughput, the stabilization of the milling process, stabilization of the filter, but there's still some room to improve production for the second semester. MSG, this increase is mainly due to we are now consolidated three months compared to December last year, there was only one month. We should not expect MSG to improve in the second quarter. Actually, we expect MSG to decrease production during the second quarter while we are totally focused on building infrastructure underground in order to prepare this mine to do the proper production for 2027. But we should see on Q3 and Q4 productivity improving, costs going down, and production going up, but not in the second quarter. Next. In terms of our all-in sustaining cash costs, I will see that reaching $1,829 compared to $1,521. If we were not by MSG, that is a position that we understand that would have a higher all-in sustaining cash cost along the year of 2026. That's because we paid only $76 million on this mine. We understand that they had to go on the turnaround process. If on one hand, our all-in sustaining cash cost is above as expected, on the other hand, the underground development is being well, we think that our expectations are significantly higher than what this mine was performing in the past. For example, the advancement on the underground tunnels, when last year it was close to 35 to 36 meters per month. Now, we are reaching 60 to 65. The efficiency that we want to implement underground to do preparation for a higher production is moving as fast as expected, sometimes even faster than we expect. That if you take out MSG, which should pollute our average during first quarter, second, along the full year, then we would have been on our sustaining cash cost close to $1,500 per ounce. Next. Very importantly that happened also during the quarter is Era Dorada project that now we have full approval. This is an outstanding project that is getting attention from many stakeholders in the world because of its potential to be one of the highest standard in ESG. Why I say so? This project is going to put many different variables in the same and learnings from other mines in the same project. Number one, we bought a Bluestone combined with a geothermal project. This project, as we develop the geothermal project that is coming in the upcoming years, we have renewable access to energy. Actually, we are thinking about increasing the MW in order to supply Guatemala with extra energy and with renewable energy. Number two, we understand that clean water and treated purified water is an issue in the area. There's not many, if there is any, municipalities that have purified water. We will use the water that we have on the ground that we would have to treat anyway in order to put this water back to the rivers. We are now improving, and we approved additional investments on water treatment in order to have this water as purified and potable to the citizens. Renewable energy and clean water for the population together with all the local training and focus on having local people working with us, local suppliers. If we don't have suppliers, we train them, we form them so that we can improve the conditions of living for everyone that is around us. In terms of production, this is a project that stacks on the feasibility study that we mentioned, with annual production of 111,000 ounces, yet with potential to further access upside as we've been doing in Aranzazu, as we've been doing in Borborema. We understand that Era Dorada also has room for further upside as we move forward with operations, as we more implement the project and go to commercial production. Another very important factor is that the significant increase in terms of reserve of this project that when we acquired as an underground, it was close to 1 million ounces. Now we have 1.7 million ounces in terms of reserves, yet with some potential on the regional side to increase resources and reserves. Next slide. I talked about ramp path of Borborema now reaching record high production. That's a significant increase of production profile last year and this year with also lower all-in sustaining costs. Number two, now I'm going to share with you about the increase in resource and reserves, we saw a major change in our inventory in reserves and resources coming from the last report that we filed on the F-1 for the Nasdaq listing was 3.4 million ounces in terms of reserves. Now we are reaching 7.2 million ounces. This is more than double the size of the reserves in one single year. Meanwhile, we come from resources of 4.6 million ounces down to 3.1, but that's very good news because we converted 2.5 million ounces of resources, Measured and Indicated, into Proven and Probable. If you add this back to the 3.1, you would see that we also continue to increase our Measured and Indicated. This is a major milestone that is helping us to just improve our life of mine while we are also increasing production per year. Next slide. I talked about increasing production, I talked about increasing resource and reserves, and now an important factor also to tackle the price per NAV, which is the daily trading volume. As I mentioned to you, we come from $2 or $3 million, $4 million per day. After the listing, then we started reaching $20 million, $10 million, $30 million, $40 million. Now we are, last month, we closed April with $120 million per day in daily trading volume. On average, close to $95 million in the first quarter. That is attracting way more quantity and quality of investors to our portfolio. I'll turn now the presentation to Kleber Cardoso, and I'll come back for Q&A.
Thanks, Rodrigo. Good morning, everyone. I'm going to go over a summary of the main financial KPIs for the quarter. What we can see in a summary is an improvement in basically all of them, with revenues a new record high, closing the quarter with $383 million. The last 12 months, we have exceeded revenues of $1.1 billion. Going forward, we expect this trend to continue. When we see the adjusted EBITDA, as Rodrigo commented before, we have reporting it for the sixth quarter in a row, a record high again, a substantial increase compared to prior periods, but mostly because a higher average gold price in that quarter. $244 million in the quarter, and now exceeding $700 million already in the last 12 months. Also a trend that we expect to continue. When we analyze the net income, we see a substantial improvement compared to the last quarters. That's a combination mainly of two factors. First is the improvement of the operational results, and second is on this quarter, gold price; it increased between the beginning and the end of the quarter, but at a slower rate than the increase we had in the last few quarters. As a result of that, we had lower mark-to-market losses with gold hedged derivatives that is impacting less our P&L this quarter than previous quarters. Later I'm going to go over more detail on this as well. With that, we are reporting $95 million in net income and then $190 million in adjusted net income. In terms of cash and net debt, mostly stable compared to the year-end. We closed the quarter with $115 million in net debt, and we see an important reduction in the financial leverage of the company as a result of stable net debt and increasing accumulated EBITDA. Our net leverage coming from 0.28 to 0.16 at the end of this quarter. Now we just understand the main items between the adjusted EBITDA and adjusted net income for this quarter. Out of the $244 million adjusted EBITDA, we see the three larger gold mines contributed the most. Borborema had the highest EBITDA, as we were already anticipating, $61 million. Minosa and Almas coming strong as well, $58 million and close to $50 million respectively. Araxa also strong for $1 million. Apoena, which we expect a much stronger second semester than the first semester, but already contributing with $24 million. MSG despite we're just starting the turnaround, contributed as well with $17 million in EBITDA for this quarter. Depreciation and amortization, it's been in line with our expectation. It's been increasing the last two quarters, basically because we added two new operations, Morro do Bema commercial production in Q4 2025, and now MSG at full quarter production in 2026. The net financial expenses, once again, the main items are the non-realized and realized losses with the gold derivatives. The non-realized portion of $24 million, and we paid $33 million with the realized losses. Combined, it was $55 million compared to over $100 million we had in losses with derivatives in the last quarter. That explains a portion of also the improvements in our net income. Income taxes expenses coming as well as expected, considering strong results from the operations. Some small other expenses bringing the net income to $95 million. Here to the right side, we excluded the typical non-cash items, the unrealized portion of the losses with the gold derivatives, some non-cash impact in deferred tax income. Excluding those items, the adjusted net income would have been $109 million by the end of the quarter. Here we bring a detailed analysis of the change in the cash position of the company throughout the quarter. We see on the, in red on the left side, here, we start with close to $290 million in cash. Here on the left side, we have what we call the recurring free cash flow to firm, which is the cash flow generated now by the six mines in production. That portion of the business generated $95 million. It's pretty much stable compared to the previous quarter. That's mostly there are two items that consume the cash proportionately higher in the first quarter than we expected for the rest of the year. First is working capital. We have some temporary increases in accounts payables and in inventory in this quarter that should improve in the next few quarters. Also income tax payments, where we paid $52 million in the first quarter. The first quarter is usually the quarter that we paid most of the taxes, where you have annual tax adjustments, especially in Mexico. That will not repeat in the same proportion during the rest of the year. In the middle of the chart, we see the investment for growth, where we invested $26 million, mostly in expansion CapEx, already including Era Dorada. The CapEx, especially the expansion CapEx, is one that we expect to increase throughout the rest of the year, especially as we advance the construction of Era Dorada and also in the expansions in Almas. Here to the right side, we see how we allocated any cash in the financial items. We paid close to $20 million in gross debts, reducing the gross debt of the company, and distributed $55 million in dividends, ending our cash close to $207 million by the end of the quarter. With this, we end the presentation and open to questions. Thank you.
分析師問答
Operator Instructions. Our first question comes from Henrique Marquis with Goldman Sachs.
Two questions from my side. First regarding the cost in Aranzazu, I think it did come above expectations and even above the guidance range for the year. At the same time, this was the only mine; you haven't commented on the mine sequence you weighted on the second half of the year. I just wanted to make sure, first, what really drove the higher cost in Q1? And second, do you see any risks to your cost guidance for Aranzazu? If not, when can we expect some improvement in terms of cost for this mine specifically? Second one just if you could give us a bit more color on the maintenance stoppage of the CIL plant in Borborema, is the situation resolved? Should we see any impacts on the second quarter? That would be great. Thank you.
Sure. In Almas, while you mentioned that Almas had a higher cash cost compared to the guidance, I would also like to take a look on All-in Sustaining Costs that was actually below the guidance. In the first quarter, what we had is the highest strip ratio and slightly lower grades. All that will improve during the second semester. We are very much in line with the guidance for Almas. We should also see improvement in MSG during the second semester. We should also see some improvement in Borborema, Minosa is stable, and Aranzazu, some improvement also during the second semester. As we saw in the past where the first semester is lower production, we should see a significant improvement in the second semester in terms of production, not in the second quarter, but third and fourth quarter. This varies about our mine sequencing. As just a quick reminder for investors is that when we have a gold mining operation it is very different from a major copper or iron ore, where it's disseminated. The grades don't vary and the strip ratio doesn't vary. Gold, by nature, is not homogeneous. It always varies quarter by quarter. Sometimes you reach higher grades or sometimes lower grades. Sometimes you need to push back the pit, increase a strip ratio. Sometimes you just collect what you already pushed back the pit. There is some volatility in terms of the quarter, which if you look back on the last four years, that's what happened to our volatility quarter to quarter. Actually, when we go to the average of the year, we are very much in line with the guidance that we provide to the market. We are very much comfortable that we are moving ahead with our guidance, actually, on the upper hand of the guidance in terms of production.
Thank you. Yeah, I just wanted to clarify...
Borborema, you mentioned about the CIL. Borborema is now producing very well. There's still improvements that we can do, mainly on filters. The filters are where we have the bottleneck. Although we overestimated, now the filters are performing very close or slightly below the plant capacity. We are now already in construction of additional filters, already preparing them for further expansion. The new filters will also unlock some bottlenecks. Those filters will get started during Q3 and Q4. We should see also some improvements in Borborema in terms of production during the year, while we are finalizing our expansion plan for Borborema to reach 4 million tons in the upcoming years.
Our next question comes from Rafael Barcellos with Bradesco BBI.
Rodrigo, despite being solid results, I think there are some watch points when we compare the numbers with your production and cost guidance, right? I just wanted to get a sense of which operations bring some concerns to you when you compare the production and cost evolution versus the guidance for the year. Lastly, if you can give us more details on your expectations for the second half of this year in terms of production and costs. The second question, particularly on the cost side. I mean, a lot has happened since you announced the cost guidance, right? I mean, we have the outbreak of the Middle East conflict. I just wanted to understand what sort of cost pressure you're seeing, driven by the conflict and if you can give, you know, more details on the specific impacts on the cost side. Thank you.
Sure. No, thank you for the question, Rafael. Where it has been more challenging in the short term and not structural for us is MSG, of course. We were not expecting as low standard compression in terms of infrastructure and underground mines. We are now putting more effort, improving underground conditions, in order to bring that mine into the productivity that we believe that can be achieved. Every time we have any kind of issues in MSG, as I was mentioning to the market in the last quarter, we will always focus on the underground development, even if it has to jeopardize the production of the month. If you have any equipment bottleneck, we'll divert all the equipment into underground development, not focus on production. That's what the main mistakes that the past owner was doing, is focusing too much on production and not doing the underground. We need to un-bottleneck the underground mine. This is taking more time than we expected. But these are things that we can correct, things that we can manage. That's within the budget that we were projecting to invest $20 million-$30 million in order to improve those conditions in the mine. On the other hand, structurally, the mine is actually better than what we expected. We saw a significant increase in the life of mine and resource and reserve of the mine come from 340,000, 250,000 up to 700,000 ounces. Still a lot of room to continue to improve resource and reserves in that mine that we have not yet even started to take a look on the exploration; we are focused on the mine. Medium to long-term projections on this mine are actually way better than we expected. Short-term, more challenging, as this is where we should see at the low range of the guidance. Some other mines also, we can go beyond what we were expecting to offset part of this. Yet it's not our focus to have a high production this year in MSG. Our focus is to improve underground mine conditions and finish the year with a very clear view that we can bring that mine above 80,000 ounces of production per year and close to $2,000 of all-in sustaining cash costs. That hasn't changed. Actually, as I mentioned, when we're doing underground development, we are moving far more efficient than we were doing in the past. Again, we were moving about 35 meters per month. Now we are reaching 60 to 65 meters per month. This is being very satisfactory to see that we can, once we put them underground into stable conditions, improve efficiency according to our plan. In terms of the cost of diesel, this is all across the world that it's happening, impacting all these sustaining cash costs for diesel. It should be between, depending on the mine, 6% to 8%. Even if you increase 10% or 20%, that will have a 1% or 2% impact on our sustaining cash cost. And of course, then higher diesel triggers some inflation, many other different matters. There's no other sector that is way protected to inflation. If inflation picks up, gold is likely to increase. Somehow the investors are very well protected in this sector through inflation in U.S. dollars.
No, just as a follow-up on the first question. I'm understanding that, you know, you're flagging more challenges on the MSG side. Is there any other operation that you'd like to highlight as a watch point or anything that we should look at particularly in the second half? Thank you.
No, you should see upsides coming from Almas as we continue to do exploration. We are increasing capacity. That mine, as I mentioned, we are already expanding to 3 million tons per year. We are just waiting for more confirmation and more exploration information in order to go even further and perhaps go to 4 million tons per year, which will combine several open pits and also underground development. That's a very important upside that should be tackled by the market in the upcoming quarters. Together with Borborema, we are also now, as we signed the contract to reallocate the road, and now we are finalizing all the engineering for improving capacity up to 4 million tons. We have several alternatives for more access to water, which is important in order for us to increase capacity. In the following couple of months, we should have a decision on that, wrapping up with the new engineering so that we can approve in the board between Q2 or Q3 expansion for Borborema. Expansion coming up in Almas, expansion coming up in Borborema. While we continue to develop Era Dorada now going into full construction.
Our next question comes from Lucas Laghi with XP.
Two follow-ups from our side. The first one on MSG. Rodrigo, you commented on some of the improvements that we expect throughout the year, but just wanted to better understand the timeline regarding the turnaround on the project. Now that you're much more familiar with the operations, what could we expect in terms of run rate production by year-end? You mentioned that we should expect some decrease by Q2, but just wanted to understand what could be the run rate by year-end. What are the most important milestones that we should be aware of such turnaround? Finally, still on MSG, do you see any upside considering the potential normalized volumes for the operations by the end of this turnaround? My second question on Borborema, another follow-up, you mentioned the expansion to 4 million tons of plant feed after the expansion. Just to get a better idea on timeline, when could we see such investments being deployed? If you could give us any idea on CapEx and production improvement considering the marginal grades for the expansion would also be very helpful. Thank you.
Okay. For MSG, the idea is to finish the year with a very clear view that we will be able next year to be close to 80,000 ounces of production per year and close to $2,000 of our all-in sustaining cash costs. That's our main objective. Our key drivers for you to take a look on that is how far, how fast we are advancing on the underground development. That's why I reinforce that in the past year, we were doing 30–35 meters per month. Now we are close to 60–65 meters. We should continue to advance underground development so that we can invert the methodology, right? Now the mine is operating from up to down, and now we need to do underground development in excess so we can start doing bottom up. This is what will change structurally our efficiency, recover, dilution and also productivity at the mine. We need time to do that, right? We cannot do all those underground developments in a couple of months. It takes several months, and we believe that we will be able to conclude that preparation by the end of this year. You should not see strong numbers in Q1. Q2, as I mentioned, slightly and gradually increased progress on Q3 and Q4, not because of structurally the diversion of the methodology, but now we are gaining efficiency, reducing costs all across the board with contracts, redefining some scope with suppliers and so on. That's all happening at the same time. We are very comfortable that we will achieve this goal by the end of the year. In terms of Borborema, we have not yet approved in the board and disclosed the CapEx. Unfortunately, I cannot yet give you a guidance on this, but we will do so as we approve the information at the board. The investment, relocating the road, preparing a water assessment and everything should take close to two years, but we will get more precise information as we approve in the board. As you well mentioned, we should not expect, for example, to keep exactly the same grades or doubling the capacity. That does not necessarily mean that we'll double the production because then we cannot supply the additional capacity with higher grade. Of course, when you increase capacity, you can have both high grade and medium grade. That will translate into higher production. It will translate into lower cash cost as well, but not necessarily will double the gold production.
Our next question comes from Lawson Winder with Bank of America.
Appreciate the update today. Quick question I'd like to ask about staging. There's a number of projects happening at the current moment. There's the Borborema expansion. You're looking at going underground at MSG. There's Matupa waiting right after Era Dorada. Are you confident that you have a large enough team in place that you guys can handle all this? In answering that question, how do you think about the staging of all these projects and making sure that you have the best people in the right place at the right time?
Thank you for the question, Lawson. That's our main discussions that we have internally. It's about people. We have a lot to perform in order to increase capacity. Very few companies in the world can come from close to 300,000 ounces, 285,000 ounces of production last year to reach over 600,000 ounces without new M&A, which we are also planning to do. That of course, drags a lot of management attention. We have a very strong team to build new mines. It's the same team that built Almas. It's the same team that built Borborema. It's the same team that's now in Era Dorada. Of course, this team is increasing. The good thing is that we are not overlapping the construction of Era Dorada and Matupa. Right? We don't want to build both simultaneously. We could start building Matupa right now. It is fully licensed, and we have the feasibility study. We are updating it because we are going to incorporate new deposits. We want to create a lag in order not to overlap the same functions of the team. During the construction, we have the preparatory early works, then we have the plant and the ramp-up. We don't want to overlap exactly the same. We want to lag. Perhaps start the construction of Matupa during next year, where we will be already on the final phase of Era Dorada. In Era Dorada, we will already be at very good speeds. The team also combined with the local team in Borborema and Almas. It's not taking full attention from the construction team in Borborema and full attention of the construction team in Almas, where there's some shared activities. We will also bring engineers and construction teams into the sites, not only using the Era Dorada team. It is something that we need to pay close attention to. That's most of why we are not overlapping construction of Matupa and Era Dorada. It's something that we cannot disregard, and that's a concern that we have. That's where myself, Kleber, and the technical team are spending a lot of time.
I think you read my mind because you mentioned M&A as another demand on the time of management. Could you just describe the current pipeline of M&A opportunities, particularly vis-à-vis the last year and the year before? Would you describe the opportunity as increasing or decreasing? Any commentary on valuation where sellers are thinking of valuation and where buyers are, and whether there's a gap there or whether you think there's room for negotiation?
Yeah, good question. It was increasing, you know, opportunities, but not for the right reasons, just because in the past, a couple of months ago, when gold price reached $5,500 or $5,400, there was an increase in a number of opportunities, but the expectation of the seller was completely out of what we would also pay. Now it's accommodating the expectation of the seller and expectation of the buyer. There's still some gap, but there's more room to work. We are confident that now we can get more traction in M&A activities along the year. Of course, it's unpredictable. M&A is a combination of what we want and what is available. The fact is there are opportunities. We are looking at a few alternatives. There's nothing that is advanced. There's nothing that is close to happen. We are, of course, prospecting and engaging a few different conversations. M&A is like an investor. What the investor does, right? They select 10 companies, start analyzing, deep diving in six, start negotiation with five to get only one. It takes time.
Our next question comes from Tathiane Candini with JP Morgan.
I think I just have a couple of follow-ups from the questions that you already answered. My first one, and I would just follow up on the question that you just answered on M&A. As you already flagged, I think we have Matupa already under the radar. The company still has a very comfortable cash flow and balance sheet position at this point. My first question here is, when it comes to M&A, you mentioned that you know what you want. Can you share just a little bit on what are the main perspectives that you search when you are thinking about the M&A, if you have any specific region that you see more availability, if you want to grow more in Brazil? Just to understand a little bit of the profile that you are looking for the next M&As. And I will do my question after.
No, it's clear that we are an Americas player—North America, Central America and South America. We are not focusing on looking alternatives in Africa, Asia or Australia. We look at gold and copper; we like a combination of gold and copper. We used to be 30% copper, 70% gold. Gold price has improved. We are investing in gold mostly in the last three years. The copper has been reduced; we would prefer to increase our copper in our portfolio, yet the alternatives that we've been seeing, gold is way more attractive. That's why we are now more on gold. In terms of, we don't look for state-of-the-art projects as our preferred targets. Those projects tend to be overpriced and overvalued. Normally companies overpay for state-of-the-art projects that have a full feasibility, big production, higher grade and no concern in any kind of risks. I think what we've done in the past is a very good example of what we would look for in the future. Take Borborema. We don't like also to take a full exploration risk. We are not an exploration developer. We don't feel we have the skills to find new mines out of the blue. We like to enter any project that already has good progress in terms of exploration and is significantly de-risked in exploration. Borborema already had resources and reserves but had problems with water access. We had an angle to solve the water access and then we could implement the project. Era Dorada could be defined as state-of-the-art in terms of grades and capacity, but had a strong local and community opposition because the project was open pit. We converted back to underground, so we could unlock the opposition from the community. Actually, now they support the project. That's why we are moving forward with them. Those are greenfield projects, close to construction. Not a lot of exploration risk, but had some issues that we had to put our people to work and unlock the value. Another example, MSG, a mine that's already operating but underperformed in terms of productivity that we understand that we can buy for a good value, implement the turnaround, improve efficiency gains, and then put that mine into higher production. There's always going to be very strong focus on where we are adding value to that project, not just buying at full price to increase capacity for size alone.
Very clear on that one. The second question is still on MSG. I think that's the main subject here today. When we check your guidance on costs, of course, they are higher than the average of your projects. This implies that your second half costs are going to be better. How confident do you feel that this is going to be delivered? What is your main struggle to actually reach the guidance? Do you feel there is room for this to get even further than the top of your guidance here?
No, I don't know where you got the number that we need to perform as a half during the second semester because that should also have a higher production. On the weighted average, maybe I'm not sure which calculation you made, but there will be improvements in the second semester. Structurally, we will see improvements in Q3 and Q4. Structurally, MSG will not have the average of our portfolio. Structurally, it is a mine that will push our all-in sustaining cash costs above the average that we have. That's not a problem because we paid only $76 million for this, and the internal rate of return of this project will be significantly high to our shareholders. Particularly now, it was already high, and now you added a new resource and reserve. It's a project that we feel very comfortable with. It's becoming more challenging in the short term, as we expected. On the other hand, it is way above expectations in the long term. We are not focusing too much on production or cash costs during the first and second quarter, and we'll see improvement in the second semester. Our main objective, which is the KPIs and the variable remuneration on this project, is more toward preparing this mine to get close to 80,000 ounces of production and close to $2,000 of all-in sustaining cash costs, so that we can plan that for next year.
Okay. Very clear. My last question — sorry.
Go ahead.
Yeah. No, my last question, I think we didn't discuss this a lot here in this call, just to kind of understand your view on gold prices. I think overall market remains very bullish on the overall story. We agree with that. Just wanted to hear your thoughts on how you see all this impact from the recent war developments and your perspective for this year.
First, I'd like to disclose that I don't feel that I am an expert in gold price, right? I think investors are way more informed on that. We don't take decisions expecting gold price to go up or down. We take decisions based on what is the higher production we can achieve at the lowest cost, and that's it. Gold price is just an input. Nevertheless, I need to learn, I need to participate and analyze, and I talk to many people participating on other boards. The idea is that on the big picture what has been pushing gold prices up is two major variables. Number one, the excess of capital, the excess of liquidity in the world. You see United States at $39 trillion now on debt, and plus $2 trillion per year in terms of deficit. Now changing treasuries, paying treasuries that cost 1%–2% to a treasury that costs close to 4%. That's increasing significantly the financial expense over excess of debt, over excess of deficit. The world is starting to think about where this can go, maybe we might have to print or maybe they'll have to lower interest rates and live with inflation. That has not changed. Actually that is, the wars are even making this worse because that is the same situation with Europe. Europe is way worse than the U.S. Well, comparatively to every other country in the world, the U.S. is not that bad, but yet, it's not easy to tackle that deficit. The whole world now, the U.S. is reducing the amount they spending on defense in Europe and other countries. They are now talking about increasing the budget for defense while they should be decreasing the deficit. That's only pushing deficit to higher levels. That's only pushing the need to print money higher. Those trends can continue to push gold ahead. The second point that pushes gold ahead has not changed and actually is also increased in terms of pressure, which is the result of the war in Ukraine and Russia, where the world confiscated assets and restricted access that has hit the alarm that countries that do not feel aligned with the United States should not have super high exposure to the U.S. dollar. What we've been seeing now in the world is that China continues to import and produce higher amounts of gold and central banks are also in very high purchase. Last quarter, another record high purchase from central banks, particularly in China, which they disclosed. We do not know what they do not disclose. Those factors are getting worse and worse. The factors that push gold higher are there and becoming more present. On the short term there is volatility. My humble opinion is that we will continue to see gold prices going up. Actually, I would also note that who is buying treasuries now? We see now Fed buying treasuries in the internal market in the U.S. The world is not, not anymore, giving that much of support for U.S. debt. That is a structural significant change in the world, while perhaps the U.S. will not be as dominant in the upcoming years and decades as a major presence. We continue to be important, but perhaps losing some relative importance. Gold plays a major role in this rebalancing of currencies.
Our next question comes from Edgard Pinto de Souza with Itau BBA.
Hi. Hi, everyone. Rodrigo, Kleber, Natasha, thank you for the questions. I want to start, I'm sorry to insist on this point, Rodrigo, on the cost front. I think that you were super clear about the gradual improvement in production throughout the year. This makes us comfortable that you are going to achieve your production guidance for the year. On the cost front, we are a little bit disappointed in the first quarter. We understand that there are some mine sequencing, there is the infrastructure works at MSG and so on and so forth. We have something that is important, that is the FX impact, right? I want to understand from you, first, which was the average FX that you considered during the guidance? Do you have any sensitivity about the impacts of a stronger BRL and also a stronger Mexican peso on your cost guidance? This, despite you being very comfortable about the operational performance, maybe could put your performance in the year closer to the upper end of the guidance, right? Do you think that there is room to be even better in terms of operational performance and more than offset the impacts of the FX? My second question is related to the hedge. How are you going to think about hedging policy going forward? The fact is, for Almas and for Borborema, you started building the hedge once you approved the projects, right? Now you approved Era Dorada, I wanted to understand what you are going to do in terms of hedges for Era Dorada, if you are doing something or not, and when you want to build that. Also, to connect this with my first question. Do you consider any structure in terms of FX hedges, zero cost collar and so forth? We know that some companies, not gold companies, but other companies that we cover, they are using a lot of structures of zero cost collars for FX, for costs and so forth. How do you think about that also? Thank you.
I will start the first question, and then I'll ask Kleber to finish and talk more specifically on FX and hedges. In terms of our cash costs, you know, sustaining cash costs, I think just as we highlighted and I will reinforce, it varies quarter by quarter and mine by mine, according to the mine sequences, mainly due to strip ratios and whether you are pushing back the pit or not. We will see progress in terms of production during the second semester that gives us confidence that we can reach production at the middle, if not above the middle, of the guidance. That will reflect also in cash costs. We'll see higher production and lower cash costs also very comfortably that will be in the guidance. Kleber, if you want to talk a little bit more on FX impact in Brazil and Mexico, I think that would be good.
Edgard, the FX was around R$5.30 that we used in the guidance. There is some challenge, but so far as we see and with our running forecasts, we would still be comfortable delivering the cash costs and our all-in sustaining costs of the Brazilian operations. We have also cost reduction initiatives in the business units. Considering the levels where the Mexican peso and the Brazilian real are now, we're comfortable with that guidance without needing to review the guidance considering the current appreciation of those two currencies. On the hedges and compared with what we did for Vergel and Almas, it's important just to first understand the context when we do the hedges, and second, where we are now. Historically, we did hedges to protect the company because of major investments we did at those times. If gold prices had some sharp reduction that could put the company at risk at the time. Historically we did a zero cost collar because selling calls was a way to finance the insurance, which were puts, to hedge until we got the payback and make sure that the money we invested in the project we got the payback. What's the difference now? First is in terms of company, we are much more diversified. If you remember when we started building Almas, we had only three other mines; now we have six. We are less exposed to risk with one single project. Second, our margins now are much stronger and our cash conversion higher. We have much more buffer and the financial risk is much less. Regardless of that, we are analyzing; we are still discussing with the board. Potentially we have now an opportunity not to do a zero cost collar like we did in the past. We might buy put options because gold price was so much higher in the last few years. That might be much cheaper today to buy put options. But because there has been so much volatility in the gold prices in the last couple of weeks, any option becomes more expensive. We are analyzing and keep quoting and seeing the cost of these structures and discussing with the board the scenarios and the right timing to implement this kind of hedging. For exchange rate, there's nothing you can do structurally in the long term. You can hedge short term, that has a cost, but structurally you don't change or protect your business by a short-term FX hedge. If you have an important milestone and you need to pay CapEx, you can think about hedging part of it, but structurally there's nothing you can do. What we can do is, if the exchange rate pushes our costs up, have more focus and attention, and try to bring back costs down by new efficiency gains or cost reduction initiatives.
Okay. Thank you, Rodrigo. Really like the pictures from Era Dorada. Very interesting to see. Things are advancing there. Thank you.
Our next question comes from Marcelo Arazi with BTG.
Two questions on my side as well. First, the company has been delivering several triggers and milestones, especially since the IPO last year. Looking forward, what else can we expect to be announced until the end of this year? What are the next milestones for the investment case? If I may have a second one, just a follow-up on the M&A discussion. We have been seeing other bigger gold projects being developed in Latin America. Especially in Guyana, with productions in the north of 200,000 to 250,000 ounces. Can we expect Aura to be looking at this kind of projects? Rodrigo mentioned that it has to be something that Aura can add value to. And despite being bigger assets, I think they are still sitting in more challenging jurisdictions that you guys can operate quite well. Just wanted to hear your thoughts on that as well. Thank you.
Thank you, Marcelo. In terms of triggers, I think we have expansion of Borborema. We have exploration and further expansion perhaps in Almas, but that will be more towards the end of the year. We are also updating the feasibility study for Matupa towards the end of the year. And of course, the improvement of the progress we make with the turnaround in MSG. Those are important factors for us to monitor along the next quarters. In terms of M&A, we monitor those transactions. Some of them we participate in, some we don't. Some we like, some we don't. It's not that we do not like bigger mines, 200,000 or 300,000 ounces, but we need to find where Aura is going to build value into that operation. That will always depend on the entry price. We are very concerned with internal rate of return. If you overpay, your internal rate of return is reduced. Normally you overpay for very big assets, so you might leverage or put a lot of capital into a lower-return project that can jeopardize the average. Our strategy has been super successful so far. We believe we can continue to do projects between 100,000 and 150,000 ounces where it shows our ability to have a higher internal rate of return up to 1 million ounces. After that, we would have to rethink our strategy. For sure then we would have to go into a bigger project that has lower returns. I think there's still room for us to continue to grow in the high-return projects up to 1 million ounces. After that, we'll have to reshuffle and rethink the strategy and go to lower-return projects.
The Q&A session is over. We would like to hand the floor back to Mr. Rodrigo Barbosa for the company's final remarks.
Now, just to recap, we are moving forward very solid steps towards our story that we shared with the market first in 2020 and recently, with the Nasdaq listing, in mid-2025. We are increasing production. We developed Borborema last year. Borborema continued to improve production this quarter. We mentioned that we would continue to grow through acquisitions. We acquired MSG. MSG now is in the turnaround process. Our focus is to buy greenfield projects that are ready to build or mines that are in operations that we have an angle to add value, do the turnaround. We did that also with MSG. We mentioned to the market that we would start construction of a new greenfield project during this year, either Era Dorada or Matupa. We just approved the construction of Era Dorada. We also mentioned to the market that we would increase resource and reserves. We just published a 20-F with a significant increase in reserves to over 7 million ounces, and now resources above 3 million ounces. That's also extending the life of mine of our mines, while we are also increasing production. We also mentioned to the market that we would have to increase our daily trading volume, and now we are delivering on average the last quarter $95 million. We are taking very solid steps towards our strategy to reach above 600,000 ounces, which is already defined. We know very well how to get there. We would like to continue to grow through M&A. I just mentioned that we aim to achieve 1 million ounces, but that would require new M&A that we should do perhaps in the upcoming years. It was also a solid quarter in terms of results as the market and analysts questioned our all-in sustaining cash costs above the other quarters. Most of these come from MSG, which was expected, and secondly, also from mine sequences, which was also expected. We should see the second semester coming in strong, which will improve production and also reduce the all-in sustaining cash costs. While doing all of that, continue the very solid step with dividends, continue to be one of the highest dividend yields in the sector. Despite that our shares have significantly appreciated, our dividend yield of course reduced compared to what we were one year ago, not because of the lower dividends, just because now the market started to pick up. There's still a lot of room to increase the multiple, and we will be tackling this multiple by increased liquidity, more conversations with investors, telling more of the story and walking the talk and increasing our size. I thank you all for participation, and I will be following up with the market as we have any kind of news.
Aura's conference is now closed. We thank you for your participation and wish you a nice day.