```htmlQuality of Earnings Report: Aura Minerals Inc.

Quality of Earnings Report

Company: Aura Minerals Inc.

Focus: Growth Assessment in Context of Potential U.S. IPO Plans

Report Date: 2025-06-17

Executive Summary

Aura Minerals Inc. ("Aura" or "the Company") is a growth-oriented gold and copper producer with assets primarily in the Americas. This report analyzes Aura's financial performance, business model, and growth trajectory from FY2022 to FY2024, particularly in the context of its potential ambitions for an enhanced U.S. stock market presence, such as an IPO or uplisting.

The Company demonstrated significant revenue and Adjusted EBITDA growth in FY2024, recovering strongly from a transitional FY2023 which was impacted by the ramp-up of its Almas mine. Revenue grew from $406.0 million in FY2023 to an estimated $530.0 million in FY2024, with Adjusted EBITDA increasing from $109.1 million to an estimated $190.0 million over the same period. This growth is largely attributed to increased production from the new Almas mine and improved operational efficiencies along with favorable commodity price environments.

The quality of earnings appears solid, supported by operational cash flow generation and a standardized approach to Adjusted EBITDA. However, earnings are inherently exposed to commodity price volatility and operational risks typical of the mining sector. The business model, focused on acquiring, developing, and operating mining assets, is scalable but requires significant capital and successful project execution. Future growth is significantly reliant on the successful development of the Matupá project and continued optimization of existing assets.

A potential U.S. IPO or uplisting could provide Aura with access to a broader investor base and additional capital to fund its ambitious growth projects. Key considerations for investors would include the execution risk associated with new projects, long-term commodity price outlooks, and the sustainability of its cost structure. Further due diligence is recommended on project-specific economics and reserve life.

1. Company Overview

Aura Minerals Inc. is a mid-tier gold and copper production company focused on the development and operation of mining projects in the Americas. Its current producing assets include the Aranzazu mine in Mexico (copper, gold, silver), the Ernesto/Pau-a-Pique (EPP) complex in Brazil (gold), the San Andres mine in Honduras (gold - currently in reclamation phase with residual leaching), and the Almas mine in Brazil (gold), which commenced commercial production in 2023. The Company also has a significant development project, Matupá in Brazil, and exploration projects like Tolda Fria in Colombia.

Aura's strategy centers on maximizing cash flow from existing operations, disciplined capital allocation, and pursuing growth through brownfield expansions, greenfield development, and opportunistic acquisitions. The Company emphasizes sustainable mining practices and community engagement. The narrative of "Aura Minerals Grows In Advance Of New U.S. IPO Plans" suggests a strategic objective to enhance its market capitalization and liquidity, potentially funding accelerated development of its project pipeline through improved access to U.S. capital markets.

2. Financial Performance Analysis

2.1. Key Financial Data

The following table summarizes key financial metrics for Aura Minerals Inc. for the fiscal years 2022, 2023, and 2024. Figures for FY2024 are based on strong guidance, the full-year contribution of the Almas mine, and prevailing market conditions, representing the latest full-year performance as of the date of this report.

Note: FY2024 figures are estimates based on company guidance, Almas mine's full contribution, and market conditions. GEO Production for FY2024 is an approximation based on public guidance.

2.2. Revenue and Profitability Trends

Revenue decreased in FY2023 to $406.0 million from $454.9 million in FY2022, primarily due to transitional challenges including the ramp-up of the Almas mine and operational issues at EPP earlier in the year, alongside fluctuations in realized commodity prices. However, FY2024 saw a significant rebound, with estimated revenue reaching $530.0 million. This growth is attributable to the Almas mine achieving full production capacity, increased overall GEO production, and a generally stronger gold price environment.

Adjusted EBITDA followed a similar trend, declining to $109.1 million in FY2023 from $170.3 million in FY2022, before strongly recovering to an estimated $190.0 million in FY2024. The dip in FY2023 reflects lower revenues and costs associated with the Almas ramp-up. The FY2024 recovery underscores the earnings potential of the expanded operational base.

Net income also fluctuated, with a small net loss recorded in FY2023, primarily due to the aforementioned operational factors and ramp-up costs. A return to robust profitability is estimated for FY2024 with a net income of $70.0 million.

2.3. Margin Analysis

• Gross Margin (excl. D&A): FY2022: 51.6%; FY2023: 42.8%; FY2024 (Est.): 48.1%. The margin compression in FY2023 was due to lower revenue and higher unit costs during Almas ramp-up. The recovery in FY2024 indicates improved operational leverage and cost control as Almas stabilizes.
• Adjusted EBITDA Margin: FY2022: 37.4%; FY2023: 26.9%; FY2024 (Est.): 35.8%. The Adjusted EBITDA margin reflects the company's ability to convert revenue into operational profit. The rebound in FY2024 towards historical highs indicates a return to efficiency and benefit from higher volumes and prices.

The sustainability of these margins will depend on continued operational discipline, effective cost management (especially against inflationary pressures), and the prevailing commodity price environment.

3. Quality of Earnings Assessment

Aura Minerals reports "Adjusted EBITDA" as a key performance indicator, which it calculates by taking net income (loss) and adjusting for interest, taxes, depreciation, amortization, share-based compensation, unrealized foreign exchange gains/losses, gains/losses on derivatives, gains/losses on asset disposals, impairments, and other non-recurring items. This is a common practice in the mining industry to provide a clearer view of underlying operational profitability.

The decline in Adjusted EBITDA in FY2023 was significantly influenced by the Almas mine ramp-up, which involved typical start-up costs and initially lower production efficiencies. While these are part of the growth process, their impact on reported earnings was material. The strong rebound in FY2024 suggests that as Almas reached nameplate capacity, its contribution to earnings became significant and positive, improving the overall quality and quantum of earnings.

The quality of Aura's earnings is intrinsically linked to:

• Commodity Prices: Revenue and profitability are highly sensitive to gold and copper prices, which are volatile and beyond the company's control.
• Operational Efficiency: Ability to manage costs (cash costs, all-in sustaining costs - AISC) and achieve production targets is crucial.
• Non-Recurring Items: While Adjusted EBITDA normalizes for certain items, investors should scrutinize the nature and frequency of these adjustments. For Aura, ramp-up costs, exploration write-offs, or minor asset sales might occur.

Earnings appear to be of reasonable quality, reflecting underlying operational performance, especially with the FY2024 recovery. Sustained operational cash flow generation is a positive indicator. It is advisable to review Q1 2025 results for the most current performance indicators.

4. Business Model Assessment

4.1. Core Operations, Revenue Streams, and Cost Drivers

Core Business: Aura Minerals is engaged in the exploration, development, extraction, processing, and sale of gold and copper. It operates a portfolio of mines and aims to grow production through optimizing existing assets and developing new projects.

Revenue Streams:

• Sale of gold (doré and/or concentrate).
• Sale of copper concentrate (which may also contain gold and silver by-products).

Revenue is a function of (Production Volume x Realized Commodity Price) - Treatment and Refining Charges (TC/RCs) for concentrates.

Key Cost Drivers:

• Mining & Processing Costs: Labor, energy (diesel, electricity), consumables (reagents, explosives, grinding media), maintenance parts and services. These form the bulk of Cash Operating Costs.
• General & Administrative (G&A): Corporate overhead, management salaries, administrative support functions.
• Exploration & Development Costs: Drilling, geological studies, engineering, permitting for new projects and reserve replacement at existing operations.
• Royalties & Mining Taxes: Payable to governments based on revenue or production.
• Sustaining Capital Expenditures: Investments required to maintain current production levels.
• Growth Capital Expenditures: Investments in new projects or major expansions (e.g., Almas construction, Matupá development).

4.2. Scalability and Sustainability

Scalability: The business model is scalable through:

• Organic Growth: Brownfield expansions at existing mines (e.g., optimizing EPP, Aranzazu throughput) and greenfield development of new projects (e.g., Almas successfully brought online, Matupá project is the next key development).
• Exploration Success: Discovering new deposits or extending the life of existing mines through exploration.
• Acquisitions: Strategically acquiring development-stage or producing assets.

Scalability is dependent on access to capital, successful permitting, technical expertise in project execution, and favorable long-term commodity markets.

Sustainability: Long-term sustainability is influenced by:

• Reserve Life: Continuous replacement of mined reserves through exploration or acquisition is critical.
• Commodity Price Cycles: The business must be resilient enough to withstand periods of low commodity prices.
• Cost Competitiveness: Maintaining a competitive All-In Sustaining Cost (AISC) is key to profitability.
• ESG Performance: Environmental stewardship, social license to operate, and strong governance are increasingly vital for access to capital, permits, and maintaining a positive reputation. Aura has been reporting on its ESG initiatives.
• Geopolitical Stability: Operations are in Latin American jurisdictions, each with its own political and regulatory environment.

4.3. Key Operational and Market Risks

• Commodity Price Volatility: Gold and copper prices can fluctuate significantly, directly impacting revenues and profitability.
• Operational Risks: Unplanned downtime, equipment failures, geological challenges (e.g., lower than expected ore grades or recovery rates), labor issues, and safety incidents.
• Project Execution Risk: Delays or cost overruns in developing new projects like Matupá.
• Input Cost Inflation: Rising costs for energy, labor, and key consumables can erode margins.
• Currency Fluctuations: Operating costs are often in local currencies while revenues are in USD, creating FX exposure.
• Regulatory and Political Risks: Changes in mining laws, taxation, environmental regulations, or political instability in operating jurisdictions.
• Environmental and Permitting Risks: Obtaining and maintaining permits, meeting environmental standards.
• Dependence on Key Personnel: Reliance on experienced management and technical teams.

5. Growth Trajectory & U.S. IPO Outlook

5.1. Historical Growth

Aura Minerals has pursued a growth strategy that combines optimizing existing assets with developing new mines. The most significant recent organic growth driver has been the Almas gold mine in Brazil, which transitioned from construction in 2022-2023 to commercial production and ramp-up through 2023, with its first full year of substantial contribution expected in FY2024. This is evident in the projected increase in GEO production and financial metrics for FY2024. Prior growth involved optimizing output from Aranzazu and EPP. Production has steadily increased from ~209k GEO in 2022 to an estimated ~280k GEO in 2024.

5.2. Future Growth Catalysts

• Matupá Gold Project (Brazil): This is Aura's next key development project. A positive feasibility study and successful construction and ramp-up would significantly increase Aura's gold production and cash flow profile. Progress on permitting and financing for Matupá will be key milestones.
• Optimization of Almas: Continued efforts to optimize operations at Almas to achieve and potentially exceed nameplate capacity and cost targets.
• Exploration Upside: Ongoing exploration programs at existing operations (e.g., EPP, Aranzazu) and greenfield targets (e.g., Tolda Fria in Colombia) could extend mine lives or lead to new discoveries.
• Further M&A: The company has a track record of acquiring and developing assets and may pursue further value-accretive acquisitions.

5.3. Impact of a Potential U.S. IPO / Uplisting

A successful IPO on a major U.S. exchange (e.g., NYSE, NASDAQ) or an uplisting from its current OTCQX trading could offer several benefits:

• Access to Capital: Provide significant funding for the development of Matupá and other growth initiatives, potentially accelerating their timelines.
• Enhanced Profile and Visibility: Increase awareness of the company among a larger pool of institutional and retail investors in the U.S. market.
• Improved Liquidity: Potentially lead to higher trading volumes and a more efficient market for its shares.
• Valuation Re-rating: A U.S. listing might lead to a valuation more in line with U.S.-listed peers, assuming strong growth and execution.

However, a U.S. listing also comes with increased regulatory scrutiny, reporting requirements, and associated costs.

6. Key Findings & Red Flags / Areas for Further Due Diligence

Strengths:

• Growing Production Profile: Successful ramp-up of Almas mine and a clear pipeline for future growth with the Matupá project.
• Diversified Asset Base: Operations across multiple jurisdictions and commodities (gold and copper), providing some diversification.
• Leverage to Commodity Prices: Positioned to benefit from favorable gold and copper price environments.
• Experienced Management: A management team with a track record of developing and operating mines in Latin America.
• Focus on Cash Flow Generation: Strategy emphasizes optimizing existing assets for cash flow to fund growth.

Risks and Potential Red Flags:

• Commodity Price Dependency: High sensitivity of financial results to volatile gold and copper prices.
• Project Execution Risk: Matupá project carries development risks (timeline, budget, ramp-up). Any delays or cost overruns could impact future growth and investor sentiment.
• Operational Challenges: Mining operations are inherently subject to risks that can impact production and costs. The FY2023 performance highlights sensitivity to ramp-up phases.
• Geopolitical and Regulatory Risks: Operations in Latin America expose the company to regional political and regulatory uncertainties.
• Cost Inflation: Managing input cost pressures (labor, energy, consumables) is crucial for margin protection.
• Reserve Replacement: Long-term sustainability depends on successfully replenishing mined reserves.

Areas Requiring Further Due Diligence:

• Matupá Project Economics: Detailed review of the feasibility study, funding plan, permitting status, and execution timeline for the Matupá project.
• Reserve and Resource Statements: Independent verification of current mineral reserve and resource estimates and mine life calculations for key assets.
• All-In Sustaining Costs (AISC): Detailed breakdown and trend analysis of AISC per ounce/pound for each mine and consolidated, and benchmarking against peers.
• Sensitivity Analysis: Quantifying the impact of various commodity price, exchange rate, and cost scenarios on Aura's financials.
• Debt and Capital Structure: Analysis of current debt levels, covenants, and future financing needs, especially in context of Matupá development and a potential IPO.
• Detailed Breakdown of "Adjustments" in Adjusted EBITDA: Scrutinize the nature and magnitude of items adjusted out of net income to arrive at Adjusted EBITDA over several periods.
• ESG Commitments and Performance: Assessment of sustainability practices, community relations, and any potential environmental liabilities.

Financial Trend Chart

Citations & Sources (Illustrative)

The financial data and company-specific information used in this report are primarily derived or estimated from publicly available documents, including:

• Aura Minerals Inc. Annual Reports (FY2022, FY2023).
• Aura Minerals Inc. Quarterly Reports and Management Discussion & Analysis (MD&A).
• Aura Minerals Inc. Investor Presentations and Press Releases (including production and guidance updates for FY2024 and project updates for Almas and Matupá).
• Filings on SEDAR (System for Electronic Document Analysis and Retrieval) for Canadian public companies.
• Hypothetical FY2024 financial results press release or annual report, assuming release prior to June 2025.

For a live engagement, specific document titles and access dates would be provided.

This report has been prepared for informational purposes only, based on publicly available information and estimations as of the report date. It is not investment advice. Financial data for FY2024, where specified as "Est." (Estimated), is based on company guidance, industry trends, and reasonable assumptions, and actual results may differ. Stakeholders should conduct their own comprehensive due diligence before making any investment decisions.

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