Aura Minerals

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Aura Minerals

Aura Minerals has had an interesting year. Around early 2009 the company had two projects that it was looking to advance, Aranzazu in Mexico and Arapiraca in Brazil. These were however mostly copper focused with some gold and silver production. Aura wanted to get more into the "gold game" and in June of 2009 they announced the acquisition of three gold mines from Yamana Gold:  San Andres, Sao Francisco and Sao Vicente. Total price paid was roughly $200 million, many analyst were valuing these three mines at about double that price.

All three were currently in production at the time the acquisitions were announced, but little money had really been recently invested in them as Yamana had bigger projects it was focusing on. Selling off these non-core assets makes sense for Yamana, and the mines have benefited as well as a result of Aura's commitment to improving the infrastructure at each one.





San Andres – Honduras

San Andres is the largest of the three mines that Aura acquired from Yamana. It's an open pit heap leach operation with production for 2010 expected at 82,000 oz at a cash cost of $480-$520 per oz.

Aura recently completed an expansion project, consisting of a new primary crusher-conveyor system and a new stacking system. The new crusher-conveyor system will significantly reduce haulage distances, which will reduce cash costs and provide an opportunity to increase throughput.  The new stacking system will increase the rate of ore stacked on the leach pad, which will increase throughput.

Production should increase to 100,000 oz per year by Q4 2010.





Sao Francisco – Brazil

The Sao Francisco Gold Mine was acquired by Aura in April 2010. It is an open-pit, heap leach gold mine that involves two separate gold recovery processes including crushing-gravity gold recovery-heap leach and run-of-mine heap leach. The ore contains a significant component of gravity gold which requires detailed sampling and attention to mine planning to ensure that the nugget gold is recovered prior to placement of ore on the leach pad.

In 2009, the Sao Francisco Mine processed 6,524,678 tonnes of ore, with gold production totalling 82,665 ounces. Gold production attributable to Aura Minerals in 2010 is expected to be between 50,000 and 55,000 ounces of gold, based on eight months of production following the acquisition on April 30, 2010.

Key operational initiatives at the Sao Francisco Mine will include:

    * updating the mine plan to improve grade control and mine contractor productivity
    * upgrading the current crushing plant to increase feed to the gravity circuit
    * improving the leaching characteristics of run-of-mine ore not previously crushed
    * reconfiguring the gravity circuit to improve recovery and increase overall gold security
    * completing an exploration program to increase the current reserve and resource base and to test identified targets on the property

Aura intends to increase production to 90,000 oz per year.



go to
https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/aura-minerals

Sao Vicente – Brazil

The Sao Vicente Mine was acquired in April 2010. In 2009, the Sao Vicente Mine began commercial production, processing 2,159,268 tonnes of ore and producing 49,584 ounces of gold. Gold production attributable to Aura Minerals in 2010 is expected to be approximately 25,000-30,000 ounces based on eight months of production following the acquisition on April 30, 2010.

Mine improvement initiatives identified for the Sao Vicente Mine include:

  • implementing upgrades to the crushing and process plant to increase equipment availability (thereby increasing plant throughput and reducing operating costs)
  • installing critical standby equipment to increase plant availability
  • upgrading elements of the gravity circuit to increase recovery
  • modifying the heap leach stacking system to reduce compaction thereby improving heap recoveries
  • conducting a definition and expansion drilling program to increase the resource base and drilling nearby targets identified for increased production

The mine is expected to produce 50,000-55,000 oz per year over 5 years, and there is potential for further upside through exploration.


go to
https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/aura-minerals


go to
https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/aura-minerals

Aranzazu – Mexico
The Aranzazu Project is an underground operation, which produces a single copper, gold and silver concentrate via floatation process. In December 2008, Aura temporarily suspended mining activities at the Aranzazu Project due to weak economic conditions. Now though it is back on track and is expected to enter production in the second half of 2010.

There was limited operating history under the previous owner and basically no exploration on the property was conducted from the early '80s to 2007. Aura upgraded the mill to take production throughput capacity up to 2,600 tonnes per day. A further expansion is planned to increase throughput to 3,000 tonnes per day.

Planned run rate production of +20mm lbs copper, +12,000 oz gold and +140,000 oz silver. By-product gold and silver contributes to low projected cash costs below $1.00 per lb.






Arapiraca – Brazil

Aura Minerals expects to complete a feasibility study for the Serrote Deposit at the Arapiraca Copper-Gold-Iron Ore Project in the fourth quarter in 2010. A Preliminary Economic Assessment conducted on the Serrote Deposit in 2009 envisages:

    * Open pit operation
    * Average annual copper production is expected to be 137 million pounds with the average in the first three years totalling 155 million pounds.
    * Average annual gold production is expected to be 27,000 oz
    * Average annual magnetite production is expected to be approximately 1.3 million tonnes of concentrate.
    * The expected life of mine cash cost for copper is estimated at $0.82 per pound including by-product credits for iron and gold sales.
    * The after tax net present value is $325 million at a 10% discount rate and the after tax internal rate of return is 25.4%.
    * The payback period is 2.8 years.
    * Mine life of 12 years
    * Capital expenditures of $490 million

Since capex is so high and Aura doesn't currently have the means to fund this, it appears that they are looking to maybe sell the project.
Financials and Production

go to
https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/aura-minerals
Q2 2010 Financial and Operating Highlights:

    * Gold production of 35,304
    * Gold sales of 32,024 ounces for net sales of $38,576,000
    * Realized average price of gold sold of $1,215 per ounce
    * Mine operating profit of $9,835,000
    *  Net loss of $13,328,000 or $0.07 per share

222 million shares fully diluted

$85 million cash

$65 million long term debt



go to
https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/aura-minerals


Conclusion

There are only two ways a small mining company can grow into a large mining company. Either they buy/discover an existing deposit and hope it's a home run. Or they follow in Aura's footsteps and buy a group of small mines that the big boys don't want anymore, then try and work their way up the gold producing ladder.

Aura is doing exactly what they should be, which is spending money to improve the infrastructure at these newly acquired mines. These properties have probably been somewhat neglected in the past. But they will never become big hits for Aura, unless one turns out to have a massive amount of undiscovered resources. Rather the company is going to take these mines, improve the performance of each one, and squeeze all they can out of them.

The three newly acquired mines will be producing 220,000 oz  of gold per year. Aranzazu will provide another roughly $80 million in revenue per year but it will be generated mostly from copper production.  I'm not sure what Aura is going to do with Arapiraca. It's mostly a copper project and capex cost are pretty high at $490 million. It seems like once they complete the feasibility study they will "open up the bidding".

By the end of 2010 Aura will have 4 mines online producing 250,000 oz of gold and 20 million lbs of copper per year. Not bad for a company working its way up the ladder.

go to
https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/aura-minerals

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