Borborema Ramp-Up And MSG Turnaround Will Support Long-Term Production Outlook

Catalysts

About Aura Minerals

Aura Minerals is a multi-asset precious and base metals producer focused on developing and operating gold and copper mines across the Americas.

What are the underlying business or industry changes driving this perspective?

• Ramp-up at Borborema, combined with expected commercial production from September, should lift group output in the second half and into 2026. This may support higher net revenues and operating leverage on fixed costs.
• The planned development of Era Dorada and either Matupa or Guatemala, with relatively contained initial capital requirements, positions the portfolio for multi-year volume growth. This may improve earnings durability and return on invested capital.
• Integration and turnaround initiatives at MSG, including underground development, equipment availability upgrades and productivity gains, are expected to lower all-in sustaining cash costs and enhance group EBITDA margins over time.
• Increased exploration spending at high-potential districts such as Almas, Matupa and Carajás should extend mine lives and enable incremental low-cost ounces. This may support sustained long-term production and valuation through higher net asset value.
• Listing on NASDAQ and the planned TSX delisting are aimed at improving liquidity and narrowing the valuation gap to larger peers. Together with rising EBITDA and a conservative leverage profile, this may support stronger earnings multiples and total shareholder returns.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Aura Minerals's revenue will grow by 26.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from -5.6% today to 36.2% in 3 years time.
• Analysts expect earnings to reach $561.7 million (and earnings per share of $7.53) by about December 2028, up from $-42.8 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $974.4 million in earnings, and the most bearish expecting $451.8 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 10.4x on those 2028 earnings, up from -81.4x today. This future PE is lower than the current PE for the CA Metals and Mining industry at 22.9x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.37%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The combination of structurally higher gold prices and Aura’s growing production base from Borborema, MSG and potentially Era Dorada or Matupa could drive sustained EBITDA expansion above the current record run rate. This outcome would likely support a higher long term valuation multiple and share price through stronger revenue and earnings growth.
• If management successfully executes turnarounds and productivity improvements at MSG, continues to hold all in sustaining cash costs near the low end of guidance and brings additional low cost ounces online from Almas underground and future projects, the resulting margin expansion could push net margins and cash generation materially higher. This would challenge the view that equity value will remain flat.
• The company’s strategy of disciplined greenfield build outs, ongoing exploration at Matupa, Carajás and Serra da Estrela and a pipeline of potential M&A in gold and copper positions Aura to become a materially larger producer over the next cycle. In a sector where scale commands higher price to net asset value ratios, this could lift the trading multiple and long term earnings, supporting share price appreciation.
• The recent NASDAQ listing combined with the planned TSX delisting is specifically aimed at increasing liquidity and narrowing the valuation discount to larger peers. If daily trading volumes rise and the company continues to deliver record results and high dividend yields, investor re rating could increase the share price via higher earnings multiples and improved market perception.
• Maintaining conservative leverage at around 0.8 times net debt to adjusted EBITDA while funding growth projects and paying one of the highest dividend yields in the gold sector could attract a broader income and quality focused shareholder base. Over time, this may bid up the stock as recurring dividends, rising revenues and improving adjusted net income are sustained.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $44.88 for Aura Minerals based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $52.8, and the most bearish reporting a price target of just $34.2.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be $1.6 billion, earnings will come to $561.7 million, and it would be trading on a PE ratio of 10.4x, assuming you use a discount rate of 8.4%.
  
• Given the current share price of $41.76, the analyst price target of $44.88 is 6.9% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.