Aura Minerals (OTCQX:ORAAF) Q2 2024 Earnings Conference Call August 6, 2024 9:00 AM ET
Company Participants
Rodrigo Barbosa – President and CEO
Kleber Cardoso – CFO
Conference Call Participants
Ricardo Monegaglia – Safra
Edgard Pinto de Souza – Itau BBA
Rabi Nizami – National Bank Financial
Operator
Good morning ladies and gentlemen. Welcome to Second Quarter 2024 Earnings Call. This conference is being recorded and the replay will be available at the company’s website at auraminerals.com/investors. The presentation will also be available for download. [Operator Instructions] We would like to inform that all attendees will only be listening to the conference during the presentation, and then we will start the question-and-answer section, when further instructions will be provided.
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’s 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.
Rodrigo Barbosa
Thank you all and good morning. Thank you for also being here with us. I’m glad to be here to present again the second quarter of 2024. I will, as usual, present an overview about the operations and how we’re progressing with our growth projects and then Kleber will go more details on the results.
The second quarter, again, we did a very strong quarter in terms of results and cash generation while we continue to advance in Borborema. Although, as we were projecting during the mine sequencing, this Q2 is the weakest compared to the other quarters of the year. And we had a change in contractor numbers, which I will explain further, in order to reduce costs. That has already completed, so we are now well-positioned to have a very strong Q3 and also very strong Q4. We project to have a stronger second semester compared to the first semester, together with a lower cost and higher gold price, which will give us a chance to continue to improve our results along the year and have a very strong year in 2024.
So in terms of production, as we were projecting a weaker quarter compared to Q1 and also Q2 and Q3. Together with the changing contractor in Almas, we reached a production of 64.3 gold equivalent houses coming from a 68 last quarter. And now we are projecting to be about 70,000 per quarter that during the next — during the second semester. The 64.3 is already a 33% increase when you compare to last year. We will see the results of the inflection in terms of production in the last 12-month that happened last year and then we continue to move upwards during this year and then also next year when Borborema starts the production.
In terms of EBITDA, although we had a lower production compared to Q1, high gold prices allow us to reach a $56 million of EBITDA, there’s a strong EBITDA again. And I want to highlight that if you add Q1 EBITDA and Q2 EBITDA, we are reaching close to $110 million on EBITDA during this first semester, which is weaker than projected in terms of production than the second semester. It’s 110 with a gold price of $2,173. And now we are going to stronger production to Q2 while gold continues to be traded closer to $2,400 or above $2,300 for the second semester which reposition us to have again very strong Q3, stronger than Q1 and Q2 and also Q4 for the year.
In terms of all-in sustaining cash costs, we had a slight increase of $41 compared to the first part of 2024. That comes mostly from lower grades that we reached in Apoena with the highest preparation and also the change in contractor in Almas. For the second — for the third quarter and fourth quarter, Almas is already — we already changed the contractor. We already producing close to 45 to 5,000 ounces — 4,500 to 5,000 ounces of gold per month. While in Apoena, we will reach a higher rate, so we should see also, or all-in sustaining cash costs improving or decreasing in value for the next quarters.
With that, EBITDA, Kleber will be going to also share with you, we had a non-recurring accounting events that affected our net income. That comes from good news, while gold price continue to increase, we have to market to market our options. So that also is a non-recurring and accounting losses that goes to net income together with exchange rates that changed reais coming from 5 to 5.5, 5.6 during the quarter.
With a strong cash flow that comes from the first semester, we also pay dividends close to $25 million, dividends plus $4 million of share buybacks. So that also continue — we continue to give cash back to our shareholders while we are investing and growing. If you add the dividends we paid along the last 12 months, that together with the share buyback is reaching 8.8% of yield to our shareholders, which is put us — continue to put us among the highest dividend yield in the world for the gold sector.
During the quarter, we also acquired two important prospection projects, Pezão and Pé Quente and we now have an option to do a drilling program that will compound together with the Matupá project, so that we can add more resources and reserves into the Matupá and extend the life of mine. Although Matupá, we already have enough to do the payback and seek good returns, it’s still 300,000 ounces of reserves and we expect with Pé Quente, Pezão, and then together with [indiscernible] to significantly increase our resources and reserves in the project. And we’ll do the drilling program during the second semester, and then we will update the market accordingly as we have the results.
We also published, or I would invite all the investors to take a look on our sustainability report that we have recently published. This is the second report that we published, and we should continue to do so along the next years, giving a full transparency of the Aura 360 concept where we also looking at the impacts over the communities and the environment and also within our employees and everything that we do.
In terms of safety, as we always share with you, we broke our internal record last quarter in Q1 that 1-year in all the operations without any lost time incidents. Unfortunately, in Apoena, we had an incident, but we continue to do a very strong incident report where we have 21 months in Aranzazu, 20 months in Minosa, and 24 months in Almas without any lost time incident and also the construction of Borborema, we don’t have any last time incidents. All the team is there, we continue to monitor on a monthly basis with independent consultant to check our structures, geotechnical structures and all our structures are in compliance and comply with the current legislations.
So, on the left side on this chart, I would — on the line on the left chart, this is the last 12-month production. As you can see, since Q2 last year, where we reached to do the challenges in lower grade — challenges in [indiscernible] ore grades. In Apoena, we reached the lowest level, 228 gold equivalent ounces produced. Every quarter after that, on the last month we’ve been increasing and that increase comes from the challenge in Honduras has been already addressed and we are producing a running rate as we can see on the right side, 19,000 ounces per quarter. Then we also have higher grades. We had higher grades in the second semester in the first quarter of this year in Apoena and Almas started commercial production during Q3 last year.
So, on every quarter now we are having a stronger production compared to last year. That put us on the last 12 months an increase. So, from 1,228,000 on Q2 2023, now at 266 on the last 12 months, and again, as we will have second semester stronger than the first semester of this year, we should continue to see improvement on the last 12 months production, Q3 and Q4. Why – -when it should be stabilized, but then I would also invite the shareholders to take a look on the Borborema project, which I will highlight on the next slide, that should start the ramp up by Q1 next year.
And then we also continue to add ounces into our last 12-months. So Aura should continue to increase production while, as we will see, we are meeting the guidance in costs, all-in sustaining cash costs. Actually, the second semester should be stronger — better than the first semester. And then next year, Borborema enters with a lower all-in sustaining cash cost compared to our average.
So, Aura will continue to grow, decrease costs, while gold prices continue to be strong. Again, we had a first semester realized close to $2,170 per ounce, and now gold price has been traded at close to $2,400 per ounce. So that combination of more production, lower cost and stronger gold price will boost or continue to boost our EBITDA for Q3 and also Q4.
On the right side of this slide, on the bars, as you can see, Aranzazu is very stable compared to Q1. Apoena, where we reached lower grades that was already projected during the mine sequencing. We’re transitioning from Minosa to [indiscernible]. So that transition reduced our grades, increased the strip ratio, but we should be also now entering higher grades with more productivity in Apoena that will — so that we’ll be able to meet the guidance.
Minosa, again, very stable, continue to be strong. We fixed all the challenges from last year. And then it’s been on the third, fourth quarter that we have strong production between 18,000 to 20,000 ounces per quarter. And we should continue to see those kinds of productions for Q3 and Q4.
Almas, were different than we were projecting, we did not project the change in contractor. So that’s where we had a lower production compared to our internal, but due to the change in contractor, Almas should be running between 400 — 4,500 to 5,000gold production — ounces of production per month. We had, in April, it was close to 2,200; May, 3,500 and now June reaching 4,800, which is the running rates that we should expect for the upcoming month in Almas, so that we are very confident that we’ll be delivering into the guidance.
So next slide. In terms of all-in sustaining cash costs, as you can see, it’s been very stable since Q4 last year, moving around the $1,300 on all-in sustaining cash costs. Last quarter we had a less Q2, we had an increase that came from mostly lower grades in Apoena, which we don’t expect to have that lower grades in Q3 and Q4. And also higher costs due to the transition in contractor in Almas.
Just to give you an idea, we are now coming from running rate during the first quarter and a little bit on the second of 17 reais per ton on the contractor. Now we have reduced to 13.5 reais per ton with the tons moved with the contractor. So that’s significant, more than 20% decreased, putting us in a very strong position to have a higher production with a lower cost so that we also boost our results during the second semester.
As already mentioned, we are doing the first semester and the production reached a 133 gold equivalent ounces. This is very much within the middle of the guidance for the year. However, as I mentioned, second semester will be stronger than first semester, which puts us on the direction to be on the stronger health in terms of production. And that the reflection of this will also happen in all-in sustaining cash costs, where we are already close to the low of the guidance, so we should continue to improve all-in sustaining cash costs, so we should be, during the second semester, at the low of the guidance in terms of all-in in terms — as a reflection of no change of contractor in Almas, and also higher grades in Apoena.
In the CapEx, on the right side of the slide, as you can see, we are very much in line on the CapEx for exploration and also maintenance and project expansion. We are on the first semester below the half of the guidance, but that’s because most of the expenses and the investments and the cash disbursement for Borborema happens on the second semester. So, we continue to maintain our guidance for the year. And actually, Borborema, as we will see in the next slide, is being very much in line in terms of schedule and budget.
So, as I was mentioning, Borborema, we are already 40% complete, which is very much within our schedule and within our budget, again highlighting the numbers of these projects that is not being priced in our shares. This project, we did a feasibility study with 812,000 ounces of reserves and the gold price at 17 — close to 1,700, and that was giving us an NPV of $182 million. Only adjusting the gold prices to 2,300, this NPV is already at $440 million at the 2,300 gold price, and gold price has already been traded above the 2,300.
But also, and more importantly, we are considering this feasibility study at 812,000 ounces of reserves, and we already have close to 2 million ounces of resources that mostly of this can also be converted into reserves as we have the permits to move close to 5 kilometers of one road. That’s already in progress. And then we expect within less than 1-year to have the permits and then from that another 1 or 2 years in terms of construction. So, this project can have more than double the reserves with that permit that will significantly boost our NPV and returns in this project.
And Borborema, as we did with Almas, we are applying all the fast track going to production. It’s easy to build, easy to operate. We are mounting the plant while we are — we did all the basements and we built a lot of the parts aside from the plants so that we mount — we’re mounting all together in a fast track process during Q3 and Q4 and ramp up each schedule to have to start on the first quarter next year.
So with that, I will pass to Kleber to go into the results, and then I’ll come back with the questions and answers and then to wrap up all the projects.
Kleber Cardoso
Thanks, Rodrigo. Good morning, everyone. Okay, so this quarter, despite the fact that Rodrigo was mentioning that we saw a slight decrease in our production compared to the last quarter and that being the lowest expected production for our quarter for the year. We saw an increase in both net revenues and EBITDA on this quarter compared to the last quarter. So in terms of net revenues, we reached $134 billion now on Q2, bringing the last 12 months to exceed $0.5 billion at the end of Q2, which is a record high in the history of Aura. We have never reported less than a month’s revenues of over $500 million.
Adjusted EBITDA, we’re going the same direction. We see also an improvement compared to the last quarter, now achieving $56 million on this quarter, coming from $53 million. If we compare it to the same period of last year, we more than doubled the EBITDA on this quarter. And then now, accumulated for the last 6 months, we have $180 million in EBITDA accumulated, which our edge is significantly higher than the EBITDA that we reported last year, which was $134 million.
So keeping our expectation to meet our production guidance, cash cost guidance and considering current gold prices, we should be continuously seeing the next quarter’s growth, the quarterly EBITDA, and also the accumulated last 12 months EBITDA increasing going forward.
When we come to the net income, and we were reporting a $26 million loss on this quarter that is entirely explained by either noncash or nonrecurring losses. Most of that, as Rodrigo anticipated is first as results of continuing increasing gold prices. The gold prices increased by over $100 between the end of the first and second quarter. We generated noncash losses related to our gold derivatives. And also FX impact because of the Brazilian real depreciated 11% this quarter.
Both factors are very positive actually from a business side. Of course, gold prices — higher gold prices is positive because we exported some metals from Brazil. It’s good if the real devaluates. But then we see on these occasions, these noncash losses and then net income. I’m now going to go in specifically slide in more detail about that.
Then finally in terms of cash and net debt, our net debt achieved $142 million at the end of the quarter, increasing from the previous quarter as expected as we continue to invest to build the Borborema project and also in the quarter we paid $29 million between dividends and share buybacks. With this net debt at the end of the quarter, our net debt over EBITDA achieved 0.8x at the end of the quarter. So we’re still very comfortable in our cash position, it’s still comfortable above $190 million at the end of the quarter.
Okay, here now we bring the details for explaining the change in the cash position throughout the second quarter. So, here on the first left side of the page, we see we started the quarter with $214 million. Then as a reminder on this left side here of the page is what we call what just the free cash flow to form, which is the cash flow generated by the four mines in production, not including how much we’re investing to grow the business in either expansion or reserves and resource. We see was a verse from the quarter, we generated $37 million in cash.
If we exclude changes in working capital, which we had $8 million, nonrecurring [indiscernible] consumption, the cash flow would have been close to $45 million, so it was a strong quarter. Again, as Rodrigo mentioned, in a quarter which gold prices were close to $2,300. In the middle here of the chart is the investment for growth. So we invest another $5 million in the quarter in exploration and $17 million is mainly the Borborema construction.
And then to the right side is what we call the financial items, the biggest one was the return of capital to their shareholders, the intended share buybacks. And I’d like to highlight here also other two items, one is with CFX, impact in cash and equivalents of $11 million. This is not a cash consumption. The reason we see this negative $11 million is because Borborema holds most of its cash in Brazilian reais, in Brazil, because most of the CapEx expected to complete the project will be incurred in Brazilian reais. Because the Brazilian real went from 5 to 555, so 11% depreciation in the quarter when we converted that cash in reais to dollars, it seems we have less dollars. But again, we don’t expect that to translate in a free cash flow loss because the CapEx is going to be incurred in reais.
And the second item I’d like to show here is the derivatives in Honduras. We have a $2 million loss, cash loss here, which was how much in cash the net payments we paid to the banks to remove the credit support agreements, which are the agreements that allow the banks to call margins against Aura. So in the second quarter, we did an negotiation. In the end we ended up paying a net amount of $2 million in cash, which we’re going to see when we see the net income, there was a 13.4 impact in our P&L, but the next cash impact was just the $2 million received.
In the quarter — so in the semester now it’s the same analysis for the semester. We see the free cash flow to firm of $53 million. Investing $54 million of significant amounts to grow the operations, $34 million mainly the Borborema, significant amounts also in exploration, $10 million in the first 6 months. In the financial items, the main items like the ones that I explained before.
And then here on this page we bring a bridge explaining the items between the adjusted EBITDA that we saw before in the net income. This quarter we bring a little bit more details because of the items that impact the net income this quarter. So, we see — as we saw before EBITDA, we start with $56 million adjusted EBITDA. When we look at that by business units, Aranzazu was once again the strongest results with $23 million. Minosa came close, a very good quarter, $19 million in EBITDA in Minosa. Apoena, despite being the most difficult quarter in terms of lower production and higher cash costs, also 7.5 at this EBITDA. In Almas also, it’s a positive highlighted with $11 million EBITDA despite being the quarter where we changed the contractor and had some impacts also in production and cash costs.
Amortization and depreciation of – at $15 million came according to our expectations. And then the ones when we detail a little bit more, the financial items, we were reporting $45 million in financial expenses this quarter. Again, it’s most of that didn’t translate or we don’t expect to translate in cash losses. Out of those 45, the main items are $11 million — $12 million, the market-to-market accounting losses because of increasing gold prices for the Borborema gold derivatives, as we saw in the last two quarters. We see here the $11 million FX cash loss, which is related to the Borborema cash held in reais.
In the 13.4, which was the fee that we agreed to the bank to remove the ability for the banks to have margin falls against the company. We agreed to pay the banks about $13 million, but we had also — as part of the negotiation, we did last year with the banks. We are expected to receive $11 million this quarter. So the next amount that we paid in the end was just the $2 million that I presented before.
The income tax expenses, a portion of that is similar. There was — when there was a big depreciation of currency, especially the Brazilian reais, we have deferred tax liabilities. We created those provisions that were not expected to become tax payments in the future, that was $7 million in this quarter. And these items explain the $26 million net income loss. And from this quarter, as I mentioned, we are starting communicating and reporting a new KPI just in net income, in which we bring it back the gain or losses with derivatives and gain or losses with FX.
We believe going forward it’s going to be easier to communicate because of the volatility of our gold and foreign exchange. Excluding those two items, our — just the loss would have been only $3 million of which if we excluded a one-time, so no cash loss related to the derivative thresholds of $13 million. And the deferred tax liabilities actually, our net income would be positive $17 million, which is more close to what we see in terms of operational results, more consistent.
And with this, we will end our presentation and open to questions now. Thank you.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from Ricardo Monegaglia with Safra. You can open your microphone.
Ricardo Monegaglia
Hello, everyone. Rodrigo, Kleber and Natasha. Solid results in the quarter, especially in Minosa and Aranzazu. So my first question is, could we expect a maintenance of such strong operating rates in those operations, Minosa and Aranzazu, maybe third quarter, not necessarily third and fourth quarter, would be interesting to understand. But on the other hand, it seems some specific conditions created some sort of perfect storm in Apoena and Almas during the quarter, and you mentioned during your presentation that you expect better figures for Q3. So could you give us more details on the drivers of this better operating performance, maybe a range for grades in strip ratio in Apoena and a new cash cost level in Almas as operating rates normalize with the new contractor? Thank you for the opportunity.
Rodrigo Barbosa
Thank you. Yes, and I think for Aranzazu and Minosa, we should continue to have strong production, understanding that some volatility quarter-to-quarter, but producing 17,000, 18,000, 19,000 ounces per quarter in Honduras is something that is reasonable. And I think that for Aranzazu, second semester seems much equal, much like the same of the first semester with some minor deviation either for less or for more.
Then Almas, as I mentioned, we lost some 3,000, 3,500 ounces during the change of contractor now, so we should expect to have close to 4,500 ounces of production per month under a lower cost. So we’re very comfortable reaching the levels of the guidance during the second semester. And actually, we are already reaching this in June, right?
Almas — then Apoena, as you mentioned, we had, and it was projected to have a lower grade during the Q2 and highest preparation. So we are comfortable that during Q3 and Q4, we should start having a higher grades and lower strip ratio, which will put us achieving at least in the middle of the guidance that we gave to the market in Apoena. So we are very comfortable with the projections. We are very comfortable with the guidance. And we’re very comfortable to share with you that we will have the second semester stronger production overall compared to the first semester.
Ricardo Monegaglia
Thank you, Rodrigo.
Operator
Our next question comes from Edgard de Souza with Itau BBA. You can open your microphone.
Edgard Pinto de Souza
Hello, everyone. Hello, Rodrigo, Kleber and Nat. So thanks for the question. Congrats for the consistency of the results, the stabilization of production in Minosa, the company on the track to deliver the guidance. This is something that enhanced the company transparency, also the company moving with the projects. So my first question would be regarding gold prices. If Rodrigo can comment a little bit on your expectations for gold prices for the next few years and also for the long-term, given these higher gold prices that we have been seeing. If you think that we should factor in above historical levels for gold prices in the long-term, this would be very helpful.
And also my second question would be regarding Matupá. We know that Matupá has a solid NPV, but you are also moving with M&As, some exploration developments in the region. So my question would be when do you think we can expect the approval of Matupá by the Board? And if you think that there is a chance that we could see another project maybe coming from M&A or any changes into Matupa’s project before the start of the construction.
And lastly a very quick one. You had those issues with the contractor at Almas. What have you been doing to prevent this in Borborema? Have you already started conversations for the contractor in Borborema? What can we expect in this front? Thank you.
Rodrigo Barbosa
Thank you, Edgar. I try to be very straight to the point. On gold prices, if we understand what drove gold prices up, I think then we can project if that should continue or not. So when we look at the last 6 months or to last year, we had a unique situation where gold price increased while real interest rates also increased, that never happened in the past. And the reason for that comes from probably the consequences of the wars, particularly in Ukraine, where the world froze all the U.S dollars that Russia had all over the world. So that triggered many other central banks to start diversifying from U.S dollars and buying other real assets such as gold. So that’s why you also see central banks in China and other non-so-friendly countries to the United States diversifying.
Also, another thing that pushed the gold price up is the record high-level in terms of fiscal deficit, either in the United States or in Europe, while they have the highest debt to GDP, they have the highest fiscal deficit and the world doesn’t see and continue to print money. When you print money, that loses value. So not necessarily gold prices are only appreciated, but perhaps U.S. dollars and other [indiscernible] currencies are devaluating because of that. So if you understand that this is the reasons, then you start projecting.
Do we think that the world will start cutting expenses and being — have a fiscal discipline? Number one. I don’t think, I don’t see that conversation coming in, for example, in the new elections in the United States. Number two, do we see the world becoming more stable in terms of geopolitics? We don’t see that, right? So we see that things escalated in the Middle East, so it’s been very unstable in the last — it’s actually deteriorating in the last couple of weeks.
And then there’s another factor, that gold price increased while interest rates increased. That never happened. Normally gold price increases when interest rates decrease. So if you put that on the top, that we are now projecting interest rates to decrease, you can also maybe project that the gold price might continue to increase. So I don’t see today variables that would drop the prices in gold. Of course, there’s always going to be volatility in the short-term, but we believe and many other reports and analysts believe that gold should continue to appreciate.
Then second question you asked about Matupá. We are in the final process of getting the license to start construction. We did those acquisitions. We are drilling also in [indiscernible]. Yes, we will analyze how they will compound together with the project Matupá, yet we have no decision yet. Our decision is to start construction as soon as we get the final license. However, those conversations are going to happen in the upcoming weeks, and we will decide the right timing for us to start the construction of Matupá.
In parallel, we continue to monitor and have variables initiatives on M&As. We cannot control when it is going to happen. There’s no negotiation in place right now. But there are many projects that we’re taking a careful look, other countries are taking a careful look, so that we can have a new M&A in the next 1 or 2 years.
Then your final question was about the contractor in Almas. That happened because we hired one contractor that had a significant lower price when we did the bid process during — over a year ago to start in Almas. We knew that he didn’t have a lot of experience, but we took the risk and we believed that we could work together with him in order to transfer know-how and then for them to be able to perform at an efficient level. Unfortunately, that did not happen. He could not achieve the productivity that we expected. The trucks and the equipment were not capable of doing so. So we had to hire additional, which increased our price, and now we transfer to a new one.
Then you ask Borborema. Yes, there’s a lot of lessons learned in Borborema, either on the construction of Almas and also on the operations that’s been applied. And we actually now already did all the bid process in order to hire a contractor in Borborema. And we are putting in — we could combine at this time a good price, a best price with a very strong company that has a very good know-how in terms of operation for Borborema.
Edgard Pinto de Souza
Thank you. Thank you, Rodrigo.
Operator
Our next question comes from [indiscernible] with XP. You can open your microphone.
Unidentified Analyst
Thanks Rodrigo and Kleber for the opportunity and congratulations on the result. So Guilherme [ph] from XP. I have two questions here on our side. So my first question is for Apoena. Production and costs were affected by the higher strip ratio and lower grades, mostly given the transition from Aranzazu to [indiscernible]. So my question is, when you — when do you expect production and costs to normalize in this operation? And my second question is, if you could give us any updates on the other projects, including Serra da Estrela, Altamira? And if you could also share your thoughts on potential new M&As?. These are my questions.
Rodrigo Barbosa
Thank you. So, in Apoena, we should see a stronger Q3 compared to Q2, and then even stronger in Q4. If you’ll see, for coincidence, Apoena has been able to achieve a stronger Q3 and Q4 over the last 3 to 4 years. So, we should see that improvement also going Q3 and Q4, understanding that we will not reach such a high upgrade that we reached in Ernesto a couple of years ago, but we will see improvement in Q3 and Q4, which give us a very comfortable position to be within the guidance.
Although if you multiply the first half production by two, you’ll see that we won’t be at the — we will not be reaching the low level of the guidance, but as Q3 and Q4 will be stronger, we will be within the guidance on our plan. So, we’re very comfortable that we’ll reach either on the production, but also on the cost side. Actually, now with the further evaluation of real, the cost side is improving in U.S dollars.
Then you asked about Serra da Estrela. We have continued to do exploration program. We renewed the option that we had on this project, so because we had a very interesting and strong results on the first year of exploration, we are consolidating the information. There was a — that area has a very strong rainy season that normally cannot do drilling, which is finished in May, June and now we started again doing the drilling campaign. And we expect to be able to publish some reports by the end of this year or early next year.
In terms of M&A, we are continuing to monitor the market. We like both either copper, gold in the Americas. That’s our focus, something that is close to production or in production or with the reserves significantly already discovered. And so we can work on the feasibility study, build the project and then operate. That’s our main focus. While we will play opportunistically as we did in Altamira, which is an early stage. That’s why we did a minor participation that they will have a few years of exploration progress, which we are monitoring. And then once they consolidate better, and they understand the resources and reserve, then we can have another discussion that if we should increase or not our participation in that project.
Unidentified Analyst
Very clear. Thank you.
Operator
Our next question comes from Paul Rankin with VSA Capital. How long will the negative performance on currency and gold hedging continue to impact the balance sheet? If, one, the gold price holds around current levels; or two, rises another $100 per ounce.
Rodrigo Barbosa
Okay, I’ll let Kleber answer this. Just 30 seconds is hopefully we will continue to have those kind of noncash losses, because that means that gold price is increasing. And most of our production are assessing those higher gold prices. Kleber, please.
Kleber Cardoso
Yes. Rodrigo stole my comment. But yes, so FX, yes, both impacts in terms of business is positive. Higher gold prices is good for the business. FX the valuation as well because we reduce our cash costs. So if gold prices stay where they were at the beginning or the end of Q2, we shouldn’t see any additional market-to-market losses in the next quarters. So gold prices now is about $100 above where they were at the end of Q2.
So, if gold prices stay above and keep increasing, we should continue seeing these unknown cash losses, which as Rodrigo said is positive. Just as a reminder, about 25% of our production, 20% to 25%, depending on the quarter, is hedged with a cap of 2,400. So if gold prices go above 2,400, what means that is we’re capped at 2,400, one-fourth of our production, but the benefit of the upside for the remaining most of our production, while we’re still incurring accounting losses.
So in general, we have all this positive. Will prices go down? We’re going to see again. We expect to continue seeing a loss. And it’s your question if prices stay where they were at the end of the quarter, that should have a zero impact in the next few quarters.
Operator
Thank you. Next question from Rabi Nizami with National Bank Financial. Can you tell us more about the organizational changes, particularly the addition of corporate level technical roles?
Rodrigo Barbosa
Yes. Thank you, Rabi, for being here with us. As we continue to increase production and complexity we — in 2018, we had two operations, then ’19 we restarted at Aranzazu, actually in ’18 we restarted at Aranzazu, three operations. Now we built Almas, four operations, building Borborema, the fifth, and then we have Matupá, Serra da Estrela, and hopefully a few others. So that’s becoming more and more important on corporate to have a very strong technical team in order to keep the stability of our operations.
So that’s why we are bringing Henrique [ph], which is the General Manager, the Director of Aranzazu that has been stable for the last 4 years into corporate so he can, together with [indiscernible] team and help us on the technical side to maintain or even improve our stability of operations and also think about the construction and new M&As that should be coming in, as I mentioned, in the upcoming years. So, that’s a part of the strategy of enhancing our technical abilities to have a very stable operations, understanding that we continue to have a slim structure, a very thin corporate in order to be very productive and focusing on what is important, while all the mines continue to have their [indiscernible], they continue to have the freedom to make a decision under the culture of Aura 360 concept.
Operator
Thank you. The question-and-answer section is over. We would like to hand the floor back to Mr. Rodrigo Barbosa for the company’s final remarks.
Rodrigo Barbosa
So, thank you all. Again, just wrapping up, strong quarter, although a weaker production compared to Q1. Very now much in line to meet the guidance, actually we should be on the top range of the guidance as I mentioned, on the first half of the guidance for the second — with the production on the second semester. Lower, we should lower also our all-in sustaining cash costs during the second semester, while our gold price continues to be strong. So that will significantly continue to boost our EBITDA cash flows and results for Q3 and Q4 and continue to build Borborema, which should start ramping up next year. So the production of Aura reached the bottom, as I mentioned, by Q2 last year. And now every quarter we are improving in terms of our last 12 months.
We will see that on Q3, we will see that in Q4, and then we’ll have next year, then we continue to see that improvement in terms of production, cash costs, and gold price we don’t control. But as I mentioned here with Edgard’s question, we believe we will continue to be strong, if not stronger, so that will boost our results for the year. And we’ll be better positioned — very well-positioned also to have a strong 2025. So I thank you all, and we will continue to update the market on the exploration and in production as we move along the next quarter.
Operator
Aura’s conference is now closed. We thank you for your participation, and wish you a nice day.
