Aura Minerals Inc

TSX:ORA

Earnings Call Analysis

Earnings Call Transcript 2023-Q3

[Operator]

Good morning, ladies and gentlemen. Welcome to Aura's Third Quarter 2023 Earnings Call. This conference is being recorded, and the replay will be available at the company's website at auraminerals.com. The presentation will also be available for download. This call is also available in Portuguese. To access you can press the globe icon on the lower right side of your Zoom screen and then choose to enter the Portuguese room. After that select mute original audio.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 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 respect to forward-looking statements.Present at this conference, we have Rodrigo Barbosa, President and CEO and Joao Cardoso, the CFO. Now I'll turn the conference over to Rodrigo Barbosa. You may begin your conference.

[Rodrigo Barbosa, executive]

Good morning, all, and thank you for being here with us. We're going to present the third quarter results and some review of the guidance that we have just disclosed yesterday. Third quarter was very important for us as a turning point as we were going to see when I share with all of you, we have increased the production, and then we will continue to increase production along the next quarters. So, we changed the curve that we were decreasing a little bit the production in the last 12 months. Now we recover and started to increase back on track again.And also, this quarter has shown a very significant appreciation in the gold price, not only because of the geopolitical situation, but also the market starting to realize that the basement of the currency and the (inaudible) currency and I'm migrating to hard assets such as gold and other commodities. I will now invite you all to take a look at how the Central Banks acquisition themselves and going on record breaking or chasing new gold reserves in order to preserve the value and get a little bit other alternatives instead of just to be supporting the dollar. China, for example, is selling the U.S. treasuries and buying gold. And this is going -- it's happening for the last 12 months, and it should continue to happen along the next years.But we all [love] this information. I will invite all of you to join us in Aura days that will be in December that we were going to give you more informational, [goal] to bring some experts and also present in more detail of our operations as we have done in the last couple of years.Now going back to the quarter. The quarter has shown a significant increase in gold production. We achieved close to 65 gold equivalent ounces, which is 34% higher than Q2, and we had an increase in all our operations. We're increasing EPP by 62%. We increased Aranzazu by 11%, and we increased San Andres 7%. And very importantly, we started to sell gold from Almas project that we implemented along the first semester. We ramped it up on the record level, and now we start to produce in September and October. The increase in operations we saw in the production, then we also increased the EBITDA that reached about $30 million compared to $26.5 million on the last quarter. That EBITDA was also negatively affected by a one-time high cash cost that we saw in Apoena that we used, and I will explain a little bit more in the next slides.We used a stockpile with a high low-grade and high cash cost during the quarter that has gone already through the plant, and we generated cash, but the cost was higher than the other partners. And we finished the quarter on Q3 already with a low cash cost on the inventory and now we are assessing our [goal]. Slightly delayed, we are now assessing Ernesto/Pau-a-Pique with a higher grade. And [they're all in] sustaining cash cost because of this high cash cost that came from Apoena Brazil, together with some one-time investments in Honduras, and we reached 14 all-in sustaining cash cost of $14, $37 per gold equivalent ounces.And as we're going to see for the year, we projected to have an average between $12.60 to $13.30 on all-in sustaining cash costs. That means that on the third, or the fourth quarter, we have prepared the basis to have a significantly lower cash costs across our operations.Important to highlight during the quarter are the two things that I mentioned. One is how much we ramped up Almas in record levels in only less than five months, reaching levels that has never been reached at all. Very occasionally, it was reached in the past. That's a combination of our strategy of keeping simple and a lot of management attention. And also, the Borborema project that we published a new feasibility study with a highly creative internal rate of return going to close to 52% internal rate of return leverage at a gold price of 1,900, not including the expansion that we are already planning in terms of resource reserves once we move the road and then we'll go more in details.We published a new feasibility studies. We secured also $100 million on leverage to build the project. We bought additional 20% participation that used to belong to (inaudible). And now we are finalizing the -- we've just analyzed the hedging program that we're also cashing $14.5 million to help us on the equity. And then we are now finalizing the royalty agreements in order to finish the funding package to the project. And also, while we are moving forward with the construction. Very remarkable achievements that we did during this quarter, and I'm very proud of what the team has been working hard to achieve those levels. We are now at a zero lost time injury in the entire year in 2023. Actually, in our operations, it's been 12 months that we have had zero lost time injury in operation. That is a significant achievement that all the team has been working for several years and now, of course, the challenge is to keep this position, but we are working hard to make sure that everybody that works with us has a very safe environment and can return to their homes in the same way they come. That's the main priority we have in all across our operations.In terms of stability on the structures, we continue to monitor. We have third parties that do reports and every quarter they come and all the structures, job technical structures, either [takes them], the leach [beds], the underground structures, they're all according satisfactory levels and being constantly monitored by third parties, anything [including] also our internal team.So, as I mentioned, as a turning point, as we see on the chart on the left side of the bars and the production of gold per quarter, and the line is the last 12-month production accumulated. So, we saw that we were slightly decreasing the production on a quarter basis, due to some challenges that we had also in Honduras. And now with the recovery of production in operation plus the commercial production problems, we see this curve starting to go up back again. And we should continue to see the curve going up as we are moving forward in the next two quarters, including now Almas production.On the right side, as a production, we see on the charts that we increased production in Aranzazu, we increased production in EPP, we increased production in San Andres and now we see the light blue one, which are very proud, Almas Project producing.If we move to Aranzazu, we should increase productivity and increase production in EPP, we also increased significantly, however, below our expectations, the [total] unexpected heavy rain during this quarter. What happens is, [on that topic], we are going to the bottom of the pit by the end of the high grades at the part of the pit once you have a significant range, a lot of water gets accumulated and that jeopardizes a lot of the mine development and the mine production. So that delayed the interest that we had when we were planning for the high-grade in EPP that is now going on the third quarter, but in the fourth quarter, but also going to be pushed to early 2024. So that's the main reason that we also [within] our guidance is that those ounces that we are planning this year, some of those ounces now is pushed to 2024.So, once we do not have access to the high grade as we're expecting in Ernesto, we use the stockpile with a low grades to fulfill the plan. That decreased the production because we are replacing high-grade with low grade. But not only that, the low-grade had a high cash cost as a stockpile. So that also went through the results and increase the cost specifically for EPP. And as we can, we'll see the cost that we had in the beginning of the quarter on the stockpile was close to [thousands of] dollars. And now we finished the quarter with the cost of the stockpile, which is the inventory close to 600 and slightly below 600.So, in terms of sustaining cash cost that is also negatively impacted by this high cash cost that came from inventory of the stockpile low-grade in EPP. We saw a slight increase compared to Q2. But I would highlight here on the right side in EPP, as you can see, we started the quarter with the stockpile with inventory of ore that is very front of the plant at $1,000 an ounce. And we took a lot of those low grades and produce the gold and now we finished the quarter at $569 per ounce on the stockpile. And then we've also been mixed with the high grade that's coming from Ernesto. We expect a significant decrease in our in sustaining cash cost for the fourth quarter as we are projecting now to have sustaining cash cost for the whole year of 2023 between close to $12.60 to $13.30 per ounce.So, those unexpected rain and delays in the Ernesto pit mostly and also some delay in Almas that we'll further explain. We are reviewing the guidance that we were projecting at 273 gold equivalent ounces of 245, now to be 231 and 253. The high level still within the old range, but we're now (inaudible) important to be more conservative and make sure we achieve this guidance until the end of the year. And the lower production also reflects on the cash cost for us in the all-in sustaining cash costs. The all-in sustaining cash costs now we will project to be 1162 to 1261, now it's 1225 and 1324.On the right side, we have the guidance for CapEx. I would highlight that the previous guidance, we were not including the Borborema project as we approved the Borborema, the construction of Borborema project. During Q3, we are now including the Borborema project on this guidance. That is what explains most of the change on the new projects and expansion. And then we remain with the same guidance for exploration and also sustaining.Now going back on the production guidance, as I mentioned, there was a delay on entering high-grade in Ernesto and also some slightly less production projected for Almas mainly to what is happening now in Almas. We ramped up very, very efficiently. The plant is producing above its nominal capacity. Now we are going more on the hard, I would say, fresh rock, which is the hard rock. So, there's a transition of a very soft rocks into the hard rock. Normally, this is not a major issue, but you need to adapt your mine methodology and mine implementation procedures. And that is a new mine, it's a new contractor. We are now adjusting all the procedures in to have in mind in the hard rock. This is a managerial decision, so that is now being implemented to guarantee that we will be able to reach the production during the next year 2024, and perhaps even more than we were projecting as we did implementation to increase capacity in the whole system. So, all those decisions are being made and fixed to recover productivity now with the fresh and hard rock in order to have a strong production for next year.So, in Almas project, which we are very proud that we have built this project on time, on budget during the pandemic and doing high inflationary pressures. We not only did that, but we also ramped up this project in less than five months. Normally, when you see the chart on the right portal side, you see on the dotted line is the theoretical curve of ramp-up where most of the curved has reached above 80% in six, seven months and close to 100% in 12 to 18 months of ramp up. The other lines are important companies such as [Newmont] and other ones that are ramped up. (Inaudible) ramped up in the last five years. And Almas we could ramp up, up to 100% of capacity within five months selling new benchmarks. This is quite an achievement for the team and is a result of very hard work, significant integration between the team that is running the plant together with the team that was building the plant plus a result of our strategy to keep in simple projects easy to build, easy to operate. And Borborema, the same team that built Almas now moved to Borborema and Borborema project. Although it's a higher scale compared to ours, it's also simple to build and simple to operate.Highlighting Borborema, as I mentioned, there was a very busy quarter in order to structure the full financial strategy to fund Borborema, published a new feasibility study, start construction. We hired already EPCM, we already had ordered (inaudible) second quarter the mill that will be delivered by the end of 2024. So, we are moving very much in line with our expectation in order to have Borborema coming online in early 2025.The results of the feasibility study is [expressive]. We would have the payback in 3.2 years, internal rate of return at 52% leveraged at the gold price $1,900. And that would also -- and I did this, and I will invite again all the analysts and also invite the investors to take a look at this project that we are starting with 814,000 ounces of reserves, but the potential is to reach up to two million ounces once we move the road. We could not include, and we cannot include ounces that is not free for mining, free to be mined. So, all those visibilities focus only in 814,000 ounces, while the project potentially can be expanded without neutrals without significant new studies up two million ounces of production. So, we expect Borborema to be significantly higher return compared to what we published on the feasibility study.Of course, that will take a while, moving the road -- we already started the procedures can take several years up to three or four years in order to be concluded.So, I'll now turn the floor to Joao to go and highlight more on the results, and then I will come back to Q&A.

[João Cardoso, executive]

Thanks, Rodrigo. Good morning, everyone. On this page, as we always do, we bring a summary of the main financial KPIs reported for the company. In the current quarter, the last few quarters and accumulated at the end of 12 months, accumulated at the end of each reporting period. Despite some headwinds we saw in Rodrigo's explanation, mainly EPP operations, what we see is improvements in almost all financial KPIs on this quarter. Revenues exceeding $100 million, again, achieving $111 million at the end of this quarter in our accumulated 12-month revenues, close to $400 million again.When we go to adjusted EBITDA, we see an increase of $10 million in EBITDA this quarter going from $27 million to $30 million at the end of Q3 with an expectation of additional increase in the fourth quarter as we expect to see increase in production, the reduction in the cash costs, and at least for now, the average gold prices of Q4 is higher than on Q3. When we look at the 12 months accumulated number, also another improvement, we're coming from $116 million accumulated on the past quarter to $229 million at the current quarter.Switching into net income. The net income, we see a reduction in this quarter from $11 million to $8 million. This is mainly because on the previous quarter, we recognized some noncash gains, which was associated with the appreciation of the Brazilian real during that quarter, which didn't not repeat on the third quarter. And when we see a core 12 months, we see another improvement, net income reaching $50 million in the last 12 months.And then finally, in terms of cash and net debt, we see also improvement in net debt and in the quarter with $112 million and an improvement in our cash and cash equivalents to close to $108 million at the end of this quarter, mainly because the debt we raised to fund the Borborema project during the quarter.Here, we bring a page detailing the main items between our adjusted EBITDA and net income for the quarter. As we saw previously, adjusted EBITDA of $30 million, of which Aranzazu once again have reported the strongest results. EBITDA of close to $19 million in Aranzazu. San Andres is still below its potential but continue showing signs of recovery reporting of $7 million. Almas we highlighted was a strong quarter considering only two months in production, in only two months Almas generates almost $7 million in EBITDA and EPP, among the business units in production, with the lowest in the quarter, $2 million because of mainly accounting impacts for the reason [we're going to explain] and the high-cost inventories, which now we start Q4 with lower inventories. So, we also expect to see EPPs EBITDA going up in these next few quarters.The amortization depletion $13 million, and we expect that finance expenses of $5 million, which includes this quarter, some effects, noncash loss because then unlike the previous quarter, in the third quarter, there was a depreciation of the Brazilian real, which caused us some FX losses. So, finance expense is negative at $5 million.On this quarter, we recognized a $5 million other gain, which was related to the acquisition of the 20% stake in (inaudible) projects, which we completed during the quarter. This $5 million is an accounting gain. It's calculated with the fair value of the estimated value of the 20% acquisition of the company's stake mines the estimated fair value of the royalties that we gave (inaudible) change for this acquisition. And we can see it's a great deal for the company.And then income tax expenses of $80 million, mainly taxes due to the results in Aranzazu in some of the deferred tax expenses of $4 million, again, no cash loss. We recognize in this quarter, again, due to the depreciation of the Brazilian real, bringing the net income to $8 million at the end of the quarter.And then finally, on this page, we bring detailed analysis on Aranzazu for the change in cash and cash positions of the company throughout the quarter. In the far side, the left side of the page in red, we started the quarter with $110 million. Then on this left side of the page, what we call adjusted free cash flow to (inaudible), which was the cash generated by now with four mines in production. Now it's including investments in the growth of our business. So, we see that portion of that business has generated $14 million in the quarter. Then in the middle of the chart, what we call investment for growth, [most] of the $11 million were used in expanding our exploration program. We invested $7 million in exploration.Expansion CapEx came down this quarter due to the completion of Almas in the commercial production declaration, only $4 million. We do expect to see an increase in this number in the quarters to come, now with the [Permian] construction. And to the right side, we see that the financial items mainly highlighting the net proceeds from that, which was close to $70 million, mainly $100 million term loan. We raised it to develop the Borborema project and also minus the payments of the first installment of the (inaudible) by (inaudible), bringing our cash position to close to $180 million at the end of the quarter.And with this, we end our presentation and open to questions. Thank you.

[Operator]

We are going to start the question-and-answer section for investors and analysts. (Operator Instructions). Our first question is from Caio Greiner from BTG Pactual.

[Caio Greiner, analyst]

So, two questions on my side. The first one on the Almas startup, Rodrigo, I'm sorry if you already mentioned this, but I had some connection issues in the beginning. But I was particularly worried about the Almas guidance downgrade. So, I just wanted to understand a little bit more how this impacts your ramp plan going into -- especially into 2024 and into 2025? And then should we expect this to be a long-lasting event? I mean are we still expected to see this materially impacting production and shipments into the first half of 2024, even into the second half of 2024. Or do you expect this to be settled already in the short term?And the second question on the acquisition you guys announced earlier today on Altamira. So, I just wanted to understand a little bit more on the rationale of this move. I mean this -- you guys are acquiring a minority stake in another company as an investment. This is not really out of usual standard. So, I just wanted to hear a little bit more on what caught your eye in this company? And why not go for a complete acquisition? Do you guys have any instruments that you can raise your stake to 100%? I mean, was this previously negotiated? So, I just wanted to understand a little bit more.

[Rodrigo Barbosa, executive]

No. Thank you very much, Caio, and thank you for being here with us. So, first question on Almas, we expect it to be a short-term transitionary challenge that we have. I mentioned that what happens. We did ramp up very fast. The plant is working very well, above actually a nominal capacity. What happened is once we were -- we started mining and normally the beginning of the mine is soft rocks that it's easier to mine and to process. Once we reach the transition from softer rock to hard rock, which we operate in EPP and we operated in the other mines, then this stabilized the productivity of our contractor together with our mine team. So, this is pure managerial [on decisions] that stabilized this contractor, they're learning how to run mines. They are beginning to operate in mines as well. So, we are teaching them a lot how to improve efficiency, a lot of teams is going there in order to regain efficiency at the mine. So, we do not expect this to be lasting to 2024, and then we do not expect this to impact the results or the projections that we have in 2024, 2025compared to what we had in the base case.Actually, as we published recently, we did a small investment in order to increase capacity. So, we are increasing capacity of Almas to be able to produce above the feasibility study production compared in 2024, and we expect these managerial decisions and improved efficiencies to happen along this fourth quarter. That's why we changed a little bit the guidance. But we do not expect a significant impact on 2024, perhaps in the first one or so of the month, January and February. But then we fastly recover the productivity.So, on the second question on Altamira, we saw Altamira -- it's an early-stage company that don't have reserves yet. They have resources in inferred. But we believe very much in the potential. It's in is in Alta Floresta region. It's close to where we have the project Matupa, not close enough to have a significant G&A and synergies because maybe it close over 200 kilometers, but it's a trend that we like. We see a lot of rotation on the project to significant resource and reserves. So, what we have -- the strategy there is that the marketplace has [clear] capital for new companies that need to raise equities. Those junior miners are starving for capital. And the prices of the shares has significantly dropped all across the world, though junior mines is struggling to raise capital with the [low] prices. But we saw a project is good, has a lot of potential. So, we saw an opportunity to put a small amount of capital and let them work and see the improved results. So, we have warrants that we can increase our participation growth to 18%. We don't have options to go beyond this. However, we found it's natural that once you're there and they start to have a successful results with drilling that we can gradually also increase participation in the project according to both interests.So why we are not doing this at Aura? We could do exploration. We are not an early stage company. Our focus is to operate (inaudible). We are not early so our focus is to build and to operate and also we are not early stage. So, our focus is to build and to operate and also increase resource and reserves within the mines that we operate. We don't have the team, the techno knowledge to be an early stage. So that's why our strategy is let's invest in countries that specialize in early stage that have management, full-time CEO in all the senior management, the technical team, full-time doing exploration in order not to distract us from our plants.We are planting seeds for us to increase production, increase participation of those projects along the next four, five years. Those again, early-stage projects that will take several years to mature, but we will be monitoring close the advancements on those companies. And the price that we have today to join, to enter, on those companies is very attractive.

[Operator]

Our next question is from [Eduard Souza] from Itau BBA.

[Unknown Analyst]

So, my first question is regarding EPP. I understood that the main impact for production was due to those heavy rains in the quarter. So, what can we expect for a normalized production level for EPP per year, maybe thinking about next year and 2025? And then my second question is regarding Matupa. Are there any news or any updates on the projects? When do you have to start the construction to make sure that you will deliver that guidance of 450,000 ounces per year by 2025?

[Rodrigo Barbosa, executive]

So, your question about EPP projection production and then what we need to do in Matupa in order to achieve the [April 25 annualized] production. So, in EPP, we will -- we are discussing now the budget for next year. But what -- so we don't have yet the numbers to share with you. However, as -- I would invite you to take a look at what we produced in the past without the high grade of Ernesto. Although early next year, we should have some high grade of Ernesto, but along the year, we should go back to the normal levels of grades of ranging at 1 gram, 0.9 to 1.1 gram per ton. So, we don't expect to have those high levels that we had along the last two years due to Ernesto. And we will be releasing the new guidance for 2024 as we finish the budget discussions and then disclose the production for the Q4.Upon Matupa, we are advancing all the permitting process in order to start the construction of this project during the second quarter next year. That's our target to reach the guidance of 2025 for those projects. Matupa can be built in 12 months, 14 months, and then you can ramp up very fast as we did with Almas. So, third, second part of next year is our target to start the construction of Matupa.

[Operator]

Our next question is from Roman Rossi from Canaccord Genuity.

[Roman Rossi, analyst]

Good morning, guys. Congrats on the advancements made on Borborema project. So, just a follow-up on [Eduard's] question regarding EPP. You mentioned the grades should be lower compared to what we saw on the last quarter of last year. But so, what will be the normalized and now that you will be close in the Ernesto pit what will be the life of mine you are expecting? Because you are investing significantly in exploration there as well.And additionally, you reported 11,000 ounces of production, but you only sold around 9,600, right? So, this was related to the heavy rains as well. And this inventory you yield is expected to be sold at higher prices or it was -- the pricing was already fixed?

[Rodrigo Barbosa, executive]

Roman, I'm not sure if I understood the last question. I think it was breaking up. I lost a little bit.

[Roman Rossi, analyst]

The second one is regarding the difference between the ounces produced at EPP and the ounce is sold. You have around 1,500 ounces there. And so that should be considering higher prices that we are seeing these days, or the pricing was already fixed?

[João Cardoso, executive]

I'm going to answer first the second question. No, that was the only difference in the shipments from the time of producing the gold and being able to sell everything at the end of the quarter. It was already sold in the fourth quarter for a [quarter price]. So, we didn't fix those ounces in the target for the end of the quarter.

[Roman Rossi, analyst]

Okay. Awesome. Yes. And the first one on EPP was regarding the grades you are expecting for the fourth quarter and the first quarter of 2024, particularly considering the stockpile you built?

[Rodrigo Barbosa, executive]

So, on the fourth quarter, we will continue to see improvement in rates because we are accessing now the Ernesto pit. Although it was delayed, we will see high grade coming in Q4 and also some high-grade coming in January, February next year. So, the guidance that we gave is based on these levels of grade, which will be Ernesto and also not 100% Ernesto but Ernesto mixes with other mines that we have, the (inaudible) or some stockpile.For the remaining years, as I was mentioning, we should not expect to see higher grade of Ernesto backing in our plans once we will exhaust the mine early next year. We were [protected] to exhaust the mine by the end of this year of Q3 and Q4, and the delay has pursed some of those high grades too early next year. So then after that, we go back to the normal levels of grades that we worked in 2018, 2019, 2017, which is 0.9 to 1.1, 1.2 grams per tonne, depending where you are on the mine.And you also asked about the life of mine. And yes, we are heavily investing in the expansion of [life of mine], particularly in EPP where we have a shorter life of mine, the results has been very interesting and a positive, particularly connecting some of our bids that we already work. So, we should see -- we expect to see an increase in life of mine in the next AIS. And probably also, we can release something before that showing to the market to this increase in life of mine and the potential to further increase on EPP.Again, EPP, we expect as we are doing -- we started operating this mine with three years life of mine back in 2016. We already operated seven years, and then we have now more than three years of life of mine. And only in the last two years, we started increasing investment in exploration. So, we should continue to see a gradual expansion in the life of mine or EPP as we move forward to the production. So, the result has been very interesting in showing this trend for us to gradually increase life of mine of operations.

[Roman Rossi, analyst]

Just one last question following up what Caio asked regarding the acquisition of Altamira, this minority stake. Just wanted to know if there is any specific project that got your attention and drove your investment decision?

[Rodrigo Barbosa, executive]

Well, they have several, but Cajueiro's probably is the most promising. They also have one copper gold project that's earlier stage that can offer potential [partial] discoveries. Again, it's an early stage company that will take several years in order to consolidate the resource and reserves, but we are very positive in (inaudible) of the full trend of that area that we know very well has a promising [Hess]. That project has 190,000 hectares in an area that has already produced between 7 million to 10 million ounces of gold. That was mostly came from artisanal and now those -- they are doing a professional drilling in order to consolidate a bigger resource and reserve and then later on producing. [G-Mining], for example, into (inaudible) operate similar structures, and they will be able to produce over 100,000 ounce 150,000, 160,000 ounces per year in that kind of exploration in geology.

[Operator]

Our next question is from Rabi Nizami from National Bank Financial.

[Rabi Nizami, analyst]

A lot of my questions on EPP have been answered, but I'll just add on. You mentioned -- you had acquired this land -- is adjacent to it, the Japones pit. It had some exploration potential. Could you comment a bit about how that's turning out so far?And second question on San Andres, if you could tell us a bit more about some of the onetime maintenance items and your thoughts on 2024, cost for that asset?

[Rodrigo Barbosa, executive]

So, you're asking about Japones or (inaudible)? Japones is the land package that we bought last year. We are doing now exploration in that area of drilling. We saw continuity of the Japones trades on that area. So, we are now narrowing and making sure that we can publish the resource and reserves in the next AIF or along next year. So, a lot of drilling has been done already in that area. Some of the (inaudible) confirmed the extension on the step out, San Andres, of course, you don't have 100% of a hit rate on those drilling. But we are very optimistic that we'll be able to expand those bids and expand the resources and reserves of EPP, along the strike of Japones or [SG]. And the new results should be coming in until the AIF that will be published in next year.Then your question about -- I mean, how much was the onetime investment? We did over $2 million, $2.3 million of onetime investments to upgrade the productivity, upgrade the belts of that whole system in order to increase the productivity of the plant and then recover the production that we had in the past. So, we don't expect this $2.3 million that nonrecurring to happen in Q4 for this year.

[Rabi Nizami, analyst]

And there was also a comment in your financials about recovery being a bit lower in that line for the time being based on the kind of ore that you're in. What's your expectation for how long that might continue? And can you tells us a bit about 2024 production and cost for Honduras?

[Rodrigo Barbosa, executive]

So yes, the ore that we are processing now that is on the pits that we are working. I have some other content that has reduced a little bit the recoveries. Some of this has been addressed and that we should see recoveries going up. But it seems that that area is not -- will not have the recovery that we had in the past of 76%, 78%. We are more down to 68% and 70% of recovers and those were and not 75%, 78%. And we should probably see those kind of results for next year.

[Operator]

Our next question is from [Ricardo Monegaglia] from [Safra].

[Unknown Analyst]

The first question is, could you give some color on EPP's AISC from second quarter 2024 onwards? Should the cost be closer to the actual 2023 guidance above or below those levels? The second question, could you please disclose further details on the deal structure and rationale and the time line of Altamira's project?

[Rodrigo Barbosa, executive]

So, the guidance for 2024 will be disclosed in January 2024. So, I cannot go in much details what would be the cost. So -- but what I can share is that the Q3 is not the levels that we'll be practicing because what happened that we used an inventory of low-grade ore that was very close to the plant. When you mine along the last -- we mined along the last two or three years, what we do is we give preference for higher grades and then we fulfill the plant with the highest grade we can and the lower grade that comes from the mine we stock with stockpile, close to the plants to use in situations that we had this quarter that we had a delay in Ernesto. So, we used a low-grade with a high cash cost has been accumulated in close to the plant for the last couple of years. And we do not -- we will not have this situation next year that we will be mining fresh ore in the lower grade, but not as low that we passed to the plant. I think a good guidance would be to see Q1, Q2, or a few years ago plus some impact of the inflation that we had.In Altamira, they are conducting several new drills. This is why they raised the capital. The drill campaign can last six months, one year. And that -- those early-stage projects is a gradual information. So, we should expect new results of drilling coming in early next year. But the consolidation of our resource and reserves and consolidation of the view that we will have about the potential, we confirmed the resource and reserves will take several years. Where we might take three, four years depending on the results they have along the next one or two years.

[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, executive]

Well, thank you all for being here. Again, it was unfortunate to review the guidance for the year. That was mainly due to Apoena and some slight Almas that we explained. However, there was a very important and remarkable quarter that we achieved 0x lost time incidents. And also, we turned the point putting Almas into production, increased production in all the operations that we have. So, the trend of the last 12 months it has been [worth it] and we should continue to see an increase in production in all our operations with improved margins with the Q4, not only for reduced cash costs, particularly for Minas and also Apoena that will not have this onetime in Minosa and the higher cash cost on stockpile. We've combined with a higher gold price. So Q4 will be higher production, low cash costs, lower cash cost, and higher price if gold continues to be at this level.And with all of that, in Q3, we also pathed the way to achieve our growth commitment to 450,000 ounces with significant advancement in Almas already producing. And then Borborema with new feasibility studies, funding package stack of construction that's already moving according to our plan. So, I thank you all. And I invite you, again, to be with us in Aura Day, then we will go more in detail of each operations, also with the detailed strategy in finance and also talking a little bit more about the strategy of the company and expect to talk about the gold price and some numbers that I would invite everybody to take a look at; particularly in this moment that we see a strong belief of the [basement of field] currencies due to the high fiscal deficits and a lot of U.S. dollars being printed on the top of the geopolitical problems. So, thank you all.

[Operator]

Aura's conference is now closed. We thank you for your participation and wish you a nice day.