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Current Management and Board has Presided over Destruction of 93.7% of Equity Value Since James M. Bannantine was Appointed President & CEO
Minority Shareholders Collectively Owning 5.5% of Common Shares Outstanding Demand Resignation of James M. Bannantine and for Aura’s Board to Initiate a Process to Sell the Company’s Assets, Valued at C$0.40 Per Share
TORONTO, June 02, 2015 (GLOBE NEWSWIRE) -- Certain minority shareholders, writing on behalf of investors who collectively own approximately 5.5% of common shares (based on the diluted shares outstanding prior to a proposed private placement), sent a letter to the Board of Directors of Aura Minerals Inc. (TSX:ORA) (Pink Sheets:ARMZF) detailing their disapproval of capital allocation, management entrenchment and the inability or unwillingness to take actions necessary to maximize the per share value of Aura’s equity.
The minority shareholders have made previous attempts to work with management and the Board of Aura to recommend what they believe to be a compelling strategy for creating value for all shareholders. However, recent announcements by the Company indicate that the incumbent management and Board at Aura will continue to pursue the same unfocused and high-risk strategy that has significantly contributed to the 93.7% decline in the Company’s market value since October 18, 2011, when James M. Bannantine was appointed President and CEO.
In order to address the current situation, the minority shareholders are calling for the resignation of James M. Bannantine and for the Board of Aura Minerals to initiate a corporate sale process, whereby all shareholders may finally realize the intrinsic value of the Company’s assets, which is not currently reflected in the share price.
Concerned shareholders are encouraged to contact Timothy Stabosz at (219) 363-7485 to discuss their investment in Aura Minerals Inc.
Full text of the letter sent by minority shareholders to the Board of Aura Minerals Inc. follows:
June 1, 2015
Members of the Board of Directors of Aura Minerals Inc.
Patrick J. Mars
Aura Minerals Inc.
155 University Avenue, Suite 1240
Toronto ON M5H 2B7
Dear Members of the Board of Directors:
We are writing on behalf of shareholders (“we” or the “minority shareholders”) that own 12.5 million common shares of Aura Minerals Inc. (“Aura” or the “Company”), representing approximately 5.5% of the total shares outstanding.
As you know, we believe the capital allocation and general corporate strategy of Aura Minerals to be deeply flawed. Further, we do not believe that the incumbent management and Board are acting in a way that will result in value maximization for all shareholders. We provide the following as evidence:
In spite of all the above, there is still tremendous value in Aura that is not reflected in the current share price. Using the mid-point of management’s 2015 guidance, Aura should generate approximately US$50 million (C$62.25 million) of cash margin from operating gold assets. Aura is expected to be free cash flow positive in 2015, after US$12.8 million of capital expenditures, US$9 million of G&A expenses, and a US$3.0 million net smelter royalty payment.
The Company’s debt obligations primarily consist of a gold loan that will be repaid with produced gold, and a loan related to the Serrote development project that is non-recourse to Aura’s producing gold assets. Further, Aura has confirmed that it expects to have a net debt position of “almost nil by the end of the first quarter of 2016.” We believe that this can be achieved at least a quarter earlier, even without the announced private placement.
For 2016 and beyond, the Company’s value is primarily derived from its San Andres gold mine in Honduras, which has been in production since 1983 and has well-developed infrastructure and on-site camp facilities. San Andres is capable of producing an average of 80,000 ounces of gold per year for a minimum of eight (and management expects more than 10) years. At spot gold prices of US$1,200/oz, this represents US$24 million of cash margin, which management has said represents US$15 million of free cash flow per year. Beginning in 2016, this stream of cash flow would recur for eight to 10 years on an all-equity capital structure. We conservatively value this at US$75 million (C$94 million) which equals C$0.40 per share on the shares outstanding prior to the announced private placement. Moreover, incremental option value exists around the Company’s Aranzazu, Serrote and Pau-a-Pique assets.
To assist management and the Board, we outlined a five-point strategic plan that we felt should be communicated to the market, which would result in the greatest long-term value for the benefit of all shareholders. The strategy summary, with brief details, is as follows:
1. Manage Costs Vigilantly.
2. To Pay Down Debt.
3. With a Commitment to Repurchase Common Shares.
4. So as to Regain Credibility – and Engage Investors and Equity Research Analysts.
5. With Prospects of Future Upside Based on Feasibility Studies, Future Asset Monetizations and Return or Redeployment of Capital for the Benefit of All Shareholders.
The press release issued by Aura on May 28, 2015 confirmed all the fears and grievances we had previously expressed to the Board and management. Rather than follow a sound capital allocation strategy based on low risk activities and creating value for shareholders, the Company announced a private placement resulting in the issuance of 25% more shares at a price equal to ¼ the standalone value of San Andres and a continuation of the high-risk and reckless capital allocation that has significantly contributed to the 93.7% decline in Aura’s equity value.
Under the incumbent Board and management, Aura has shirked accountability to minority shareholders and failed in its fiduciary obligations of duty and care. As such, we are calling on you to take immediate actions to maximize the value for all shareholders. Specifically, we believe that the resignation of the President and CEO, James M. Bannantine, is warranted, and that an orderly sale process of the Company should be initiated expeditiously.
Timothy J. Stabosz (on behalf of minority shareholders)
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