Jun 02, 2015 (GLOBE NEWSWIRE via COMTEX) —
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. (ORA) ARMZF, +0.00% 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
Jim Bannantine
Tom Ogryzlo
Stephen Keith
William Murray
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:
- Share price underperformance. James M. Bannantine was appointed President and CEO on October 18, 2011. Shortly thereafter, certain capital allocation decisions impacted the capital structure of the Company and Aura moved from a net cash to a net debt position by early 2012. Since Mr. Bannantine was appointed President and CEO, the equity value of Aura has declined by 93.7%.
- Poor capital allocation. Under Mr. Bannantine's leadership, beginning in the third quarter of January 2011, Aura has generated approximately US$145 million of free cash flow (defined as EBITDA less capital expenditures) from the Company's gold mines in Brazil and Honduras but incurred approximately US$100 million of negative free cash flow from its Aranzazu and Serrote development projects and US$50 million in cash G&A expenses. Had Aura simply retained the cash from its gold operations less G&A expenses, the Company would now have cash savings equal to approximately 4.6x the current market capitalization.
- Dilutive transactions. Despite forecasting to be free cash flow positive in 2015, Aura announced on May 28, 2015 that it had entered into a private placement agreement to issue an additional 25% of common shares at a price of C$0.107. The issue price represents roughly ? of the value that we ascribe to Aura's principal asset. In a similar fashion, Aura has demonstrated a complete lack of concern for the value of its shares by issuing millions of warrants and options to Auramet, insiders and Yamana at exercise prices that are a fraction of intrinsic value.
- High G&A expenses. Aura claims that they are the victim of a weak commodity market that has been particularly harsh on junior mining companies. It is not immediately clear where that harsh environment is reflected in Aura's G&A expenses. With a corporate staff of approximately 10, Aura recorded 2014 expenses of US$6.3 million (2013:US$7.0 million) for salaries and wages plus US$2.3 million (2013:US$1.7 million) for professional and consulting fees plus US$3.0 million (2013:US$5.0 million) for a line-item simply described as "Other." Together, these corporate G&A expenses represent a cash outflow of US$11.6 million (2013:US$13.7 million), which is greater than 50.0% of the Company's equity value.
- Minimal insider ownership. Aura's Board collectively owns 1.9 million common shares representing approximately 0.8% of Aura with a current market value of C$171,000. Management contends that the corporate finance activities of Aura left them in an effectively continuous blackout period for the past two years.
- Poor disclosure. Paulo Carlos de Brito, a well-known name in the mining industry, controls Cyprus River Holdings Ltd., which owns 45.6 million common shares, representing approximately 19.9% of Aura. In December 2014, Sercor Ltd., believed to be an irrevocable trust affiliated with (but not controlled by) Mr. de Brito acquired 43.8 million common shares, representing 19.2% of Aura from an entity controlled by Yamana Mining Inc. As of the date of Aura's Information Circular, Sercor had increased its ownership to 45.6 million shares, representing 19.9% of Aura. Finally, Board member Stephen Keith is understood to be Mr. de Brito's representative on the Board. Yet nowhere is the name Paulo Carlos de Brito mentioned in Aura's public filings, nor are there any disclosed measures taken by the Board to ensure independence and good faith dealings for the benefit of all shareholders.
- Lack of credibility. In contrast to the name Paulo Carlos de Brito, the name James M. Bannantine is not as well-known. Other than Mr. Bannantine's ability to speak Spanish and Portuguese, and being a self-proclaimed former activist investor and private equity entrepreneur, his only long-tenured corporate affiliation is that he was a senior executive at Enron for 10 years. As outlined above, the share price performance under Mr. Bannantine's tutelage has been nearly as catastrophic as that of Enron. Further, he has alienated the Company from the investment community. Specifically, in Q3'11 there were six research analysts covering Aura Minerals, all with a "BUY" rating and an average price target of C$3.70 per share (representing C$840 million of equity value.) Today, there are zero analysts covering the Company, the market capitalization is approximately C$20 million and no actions are being taken to engage the investment community.
