Aura Minerals’ Dividend Strategy and Its Implications for BDR Holders: A Tax-Efficient Approach to Cross-Border Mining Investments

Aura Minerals Inc. has emerged as a standout in the gold mining sector, not only for its operational resilience but also for its aggressive dividend strategy. In August 2025, the company announced a 32% increase in its quarterly dividend to $0.33 per share, translating to $0.11 per BDR (Brazilian Depositary Receipt) [1]. This move, which aligns with its policy of distributing 20% of Adjusted EBITDA minus sustaining and exploration capital expenditures [2], has positioned Aura as one of the highest-yielding gold stocks, with a 7.4% yield over the last twelve months [3]. For BDR holders, this represents a critical juncture where financial structure and tax efficiency intersect.

The Mechanics of Aura’s Dividend Policy

Aura’s dividend policy is anchored in a formulaic approach: quarterly cash dividends are calculated as 20% of reported Adjusted EBITDA, adjusted for sustaining and exploration capital expenditures [2]. This framework ensures dividends remain tied to operational performance while allowing flexibility during periods of capital reinvestment. Recent trends underscore this dynamic: the dividend surged to $0.40 per share in May 2025, dipped to $0.25 in March 2025, and now stands at $0.33 per share in August 2025 [1]. For BDR holders, the payout is proportionally adjusted—1 BDR equals 1/3 of a common share—resulting in $0.11 per BDR, with payments converted to Brazilian reais at the prevailing exchange rate [1].

This structure offers transparency but introduces currency risk for BDR holders, as the real-dollar exchange rate directly impacts the value of distributions. For instance, the August 2025 dividend equated to approximately R$0.593 per BDR using an exchange rate of BRL 5.4134 per USD [1]. Investors must weigh this volatility against the company’s commitment to maintaining a robust payout ratio, which has historically ranged between 20% and 30% of Adjusted EBITDA [2].

Tax Implications for Cross-Border Investors

The financial structure of Aura’s dividends is further complicated by Brazil’s proposed tax reform, which could significantly alter the after-tax returns for non-resident investors. Under the new legislation (PL 1.087/2025), a 10% withholding tax on dividends to non-residents will take effect on January 1, 2026 [4]. This marks a departure from Brazil’s long-standing policy of exempting dividends since 1996 [5]. While the 10% rate is lower than typical treaty rates (10–15%), the reform introduces a tax credit mechanism to offset combined effective tax burdens if they exceed Brazil’s nominal corporate tax rates (e.g., 34% for most entities) [4].

For US investors, the US-Brazil tax treaty offers potential relief. Although the treaty does not reduce the 10% withholding tax below the proposed rate, it allows for foreign tax credits in the US for taxes paid in Brazil, potentially mitigating the effective tax burden [6]. This is particularly relevant for BDR holders, who must navigate both the 10% withholding tax and a 0.38% tax on financial transactions [1]. The interplay of these taxes underscores the importance of strategic tax planning, especially as the reform remains subject to legislative adjustments before its 2026 implementation [4].

Evaluating Tax Efficiency in Cross-Border Mining Investments

Aura’s dividend strategy exemplifies how mining companies can balance growth and shareholder returns. By tying payouts to Adjusted EBITDA, the company ensures dividends remain resilient during capital-intensive phases, such as exploration or acquisitions [3]. However, the proposed Brazilian tax reform introduces a layer of complexity for BDR holders. Investors must assess whether the 10% withholding tax, combined with the 0.38% financial transaction tax, will erode the 7.4% yield. For example, a $0.11 BDR dividend would incur $0.011 in withholding tax and $0.00042 in financial transaction tax, reducing the net payout to $0.0986 per BDR [1].

The tax credit mechanism, however, offers a silver lining. If the combined effective tax rate exceeds Brazil’s nominal corporate tax rate (34%), investors can claim credits to offset the excess. This is particularly relevant for large institutional investors with diversified portfolios, as the 360-day filing window for tax credits provides flexibility [4]. Meanwhile, the US-Brazil tax treaty’s reciprocity provisions may further reduce the effective tax burden, though individual investors should consult tax advisors to optimize their strategies [6].

Conclusion

Aura Minerals’ dividend strategy reflects a disciplined approach to capital allocation, with a clear emphasis on shareholder value. For BDR holders, the challenge lies in navigating the evolving tax landscape. While the proposed 10% withholding tax introduces uncertainty, the tax credit mechanism and treaty provisions offer pathways to preserve after-tax returns. As the reform moves toward implementation, investors must stay informed and adapt their strategies to harness the full potential of cross-border mining investments.

Source:
[1] Payment of dividends to BDR holders [https://www.globenewswire.com/news-release/2025/08/29/3141841/0/en/Payment-of-dividends-to-BDR-holders.html]
[2] Dividends and Charts [https://www.auraminerals.com/en/investors/dividends-and-interactive-charts/]
[3] Aura Minerals Boosts Dividend by 32% to $0.33 Per Share [https://www.ainvest.com/news/aura-minerals-boosts-dividend-32-0-33-share-2508/]
[4] Brazilian government proposes changes to taxation of [https://www.mattosfilho.com.br/en/unico/changes-taxation-dividends/]
[5] Brazil - Corporate - Withholding taxes [https://taxsummaries.pwc.com/brazil/corporate/withholding-taxes]
[6] Brazil - Individual - Foreign tax relief and tax treaties [https://taxsummaries.pwc.com/brazil/individual/foreign-tax-relief-and-tax-treaties]