Ero Copper Corp. Q2 FY2024 earnings call

• Safety was emphasized with acknowledgment of a fatal incident at Caraiba Operations, and commitment to safety as non-negotiable.
• Tucuma Project: Awarded operational license, achieved first concentrate production in late June, first saleable copper concentrate in mid-July, with plant performance well above design target grades and recoveries near design. Ramp-up focus on stabilizing material flow and producing quality concentrate.
• Caraiba: Mill expansion completed late last year reflected in higher throughputs, though processed copper grades were slightly lower due to factors like dilution in high-grade stopes. Benefited from favorable copper concentrate market dynamics with lower treatment charges and dollar strength against Reais, leading to lower C1 cash costs and higher gross profit margins.
• Xavantina: Saw another exceptional quarter with expansion in gross profit margins, elevated gold grades, and record gold prices. Gold production was 16,555 ounces, with unit operating costs below budget.
• Furnas Copper Project: Signed definitive earning agreement with Vale Base Metals, with baseline environmental studies and core relogging underway, expecting inaugural NI 43-101 resource estimate later this year and initiation of 1st exploration campaign.

In the second quarter, the Tucuma Project achieved first concentrate production at the end of June and first saleable copper concentrate in mid-July. At Caraiba, throughputs were up 12.2% quarter-on-quarter and 17.9% compared to Q4 2023, with copper production at 8,867 tons, a 9.6% increase. Copper C1 cash costs were $2.16 per pound. Xavantina had gold production of 16,555 ounces, with tons processed up 6.9% quarter-on-quarter, and unit operating costs below budget. The Tucuma Project's copper concentrate grades were above-designed targets, and it's on track for commercial production by end of third quarter. Revenue contributions: Caraiba and Xavantina operations contributed based on their respective productions and market conditions, while Tucuma's contribution will increase as it ramps up.

• Reaffirmed copper production and cash cost guidance ranges for Carajás, but guided to lower end of copper production guidance range. For Xavantina, lowered full-year gold C1 cash cost guidance to $450-$550 per ounce and all-in sustaining cost guidance to $900-$1,000 per ounce. Expect consolidated copper production to increase sequentially in second half driven by Tucuma ramp-up, and Xavantina's mined and processed grades to remain above budget though slightly lower in second half but full-year unit operating costs lower than budgeted.
• Tucuma is on track to reach commercial production levels (80% of design mill capacity and 80% of design recovery rates) by end of third quarter.

• A fatal incident at Caraiba Operations involving a light-duty pickup truck on surface, with another colleague in critical condition. Safety is a key focus and unwavering commitment to safety is emphasized.

Q: Can you get some color on Tucumã ramp-up in terms of recoveries and throughput?

A: At early ramp-up, concentrate grades above design expectations, recoveries near design targets, throughput volumes increased to 40%-50% of design capacity.

Q: Should we expect financials related to Tucumã until commercial production?

A: In Q3, will expense some costs as first sales are expected, with portion of costs expensed and capitalized until commercial production.

Q: Focus for 2025, deleveraging or exploration?

A: Focus is on deleveraging the balance sheet, with possible reallocation of exploration budget to Furnas but no big material change in overall exploration expenses.

Q: Seismic event at Caraiba?

A: Seismic events are common in active mining, two events unrelated to fatality, mine evacuated temporarily for assessment and returned to operations.

Q: Grade expectations for Caraiba second half?

A: Expect proportion of high-grade stopes to increase, with higher grades coming through, though one high-grade stope had dilution.

Q: Exploration in Carajás Camp and personnel additions?

A: Mike Hocking joined team, working on exploration in Carajás, including drilling underground resource at Tucumã and other areas.

Q: Mining rates and open pit at Caraiba?

A: Pilar mine rates expected to increase in second half, open pit mining 800,000 tons a year from Serbian.

Q: Argentina veins mining progress?

A: San Antonio vein is well into operations, Mauritania vein entered last year, with higher grades in San Antonio zone.

Q: TC rates at Caraiba?

A: TCs locked in at ~$5 per ton for rest of year, previously averaging nearly $80 per ton.

Q: Furnas project timeline?

A: In preparation of resource estimate, expecting inaugural NI 43-101 resource estimate later this year and initiation of 1st exploration campaign.

Q: Currency hedging strategy?

A: Hedges front end weighted to protect capital spend, now more opportunistic with BRL weakness, looking for downside protection and opportunism.

Q: Tucumã stockpile grade?

A: Overall stockpile of 460,000 tons has average grade around 1%, with low-grade and high-grade mixed.