Ero Copper Corp. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Leadership Succession: David Strang steps into Executive Chairman, Makko DeFilippo becomes President and CEO, with Gelson Batista joining to support growth.
• Tucumã: Completed construction and first production in July; executed earning agreement with Vale Base Metals; Phase 1 drill program started with two drill rigs on-site.
• Caraíba: Production increased but development contractor underperformance led to revised guidance; C1 cash costs decreased due to higher grades and favorable exchange rates.
• Xavantina: Strong gold production performance, reaffirmed guidance.

Segment Performance

• Caraíba: Produced 9,920 tonnes of copper in concentrate in Q3, an 11.9% increase. However, underground development underperformance by a third-party contractor led to revising full-year copper concentrate production guidance to 35,000-37,000 tonnes. C1 cash costs decreased 24.5% to $1.63 per pound.
• Tucumã: Completed construction and first production of salable copper concentrate in July. Encountered power issues due to voltage fluctuations and a windstorm, leading to revising full-year copper concentrate production guidance to 8,000-11,000 tonnes.
• Xavantina: Gold production totaled 13,485 ounces in Q3. Reaffirmed full-year gold production guidance of 60,000-65,000 ounces and cost guidance of $450-550 per ounce for C1 cash costs and $900-1,000 per ounce for all-in sustaining costs.

Guidance

• Caraíba: Revised full-year copper concentrate production guidance to 35,000-37,000 tonnes.
• Tucumã: Revised full-year copper concentrate production guidance to 8,000-11,000 tonnes.
• Xavantina: Reaffirmed gold production (60,000-65,000 ounces) and cost guidance ($450-550 per ounce C1 cash costs, $900-1,000 per ounce all-in sustaining costs).
• 2025 Outlook: Caraíba expected to underperform initially due to contractor delays, while Tucumã production expected to trend towards higher end of previous guidance.

Risks

• Operational Challenges: Power issues at Tucumã affecting mill throughput and ramp-up; development contractor underperformance at Caraíba impacting underground development rates.

Question and Answer

Q: Ralph Profiti asked about the contractor issues at Caraíba and power issues at Tucama.

A: Makko DeFilippo clarified contractor issues at Caraíba don't affect stope dilution/reconciliation, and at Tucama, the power solution is being addressed with minor capital needed.

Q: Guilherme Rosito inquired about Caraíba guidance and capital allocation.

A: David Strang and Wayne Drier discussed Caraíba guidance being conservative with October showing improvement, and capital allocation priority is repaying revolver then returning cash to shareholders.

Q: Connor Mackay asked about Pilar contractor and Tucama commercial production.

A: Makko DeFilippo said second contractor at Pilar is a risk mitigation measure, and Tucama is expected to reach commercial production within months.

Q: Roald Ross asked about Caraíba cash costs, realized copper price, and Tucama sustaining CapEx.

A: Makko DeFilippo discussed cash cost tailwinds, Wayne Drier explained realized copper price tied to shipment timing, and Makko deferred sustaining CapEx discussion to January guidance.

Q: Dalton Baretto asked about Caraíba contractor root cause and Tucama power solution.

A: Makko DeFilippo cited contractor mobilization delays as the root cause at Caraíba, and David Strang explained the voltage solution at Tucama is managing mill motor sensitivity to voltage fluctuations.