Ero Copper Corp. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Tucuma: On track for commercial production, with successful execution of programs to address plant bottlenecks in January and February, and completion of repairs on the third tailings filter in April.
• Balance Sheet: Amended credit facility to $200M, drew $25M from copper prepayment facility, entered zero cost copper collars for price protection, and extended stream agreement with Royal Gold for $50M.
• Growth Initiatives: Eight drill rigs operating at Furnas, on track to complete Phase 1 drill program in Q3 2025, with preliminary economic assessment expected in H1 2026.
• Caraiba and Xavantina: Caraiba seeing benefits from additional development investment and third-party contractor, while Xavantina expects grades to improve with ongoing equipment and infrastructure investments.

Segment Performance

• Tucuma: On track for commercial production in the coming weeks. Contributed significantly to consolidated net income and EBITDA in Q1. Addressed plant bottlenecks in January and February, with March having more than half of Tucuma’s total plant throughput and copper production. Repaired the damaged third tailings filter at the end of April.
• Caraiba: Lower planned mined and processed copper grades led to QoQ decline in copper production and elevated unit costs. However, benefits from additional development investment were seen, with target mining rates achieved at the Pilar Mine in March, and sequential growth in mine and process volumes expected for the rest of the year.
• Xavantina: Mine and process volumes increased by over 27% QoQ, but lower grades resulted in a decrease in total gold production. Grades are expected to improve through continued investment in low profile mining equipment and support infrastructure, with higher production levels and lower unit costs anticipated moving forward.

Guidance

• Reaffirmed full-year guidance ranges.
• Expect throughput volumes at Tucuma to increase steadily post-repairs.
• Plan to begin repaying revolving credit facility in H2 2025 assuming metal prices remain constructive.
• FX hedge program with notional position $332.5M, collars extend to June 2026 with weighted average floor and ceiling of BRL5.52 and BRL6.49 per U.S. dollar.

Risks

• Commodity price volatility impacting cash flows.
• Macroeconomic uncertainty affecting business operations.
• Execution risks related to ramping up operations at Tucuma and other growth initiatives.
• Foreign exchange rate fluctuations affecting financial results.

Question and Answer Q: Update on assets in April.

A: Xavantina grades improving, Caraiba seeing benefits from third-party contractor at Pilar Mine, Tucuma completed repairs on the third tailings filter at the end of April.

Q: Context on $43M advance to customers.

A: Accounting treatment due to switching sales between trading houses, resulting in elevated accounts receivable and payable.

Q: Tucuma grade expectations, Xavantina grade improvement, liquidity management.

A: Tucuma grade decline due to geology, Xavantina grades returning to normal levels, stream agreement with Royal Gold for Xavantina development as a non-dilutive funding source.

Q: Tucuma maintenance and power situation.

A: Major maintenance completed, power oscillations still occur but improved, with a long-term power solution being designed.

Q: Tucuma commercial production timeline, Caraiba costs.

A: Commercial production still expected in H1 2025, Caraiba costs expected to improve with margin expansion efforts and FX hedging.

Q: Definition of commercial production at Tucuma.

A: Based on throughput rates, concentrate grades, and recovery, with ongoing assessment of these metrics.

Q: Exploration update, Tucuma grade backfilling, M&A.

A: Exploration focused on Furnas with 8 drill rigs, ongoing work at Caraiba and Xavantina, regional M&A still active in the Carajas region.

Q: Pilar shaft milestones and CapEx.

A: Shaft sinking progressing, with CapEx for Caraiba deeping project ~$80-90M in 2025, fully reflected in guidance.

Q: Xavantina production progression.

A: Steady progression with equipment delivery timelines, expecting sequential growth in volumes.

Q: Review of metrics for commercial production at Tucuma.

A: Assessing throughput rates, concentrate grades, and contribution to consolidated net income and EBITDA for the designation.