Ero Copper Corp. Q1 FY2026 earnings call

• Marco's Observations: Broad enthusiasm for copper with tight supply and lack of quality development assets, sector-wide cost inflation, Brazil's increasing attention and impact on the business. Portfolio and risk management efforts to benefit from copper market tailwinds, protect bottom line from cost and currency pressures.
• 12-Month Performance: Consolidated copper production up nearly 40%, gold sales volumes (including concentrates) up 77% year-on-year, quarterly revenue up 110%, adjusted EBITDA up 100%, net debt down ~$70 million, leverage ratio reached targeted one times. Safety milestone at Tucumã with four years without a lost time injury.
• Q1 Operational Performance: Operationally tracked largely to plan. Javanchina was trough quarter due to ventilation and cooling investments, with work substantially completed by end of April, expecting step change in mining rates and throughput in second half.
• Jelson's Operational Details: Caraiba's Q1 throughput, copper production and cash cost details, outlook for Q2 and second half. Tucuman's production, cash cost, and tailings filtration circuit initiatives. Cervantina's transitional Q1, production outlook for remainder of year.
• Wayne's Financial Details: Revenue growth driven by stronger copper and gold prices, higher realized prices, and gold concentrate sales. C1 cash cost increase due to BRL, foreign exchange hedge gain offsetting some impacts. Adjusted EBITDA doubling year-over-year, balance sheet deleveraging, top capital allocation priority on balance sheet deleveraging.

Caraiba

• Q1 meal throughput exceeded 1 million tons (second time in history, first in Q4 last year after debottlenecking). Copper production declined from Q4 due to lower head grades, planned stop sequencing at Pilar, and constrained mining rates at Surubi open pit. C1 cash cost for Q1 was $2.79 per pound. Q2 process tones and grade expected to be broadly similar to Q1, with strong production in second half driven by normalization of mining rates and higher grades/tonnage from certain areas. Q1 cash costs expected to decline in third and fourth quarters.

• Tucuman

• Copper production decreased modestly from Q4 due to lower process grades, partially offset by higher throughput. C1 cash cost for Q1 was $1.97 per pound, in line with expectations and full-year guidance. Process tons expected to increase from Q1 levels, process copper grades projected to moderate, production slightly weighted towards second half on higher throughput, with C1 cash costs expected to be relatively stable for the year.

• Cervantina

• Q1 was transitional as it completed necessary ventilation and cooling infrastructure upgrades. This impacted first quarter gold production and costs. Q1 was expected to be the weakest gold production quarter of the year. Remainder of year expected to see mining rates and throughput pick up, with 60%-65% of Savantino's production in second half, and costs declining significantly from Q1 levels, maintaining full-year operating production and cost guidance. Also, sold approximately 4,300 ounces of gold concentrate in Q1, with concentrate sales volumes expected to benefit from drier conditions, and efforts underway to support continuity of concentrate sales through next rainy season.

• Reaffirmed full-year operational guidance. Javanchina's ventilation and cooling work completed, expecting step change in mining rates and throughput in second half. Tucuman's tailings filtration circuit initiatives not reflected in 2026 guidance. Cervantina's production and cost guidance maintained with 60%-65% of production in second half and costs declining from Q1 levels.

• Forward-looking statements involve risks, detailed in most recent annual information form. Sector-wide cost inflation, potential addition of 5-10 cents per pound to operating costs due to Middle East conflict if key inputs stay at current levels. Supply chain concerns monitored, but no current supply-related shortages. Impact of Brazilian real exchange rate, with foreign exchange hedge program in place to mitigate some impacts.

Q: Hi, thanks for taking my question. You mentioned quite a bit about Brazil and the dynamics there. Can you just talk about what you're seeing in terms of labor inflation?

A: Yeah, thanks for the question. So I think more broadly speaking, I'll give a bit of nuance about our labor negotiations, which happen annually in the fall. those are typically set around the standard inflation rate. So, going back to last year in the fall, we negotiated, on average, a 5 percent increase on labor year on year. If you go back over the last, you know, 10 years, this was historically absorbed by the depreciation of the Brazilian Reiche. Obviously, as Wayne alluded to and we spoke in the prepared remarks, The BRL strengthens significantly, and hence the hedge program that we've put in place to help offset some of that inflation. But 5% was the negotiated rate last year in the fall.

Q: Good morning. The comment earlier about that there's currently, I think, 12,000 tons of gold concentrate drying, is that indicative of what you expect to sell in Q2? And I'm wondering if you could provide any guidance for the year with respect to contained ounces in the gold concentrate.

A: Yes. Thank you, Oris. Both great questions. We do have 12,000 tons drying. As we saw in our Q1 performance and looking back at Q4, the rate of drying and transportation is a function of the sunny days during the month. As you can see on the slide 9 that we prepared showing average rainfall, obviously May, you know, May, June, July, and August have very low rainfall, on average, you know, less than 10 millimeters, and so we're expecting to ramp up sales volume pretty meaningfully here in Q2. But in terms of giving the exact amount, it's going to be predicated by the amount of sunny days during that time period. So hesitant to do that for obvious reasons. When I look ahead to Q4, as Jelson mentioned and as shown on slide nine, we did make progress on some installations and equipment we ordered last year. to help ensure continuity of deliveries and shipments through next year's rainy season. But again, for reasons that I think everyone on this call is well aware, we're unable to provide forward-looking guidance on concentrate sales. What I can tell you is that we have seen nothing to date in terms of grade that suggests anything different from the resource that we put out on the sampled volume. So we still see you know, right around one ounce per ton or a bit higher as being the benchmark there. So I haven't seen any evidence that the grades are lower. But, again, giving exact delivery schedule and timing still requires additional sampling from the material that we're extracting, and then obviously additional weather, favorable sunny weather to get that support.

Q: Yeah, thanks very much. Just wondering, is there any updates or color on just how the shaft project's going at Pilar?

A: Yeah, great, Stefan. I'll jump in and then Jelson can carry on if I miss any details here. Shaft is progressing well. As we discussed last quarter, we've now finalized the completion of the second leg. So we're starting the third and final leg of the shaft, which is a very important connection for us that was completed this year, still targeting the reaching shaft bottom at the end of this year or early into next year. And that's really the critical path for that project. When you look at the surface installation, substantively complete, the underground installation of conveyors and crusher chambers, or the excavations are complete. We're installing that equipment very soon. We're in the process now. And so we're pretty happy with the progress. As I said, a critical path for us is reaching shaft bottom at the tail end of this year, early next year, so that we can transition from sinking into transitioning that shaft over to the operational phase.

Q: Hi, thank you for taking my questions. First question on our sales versus production gap for copper specifically. I noticed that sales for the quarter came above production figures for both Caraiba and Tucumana. I was just wondering how should we think about the gap between sales and production going forward? That's the first question.

A: Thanks for the question. And look, obviously sales and production for us do on a quarterly basis vary slightly. You know, if you look at the volume of concentrate we produce, it's not as significant as some of the larger copper producers. So we sell in 10,000 ton lots. And so depending on the timing of when we invoice and we close a lot, You can see some inventory buildup. We did have inventory build in the back end of Q4, which was sold early in Q1. So, you know, that timing will always vary just depending on how we assemble our lots. I mean, obviously, we try our very best to sell everything we produce, but sometimes it's just the timing just doesn't work.

Q: Good morning, team. Can you hear me? Barely, to be honest. Is it better now?

A: Yes, just speak slowly and I think we'll be able to, it'll come through. All right, all right. Thanks for the time, guys. So just on Chabanchina, I just want to to understand what is your guys' expectations for good prediction comparing to the guidance. I mean, it's pretty clear that grades should improve as well as throughput because you're getting access to the higher steps, right? But even so, I mean, the change in prediction should be quite material to deliver on the low end of the guidance. So I'm just trying to understand here if you guys think that 17-year-old production is now more secure to the low end of the guidance. So this is the first question. And just a second one, on Tucuma, I mean, it's also pretty clear that we should see an improvement in second Q, but just looking at, I mean, it doesn't have, but just looking at second Q specifically, I mean, what are your expectations for throughput in grades? given that, I mean, grades should decline particularly by the second half, but on the other hand, throughput should also improve. So, just specifically on tech and Q for Tukuma and on challenging as a good prediction and guidance, please.

A: Yeah. So, when we think about Jeb and Sheena, I think it's important looking at throughput volume, and I hear what you're saying on the step up. I would look at Q4, really the second half of last year in terms of throughput volume and what we achieved there as being aligned with our expectation, obviously a little bit of a step up given some of the work we're doing now in development. When I look at the second half of April into May and the development rates that we're achieving, as well as some of the productivity in preparing stoves and having better access to higher grade. We still see ourselves firmly within that guidance range. So I understand the nature of the question. If we felt the guidance was at risk, then obviously we'd be talking about a different guidance range. So we still feel comfortable with where we're at, particularly looking at the second half of April. and the first few days in May here. So I hope that addresses the question on Javanchina. At Tukama'a, in terms of grade, when I think about the full year, I think you used the word material decrease in grade, but we're looking at a fairly elevated grade profile for the whole year. So we were 1.66 in Q1. A full year average, we're still looking around 1.4. So, you know, you can look at the rate of decline there, and I would argue that it's still very high grid across the full year.