Ero Copper Q3 2026 Earnings Call Transcript

Quartr
Provided by Quartr
November 3, 2026

Key Takeaways

  • Positive Sentiment: Record financial performance and rapid deleveraging: Q3 cash flow from operations reached approximately $191 million and adjusted EBITDA exceeded $200 million, while net debt fell by about $99 million to $353 million and leverage declined to 0.5x. Management expects to repay the remaining revolver balance during Q4 and is actively discussing a shareholder-return framework with the board.
  • Positive Sentiment: Copper operations remain on track, with 18,300 tonnes produced in Q3 and sequential throughput gains of 8% at Caraíba and 14% at Tucumã. Management expects stronger Q4 grades, recoveries and production, while Tucumã’s additional filters remain scheduled for commissioning by year-end.
  • Neutral Sentiment: Xavantina’s mine production was below expectations in Q3 because of delays accessing high-grade stopes, although total gold recovered rose 23% sequentially to about 25,000 ounces due to historic concentrate sales. The company now expects 75,000–80,000 ounces in 2026, but provided limited visibility beyond the next eight weeks and acknowledged that concentrate volumes and grades remain uncertain.
  • Positive Sentiment: Ero completed the 45,000-metre Phase 3 drilling program at the Furnas copper project more than two years ahead of schedule, with results showing continued high-grade continuity and extensions. A Pre-Feasibility Study is expected by September 2027 at the latest, though permitting and further engineering remain necessary before any potential investment decision.
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Earnings Conference Call
Ero Copper Q3 2026
00:00 / 00:00

There are 13 speakers on the call.

Operator

Thank you for standing by. This is the conference operator. Welcome to the Ero Copper Third Quarter 2026 Operating and Financial Results Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may reach an operator by pressing star then 0. I would now like to turn the conference over to Farooq Hamed, VP Investor Relations. Please go ahead.

Speaker 1

Thank you, operator. Good morning, and welcome to Ero Copper's third quarter earnings call. Our operating and financial results were released yesterday afternoon and are available on our website, along with our financial statements and MD&A for the three and nine months ended September 30, 2026. A corresponding earnings presentation can be downloaded directly from the webcast and is also available in the presentation section of our website. Joining me on the call today are Makko DeFilippo, President and Chief Executive Officer, Wayne Drier, Executive Vice President and Chief Financial Officer, Gelson Batista, Executive Vice President and Chief Operating Officer, and Courtney Lynn, Executive Vice President, External Affairs and Strategy. Before we begin, I'd like to remind everyone that today's discussion will include forward-looking statements, which involve risks and uncertainties that may cause actual results to differ materially.

Speaker 1

For a detailed discussion of these risks and their potential impact on our business, please refer to our most recent annual information form available on our website, as well as on SEDAR and EDGAR. Unless otherwise noted, all figures discussed today are in USD. With that, I'll now turn the call over to Makko DeFilippo.

Speaker 2

Thank you, Farooq, and good morning, everyone. As always, we will keep today's prepared remarks short to allow sufficient time for Q&A. Before turning to the quarter, I do want to take a step back for a moment. Despite recent market volatility and lingering questions about the pace of AI infrastructure spending, the underlying value of high-quality copper production, strong free cash flow generation, and a tangible organic growth pipeline has never been more clear. This brings me to what I hope will be the four key takeaways from today's call. First, our operational performance is translating directly into cash generation and balance sheet strength. This year, we have applied $0.97 of every available dollar towards debt reduction. Our commitment to our balance sheet has resulted in a net debt reduction of approximately $100 million in Q3 alone.

Speaker 2

For Ero, this means greater flexibility to continue advancing our organic growth projects, including Furnas. Second, our cash operating margins remain strong. Cost savings from our OneEro initiative and a successful foreign exchange hedge strategy are working in tandem, as intended, to offset the impact of inflationary pressures we are seeing at Ero and throughout the mining sector. Third, our copper business continues to perform well, and we remain well-positioned to achieve our full-year copper production guidance. Fourth, the gold concentrate program we launched at Xavantina in late 2025 has provided us with real operational and commercial flexibility this year. We now have assays for the in-process material we expect to sell over the next eight weeks, and based on those results, we expect a combined 75,000 to 80,000 ounces of gold from Xavantina this year, a record for the company by any measure.

Speaker 2

With those takeaways in mind, let me now turn to the quarter. As you have seen, we delivered record financial performance this quarter and year to date, establishing new high watermarks across all key financial metrics. Our results reflect progress. In particular, I would point to the sequential quarterly increases in plant throughput at our copper operations. Both Caraíba and Tucumã are set to achieve record annual throughput volumes this year. Operating momentum across our business, paired with metal price tailwinds, contributed to record cash flow from operations of approximately $191 million and adjusted EBITDA of over $200 million, both up nearly 40% quarter-on-quarter, and an impressive 260% since our third quarter of last year.

Speaker 2

On a year-to-date basis, we've generated over $420 million in cash flow from operations and $470 million in adjusted EBITDA, up approximately 60% and 110% respectively compared to this time last year. Against this backdrop of improving operational performance, it should be no surprise that this was our seventh consecutive quarter of accelerated deleveraging. When I look back and compare our vastly improved net debt leverage ratio of 0.5 times in Q3 to our peak of 2.6 times at the start of 2025, I cannot help but be proud of our leadership team's commitment and focus to this objective. Turning to our operations themselves, our copper business produced 18,300 tons of copper during the third quarter at a consolidated C1 cash cost of just over $2.50 per pound.

Speaker 2

Throughput volumes at Caraíba and Tucumã remained strong during Q3, increasing quarter-on-quarter by 8% and 14% respectively. We continue to expect Q4 to be the strongest operating quarter of the year and are on track to achieve full-year copper production guidance. On the cost side of the equation, since the onset of the US-Iran conflict, we have pointed to a potential $0.10 per pound impact on our reported cash costs as a result of the inflationary pressures we're seeing and the flow-through of a stronger BRL on our functional currency. We have now reflected that in our consolidated C1 cash cost guidance for the year. Offsetting this from a cash margin perspective, through the first nine months of the year, we've generated realized gains of $30 million from our foreign exchange hedge book.

Speaker 2

This protection is in place to protect our business against exactly the type of environment we have operated in during the first nine months of this year. Wayne will speak to how we as management view this margin protection in the context of our adjusted C1 cash costs in more detail. At Xavantina, while mine performance was just short of 8,000 ounces and objectively below our expectations in Q3, total gold produced and recovered grew by 23% quarter-on-quarter to a record of approximately 25,000 ounces. Increasing production from historic concentrates was a key operational focus for us this year, given the slow start to mining operations in the first half. At sub $750 per ounce all-in sustaining costs, it is perhaps no surprise why we prioritized the sale of this material.

Speaker 2

The investments we made during the first half of the year to enhance our drying capacity of historic concentrates are clearly paying off as we enter the second half of the year. As a result, we expect total gold from Xavantina of between 75,000 and 80,000 ounces this year. Transitioning into our growth pipeline at the Furnas Project, we completed the 45,000-meter phase three drill program in August, completing the entirety of the exploration component of the earn-in agreement with Vale Base Metals more than two years ahead of schedule. Drilling results have consistently demonstrated high-grade continuity within the deposit and extensions at depth and along strike. We expect to provide the full results of the phase three program prior to year-end. In parallel, we are moving forward across all technical work streams to support the project's Pre-Feasibility Study, and we expect to publish this in 2027.

Speaker 2

The work we have done and are continuing to do to strengthen our operating performance and improve operating margins through our OneEro program are translating into strong free cash flow generation and record financial performance. With that, I'll turn the call over to Gelson.

Speaker 3

Thank you, Marco, and good morning, everyone. As Marco outlined, we had strong metal production in Q3 and are expecting improved performance across all three operations in Q4. I will provide some additional detail on the underlying operation drivers and our expectations for the remaining of the year. At Caraíba, copper production totaled 9,387 tons during the quarter at C1 cash costs of $2.89 per pound produced. Production increased by 12% over the previous quarter, driven by higher plant throughput, grades, and recoveries. Costs in the quarter were impacted by accelerated waste stripping costs at Surubim open pit and elevated road fleet maintenance costs. Both of these cost centers were heavily influenced by the elevated diesel price environment in Q3.

Speaker 3

Looking ahead, we expect stronger production at Caraíba in Q4, driven by higher mine and process grades coming from deeper high-grade benches at Surubim, combined with contributions from the Pilar underground mine, positioning us well to achieve full-year production guidance. C1 cash costs are expected to decline in Q4 with increased production volumes. At Tucumã, copper production totaled 8,958 tons at C1 cash costs of $2.12 per pound produced. Production and costs were similar to the prior quarter, as a planned decrease in process grades was offset by a 14% increase in plant throughput. Recoveries were impacted in Q3 due to operational adjustments that were required coming out of a mill liner replacement and maintenance shutdown. This was a temporary impact, which Marco spoke to on our Q2 conference call. Looking to Q4, we expect production to benefit from higher throughput rates and increased metallurgical recoveries.

Speaker 3

C1 cash costs are expected to decline sequentially, supporting our maintained full-year production and cost guidance for Tucumã. The three new filters we are installing were delivered to site in late Q3 and will remain on schedule to finalize their installation and commissioning prior to year-end. At Xavantina, mine gold production totaled 7,844 ounces at C1 cash costs of $1,892 per ounce produced in Q3. Mine and process grades increased as expected. However, as Marco noted, operational delays in accessing key high-grade stopes resulted in lower grades processed during the quarter. Looking ahead, we expect mine and process tonnage and grades to improve in the fourth quarter. This outlook is supported by all-time record development levels achieved over the past few months.

Speaker 3

Gold recovered from the historic concentrate stockpiles increased by 47% from the previous quarter to 17,414 ounces at C1 cash costs of $621 per ounce, as the operations benefited from the mobile filter press and industrial dryer commission at the end of June. Looking to quarter four, further increases in throughput volumes along with an improved grade profile we expect will translate directly into lower C1 cash costs. We expect historic concentrate volumes to remain robust based on the volumes shipped and in process so far through October, as Marco mentioned. I will now turn the call over to Wayne to walk through our financial results.

Speaker 4

Thank you, Gelson, and good morning all. Our third quarter financial results reflected a 10% and 47% quarter-on-quarter increase in copper and gold sales volumes respectively, coupled with strong metal prices. These factors together drove quarterly revenue to $348 million, up 22% from the second quarter. As Marco noted, we achieved record quarterly cash flow from operations, which increased to $191 million, while adjusted EBITDA increased to a record of $201 million, both measures up 39% sequentially. The strong financial performance allowed us to accelerate debt reduction with repayments of $70 million in the quarter against our revolving credit facility, bringing total repayments in 2026 to $105 million. As a result, net debt declined by $99 million during Q3 to approximately $353 million, while the last 12-month adjusted EBITDA increased to $657 million.

Speaker 4

Together, these factors reduced our net debt leverage ratio to approximately 0.5 times. Our liquidity position also improved during the period, increasing $82 million to $264 million, including $114 million of cash and cash equivalents and $150 million of availability under our revolver. Turning to foreign exchange, a stronger BRL continued to adversely impact our reported operating costs and CapEx during the quarter. However, on a cash basis, our hedge program worked as intended, generating $10 million of realized gains in the quarter and bringing the total foreign exchange gains through the first three quarters to $30 million. While these gains mitigate the cash impact of the stronger BRL, they are not included in our reported C1 cash costs.

Speaker 4

To better capture how we think about our cash margins at Ero, if we were to apply the year-to-date $30 million of realized gains to the operations on a pro-rata basis, this would translate to a $0.15 per pound reduction in consolidated copper C1 cash costs and a $50 per ounce reduction to Xavantina's C1 cash costs over the full year. This is illustrated on slide 17 of the webcast presentation. With that, I'll pass the call back to Marco for some closing remarks.

Speaker 2

Thank you, Wayne. Before we open the line for questions, let me bring everyone back to the four points I opened with. First, we are turning operating performance into cash generation. We put 97 cents of every dollar available towards debt reduction this year, including approximately $100 million of net debt reduction in Q3 alone. Second, our copper business is performing well, and we remain on track to meet our full-year production guidance. Third, the gold concentrate program at Xavantina has us on track for approximately 75,000-80,000 ounces of gold this year, a record for the company. Fourth, our OneEro program and our BRL hedge strategy are working in tandem and as intended to maintain strong cash operating margins despite the inflationary pressures we're seeing across the sector.

Speaker 2

Finally, looking a little bit further ahead to Furnas milestones, we remain on track to deliver the Pre-Feasibility Study in 2027. Thank you for joining us this morning. Operator, we are ready for questions.

Operator

Thank you. We will now begin the question-and-answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. The first question comes from Fahad Tariq with Jefferies. Please go ahead.

Speaker 5

Hi, thanks for taking my questions. With the leverage ratio and net debt to EBITDA now at 0.5 times, can you talk a little bit about the shareholder return program, when we should be expecting some sort of announcement, and just how the management team is thinking about shareholder returns? Thanks.

Speaker 4

Yeah, thanks for the question. Look, I think I covered it fairly extensively on our Capital Markets Day in September in Sao Paulo. We're well on that journey. We're below the leverage ratio where we wanted to be. We're on track to repay the revolver, and certainly with the current price environment, the expectation is that will be repaid during Q4. We have a very active discussion with our board, and I think around what that shareholder return framework will look like, and I think you just have to see when we're ready to put that out to the market.

Speaker 5

Okay. Just on the Brazilian real, I mean, it's weakened pretty substantially the past couple of weeks since the election. How should we be thinking about the effect of that in the fourth quarter as it pertains to the hedges and the floor price in the second half, along with the operating cost impact? Does it net out?

Speaker 4

Yeah, I'll take that question as well. Obviously, we have already in place our hedge book for 2026, and so we're fairly well covered for Q4. That obviously doesn't cover the entire amount of OPEX and CapEx, so certainly some of these tailwinds we've seen following the election will help. But I think if we look through to 2027, we actively manage our book in a proactive manner. We have taken advantage of some of this weakening to put in place some hedges for 2027, so we're starting to build our book for 2027 as well.

Speaker 2

Yeah, maybe just to answer that question, as we think about Q4, I think it's important to note that the way that our hedge strategy works is we protect the floor, in this case for Q4, at 5.54. So that's our protection level. We participate in the exposure of the BRL all the way up to our ceiling, which is 6.42, and that's shown on slide eight of the webcast presentation. So when you think about where we were in the first nine months of the year versus where we are today, should we see continued weakness in the BRL, we will participate in that up until our cap of 6.42.

Speaker 5

Yeah, got it. Thank you.

Operator

The next question comes from Orest Wowkodaw with Scotiabank. Please go ahead.

Speaker 6

Hi, good morning. Great to see the cash flow generation. I had a couple questions on Caraíba. First of all, I mean, the grade was quite low in Q3. I am wondering if you have now seen the turn in Q4 in terms of a grade that is, say, closer to reserve grade.

Speaker 2

Yeah, look, I will jump in, Orest, and then Gelson can comment on this. We expect Q4 to be the strongest quarter of the year. I think some of the key high-grade stopes, as Gelson pointed to in the conference call, that we had planned coming in late Q3 were shifted a bit, so those are coming in Q4. I mean, I think, which actually it is important to keep in mind that when we think about reserve grade, that is an average over the life of the mine. We obviously, every month, every quarter, we mine stopes that are well above that range in some instances, as we saw the last couple years, and then some that are lower. So it is obviously a blended grade when we think about reserves. But what I can tell you is that looking at our results here, we do see grades climbing as expected.

Speaker 2

It is well supported by our infill drill program and channel sampling that we have for Q4. So we are feeling pretty good about the stopes that we are into now and going to mine in Q4. I do not know, Gelson, if you have got anything to add there.

Speaker 3

No, thanks, Orest, for the call. I think Makko had mentioned well there about the stopes that we got in and into the squirt, and then we are back on track, so I have no further.

Speaker 2

Yeah, I think, Orest, Gelson mentioned this too. It's actually a real priority for us. Coming out of the first half, obviously, we're behind where we hoped to be in terms of development and mine performance. I think a good leading indicator for us, as Gelson mentioned there, we achieved record development the last three months, all-time historic record development levels. We're certainly not out of the woods yet. I think it's too early to declare victory, but based on achieving the development that we being ahead on development, being in some high-grade stopes and seeing that flow through, I think, is a strong indicator for where we think Q4 is heading.

Speaker 6

Thank you for that. As a follow-up, you're guiding to, I believe, 15,000 ounces of gold from the concentrate sales in Q4. Why are you thinking it's going to be lower than Q3? Are you expecting a pickup in the rainy season late in the year, or I'm just wondering if that's a conservative estimate, or is there something constraining volume here in Q4?

Speaker 2

Yeah, look, obviously, we've made big investments in the drying infrastructure on site. We saw that flow through Q3. That did coincide with a seasonal dry period, which obviously helps that dryer perform well. I'd say the reality for us is that our approach in the concentrates has been consistent. We can only provide forward-looking information for the information that we have available on hand. What we have today in dried inventory or drying inventory is that 9,000 ounces. Obviously, we expect to add more to that, but the 15,000 is what we have assayed and available today. I would say that includes also over 6,000 ounces that were invoiced in October, right? I think that's an important thing to keep in mind as we think about Q4.

Speaker 6

Okay, thank you for that. Just finally, if I could just switch gears for a second. Can you give us an update on the shaft sinking project in Caraíba in terms of current expectation for completion and how much CapEx is remaining on the project?

Speaker 2

Yeah, sure. I'll jump in here, and Gelson can pick up if I miss anything there. As of right now, we're about 1,250 meters complete. That means that we've got about 300 meters to go, if you follow where that progress has been, as we talked about on our Capital Markets Day. We still expect to complete that shaft in Q1, as we outlined in September at our Capital Markets Day. That's an important metric for us. As I said, when we think about the timing and completion of the shaft, to go back to some of the commentary from Q2, I want to remind everyone that the last shaft that was built in Pilar was in 1986, about 40 years ago. We're certainly not trying to solve for a specific month next year. This investment will support the operation for hopefully decades to come.

Speaker 2

On the CapEx side, yeah, look, it's a $370 million investment. At the end of Q3, spent about $300 million, so $70 million to go. We expect to spend a good chunk of that here in Q4 with balance in through next year.

Speaker 6

Thanks for that.

Operator

The next question comes from Guilherme Rosito with Bank of America. Please go ahead.

Speaker 7

All right. Thank you for taking my questions. Good morning, everyone. I have two on my side. Maybe if you could begin with an update on Tucumã, how are the filters coming along, and what are you expecting for? Maybe if you can give us some color for 2027 versus what you guys are probably producing in 2026, or how Q4 is coming along. My second is also on Xavantina, and I know you guys commented on that a bit, but if we look at the previous three-year production outlook, it implied 50,000-60,000 ounces in Xavantina, and with the performance we had year-to-date, especially in terms of grades, it seems a bit more challenging than it would have seemed earlier in the year, right? My question is, how are you guys feeling about the three-year production outlooks?

Speaker 7

Is there any chance you guys think it could be revised lower? Just to hear your thoughts on that. Thank you.

Speaker 3

Thank you. Thank you for your question there. It's Gelson here. In Tucumã, we've got all the filters on site. They arrived in last quarter, late last quarter. Everything is on track for completion by the year end. We expect, as we mentioned before, to come out of 2026 at 4 million tons per annum, as we planned before. The filters are on track, and the team is working there to make sure that we can complete them on time.

Speaker 2

Yeah. I think just maybe touching that point, Gelson and I speak about this a lot. If you look at the performance quarter on quarter, even without the additional filtration capacity, huge progress has been made there, reaching that above 800,000 tons a quarter. We're well on our way. As Gelson said, expect to exit the year there at that 4 million ton a year rate, which is where we expect to be for 2027. Circling to the question on Xavantina, I would maybe point you in a slightly different direction there. I think if you look at even our adjusted guidance, obviously, which came down versus our expectations in the early part of the year, that really reflects a delay in ventilation cooling development.

Speaker 2

If you look at the Q4 in isolation, I think that's a better representation of what that asset's capable of doing, with obviously the transition that happened this year. So, looking at Q4 and multiplying by four, I think it's probably a better representation than looking at the full year 2026, especially the first nine months, and getting to that range. So, I would say that when we think about Xavantina, I think Q4 is more representative of what we think we can do, both in terms of throughput volumes, mine performance, throughput volumes, and also process grades.

Speaker 7

All right. Thank you.

Operator

The next question comes from Matheus Moreira with Bradesco BBI. Please go ahead.

Speaker 8

Yeah. Thank you. Good morning, everyone. Thanks for taking my questions. Two questions on my side. First, at Caraíba, you mentioned that we should see production improving in the last quarter, driven by higher grades. I'm just wondering how should we expect these grades to extend into 2027, and could you help us understand what would be a reasonable production mix between Pilar, Vermelhos, and Surubim for next year? My second question on Furnas. I mean, you've completed the phase III drilling program during the quarter, which is roughly two years ahead of the original schedule. Does that give you room to bring forward an eventual FID? What are the key milestones you still need to work through? Then maybe just one more on Furnas, on the PFS, which you expect to complete in 2027.

Speaker 8

Can you give us a sense of whether that's more likely to be early or late in the year? Those are my two questions. Thank you.

Speaker 2

Yeah, perfect. Lots to unpack there, so if I miss something, I apologize. Just ask it again. Starting with the first question on Caraíba. Yeah, look, we've been, I think, consistent that with the main contributor to higher grades this year from Caraíba as a mix of these lower levels, these lower benches in Surubim. We've been mining at Surubim for the last couple years, really. When you look at the last couple years, the strength of that investment is really supported by these lower benches, right? They're about 1% copper, versus where we were a few years ago. It's a very high-grade open-pit operation, at least the lower levels of Surubim. We do expect to see some of that in Q4 with a bit of a delay there in Q3. We expect some of that material to roll forward into Q1 of next year.

Speaker 2

We provided in our Capital Markets Day, we provided more clarity about the relative mix and how we see Surubim transitioning into N8 for next year, and over the next couple years. So, I would point you to the Capital Markets Day for that allocation on the mix of relative sources. We do see this transition in 2027 from Surubim into N8. Again, a little bit of a grade profile difference there, particularly because the lower benches that we're mining now are quite high grade from an open-pit perspective at Caraíba. Furnas, just to touch on the couple of questions that you asked there. So, one being two years ahead schedule. I think there's very important milestones. The one that we're able to control directly is the effort put on drilling.

Speaker 2

We think that with the quality of project that Furnas is, getting well ahead on drilling is one of the best places to put growth capital towards. So we've obviously done that, right? Two years ahead schedule, as you pointed to. In terms of pulling forward FID, we still have a couple of levels of engineering to go, including the PFS here next year, and then obviously a feasibility study. I would say let's get through the Pre-Feasibility Study and the work that we're doing now, and then have a discussion sometime next year about that. The reality, though, is, as said many times, we still have to go through the permitting process. We're obviously familiar with what that entails, having done that for Tucumã quite recently. So that's another key parallel work stream that's happening in conjunction with all the drilling and all the engineering work.

Speaker 2

We have a couple key milestones on permitting that we are advancing this year. Those are going well, as we have talked about in our Capital Markets Day as well. In terms of timing of the Pre-Feasibility Study, I would say, look, yeah, we are moving as fast as we can. If you follow the milestone agreement, we have until September to finalize that. Obviously, we continue to work as fast as possible to get that done. But I would say September at the latest, given the timeline as outlined in the agreement.

Speaker 8

Great. That is very good call. Thank you. Thanks, Marco.

Operator

The next question comes from Ricardo Monegaglia with Banco Safra. Please go ahead.

Speaker 9

Hello, guys. Good morning. Thank you for taking my questions. I have two. First on Tucumã, just a quick follow-up. Throughput rose, and that is great, but recoveries fell a bit short of our estimates. Could you give us some color on what drove it, and maybe how confident are you on reaching that high 80s or low 90s level?

Speaker 2

Yeah. Perfect. Thanks for the question. We've spoken about this on our Q2 conference call, right? We did see coming out of Q. Right at the end of Q2, we had a mill reline and a major maintenance period that was successfully completed. We did, however, see an impact on recovery coming out of that. There was operational adjustments that needed to be made, largely around liberation size that impacted the recoveries for Q3. That was early in the quarter. Throughout the quarter, we did see an increase in recovery, and obviously that supports kind of where we think we're going to be through the balance of that year, as Justin mentioned, improving recoveries into that high 80s range. I would say that, keep in mind that recoveries are a function of grade. There is a grade recovery curve at Tucumã, as with all copper flotation operations.

Speaker 2

We expect strong recoveries in Q4. Over time, there's obviously a relationship to grade, and we've got a number of initiatives to help improve recovery as we go forward. Again, I would say that the reads around Q3 is really a one-off impact coming out of that maintenance period, and so the operational adjustments that we had to make to improve the circuit, again, with higher throughput volumes during the period as well.

Speaker 9

Thank you, Marco. Very clear. My second question on corporate G&A. G&A in the operations were fairly in line with what we expected, but corporate G&A was a bit higher and growing like 30% year-over-year. Just wanted to understand, what could we consider as a one-off, and maybe what run rate do you think we should model for the upcoming quarters and maybe 2027?

Speaker 4

Yeah, good question. The change from Q2 to Q3, which is about $4 million, is actually entirely related to a SAP implementation project, which is underway. Right now, we are basically instituting SAP S/4HANA, which is a cloud-based ERP system through the enterprise. Unfortunately, the rules, the IFRS rules under cloud-based systems don't allow us to capitalize that, much like legacy ERP systems. Those costs are being expensed through the implementation. I think you can expect to see that amount for the next two quarters, two to three quarters. We expect implementation to be done by Q2. But the run rate, certainly if you look at Q1, Q2, that is our typical run rate. The change is simply related to the SAP implementation.

Speaker 9

Right. Thanks, Wayne, and congrats on the results.

Speaker 4

Thank you.

Operator

The next question comes from Stefan Ioannou with ATB Cormark. Please go ahead.

Speaker 10

Yeah, thanks very much, guys. I'm not sure if I maybe missed it earlier, but just maybe when we were down on site, I guess, a month or so ago at Xavantina, just wondering if the outlook for the concentrate that will be still coming out of the ground, say, through the middle of next year, or is there any additional color on sort of the outlook over the coming quarters for what the gold in concentrate production might look like?

Speaker 2

Yeah, we don't have an outlook beyond Q4. It's a good question. I think the reality there is, as I outlined, we're comfortable with the eight weeks that we have. All the material's been assayed and is in an inventory or drying process now. To go beyond that, obviously, difficult to provide any information on, given the lack of samples there, as we've discussed a few times here. I do think that there is volume remaining. We're obviously prioritizing the extraction, sale of that material, particularly in this gold price environment. Again, as I mentioned, sub $750 all-sustaining costs, probably no surprise why we're doing that. But I think stay tuned. We'll sort of reconcile some of what's remaining on the balance there. But I think looking at that material continuing for the next couple of quarters into 2027 is not an unreasonable timeline.

Speaker 2

Obviously, I can't speak to the grades that are in there, because we don't know. But I think it's reasonable to assume that we will have additional material remaining from which to sell over the next couple of quarters.

Speaker 10

Okay. Is it really just a function of the fact that it's obviously underwater, so it's hard to really guesstimate or estimate how many tons you actually still have, right?

Speaker 2

Yeah. In order to get a representative sample, we'd have to pump all that material out.

Speaker 10

Yeah

Speaker 2

and dry it. If we're going to do that, then we might as well sell it.

Speaker 10

For sure.

Speaker 2

Yeah, the reality is that we just won't be able to sample that material until it's in the drying process, as we saw in Q4.

Speaker 10

Okay. Okay, great. Thanks very much, guys.

Operator

The next question comes from Rodrigo Gotardo with BTG. Please go ahead.

Speaker 11

Hello. Good morning, guys. Good morning, all our teams. Two questions on my side. The first one, could you give us some updates? How are the updated technical reports for the three current mines evolving right now? Since the last one, Ero has made meaningful development in operations, brought forward initiatives. We have new metal prices since then. What do you expect from these studies? If there's a planned timeline, when do you plan to release them? If you could give us an outlook and what you expect to do would be very helpful.

Speaker 2

Yeah, good question. Thank you. I think we had this question, particularly in Tucumã, last quarter. We do expect to put out an updated tech report in Tucumã this year. That's in the late stages here. Stay tuned. That'll be before year-end. We'll continue with our normal reporting process for Caraíba and Xavantina. On this call, we'll not give a steer as to what we're saying there. Obviously, metal prices being where they're at has given us a good opportunity to kind of reevaluate those plans and make some optimizations. I'd say the focus for us is still on margins. Yeah, stay tuned. We'll have that discussion later this year.

Speaker 11

Okay, perfect. Thanks for the update. My second question, Marco and all Ero team, just how do you see Ero's equity story until 2029 before Furnas, right? We've been seeing many brownfield initiatives, Ero's generating cash, deleveraging in a fast pace. Just in a broader picture, in terms of operations, project, shareholders return, how do you see the company until 2029?

Speaker 2

Yeah, it's a good question. Thanks for that. I think, as I've said many times, the investment case for high-quality assets in copper, ones that are generating significant amount of cash flow in this environment, certainly I think deserves attention. Obviously, leveraging our assets and the strength of our balance sheet into what we think is truly an incredible growth project in Furnas and setting up the business to execute on that is something that we spend a lot of time thinking about, as well as advancing some of the exploration programs in our portfolio. I think what differentiates Ero in this environment from perhaps, I don't want to say the rest of the sector, I think that's too broad of a brush, but certainly some of our peers is. We're at the tail end of what has been a multi-year, very capital-intensive phase.

Speaker 2

We're seeing the rest of. We have a few years until we embark on our next growth asset. We think that sets up our business very well to invest not only in the future growth that we have in Furnas, but a couple of organic growth drivers we have around our operations, as we spoke to in detail in our Capital Markets Day. But it's an exciting time, obviously, to see the effort that we've put into the operations, into value drivers like the concentrate sales program, and obviously the OneEro initiative that we've been driving compared to our risk mitigation strategy in the currency.

Speaker 2

I think it's all setting us up well to position the company to execute on our organic growth pipeline in Furnas, add additional value through some of our exploration programs and brownfield development projects that we spoke about on our Capital Markets Day, and yeah, have a strong balance sheet on top of that. Our priority in the short term, I think, as Wayne alluded to, when I think short term, you know, the next quarter, obviously we want to pay down the balance of our revolver. That is a top priority for us as a team, and it's something that we committed to all of our shareholders back in 2025. I think, collectively, very pleased to see that on the near-term horizon.

Speaker 11

That's very clear. Thanks for that, Pete.

Operator

The next question comes from Anita Soni with CIBC Capital Markets. Please go ahead.

Speaker 12

Hi, good morning. I apologize if this has been asked, but I just wanted to circle back to Xavantina. You mentioned that if we looked at Q4 as a run rate, that would be more indicative of what it could do in 2027. Did you give the parameters around what you are seeing for Q4? I might have missed that.

Speaker 2

No, but I think we said

Speaker 12

Basically, for tonnage grade. Yeah. Sorry, go ahead.

Speaker 2

Yeah, if you just look at sort of the midpoint of our guidance, it still implies a pretty big step up in operational performance there. I think the question is, how do you see yourself to the 50,000 ounce plus range? I think looking at the full year of 2026 and multiplying that, looking at the first nine months and saying, "Well, that's representative of what the asset can do," I don't think is fair. I would point to what we expect to do in Q4. I mean, from an operational perspective, we talked about this in our Capital Markets Day, and if you look at where we expect to be, we're sort of triangulating in the 20,000-25,000 ton a month range from the mine and plant. I think we saw very close to those levels in Q3.

Speaker 2

I think the normalized value is about 19,000 a month. So we did see the mine come back, as Gelson alluded to. Big impact there was on grade as we delayed some access to some of the really key high-grade stopes that we expected at the end of the quarter, and those are obviously transitioning to in Q4 here. We did not provide specific parameters. It was more of a applied mathematical extrapolation based on the midpoint of our guidance and where we've been for the first nine months.

Speaker 12

Sure. At Caraíba, I just wanted to ask, in terms of the tonnage, so it looks like you've kind of ramped up to that. I think the Capital Markets Day said kind of a 4.5-4.7 million ton per annum sustained throughput, and you're pretty close to that this quarter, if I'm doing the math right. So, do you expect that that could be sustained into 2027 at this stage, or is there something that I might be missing in terms of additional tie-ins or other work that needs to be done in 2027 to sustain that rate?

Speaker 2

No, we think that's sustainable. From time to time, we obviously do have planned shutdowns that will impact that on a quarterly basis, but nothing, no major tie-ins. I think the debottlenecking work that the team did, it was led by Gelson here, I think it showed up this year in sequential throughput improvement. And we think that pace is representative of what we can do, notwithstanding the normal downtime for maintenance in the year. But pretty solid performance from that operation, given where we were just a few years ago.

Speaker 12

Okay. Thank you. That is it for my questions.

Operator

We have a follow-up question from Orest Wowkodaw with Scotiabank. Please go ahead.

Speaker 6

Hi. Thanks for the follow-up. Just a clarification question, Marco. You mentioned there is a tech report update coming for Tucumã before year-end. Is that going to be only updated, like reserves, resources, or can we anticipate also, like a life of mine production plan updated in that as well?

Speaker 2

Yeah. Thanks, Orest. We do expect an updated resource and reserve estimate coming from that operation prior to year-end. There will be details about the phase of that operation, is maybe as far as I am prepared to go on the call. That is a requirement under NI 43-101, so not a huge surprise thing on the call. We will provide some information about the phases, particularly around how the reserves are constructed. That work is happening as we speak, and we are well-positioned to put that out before year-end.

Speaker 6

Okay. Thanks.

Operator

This concludes the question and answer session. I would like to turn the conference back over to Makko DeFilippo for any closing remarks. Please go ahead.

Speaker 2

Yeah. Thank you, operator, and thank you everyone for joining us. I know it's a very busy time, and as always, we appreciate the lively Q&A discussion. It's one of the highlights of the quarter for me, and appreciate the active dialogue. As always, our team is available for follow-up discussions and questions, so please do reach out to Corey or anyone on our team. And for those of you that we're going to see in Toronto, Boston, and Montreal in the coming days, we look forward to seeing you in person. Thank you very much. Talk soon.

Operator

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

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