Ero Copper Q2 2026 Earnings Report

Ero Copper EPS Results

• Actual EPS: $0.83
• Consensus EPS: $0.74
• Beat/Miss: Beat by +$0.09
• One Year Ago EPS: N/A

Ero Copper Revenue Results

• Actual Revenue: $284.30 million
• Expected Revenue: $277.64 million
• Beat/Miss: Beat by +$6.66 million
• YoY Revenue Growth: N/A

Ero Copper Announcement Details

• Quarter: Q2 2026
• Date: 8/5/2026
• Time: After Market Closes
• Conference Call Date: Thursday, August 6, 2026
• Conference Call Time: 11:30AM ET

Ero Copper (NYSE:ERO) Corp (NYSE: ERO) is a Canada-based natural resource company focused on the production of copper concentrate from its Brazilian operations. The company’s flagship asset is the Vale do Curaçá mining complex in the state of Bahia, which includes multiple underground mines and a centralized processing facility. Ero Copper’s primary product is copper concentrate, which is sold to smelters and end users around the world.

The Vale do Curaçá complex comprises the Pilar and Surubim underground mines, supported by a fully integrated processing plant. The operation uses conventional longhole stoping and paste backfill methods to extract copper ore, which is then crushed, ground and subjected to flotation to produce a high-grade concentrate. Ero Copper continues to invest in exploration on its existing land packages, targeting both near-mine and district-scale discoveries to extend mine life and support future growth.

The company was originally established as Brasil Resources Inc. in 2014 and acquired its Bahia copper assets from Vale S.A. in 2017. In 2020, it rebranded as Ero Copper Corp to reflect its focus on copper production. Headquartered in Vancouver, British Columbia, Ero Copper maintains a corporate office in São Paulo to oversee Brazilian operations and exploration activities.

David F. Strang serves as President and Chief Executive Officer, leading a management team with deep experience in mining project development and operations. Under its current leadership, Ero Copper emphasizes sustainable mining practices, community engagement in Bahia, and continued exploration to unlock the full potential of its Brazilian copper portfolio.

Ero Copper Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Cash generation and deleveraging improved materially: Q2 operating cash flow rose nearly 50% sequentially to approximately $138 million, while net debt fell to about $453 million and leverage declined to 0.8x from a peak of 2.6x. The company also repaid another $25 million on its revolver in July.
• Positive Sentiment: Copper operations are positioned for a stronger second half, supported by higher-grade areas at Caraíba and sustained throughput improvements at Tucumã. Tucumã’s filtration expansion, including three modular filters expected to be commissioned in Q4, is intended to support further throughput growth.
• Negative Sentiment: Xavantina’s first-half performance was slower than planned, leading management to expect mined gold production at the low end of its guidance range and to raise full-year mined-gold C1 cost guidance to $1,100–$1,350 per ounce and AISC guidance to $2,200–$2,700 per ounce. Management expects higher mining rates, grades and concentrate sales in the second half, but execution remains important.
• Neutral Sentiment: Full-year capital expenditure guidance increased by $10 million to $285–$330 million due to a new Xavantina power line, while stronger Brazilian real and inflation could add further reported costs. Hedging is expected to substantially offset the cash impact, with potential full-year realized gains of approximately $40–$45 million.
• Positive Sentiment: Ero is rapidly advancing the Furnas growth project, with its 45,000-meter Phase 3 drilling program on track for completion before year-end and a pre-feasibility study expected in 2027. Recent drilling continues to show high-grade continuity at depth and along strike.

Presentation

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the Ero Copper second 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 zero. I would now like to turn the conference over to Farooq Hamed, VP, Investor Relations. Please go ahead.

[Farooq Hamed, VP of Investor Relations at Ero Copper]

Thank you, operator. Good morning and welcome to Ero Copper's second 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 six months ended June 30th, 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.

[Farooq Hamed, VP of Investor Relations at Ero Copper]

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 US dollars. With that, I'll now turn the call over to Makko DeFilippo.

[Makko DeFilippo, President and CEO at Ero Copper]

Thank you, Farooq, and good morning. I appreciate everyone taking the time to join us today. As I reflected on our results this quarter, what stood out most was not any one individual metric, but the breadth of progress we were seeing across the business. Our efforts to reshape Ero are now increasingly visible in both our operating and financial results. A meaningful part of that progress traces back to One Ero, a company-wide initiative we launched at the start of 2025. One Ero is designed to streamline how we operate, improve efficiency, and unlock synergies across operations, human resources, procurement, and finance while investing in people, systems and processes to drive frontline excellence in data and analytics. We have fundamentally changed how we work together, brought leadership changes on-site and across the organization.

[Makko DeFilippo, President and CEO at Ero Copper]

These changes are translating into safer, stronger operational performance, higher cash flows, and meaningful balance sheet improvements, allowing us to accelerate longer term growth within our portfolio. These were the commitments I made to shareholders at the start of 2025, and we are delivering on them. These changes are coming together at exactly the right time. Paired with commodity price tailwinds, our operational momentum drove another quarter of solid financial performance. Cash flow from operations increased nearly 50% quarter-on-quarter to approximately $138 million, and adjusted EBITDA increased to $144 million. Stepping back to the first half as a whole really illustrates how much our business has changed over the past year.

[Makko DeFilippo, President and CEO at Ero Copper]

Cash flow from operations for the first six months of 2026 increased to approximately $231 million from $156 million in the first half of 2025. Adjusted EBITDA increased to $269 million from $146 million over the same period. Stronger cash generation has enabled us to make significant progress on deleveraging our balance sheet, one of our key strategic priorities this year. Over the past 18 months, we've reduced net debt by approximately $100 million while improving our net debt leverage ratio to 0.8 from a peak of 2.6 at the start of 2025. As outlined in our news release, we repaid an additional $25 million in our revolving credit facility in July, bringing total payments in 2026 to $60 million.

[Makko DeFilippo, President and CEO at Ero Copper]

One Ero has been an important contributor to that progress, we can point to several tangible examples of the value it is creating across the business. Operationally, investments we continue to make in infrastructure, equipment, people, processes and technology are increasingly being reflected in our results. Our copper operations produced a combined 17,315 tons of copper during the second quarter at a consolidated shipping cash cost of $2.42 per pound. At Caraíba, we are sustaining the higher throughput rates we achieved at the end of last year, following our completion of a substantial debottlenecking effort, and remain on track for a new annual throughput record in 2026. At Tucumã, plant throughput increased 27% quarter-on-quarter, and in June we completed the first phase of our tailings filtration expansion.

[Makko DeFilippo, President and CEO at Ero Copper]

During the second half of the year, we are on track to install and commission three new modular filters, which are expected to significantly increase filtration capacity and support higher plant throughputs into the future. At Xavantina, important investments in ventilation and cooling are supporting improved mining and development rates, and we saw that reflected during the quarter. Our focus on bringing forward value from our gold concentrate program coincided with the end of the rainy season, which allowed us to recover more gold from our historical concentrates. Together, improved mine performance and increased contributions from historical concentrates drove 170% quarter-over-quarter increase in total gold from Xavantina to more than 20,000 ounces. This included 8,693 ounces of mined gold production at C1 cash cost of $1,586 per ounce and 11,860 ounces recovered from historic concentrates at a C1 cash cost of $633 per ounce.

[Makko DeFilippo, President and CEO at Ero Copper]

We expect a successful commissioning and ramp-up of our mobile filter press and industrial dryer to be a real benefit to our concentrate operations through the rest of this year. The collective improvements we have made and are making across our portfolio have positioned us for a strong second half of 2026. Our copper operations remain well-positioned against full-year guidance, with stronger production expected in the second half. We have also maintained consolidated copper C1 cash cost guidance, with unit costs expected to decline sequentially through the remainder of the year. At Xavantina, we expect mining rates throughput and mined gold production to be meaningfully higher in the second half, with unit cost declining as production increases. The slower start to the year means we now expect mined gold production at the low end of the maintained guidance range.

[Makko DeFilippo, President and CEO at Ero Copper]

As a result, we have updated full-year C1 cash cost guidance to $1,100-$1,350 per ounce, and our all-in sustaining cost guidance to $2,200-$2,700 per ounce. We have also increased our consolidated capital expenditure guidance by $10 million to include the approval of a new power line at Xavantina. Once operational, the power line is expected to strengthen site infrastructure, support our ongoing efforts to grow our operational footprint at Xavantina, and importantly, reduce power transmission costs, allowing this investment to effectively pay for itself within two years. At Furnas, our June project update showed continued high-grade continuity with mineralization extending both at depth and along strike. An encouraging sign for the life of mine production plan we outlined in the PEA. We are well advanced on the 45,000-meter phase 3 drill program and remain firmly on track to complete it before year-end.

[Makko DeFilippo, President and CEO at Ero Copper]

In parallel, we are progressing various work streams in support of a pre-feasibility study that we expect to publish in 2027. In summary, our strategy is working. We are investing in and strengthening operating performance across the portfolio, realizing measurable benefits from One Ero, converting that progress into cash flow and balance sheet improvement, and rapidly advancing Furnas as Ero's next major leg of growth. Before I turn the call over to Gelson, I also want to remind everyone that we'll be hosting our capital markets day in São Paulo on Monday, September 14th. For those of you interested in attending, please reach out to our investor relations team for more information and to register. We look forward to seeing many of you there. With that, I will turn the call over to Gelson.

[Gelson Batista, EVP and COO at Ero Copper]

Thank you, Makko, good morning, everyone. As Makko outlined, we are entering the second half with improving performance across all three operations. I will provide some additional detail on the underlying operating drivers and our expectation for the remaining on our key projects. At Caraíba, copper production totaled 8,351 tons during the quarter. Lower plane head grades were partially offset by slightly higher throughput and improved recoveries. Looking ahead, we expect stronger production at Caraíba in the second half. This should be driven by access to higher-grade benches at Surubim, as well as higher grades and tonnage from Pilar due to planned stope sequencing. We expect the higher throughput levels, grades, and production in the second half of the year. As a result, C1 cash costs are expected to decline sequentially through the remainder of the year.

[Gelson Batista, EVP and COO at Ero Copper]

At Tucumã, copper production increased approximately 6% quarter-over-quarter to 8,964 tons. A 27% increase in plant throughput more than offset the plant decrease in processed grades. Looking to the balance of the year at Tucumã, we expect sustained higher throughput rates to increase overall processed tons. While copper grades are expected to moderate in accordance with the mine plan. As a result, production is expected to be modestly higher in the second half, while C1 cash costs should remain relatively stable, supporting our maintained full-year production and cost guidance for Tucumã. As Makko discussed, we completed the expansion of Tucumã, three existing filter presses in June. We continue to expect the new three modular filters to be delivered through the third quarter and commissioned during the fourth quarter. The combined initiatives are expected to increase filtration capacity and support higher plant throughput as we exit 2026.

[Gelson Batista, EVP and COO at Ero Copper]

At Xavantina, completion of the ventilation and cool tie-in supported higher mining rates, increased throughput, and improved access to higher-grade stopes beginning in May. We expect these benefits to become increasingly visible through the second half as mining rates continue to improve quarter-on-quarter. During Q2, we also advanced process optimization work at the Xavantina processing plant to improve plant recoveries and increase efficiency.

[Gelson Batista, EVP and COO at Ero Copper]

This work included a modest change to the overall process flow sheet, as well as new investments in flotation cells and a new Falcon concentrator. Our quarter-on-quarter increase in recoveries reflect these improvements and ongoing optimization work. For the remaining of the year, we expect mining rates and throughput to increase significantly. Approximately 65% of full-year mine gold production is expected in the second half, with unit cost declining as production increases. We are focusing on delivering value from our historical gold concentrate initiative. During the second quarter, we recovered 11,860 ounces of gold, with sales volumes increasing significantly from Q1. We expect volumes to continue benefiting from drier seasonal conditions as well as from the mobile filter press and industrial dryer we successfully commissioned at the end of the quarter. I will now turn the call over to Wayne to walk through our financial results.

[Wayne Drier, EVP and CFO at Ero Copper]

Thank you, Gelson, and good morning all. Our second quarter financial results reflected solid copper production, strong metal prices, and a 65% quarter-on-quarter increase in gold sales. These factors drove quarterly revenue to $284.3 million, up 8% from the first quarter. As Makko noted, cash flow from operations increased to $138 million, while Adjusted EBITDA increased to $144 million. The stronger cash generation has provided us with the financial capacity to accelerate debt reduction. Net debt declined by $38 million during Q2 to approximately $453 million, while last 12-month Adjusted EBITDA increased to $533 million. Together, these factors reduced our net debt leverage ratio to approximately 0.8 times. We continued that progress after quarter end, repaying an additional $25 million on our revolving credit facility in July, bringing total repayments in 2026 to $60 million.

[Wayne Drier, EVP and CFO at Ero Copper]

Our liquidity position also improved during the period, increasing $36 million to $182 million, including $102 million of cash and cash equivalents and $80 million of availability under the revolver. Turning to foreign exchange. While the stronger BRL continued to impact our reported operating costs and capital expenditures during the quarter, on a cash basis, our hedge program worked as intended, generating $13 million of realized gains, bringing the total gains for the first half of the year to $20 million. The hedge program is designed to protect approximately 70% of our consolidated full-year operating and capital costs at an average floor of 554 Brazilian reais per US dollar, as described on slide eight of our results presentation.

[Wayne Drier, EVP and CFO at Ero Copper]

Assuming an exchange rate of 510 through year-end, we expect the hedge book to generate an additional $20 million-$25 million of realized gains, resulting in potential full-year gains of approximately $40 million-$45 million. While these gains substantially mitigate the cash impact of the stronger real, they are not included in C1 cash costs. As a result, reported unit costs remain sensitive to the local currency and to inflationary pressures on inputs such as fuel, consumables, transportation, and freight. If current currency and inflationary conditions persist through year-end, we estimate potential incremental impacts of approximately $0.10 per pound on reported consolidated copper C1 cash costs and approximately $100 per ounce on reported mined gold C1 cash costs at Xavantina. Again, the cash impact associated with the stronger real is expected to be substantially offset by realized gains from the hedge program.

[Wayne Drier, EVP and CFO at Ero Copper]

Turning to capital expenditures, we have updated full-year consolidated guidance to $285 million-$330 million, an increase of $10 million from our previous range. The increase reflects the approval of a new power line at Xavantina. As Makko discussed, this investment is expected to strengthen site infrastructure, support future growth, and reduce ongoing power transmission costs once operational. If current currency and inflationary conditions persist, we estimate a potential incremental impact of approximately $20 million-$25 million on reported capital expenditures. The cash impact associated with the stronger real is also expected to be substantially offset by the hedge gains I just discussed. With that, I'll pass the call back to Makko for some closing remarks.

[Makko DeFilippo, President and CEO at Ero Copper]

Thank you, Wayne. Before we open it up to questions, a few points I would like to leave everyone with this morning. First, our operations are performing well and we are positioned to deliver on our full-year guidance with stronger performance at both our copper and gold operations expected in the second half of the year. Second, with strong cash flows, we expect to continue to deliver on our commitment of deleveraging our balance sheet. Third, we are rapidly advancing Furnas, where we are on track to complete the phase three drill program well before year-end and deliver a pre-feasibility study in 2027. With that, we'll open the line for questions.

[Operator]

Thank you. We'll now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request.

[Makko DeFilippo, President and CEO at Ero Copper]

Operator, if you can open the line for questions. Thank you.

[Operator]

Yes. Are you not hearing me? We'll now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad.

[Operator]

Sorry. Operator? Are you able to hear me now?

[Makko DeFilippo, President and CEO at Ero Copper]

Apologies. We seem to be having some technical difficulties here. Just stay tuned. We're trying to open the line here for questions. Thank you.

[Operator]

I'm sorry. Can you hear me now? This is the operator. Are you able to hear me now? Okay. I'm getting word that others in the call can hear me. What I'm going to do is ask the presenter line to reconnect. Perhaps the issue is on their end. If the presenter I'll just ask them now. Please stand by. We'll get this resolved. Okay. We have our presenter line reconnected, and they are able to hear me. Let's get the question and answer session underway. As I said, if you wish to ask a question, press star then one. If you wish to remove yourself, press star then two. Our first question is from Matt Murphy with BMO Capital Markets. Please go ahead.

[Matt Murphy, Analyst at BMO Capital Markets]

Hello. First question would be on the Tucumã tailings expansion. Can you just remind me what expansion was completed? What timeline are you currently looking at for adding these filters in the second half?

[Makko DeFilippo, President and CEO at Ero Copper]

Yeah. Hey, Matt. Apologies for the delay there, everyone. The expansion that we completed so far was with our existing circuit. During the quarter, we added additional filtration plates to our three existing filters. That's about a net 8% improvement to tailings filtration capacity. That was completed successfully during the quarter. Right now, our three modular filters are expected to arrive on site this quarter and be installed and operational in the fourth quarter.

[Matt Murphy, Analyst at BMO Capital Markets]

Okay, got it. Thank you. Then on Xavantina, the addition of a dryer and filter press, what could that do for your Q3 concentrate sales?

[Makko DeFilippo, President and CEO at Ero Copper]

Yeah, look, obviously, under the confines that we're at, we're unable to provide forward-looking guidance, as we've talked about multiple times. That's related to the technical and scientific information that we have available. What I can tell you, Matt, is that if you look at June and July when we had those operational, both those months, we achieved more than 7,000 ounces of gold. I think that speaks really well for Q3 and through the rest of the year.

[Matt Murphy, Analyst at BMO Capital Markets]

Okay, that's interesting. Thank you.

[Operator]

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

[Guilherme Rosito, Analyst at Bank of America]

Hi, everyone. Thanks for taking my questions here. My first question is on Xavantina and maybe Makko. Maybe, Makko, if you could just explore, you have an adjusted production guidance and it sounded pretty confident on the call. Maybe if you could just give us some color on what you guys are seeing right now from July at Xavantina. What makes you so confident that you're reaching guidance even after a rough first half of the operation? Maybe just if you could comment on that and what you guys are seeing in terms of grades and, because they've been pretty volatile ever since you made the mechanization investments, right? Maybe if you could just touch on that a bit. Second question is, we're at 0.8 times net debt to EBITDA. You generated cash this quarter.

[Guilherme Rosito, Analyst at Bank of America]

From everything, that looks like second half is stronger in production, therefore in cash generation. Probably moving lower there. What's next now? What are your priorities in terms of capital allocation? Is this the time to, maybe we can discuss shareholder returns or anything else. Just wanted to pick your brains there. Thank you.

[Makko DeFilippo, President and CEO at Ero Copper]

That's perfect. We'll go through those in detail. Few things to unpack, but starting with Xavantina, I would say, look, as taking a step back here, as we discussed last quarter, we've made very important investments at Xavantina in ventilation and cooling. What we've seen since we completed that tie-in, is that we've been able to get back on track in terms of development rates. The reason that we're focused on the second half of the year at Xavantina and why we firmly expect to have a better second half is when you look at the stopes that we're developing into, particularly in Santo Antônio, we're developing into stopes that are higher grade and they're also much thicker. What that translates to in operational terms is that every meter of development that we're doing now is releasing more ore to feed to the mill.

[Makko DeFilippo, President and CEO at Ero Copper]

When you look at where we've been in the last several months, again, sort of May, June, July, all hitting those development rates that we need to achieve and really working towards getting these higher grade stopes, larger stopes, into the mine plan as we expect. Obviously that is a slightly slower ramp-up than we anticipated at the end of Q2, both in development in terms of getting to those development rates that we're achieving now, and also as a consequence, mining rates. I think really the main thing to look forward to is how we see that translate into second half production at Xavantina.

[Makko DeFilippo, President and CEO at Ero Copper]

I was just there with Gelson two weeks ago and really pleased to see the progress the team's making on-site there to improve performance again, not just at the mine as we discussed, but as Matt asked, our gold concentrate sales and as I mentioned, we're seeing really good progress on the Not only the end of the rainy season, but also the filter and dryer that we put in place and achieving elevated levels for two months. Obviously, two months don't make a quarter and don't make a year, so we've got a lot more work to do. We're feeling good about where the mine's positioned and certainly where the gold concentrate program is positioned.

[Makko DeFilippo, President and CEO at Ero Copper]

This quarter, we talked a little bit more about the operating costs associated with gold concentrates, and as you can see, that's very high-margin material and hence our focus on delivering that to the bottom line. Hopefully, that answers your question on Xavantina. Happy to expand on that in a follow-up question. Getting to your second point on leverage and cash generation, absolutely, I would say the cash inflection of our business, it's clear that it's already happened. We saw that happen in Q2 and into July where we made another $25 million repayment on our revolver. Our objectives for this year that we set out were threefold. Number one, to get below one times leverage. We did that at the end of Q1. Obviously coming at 0.8, we're progressing below that level. Step two is to pay down a revolver.

[Makko DeFilippo, President and CEO at Ero Copper]

As we mentioned, we've paid to date $60 million in that revolver through the end of July. That means we have an additional $95 million to go. I think from our perspective as a management team, we want to make sure that that pace continues to decrease. We're making excellent progress so far. I think it's still too early to talk about shareholder return program, obviously it is top of mind, as everyone knows in this call, we've talked about many times. Ero Copper was built around a philosophy return on invested capital, that certainly is one of our objectives. We want to see us really achieving that second milestone, which is to pay down our revolver. We've made excellent progress so far this year. We've got a bit more to go.

[Guilherme Rosito, Analyst at Bank of America]

Super clear, Makko. Appreciate it. Thanks.

[Operator]

The next question is from Craig Hutchison with TD Cowen. Please go ahead.

[Craig Hutchison, Analyst at TD Cowen]

Hi, guys. I wanted to ask about Tucumã and specifically, I guess around the reserves. It's been about five years since you guys provided an updated reserve report. Over that period of time, obviously, copper prices have nearly doubled here. Just curious whether there's a plan to put up an updated report, whether you guys have done some drilling there, and whether there's a potential to see some of the measured indicated resources come into the mine plan over the next couple of years. Thanks.

[Makko DeFilippo, President and CEO at Ero Copper]

Yeah, thanks for the question. For sure, that's something top of mind, and we've been working. We do expect to publish a tech report on Tucumã this year, so stay tuned for that.

[Craig Hutchison, Analyst at TD Cowen]

Okay, great. Thanks, guys.

[Operator]

The next question is from Emerson Vieira with Goldman Sachs. Please go ahead.

[Emerson Vieira, Analyst at Goldman Sachs]

Hey everyone. Good morning. I have three questions, maybe. First one on Caraíba. I think despite the low production grades and FX impacting costs, Q1 declined quarter-over-quarter, it was helped by lower TCRCs, right? That offset those impacts. You guys mentioned that you were able to achieve a $20 million savings due to renegotiations in TCRCs. Just wanted to confirm if going forward, into second half, TCRCs will continue to be running at those lower levels that we saw in the second quarter and maybe providing some offset to other cost pressures. That's the first question. Thank you.

[Wayne Drier, EVP and CFO at Ero Copper]

Yeah, sure. It's Wayne speaking here. I think it's important to point out, yeah, we did get the benefit of renegotiated contracts for our concentrate sales. We sell our concentrate on term contracts, not on spot contracts, some of our historical contracts rolled off and we were able to negotiate obviously much more favorable terms given the current environment. I would say, though, the $20 million you referred to is the total savings. We didn't get the full benefit of the $20 in Q2, that benefit will be spread over the remainder of the year. Our contracts allow us to basically sell both mines production into each contract. That benefit you may see, depending on shipping schedule and depending on which contract we're selling into, you could see some of that benefit flow to Tucumã in the second half of the year, rather than Caraíba.

[Emerson Vieira, Analyst at Goldman Sachs]

Right. Thank you. My second question goes on Tucumã. Can you please comment on what was the exit throughput at the plant? What could be, I don't know, increments in throughput in the second half, given that you have increased the tailing filtration capacity by 8%?

[Wayne Drier, EVP and CFO at Ero Copper]

Yeah, I would say, we're really encouraged by what we're seeing at Tucumã. If you look at where we were at too in Q2 and some of the levels that we're achieving there. I think the most important thing to probably look at is if you take what we achieved in the second half of the quarter, end of July, we've been able to maintain a rate of between 250,000 and 260,000 tons per month. I think what's particularly noteworthy is that in July, we achieved a rate of throughput right around 250,000, that included five days of downtime for a mill liner replacement. I think, we're really pleased to see the daily progress that's happening there and increasing production rates. Again, we think that bodes well for the second half of the year as we outlined in our guidance discussion.

[Emerson Vieira, Analyst at Goldman Sachs]

Okay. Thank you. Just last one here. On the capital allocation, just to follow up, actually. The company has $120 million in the revolving credit, that facility, right? If we take the same money, the same pace of amortization, does it make sense to believe that the company will be in a better position, by third Q or four Q of next year to maybe update us on the shareholder distribution policies? Does it make sense about the timing?

[Makko DeFilippo, President and CEO at Ero Copper]

Yeah, look, I think if you go back to whenever we talked about shareholder returns and the commitments we made, it was a three-step process. Number one, get leverage below one, which we achieved in Q1. We're doing great there. The second was to pay down our revolver. Again, coming back to the payment we made in July, that brings year-to-date total payments on our revolver to $60 million, meaning that we have $95 million left to go in that program. I think the pace of that second step obviously depends on commodity prices. We continue to see very strong tailwinds there and also operational performance in the second half of the year. I would say stay tuned on both those things, and we'll give more clarity on what that looks like later in the year once we achieve the second step.

[Emerson Vieira, Analyst at Goldman Sachs]

All right. Thank you. Very clear.

[Operator]

The next question is from Fahad Tariq with Jefferies. Please go ahead.

[Fahad Tariq, Analyst at Jefferies]

Hi. Thanks for taking my questions. On the Xavantina concentrate, can you just remind us where we are on the remaining 80% of the stockpiles that were not sampled and when we should expect the next update? Thanks.

[Makko DeFilippo, President and CEO at Ero Copper]

Yeah. Thank you. Just going back to Q4 last year for a bit of context. I'm sure everyone on this call is aware, that was a value initiative that we announced in October of last year. At that time, we had sampled 20% of the known volume to develop a resource estimate. As we've discussed before, under NI 43-101, we can't provide forward-looking guidance on information that's not supported by a 43-101 estimate. Really unfortunately, unable to provide that information and clarity that you're looking for, other than to say, we've seen really strong sales, June, July, coming a dry season on the back of our filtration and concentrate program.

[Makko DeFilippo, President and CEO at Ero Copper]

We continue to expect this program to last through at least mid-2027 as we put out early in the year. We see really strong sales in the second half again, with the effort that we put into the filter press and dryer.

[Fahad Tariq, Analyst at Jefferies]

Okay, great. Then just maybe a high level question. Given where copper prices are now, is there anything in the portfolio that you're looking at differently, whether it's a brownfield opportunity or additional exploration spend at a particular asset? Just wondering if you're thinking about anything differently given how elevated copper prices are. Thanks.

[Makko DeFilippo, President and CEO at Ero Copper]

Yeah. I don't think it's fundamentally changed the way we think about our business. We've continued to invest in exploration across the portfolio. It's been part of our strategy from day one when we started the company. Obviously, if you look at where our exploration dollars are allocated today, obviously we're putting a big focus in Furnas, as we've spoken to, but we've continued to allocate exploration dollars to earlier stage opportunities throughout our portfolio. The last decade, we've built a really strong knowledge of the regions that we're operating in, and we're seeking to leverage those through some earlier stage opportunities. Again, that's not a change in strategy. That's continued over the last couple of years. Could we in the second half see some of those programs getting a little bit more capital allocation? Perhaps.

[Makko DeFilippo, President and CEO at Ero Copper]

It's not going to fundamentally change the way that we think about our business, or how we're operating.

[Fahad Tariq, Analyst at Jefferies]

Thank you very much.

[Operator]

The next question is from Stefan Ioannou with Cormark Securities. Please go ahead.

[Stefan Ioannou, Analyst at Cormark Securities]

Yeah, thanks very much. Just back on to Xavantina. You mentioned this is kind of the first quarter where we're seeing reported C1 and AISC costs for the concentrate gold production. Just looking at the numbers for the latest quarter, can we sort of interpolate those as sort of a steady state run rate for costs, or do you think they could come down even further going forward?

[Makko DeFilippo, President and CEO at Ero Copper]

Yeah, look, I think they're pretty steady state. Obviously, it's mostly variable costs, right? Because if you look at the component that makes up that C1, the overwhelming majority is going to be on transport costs. We don't see much of an opportunity even with increased sales to reduce those costs further. We obviously now are operating the filter and the dryer, which has increased that cost, relative to where we were last year. As you can see, $700 all in sustaining cost at $4,200 gold is a pretty healthy margin by any measure.

[Stefan Ioannou, Analyst at Cormark Securities]

Definitely. Yeah. Just while I got you, sorry to pile these on mine, maybe just one housekeeping question. Just when Wayne was talking about the FX hedge program, sorry, Wayne, did you say that the effect of the hedges are reflected in the C1 cash cost or not?

[Wayne Drier, EVP and CFO at Ero Copper]

They are not reflected, Stefan.

[Stefan Ioannou, Analyst at Cormark Securities]

Not, okay.

[Wayne Drier, EVP and CFO at Ero Copper]

Yes. They're below the line.

[Stefan Ioannou, Analyst at Cormark Securities]

Got it.

[Wayne Drier, EVP and CFO at Ero Copper]

we run the business and we think about the business is around the exchange rate that we guided to at the beginning of the year, which was 540, and we structure our hedges to protect that level. That's why you see the fairly significant gains year to date.

[Stefan Ioannou, Analyst at Cormark Securities]

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

[Operator]

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

[Orest Wowkodaw, Analyst at Scotiabank]

Hi, good morning. I wonder if you could give us an update on the shaft sinking project at Caraíba and what the timeline is for, I guess, that to go into operation next year.

[Makko DeFilippo, President and CEO at Ero Copper]

Yeah. Thanks, Orest. Good question. We'll have the opportunity in a few weeks to be there in person to review the progress there. Right now, we're just over 1,100 meters below surface. We continue to see our sinking rate improve month on month since we started connecting that third leg, which is a fairly significant milestone in that project. I think the thing to keep in mind about the shaft, we started engineering on this back in 2020. The last shaft that was built at Pilar was in 1986, and we're making this investment for the next several decades, not for one quarter or the next. As we said last quarter, our objective is to get to shaft bottom by year-end. With the progress that we've made so far and increasing, I talk to Gelson about this nearly daily.

[Makko DeFilippo, President and CEO at Ero Copper]

You look at some of the projects that are happening in the world today. I think if the team needs an extra month or two to make sure that we can deliver that project safely, we're going to go ahead and make that call 10 times out of 10. We'll have the opportunity to be on site in a few weeks to review that progress. I would say that, as I said, our sinking rate's improving. We're continuing to make significant improvements month-on-month. We need to see a bit faster pace here through the balance of the year to hit that milestone. We're going to make sure that we do that safely and deliver that project for the next several decades.

[Orest Wowkodaw, Analyst at Scotiabank]

No, that all totally makes sense. What about the budget? Where are you in terms of the capital spend on that, and are you seeing inflationary pressures?

[Makko DeFilippo, President and CEO at Ero Copper]

Yeah, we're not seeing much inflationary pressures there. We've got a small team that's on site that you'll meet, that are coming in from South Africa. It's a third-party contractor that's doing that sinking rate. We don't have the same type of exposure that we do to operations in terms of diesel prices because the hoist is all electrical powered. We're not seeing much in the way of inflation on the shaft itself. Obviously, if we make the decision to slow that rate down to make sure we deliver that project safely, there'll be an incremental cost component, but it's been relatively minor, and we think that if you look at where we're at against that budget, as I've said many times, we're very much through peak CapEx in our business.

[Makko DeFilippo, President and CEO at Ero Copper]

Irrespective of kind of where we land through year-end, we see that capital coming down significantly into next year, with this year being the last big year of CapEx that we have to spend.

[Orest Wowkodaw, Analyst at Scotiabank]

Okay. Just to clarify, how much was left in the budget as of June 30th for that project?

[Makko DeFilippo, President and CEO at Ero Copper]

Yeah. If you look at what we said early on in the year, we had about $80 million-$90 million to spend this year with a stub into next year. We are about halfway through the budget on this year's spend. What will be next year, we expect is a stub year of CapEx, right? As we switch that shaft over from its sinking phase into its operational phase.

[Orest Wowkodaw, Analyst at Scotiabank]

Okay. Thank you very much.

[Operator]

Once again, if you have a question, please press star then one. Our next question is from Rafael Barcellos with Bradesco BBI. Please go ahead.

[Rafael Barcellos, Analyst at Bradesco BBI]

Hi, thanks for taking my questions. My first question on Caraíba. Can you please provide like an update on the Pilar shaft in terms of the potential for productivity gains going forward, and the timing for these gains? Of course, more color on what you're expecting in terms of the ramp-up of this project. Then moving to capital allocation, just a quick follow-up. I mean, the company will probably turn into a net cash position by the end of the year. Just wondering if you could discuss more shareholder remuneration versus the preparation for starting the investment plans for Furnas. How do you expect to balance those things? That could be interesting. Thank you.

[Makko DeFilippo, President and CEO at Ero Copper]

Yeah. Perfect. Thank you. I think as Orest allude to, the shaft's making good progress. We continue to expect the full first year of full benefit to be 2028. Obviously, next year, 2027, we'll be focused on transitioning that from the sinking phase into the operational phase, after we reach shaft bottom. I think the easiest way to talk about the benefit is to give you the current experience in the future state. If you go right now to the deeper part of Pilar mine and you drive down the ramp, that can take up to about an hour and a half. As you well know, underground mines in Brazil operate on six-hour shifts. What that means in practical terms is we're starting out with 50% availability of our workforce, in the deepest part of the mine.

[Makko DeFilippo, President and CEO at Ero Copper]

Obviously, we operate at multiple different levels, that's not true for the entire operation, but in the deeper, higher grade zones, that's the reality today. When the shaft is completed, it's been designed to get our entire workforce in and out of the mine in under an hour. We expect a very significant improvement in workforce productivity, improved access, improved ventilation. It'll be a transformational investment that, again, if you go back to when the last shaft was built, 1986, this one happening now, it's going to support the operation for decades to come. There's no one more excited about finishing that project than me, having been involved with it since 2019, and we're making good progress.

[Makko DeFilippo, President and CEO at Ero Copper]

As I said to Orest, we're going to make sure that we deliver that project safely and on budget, that's what we're committed doing over the next, the second half of this year and into next year. On the cash position and shareholder returns, yeah, look, we're excited as everybody here. We're making great progress on our objectives that we committed to in 2025. I think the way that I would characterize our priorities in terms of capital allocation, we're still focused on that second step, which is paying down our revolver. We have $95 million left to pay down after the payment that we made in July. We're continuing to accelerate Furnas. I would say it's not one or the other. If you look at where we're at in Furnas, we're going to finish effectively a five-year drill program in the better part of two years.

[Makko DeFilippo, President and CEO at Ero Copper]

If you look at when we started drilling to this in October 2024 to the end of this year, we're going to complete all the 90,000 meters that were envisioned under that project, or we completed the PEA. We're rapidly advancing the PFS. I wouldn't look at it as an either/or. Obviously, if we see opportunity to accelerate Furnas and put more capital to work there, that's a great place to put capital. We're working flat out on that project already. Taking a big step back again, for us, first priority here. Well, first priority was to get to below one times leverage. We did that. Second priority, pay down our revolver. Number 3, I think come back to the market later this year when we've met that second milestone, which is to pay down our revolver.

[Rafael Barcellos, Analyst at Bradesco BBI]

If I may, one follow-up. Still on this part of the capital location topic. How do you see Ero Copper in the middle of this recent M&A trend that we have seen over the past few years in the copper sector? I mean, how do you see the company in this environment?

[Makko DeFilippo, President and CEO at Ero Copper]

Look, as I always say, we have a corporate development team. They have a very, very important job in our organization. We look at opportunities in the Americas for growth. We do that pretty thoughtfully in the lens of what our existing portfolio looks like. We have, I would say, one of the better, if not the best from our perspective, development projects in the market, which is Furnas. We have incredible pipeline of early-stage exploration projects that our exploration team's working on. We look at opportunities outside of our business through that lens. We take reviews in the Americas very, very seriously. I think our focus is really on executing on our own portfolio. As I said, we have a corporate development team.

[Makko DeFilippo, President and CEO at Ero Copper]

They have an important job to do in our company, but we're really happy with where our portfolio sits today, and that's what we're focused on executing.

[Rafael Barcellos, Analyst at Bradesco BBI]

Okay, thank you.

[Operator]

This concludes the question and answer session. I'd like to turn the call back over to Makko DeFilippo for any closing remarks.

[Makko DeFilippo, President and CEO at Ero Copper]

Yeah. Thank you, everyone. As always, our team's available. We appreciate your patience as we redialed back in here. Just one last reminder on our Capital Markets Day in São Paulo, look forward to seeing many of you there. Thank you very much. Have a great day.

[Operator]

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

Participants

Executives

• Farooq Hamed, VP of Investor Relations
• Makko DeFilippo, President and CEO
• Gelson Batista, EVP and COO
• Wayne Drier, EVP and CFO

Analysts

• Matt Murphy, Analyst at BMO Capital Markets
• Guilherme Rosito, Analyst at Bank of America
• Craig Hutchison, Analyst at TD Cowen
• Emerson Vieira, Analyst at Goldman Sachs
• Fahad Tariq, Analyst at Jefferies
• Stefan Ioannou, Analyst at Cormark Securities
• Orest Wowkodaw, Analyst at Scotiabank
• Rafael Barcellos, Analyst at Bradesco BBI