Ero Copper Q3 Earnings Call Highlights

Key Points

• Record financial performance was driven by higher sales volumes, stronger metal prices and increased throughput, generating about $191 million in operating cash flow and more than $200 million in adjusted EBITDA in Q3. Ero remains on track for full-year copper guidance and expects record gold output from Xavantina.
• Ero reduced net debt by $99 million to approximately $353 million, lowering leverage to about 0.5 times, while liquidity rose to $264 million. Management expects to repay its revolving credit facility in Q4 if favorable price conditions continue and is discussing a shareholder-return framework.
• Copper operations maintained momentum, while historic concentrate sales helped lift Xavantina’s total gold output and recovery to a record of about 25,000 ounces. The company also completed Furnas’ Phase III drilling program and remains on track to publish a pre-feasibility study in 2027.

Ero Copper NYSE: ERO reported record third-quarter financial results as higher copper and gold sales volumes, stronger metal prices and increased throughput supported cash flow and debt reduction. The company said it remains on track to meet full-year copper production guidance and now expects record annual gold output from its Xavantina operation.

President and Chief Executive Officer Makko DeFilippo said the company generated approximately $191 million in cash flow from operations and more than $200 million in adjusted EBITDA during the third quarter. Both figures rose nearly 40% from the prior quarter, according to the company.

For the first nine months of 2026, Ero Copper generated more than $420 million in operating cash flow and $470 million in adjusted EBITDA, representing increases of about 60% and 110%, respectively, from the comparable period a year earlier, DeFilippo said.

Debt Reduction and Liquidity

The company used its stronger cash generation to continue deleveraging. Chief Financial Officer Wayne Drier said Ero repaid $70 million on its revolving credit facility during the quarter, bringing total 2026 repayments to $105 million.

Net debt fell by $99 million in the third quarter to approximately $353 million. Combined with higher last-12-month adjusted EBITDA of $657 million, that reduced Ero Copper’s net-debt-to-EBITDA leverage ratio to approximately 0.5 times, down from a peak of 2.6 times at the start of 2025.

Liquidity increased by $82 million to $264 million at quarter-end, including $114 million in cash and cash equivalents and $150 million available under the company’s revolving credit facility.

During the question-and-answer session, Drier said the company expects to repay its revolver during the fourth quarter if current price conditions persist. He said management and the board are actively discussing a shareholder-return framework but did not provide a timetable for an announcement.

Copper Operations Maintain Momentum

Ero Copper produced 18,300 tonnes of copper in the third quarter at consolidated C1 cash costs of just over $2.50 per pound. Throughput rose 8% sequentially at the Caraíba operation and 14% at Tucumã. DeFilippo said both operations are positioned to achieve record annual throughput volumes in 2026.

At Caraíba, copper production totaled 9,387 tonnes, up 12% from the second quarter, at C1 cash costs of $2.89 per pound. The company attributed the increase to higher throughput, grades and recoveries. Costs were affected by accelerated waste stripping at the Surubim open pit, elevated road-fleet maintenance costs and higher diesel prices.

Management expects Caraíba’s fourth-quarter production to improve with higher grades from deeper, high-grade benches at Surubim and contributions from the Pilar underground mine. DeFilippo said some high-grade material originally expected late in the third quarter was shifted into the fourth quarter and could extend into the first quarter of 2027.

At Tucumã, production was 8,958 tonnes of copper at C1 cash costs of $2.12 per pound. While process grades declined as planned, higher throughput offset the impact. Recoveries were affected by operating adjustments following a mill liner replacement and maintenance shutdown, though management said this was temporary and recoveries improved during the quarter.

The company expects higher throughput and metallurgical recoveries at Tucumã in the fourth quarter. Three new filters were delivered to the site late in the third quarter and are expected to be installed and commissioned before year-end. Management said Tucumã is expected to exit 2026 at a 4 million-tonne-per-year processing rate, which it also views as the expected rate for 2027.

Gold Concentrate Program Lifts Xavantina Output

At Xavantina, mine gold production was 7,844 ounces at C1 cash costs of $1,892 per ounce. The company said access delays to key high-grade stopes limited the grades processed during the quarter, despite increases in mine and process grades.

However, total gold produced and recovered at Xavantina increased 23% sequentially to a record approximately 25,000 ounces, aided by sales of historic concentrate stockpiles. Gold recovered from those stockpiles rose 47% from the prior quarter to 17,414 ounces at C1 cash costs of $621 per ounce.

DeFilippo said investments in drying capacity, including a mobile filter press and industrial dryer commissioned at the end of June, supported the stockpile program. Ero Copper expects between 75,000 and 80,000 ounces of total gold production from Xavantina in 2026.

Management said it has assays for the material expected to be sold over the next eight weeks. It expects historic concentrate sales to continue for at least the next several quarters, potentially into 2027, though it did not provide an outlook for grades beyond the fourth quarter because the remaining material cannot be sampled until it is processed and dried.

Currency Hedges and Growth Projects

Ero Copper said a stronger Brazilian real increased reported operating costs and capital expenditures during the quarter. The company revised its consolidated C1 cash-cost guidance to reflect an estimated $0.10-per-pound inflationary impact tied to diesel prices and the stronger currency.

Its foreign-exchange hedging program generated $10 million in realized gains during the third quarter and $30 million through the first nine months of the year. Drier said those gains are not included in reported C1 costs but would equate to a $0.15-per-pound reduction in consolidated copper C1 costs and a $50-per-ounce reduction in Xavantina C1 costs for the full year if allocated on a pro-rata basis.

The company said its fourth-quarter hedge structure provides protection at a Brazilian-real floor of 5.54, while allowing participation in currency weakness up to a cap of 6.42. Management also said it has begun establishing hedges for 2027.

On the company’s growth pipeline, Ero completed its 45,000-meter Phase III drilling program at the Furnas project in August, more than two years ahead of the schedule in its earn-in agreement with Vale Base Metals. The company expects to release full drilling results before year-end and remains on track to publish a pre-feasibility study in 2027.

At Caraíba, Ero said its shaft-sinking project was approximately 1,250 meters complete at the end of the third quarter, with about 300 meters remaining. The company continues to expect completion in the first quarter. Of the project’s $370 million expected cost, approximately $300 million had been spent by the end of the quarter.

About Ero Copper (NYSE:ERO)

Ero Copper Corp. is a Canadian-based mining company focused on the exploration, development and production of copper and associated minerals. Its shares trade under the symbol ERO on the New York Stock Exchange and the Toronto Stock Exchange.

The company's principal assets are in Brazil. Its Caraíba Operations in the state of Bahia include underground and open-pit copper mines, processing facilities and related infrastructure. Ero Copper also operates the Tucumã copper mine in the state of Pará, while advancing additional exploration and development opportunities in Brazil.

Ero Copper was established in 2016 and has built its business around operating and expanding its Brazilian mining portfolio.

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