Ero Copper Reports Third Quarter 2024 Operating and Financial Results
(all amounts in US dollars, unless otherwise noted)
VANCOUVER, British Columbia, Nov. 05, 2024 (GLOBE NEWSWIRE) -- Ero Copper Corp. (TSX:ERO, NYSE:ERO) ("Ero" or the "Company") is pleased to announce its operating and financial results for the three and nine months ended September 30, 2024. Management will host a conference call tomorrow, Wednesday, November 6, 2024, at 11:30 a.m. eastern time to discuss the results. Dial-in details for the call can be found near the end of this press release.
HIGHLIGHTS
The Tucumã Operation achieved a major commissioning milestone in July 2024, producing its first saleable copper concentrate. As ramp-up efforts increased mill throughput during the quarter, the operation delivered 839 tonnes of copper, contributing to consolidated quarterly copper production of 10,759 tonnes.
Consolidated quarterly copper production also included contributions from the Caraíba Operations of 9,920 tonnes at C1 cash costs(*) of $1.63 per pound of copper produced.
Gold production for the quarter was 13,485 ounces at C1 cash costs(*) and All-in Sustaining Costs ("AISC")(*) of $539 and $1,034, respectively, per ounce produced.
Improved operating margins were supported by a significant decrease in unit operating costs at the Caraíba Operations and higher realized gold prices at the Xavantina Operations, resulting in:
Net income attributable to the owners of the Company of $40.9 million, or $0.39 per share on a diluted basis.
Adjusted net income attributable to the owners of the Company(*) of $27.6 million, or $0.27 per share on a diluted basis.
Adjusted EBITDA(*) of $62.2 million.
Available liquidity at quarter-end was $125.2 million, including $20.2 million in cash and cash equivalents, $80.0 million of undrawn availability under the Company's senior secured revolving credit facility, and $25.0 million of undrawn availability under the copper prepayment facility.
(*) These are non-IFRS measures and do not have a standardized meaning prescribed by IFRS and might not be comparable to similar financial measures disclosed by other issuers. Please refer to the Company's discussion of Non-IFRS measures in its Management's Discussion and Analysis for the three and nine months ended September 30, 2024 and the Reconciliation of Non-IFRS Measures section at the end of this press release.
During the quarter, the Company opportunistically entered into zero-cost gold collar contracts on 2,500 ounces of gold per month from January 2025 to December 2025, representing just over 50% of projected 2025 gold production at the Xavantina Operations. These contracts set a floor price of $2,200 per ounce, while allowing for upside participation in gold price increases up to a cap of $3,425 per ounce, over 20% above the all-time high price reached in October 2024.
Key 2024 guidance updates include:
The Company is updating consolidated copper production guidance to 43,000 to 48,000 tonnes in concentrate, reflecting an extension of Tucumã's ramp-up schedule due to power disruptions in Q3 and October 2024 and slower-than- expected underground development progress at Caraíba's Pilar Mine.
Due to the anticipated delay in achieving commercial production at the Tucumã Operation, the Company is narrowing 2024 C1 cash cost guidance to only include the Caraíba Operations. The Company is reaffirming full-year C1 cash cost guidance for the Caraíba Operations of $1.80 to $2.00 per pound of copper produced.
Full-year gold production guidance is being maintained at the increased range of 60,000 to 65,000. The Company is also reaffirming reduced full-year gold cost guidance of $450 to $550 per ounce of produced for C1 cash costs, and $900 to $1,000 per ounce for AISC.
The Company is maintaining full-year consolidated capital expenditure guidance of $303 to $348 million.
"The third quarter and year-to-date period presented both significant achievements to celebrate and new challenges to navigate," said David Strang, Chief Executive Officer. "We have reached the inflection point we have been working towards since the publication of Tucumã's Optimized Feasibility Study in September 2021. With construction complete and ramp-up to commercial production underway, reaching this milestone in just over three years is a remarkable accomplishment.
"Alongside this achievement, came operational headwinds, including power-related challenges that have impacted our ramp-up schedule at Tucumã. At our Caraíba Operations, we made progress in accelerating underground development rates at the Pilar Mine, though the performance of a third-party development contractor has been below expectations. We view these challenges as transitional, and our team is actively working on returning to plan.
"Despite these setbacks, our financial results have been strengthened by improved operating margins driven by significantly lower unit costs at Caraíba and higher realized gold prices at Xavantina. We are optimistic about the path ahead, with 2025 on track to be our best year yet, and look forward to delivering strong value for our stakeholders."
THIRD QUARTER REVIEW
The Caraíba Operations
Quarterly copper production at the Caraíba Operation increased 11.9% quarter-on- quarter to 9,920 tonnes of copper in concentrate, with higher mined and processed copper grades offsetting lower mill throughput.
Higher copper grades also contributed to a 24.5% decrease in C1 cash costs, which averaged $1.63 per pound of copper produced for the quarter. C1 cash costs and margins also benefited from improved concentrate treatment and refining charges, secured as of May 2024, as well as a more favorable USD to BRL exchange rate.
Efforts to increase underground development rates at the Pilar Mine were impacted by slower-than-anticipated progress by a third-party development contractor during the quarter. Consequently, the Company expects lower mined and processed tonnage at the Caraíba Operations through year-end.
To support accelerated development rates, the Company intends to engage an additional contractor in Q4 2024.
The Tucumã Operation
The Tucumã Operation successfully produced first saleable concentrate in July 2024. Production for the quarter was 839 tonnes of copper in concentrate, with mill throughput totaling 110,778 tonnes and metallurgical recoveries averaging 75.7%.
Mining operations continued ahead of schedule, contributing to a buildup of ore stockpiles that are expected to be processed in Q4 2024 and throughout 2025.
The ramp-up of Tucumã's processing plant progressed well through July and the majority of August; however, as the plant moved toward continuous operations, the Company detected intermittent voltage oscillations within the third-party regional power grid. These oscillations limited the ability to run the mill at full capacity on a continuous basis.
Subsequent to quarter-end, the Tucumã Operation experienced a temporary power disruption following a severe localized windstorm that impacted the regional power grid, including the main 230kV transmission line servicing the southwest region of the Carajás Mineral Province. Power was restored after approximately 10 days, allowing the Company to safely resume ramp-up activities on October 16, 2024.(1)
To address ongoing intermittent voltage oscillations, the Company implemented a mill power management solution that enables continuous plant operations despite minor voltage fluctuations. Since this implementation, the plant has maintained continuous operations and is advancing toward full capacity.
(1) For further details on the power disruption and resumption of ramp-up activities, please refer the Company's press releases dated October 5, 2024 and October 16, 2024.
The Xavantina Operations
Quarterly gold production at the Xavantina Operations totaled 13,485 ounces with tonnes processed up 3.3% quarter-on-quarter, partially offsetting a planned decrease in mined and processed gold grades.
Unit operating costs were in line with expectations for the quarter, averaging $539 per ounce for C1 cash costs and $1,034 per ounce for AISC.
The Xavantina Operations are expected to deliver similar production levels and unit cost performance in Q4 2024 compared to Q3 2024.
OTHER SUBSEQUENT EVENTS
The Company continued to advance its growth pipeline with the announcement of an initial National Instrument 43-101 compliant mineral resource estimate for Furnas Copper-Gold Project (the "Project") on October 2, 2024. This initial mineral resource estimate, supported by over 90,000 meters of historic drilling, highlights the significant potential of this Project.
In October 2024, the Company also commenced the Phase 1 drill program under the definitive earn-in agreement(1) for the Project, after receiving drilling permits from the Pará State environmental agency in September 2024. This minimum 28,000-meter program, designed to support a preliminary economic assessment on the Project, is focused on infill drilling and extending high-grade zones within the broader deposit to depth. For more information on the Project's initial mineral resource estimate and the Phase 1 drill program, please refer to the Company's press release dated October 2, 2024.
(1) In July 2024, the Company signed a definitive earn-in agreement ("Agreement") with Salobo Metais S.A., a subsidiary of Vale Base Metals Limited, to earn a 60% interest in the Project, located in the Carajás Mineral Province in Pará State, Brazil. The terms of the Agreement align with the previously signed binding term sheet outlined in the Company's press release dated October 30, 2023.
OPERATING HIGHLIGHTS
2024 - Q3
2024 - Q2
2023 - Q3
2024 - YTD
2023 - YTD
Copper (Caraíba Operations)
Ore Processed (tonnes)
900,289
957,692
806,096
2,711,352
2,419,465
Grade (% Cu)
1.20
1.03
1.46
1.10
1.45
Cu Production (tonnes)
9,920
8,867
10,766
26,878
32,097
Cu Production (000 lbs)
21,871
19,548
23,734
59,257
70,761
Cu Sold in Concentrate (tonnes)
9,970
8,706
10,090
28,137
31,166
Cu Sold in Concentrate (000 lbs)
21,980
19,192
22,244
62,031
68,709
Cu C1 cash cost(1)(2)
$
1.63
$
2.16
$
1.92
$
2.01
$
1.83
Copper (Tucumã Operation)
Ore Processed (tonnes)
110,778
—
—
110,778
—
Grade (% Cu)
1.00
—
—
1.00
—
Cu Production (tonnes)
839
—
—
839
—
Cu Production (000 lbs)
1,850
—
—
1,850
—
Cu Sold in Concentrate (tonnes)
357
—
—
357
—
Cu Sold in Concentrate (000 lbs)
787
—
—
787
—
Gold (Xavantina Operations)
Ore Processed (tonnes)
41,761
40,446
31,446
120,041
101,586
Grade (g / tonne)
11.41
14.00
18.72
13.85
14.43
Au Production (oz)
13,485
16,555
17,579
48,274
42,355
Au C1 cash cost(1)
$
539
$
428
$
371
$
447
$
425
Au AISC(1)
$
1,034
$
842
$
844
$
879
$
943
(1) EBITDA, adjusted EBITDA, adjusted net income (loss) attributable to owners of the Company, adjusted net income (loss) per share attributable to owners of the Company, net (cash) debt, working capital, copper C1 cash cost, copper C1 cash cost including foreign exchange hedges, gold C1 cash cost and gold AISC are non- IFRS measures. These measures do not have a standardized meaning prescribed by IFRS and might not be comparable to similar financial measures disclosed by other issuers. Please refer to the Company's discussion of Non-IFRS measures in its Management's Discussion and Analysis for the three and nine months ended September 30, 2024 and the Reconciliation of Non-IFRS Measures section at the end of this press release.(2) Copper C1 cash cost including foreign exchange hedges was $1.72 in Q3 2024 (Q3 2023 - $1.77) and $2.04 in YTD 2024 (YTD 2024 - $1.73).
FINANCIAL HIGHLIGHTS($ in millions, except per share amounts)
2024 - Q3
2024 - Q2
2023 - Q3
2024 - YTD
2023 - YTD
Revenues
$
124.8
$
117.1
$
105.2
$
347.7
$
311.1
Gross profit
53.7
43.3
35.5
128.2
115.0
EBITDA(1)
74.5
(36.2
)
28.3
56.1
135.0
Adjusted EBITDA(1)
62.2
51.5
42.9
157.0
133.2
Cash flow from operations
52.7
14.7
41.9
84.6
113.7
Net income (loss)
41.4
(53.4
)
2.8
(18.9
)
57.3
Net income (loss) attributable to owners of the
40.9
(53.2
)
2.5
(19.5
)
56.3
Per share (basic)
0.40
(0.52
)
0.03
(0.19
)
0.61
Per share (diluted)
0.39
(0.52
)
0.03
(0.19
)
0.60
Adjusted net income attributable to owners of the Company(1)
27.6
18.6
17.3
63.0
62.0
Per share (basic)
0.27
0.18
0.19
0.61
0.67
Per share (diluted)
0.27
0.18
0.18
0.61
0.66
Cash, cash equivalents, and short-term
20.2
44.8
87.6
20.2
87.6
Working (deficit) capital(1)
(60.9
)
(57.6
)
32.8
(60.9
)
32.8
Net debt(1)
518.7
482.0
331.8
518.7
331.8
(1) EBITDA, adjusted EBITDA, adjusted net income (loss) attributable to owners of the Company, adjusted net income (loss) per share attributable to owners of the Company, net (cash) debt, working capital, copper C1 cash cost, copper C1 cash cost including foreign exchange hedges, gold C1 cash cost and gold AISC are non- IFRS measures. These measures do not have a standardized meaning prescribed by IFRS and might not be comparable to similar financial measures disclosed by other issuers. Please refer to the Company's discussion of Non-IFRS measures in its Management's Discussion and Analysis for the three and nine months ended September 30, 2024 and the Reconciliation of Non-IFRS Measures section at the end of this press release.
2024 GUIDANCE(*)
The Company is updating production guidance for both the Caraíba and Tucumã Operations, resulting in a consolidated copper production guidance for the year of 43,000 to 48,000 tonnes in concentrate.
Due to the anticipated delay in achieving commercial production at the Tucumã Operation, the Company is narrowing 2024 C1 cash cost guidance to only include the Caraíba Operations. The Company is reaffirming full-year C1 cash cost guidance for the Caraíba Operations of $1.80 to $2.00 per pound of copper produced. Positive factors, including improved concentrate treatment and refining charges secured as of May 2024, a higher gold byproduct credit, and a more favorable USD to BRL exchange rate, are expected to more than offset the impact of lower projected copper production.
At the Xavantina Operations, the Company is reaffirming increased full-year gold production guidance of 60,000 to 65,000 ounces, with similar production levels and unit cost performance expected in Q4 2024 compared to Q3 2024. Consequently, the Company is reaffirming its reduced gold cost guidance ranges, including C1 cash cost guidance of $450 to $550 per ounce, and AISC guidance of $900 to $1,000 per ounce.
The Company is also maintaining consolidated 2024 capital expenditure guidance of $303 to $348 million.
The Company's cost guidance for 2024 assumes a foreign exchange rate of 5.00 BRL per USD, a gold price of $1,900 per ounce and a silver price of $23.00 per ounce for Q4 2024.
Original Guidance
Updated Guidance
Consolidated Copper Production (tonnes)
Caraíba Operations
42,000 - 47,000
35,000 - 37,000
Tucumã Operation
17,000 - 25,000
8,000 - 11,000
Total
59,000 - 72,000
43,000 - 48,000
Caraíba Operations C1 Cash Cost(1) Guidance
$1.80 - $2.00
Unchanged
The Xavantina Operations
Au Production (ounces)
55,000 - 60,000
60,000 - 65,000
Gold C1 Cash Cost(1) Guidance
$550 - $650
$450 - $550
Gold AISC(1) Guidance
$1,050 - $1,150
$900 - $1,000
* Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company's most recent Annual Information Form and Management of Risks and Uncertainties in the MD&A for complete risk factors.
(1) Please refer to the section titled "Alternative Performance (Non-IFRS) Measures" within the MD&A.
CONFERENCE CALL DETAILS
The Company will hold a conference call on Wednesday, November 6, 2024 at 11:30 am Eastern time (8:30 am Pacific time) to discuss these results.
Date:
Wednesday, November 6, 2024
Time:
11:30 am Eastern time (8:30 am Pacific time)
Dial in:
Canada/USA Toll Free: 1-844-763-8274,International: +1-647-484-8814Please dial in 5-10 minutes prior to the start of the call or pre-register using this link to bypass the live operator queue
Webcast:
To access the webcast, click here
Replay:
Canada/USA: 1-855-669-9658, International: +1-412-317-0088 For country-specific dial-in numbers, click here
Replay Passcode:
1437453
Reconciliation of Non-IFRS Measures
Financial results of the Company are presented in accordance with IFRS. The Company utilizes certain alternative performance (non-IFRS) measures to monitor its performance, including copper C1 cash cost, copper C1 cash cost including foreign exchange hedges, gold C1 cash cost, gold AISC, EBITDA, adjusted EBITDA, adjusted net income attributable to owners of the Company, adjusted net income per share, net (cash) debt, working capital and available liquidity. These performance measures have no standardized meaning prescribed within generally accepted accounting principles under IFRS and, therefore, amounts presented may not be comparable to similar measures presented by other mining companies. These non-IFRS measures are intended to provide supplemental information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
For additional details please refer to the Company's discussion of non-IFRS and other performance measures in its Management's Discussion and Analysis for the three and nine months ended September 30, 2024 which is available on SEDAR+ at www.sedarplus.ca, and on EDGAR at www.sec.gov.
Copper C1 cash cost and copper C1 cash cost including foreign exchange hedges
The following table provides a reconciliation of copper C1 cash cost to cost of production, its most directly comparable IFRS measure.
Reconciliation:
2024 - Q3
2024 - Q2
2023 - Q3
2024 - YTD
2023 - YTD
Cost of production
$
40,149
$
41,945
$
39,345
$
124,321
$
113,397
Add (less):
Transportation costs & other
1,283
1,283
1,614
3,818
4,686
Treatment, refining, and other
3,170
4,058
6,574
12,398
20,991
By-product credits
(6,584
)
(3,431
)
(3,022
)
(12,455
)
(9,536
)
Incentive payments
(1,138
)
(1,174
)
(1,609
)
(3,511
)
(3,975
)
Net change in inventory
(1,220
)
(468
)
2,835
(5,581
)
2,973
Foreign exchange translation and other
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