Ero Copper Corp. Q4 FY2024 earnings call

Strategy Overview

• Four-step strategy: achieve commercial production at Tucuma, deleverage balance sheet, advance long-term growth initiatives (including Furnas partnership), and initiate returns to shareholders.

Tucuma Update

• Positive aspects: Mining operations ahead of schedule, higher grades than expected, process plant meeting design net recoveries and concentrate grades. Challenges: Multi-week power outage due to extreme weather, low power quality, and teething pains during ramp-up (material flow constraints). Fixed with shutdowns in Jan-Feb, seeing improvement with increased plant reliability and throughput volumes expected in Q2.

Caraiba and Xavantina

• Caraiba: Q1 soft as setting up for long-term success. Xavantina: Transitioning to mechanized operation with capital investments in asset integrity, mine improvement, etc., with Q1 expected to be soft as setting up for mechanization.

Deleverage Balance Sheet

• Path to normalized net debt leverage ratio of 1.5 times, strong liquidity at year-end ($90M), credit facility amended to $200M with extended maturity and reduced margin.

Furnas

• 5 drill rigs on site, Phase 1 drill program to midyear, Phase 2 to year-end, progressing technical work and initial mine/infrastructure layout designs.

The company's key segment is Tucuma. Since completing the project on schedule last year, mining operations have tracked ahead of schedule. Grades from infill drill program were higher than expected, and the process plant has consistently achieved at or above design net recoveries and concentrate grades. Financially, cash flow from operations was $60.8 million for the fourth quarter and $145.4 million for the full year. Adjusted EBITDA was $59.1 million for the fourth quarter and $216.2 million for the full year.

Tucuma

• Production cadence aligned with reaffirmed full year guidance.

C1 Guidance

• Influenced by FX, lower grades, and mining deeper parts of mines.

Xavantina 2025

• Guidance reflects investments in asset integrity and mine improvement.

• Power quality issues at Tucuma impacting operations. - Teething pains during Tucuma ramp-up. - Potential impact of copper price volatility on liquidity and operations.

Q: On the ramp-up at Tucuma, are you still experiencing intermittent power outages that's impacting the mill?

A: Yes, still working on long-term solution, adjustments made have significantly reduced mill power trips, and long-term solution engineering work finalized with installation off-site expected imminently.

Q: First question on the C1 guidance, what's driving the large C1 increase this year?

A: Biggest drivers are FX being more conservative than spot pricing on BRL, mining deeper parts with increased costs, and lower grades across portfolio including Surubim and Vermelhos.

Q: On the power solution at Tucuma, can you give an explanation of the off-site power solution?

A: It's a series of capacitors or batteries to absorb and discharge energy for stable power quality despite incoming volatility, engineering work finalized with installation off-site and no expected operation interruption.

Q: On Xavantina, is Q1 going to look a lot like Q4 with respect to grades and throughput?

A: Expect a drop in tonnage and grade as setting up mine for mechanization, changing interlevel spacing, and timing of pillar recovery program.