Ero Copper Q2 Earnings Call Highlights

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Ero Copper (NYSE:ERO) reported stronger second-quarter operating and financial performance, supported by higher gold sales, solid copper output and commodity-price tailwinds, while continuing to reduce debt and advance expansion projects across its Brazilian operations.

President and Chief Executive Officer Makko DeFilippo said the company’s “One Ero” initiative, launched in early 2025 to streamline operations and improve efficiency across functions, has contributed to operational improvements, higher cash generation and balance-sheet progress.

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Second-quarter cash flow from operations rose nearly 50% from the prior quarter to approximately $138 million, while adjusted EBITDA reached $144 million. For the first six months of 2026, cash flow from operations totaled about $231 million, compared with $156 million in the first half of 2025. Adjusted EBITDA for the first half increased to $269 million from $146 million a year earlier.

Production and operating developments

Ero produced a combined 17,315 tonnes of copper during the second quarter at a consolidated shipping cash cost of $2.42 per pound. The company said it remains positioned to meet its full-year copper production guidance, with stronger production expected in the second half and sequentially lower copper unit costs anticipated through the rest of the year.

At the Caraíba operation, second-quarter copper production totaled 8,351 tonnes. Lower plant head grades were partly offset by higher throughput and improved recoveries, according to Executive Vice President and Chief Operating Officer Gelson Batista. The company expects second-half output to benefit from access to higher-grade benches at Surubim as well as increased grades and tonnage at Pilar under its planned stope sequencing.

At Tucumã, copper output rose about 6% sequentially to 8,964 tonnes. Plant throughput increased 27% from the first quarter, more than offsetting lower processed grades. Batista said the operation achieved throughput rates of roughly 250,000 to 260,000 tonnes per month in the latter part of the second quarter and in July. July throughput was approximately 250,000 tonnes despite five days of downtime for a mill liner replacement.

The company completed an expansion of Tucumã’s existing filtration circuit during the quarter, adding plates to three existing filters and increasing tailings filtration capacity by approximately 8%. Three modular filters are expected to arrive during the third quarter and be installed and operating in the fourth quarter. Ero said the combined filtration initiatives are expected to support higher plant throughput as it exits 2026.

Xavantina gold performance and updated cost outlook

At Xavantina, investments in ventilation and cooling supported improved mining and development rates beginning in May, while process changes and investments in flotation cells and a Falcon concentrator contributed to improved recoveries.

Total gold production from Xavantina increased 170% sequentially to more than 20,000 ounces. This included 8,693 ounces of mined gold production at a C1 cash cost of $1,586 per ounce and 11,860 ounces recovered from historical concentrates at a C1 cash cost of $633 per ounce.

DeFilippo said the end of the rainy season, along with the commissioning of a mobile filter press and industrial dryer at the end of the quarter, supported higher concentrate sales. He said the company achieved more than 7,000 ounces of gold in both June and July with the equipment operating, though he did not provide quarterly forward guidance for concentrate sales.

Ero expects approximately 65% of full-year mined gold production at Xavantina to occur in the second half. While the company maintained its mined-gold production guidance range, it now expects production to land at the low end after a slower first half. It updated full-year mined-gold C1 cash cost guidance to $1,100 to $1,350 per ounce and all-in sustaining cost guidance to $2,200 to $2,700 per ounce.

Debt reduction, hedging and capital spending

Executive Vice President and Chief Financial Officer Wayne Drier said second-quarter revenue was $284.3 million, up 8% from the first quarter, aided by solid copper production, strong metal prices and a 65% sequential increase in gold sales.

Net debt fell by $38 million during the quarter to approximately $453 million. With last-12-month adjusted EBITDA of $533 million, Ero’s net-debt leverage ratio declined to about 0.8 times. The company repaid an additional $25 million on its revolving credit facility in July, bringing total repayments in 2026 to $60 million.

Liquidity increased by $36 million during the quarter to $182 million, including $102 million in cash and cash equivalents and $80 million available under the revolver.

The stronger Brazilian real continued to affect reported operating costs and capital expenditures. However, Drier said Ero’s currency hedge program generated $13 million in realized gains during the second quarter and $20 million in the first half. Assuming an exchange rate of 510 Brazilian reais per U.S. dollar through year-end, the company expects an additional $20 million to $25 million in realized hedge gains, potentially bringing full-year gains to $40 million to $45 million.

Ero said hedge gains are not included in C1 cash costs. If currency and inflationary conditions persist, it estimates an incremental impact of about $0.10 per pound on reported consolidated copper C1 costs and roughly $100 per ounce on reported mined-gold C1 costs at Xavantina.

The company increased consolidated 2026 capital expenditure guidance by $10 million to a range of $285 million to $330 million, reflecting approval of a new power line at Xavantina. Management said the project is expected to strengthen infrastructure, support future growth and reduce power transmission costs, with an anticipated payback period of about two years.

Projects and capital allocation

At the Furnas project, Ero said its 45,000-meter Phase 3 drill program remains on track for completion before year-end. The company is also advancing work toward a pre-feasibility study expected in 2027. Management said it expects to publish an updated technical report on Tucumã later this year.

At Caraíba’s Pilar mine, the company is advancing a shaft-sinking project that had reached more than 1,100 meters below surface. DeFilippo said Ero’s objective remains to reach shaft bottom by year-end, although the company would accept additional time if needed to complete the work safely. The first full year of benefits from the shaft is expected in 2028, following a transition to operations in 2027.

Management reiterated that its immediate capital-allocation priority is repaying the remaining $95 million on its revolving credit facility. DeFilippo said it was too early to discuss a shareholder-return program and that the company would provide greater clarity later in the year after progressing further on revolver repayment.

About Ero Copper (NYSE:ERO)

Ero Copper 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.

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