• Copper Production at Kariba: Increased by 11.9% to 9,920 tons of copper in concentrate.
• Full Year Production Guidance at Kariba: Adjusted to 35,000 to 37,000 tons of copper in concentrate.
• C1 Cash Costs: Decreased by 24.5% to $1.63 per pound of copper produced.
• Full Year Copper Production Guidance for Tucuman: Revised to 8,000 to 11,000 tons in concentrate.
• Gold Production at JTI: Totaled 13,485 ounces.
• Quarterly Operating Cash Flows: $52.7 million.
• Adjusted EBITDA: $62.2 million.
• Adjusted Net Income: $27.6 million or 27 per share on a fully diluted basis.
• Total Balance Sheet Liquidity: $125.2 million at quarter end.

• Warning! GuruFocus has detected 6 Warning Signs with ERO.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Ero Copper Corp (NYSE:ERO) successfully completed the construction of the Tua operation, achieving the first production of saleable copper concentrate without any lost time injuries.
• The company executed a definitive earning agreement on the FNAs copper gold project with Vale Base Metals, advancing the project towards a final investment decision.
• Ero Copper Corp (NYSE:ERO) achieved an 11.9% increase in copper production at the Kariba operation, driven by higher mine grades.
• The company reported a significant decrease in C1 cash costs by 24.5% to $1.63 per pound of copper produced, supported by favorable treatment and refining terms and a favorable exchange rate.
• Ero Copper Corp (NYSE:ERO) maintained strong financial performance with quarterly operating cash flows of $52.7 million and adjusted EBITDA of $62.2 million, alongside a robust liquidity position of $125.2 million.

Negative Points

• The company faced operational challenges at both the Kariba and Tucuman operations, impacting production rates and leading to revised production guidance.
• Underground development rates at Kariba did not advance as anticipated due to underperformance by a third-party contractor, necessitating the engagement of a second contractor.
• Voltage fluctuations on the regional power grid affected the ramp-up of the Tucuman operation, causing intermittent power disruptions and delaying commercial production.
• Ero Copper Corp (NYSE:ERO) had to revise its full-year copper production guidance for Tucuman to a range of 8 to 11,000 tons due to power issues and extended ramp-up timelines.
• The company anticipates that Kariba will initially underperform relative to previous 2025 guidance due to ongoing development challenges, impacting production in the first half of the year.

Q & A Highlights

Q: Can you clarify the impact of contractor issues at Karra on dilution and reconciliation plans? A: Makko DeFilippo, President and COO, explained that the issue with the third-party contractor is not related to dilution or reconciliation but rather to operational flexibility and access to high-grade stopes. The underperformance has shifted plans to the first half of next year, affecting the timing of accessing these areas safely.

Q: Regarding Tua and power issues, are these structural problems requiring capital investment? A: David Strang, CEO, noted that the power grid issues are complex due to multiple providers. The problem was identified when Vale's Onsipuma mine increased power draw. Solutions have been implemented, including software updates, and a potential capital investment of around $1 million is being considered for a more permanent fix.

Q: What are the priorities for capital allocation given the expected cash generation? A: Wayne Drier, CFO, stated that the first priority is to pay back the revolver. Once Tua reaches commercial production, discussions on returning cash to shareholders, possibly through dividends or buybacks, will be more robust.

Q: What are the cost implications of adding a second mining contractor at Pilar? A: Makko DeFilippo clarified that adding a second contractor was always part of the plan for 2025 to increase development rates. The current acceleration is a risk mitigation measure, not expected to significantly impact long-term costs.

Q: Can you provide more details on the power management solution at Tua and its effectiveness? A: Makko DeFilippo explained that the solution implemented last week has been effective in addressing voltage variability, allowing continuous mill operations. A more expensive solution is being engineered as a contingency, but current results are encouraging.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.