(all amounts in US dollars, unless otherwise noted)
Vancouver, British Columbia – Ero Copper Corp. (the "Company") (TSX: ERO) today is pleased to announce its financial results for the three and six months ended June 30, 2020. Management will host a conference call tomorrow, Friday, August 7, 2020, 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.
- Second quarter copper production of 11,178 tonnes of copper;
- New record quarterly C1 cash costs* of $0.65 per pound of copper produced ($0.71 per pound in Q1 2020) contributing to record quarterly cash flow from operations of $42.5 million during the three month period ended June 30, 2020;
- Significant increase in gold and silver production at the NX Gold Mine totalling 8,739 ounces of gold and 5,327 ounces of silver at record C1 cash costs* of $437 per ounce of gold produced during the period;
- Generated a quarterly record $42.4 million in Adjusted EBITDA* during the three month period ended June 30, 2020;
- Adjusted net income attributable to owners of the Company* of $20.3 million ($0.22 per share on a diluted basis) during the three month period ended June 30, 2020;
- Strong liquidity position at June 30, 2020 of $51.6 million; and,
- Reiterating full year production guidance and previously revised capital and operating cost guidance for 2020.
Commenting on the results, David Strang, President & CEO, stated, "While our primary objective shifted at the onset of the COVID-19 pandemic to prioritize the health and well-being of our employees, contractors, their families and local communities, our operational performance, outstanding financial results and execution during the second quarter are testament to the hard work and efforts of our team, particularly in Brazil, during very trying times for them and their families. At our operations and at the corporate level we are committed to prudently managing the business so that we remain as well positioned as possible to withstand any unforeseen challenges that may arise as a result of COVID-19.
I am pleased to report that our operations have and continue to perform well. At MCSA in the Curaçá Valley, we saw quarter-on-quarter increases in both tonnes and grades processed as well as improved metallurgical recoveries contributing to a 5% increase in copper production when compared to the first quarter at record C1 cash costs of $0.65 cents per pound. Similarly, at our NX Gold operations we continued to see quarter-on-quarter improvement in production from the Santo Antonio Vein with a significant increase in tonnes mined and processed as well as improving metallurgical recoveries, contributing to an 11% increase in gold produced when compared to the first quarter, also at record C1 cash costs of $437 per ounce of gold. Continued operational performance and underlying currency tail-winds contributed to record cash flow from operations and Adjusted EBITDA during the period of $42.5 million and $42.4 million, respectively.
With respect to key growth projects, our team was able to complete installation of our new HIG Mill in July, only a few weeks behind schedule. We are currently moving forward with commissioning of the new mill using a combination of on-site and virtual commissioning teams due to COVID-19 travel restrictions and we expect the mill to be operational during the third quarter. Once operational, we expect to see additional improvements in copper recoveries. We also continued to advance the test program for ore-sorting implementation in the Curaçá Valley. To date, we have now tested eight different material sources at varying grade profiles. We are very pleased with the results of this program and continue to view pre-concentration as a potentially significant value-enhancing opportunity to further optimize our operations at MCSA. We expect to provide further clarity on quantifying this potential once we have finalized our review in the coming months. Finally, we completed necessary improvements to our laboratory to allow in-house analysis of platinum group metals ("PGMs"), which will significantly decrease turn-around times and allow our exploration teams to systematically analyze for PGMs throughout the Curaçá Valley for the first time.
On exploration, we are continuing to advance several in-mine growth objectives at both Pilar and Vermelhos, most recently highlighted by our second-quarter Deepening Extension zone results where we continue to intercept thick and high-grade mineralization. We are also evaluating a number of regional exploration targets within the Curaçá Valley, where we expect the majority of our drilling to be allocated during the second half of the year."
*EBITDA, Adjusted EBITDA, Adjusted net income (loss), C1 cash cost of copper produced (per lb) and C1 cash costs of gold produced (per ounce) are non-IFRS measures – see the Notes section of this press release for a discussion on non-IFRS Measures
OPERATIONS & EXPLORATION HIGHLIGHTS
- Mining & Milling Operations – building positive operational momentum with no disruptions to date
- 627,071 tonnes processed grading 1.98% copper producing 11,178 tonnes of copper in concentrate after metallurgical recoveries that averaged 90.0% at the Company's Curaçá Valley operations;
- The Company's 97.6% owned NX Gold Mine processed 39,108 tonnes of ore grading 7.75 grams per tonne gold, resulting in the production of 8,739 ounces of gold and 5,327 ounces of silver as by-product after metallurgical recoveries that averaged 89.6% during the second quarter of 2020; and
- Continued to have no disruption to operations, supply chains or sales channels to date as a result of the COVID-19 pandemic.
- Exploration Activities – Continuing to advance priority near-mine targets while shifting to regional exploration focus during the balance of 2020
- Pilar District
- Exploration activity within the Pilar District, where nine drill rigs are currently operating, is focused on extending the limits of high-grade ‘Superpod' mineralization of the Deepening Extension zone. The Company has now identified a mineralized target area that extends over approximately 800 meters in strike length, over a total depth of approximately 500 meters and over an average thickness of approximately 15 to 20 meters with localized thicknesses of up to 50 meters. The zone remains open to the north and to depth. Results during the period continue to support the potential to meaningfully extend the mine life while maintaining an elevated grade profile from the Pilar Mine.
- Vermelhos District
- Exploration in the Vermelhos District, where eleven drill rigs are currently operating, is focused on both near-mine extensional drilling below the main Vermelhos orebodies and the extension of massive-sulphide mineralization down-plunge within the Siriema conduit.
- NX Gold Mine
- At the NX Gold Mine, five exploration drill rigs are primarily focused on extending mine life through resource upgrade programs within the current inferred mineral resource as well as testing down-plunge extensions of the Santo Antonio Vein.
- Regional Exploration
- Regional work at MCSA comprised of both exploration drilling and ground-based geophysical work is focused on four new and recently interpreted mineral systems within the portfolio of targets defined by the Company's comprehensive targeting work. Each of these new systems has an average strike length of five kilometers and contain multiple priority drill targets. While preliminary results are encouraging, additional detail on these ongoing exploration programs continues to be expected during the second half of the year.
- In addition, the first regional exploration effort within the broader NX Gold Mine property commenced during the first half of 2020.
- Pilar District
- Growth Projects Well Advanced – HIG Mill commissioning underway, ore-sorting project test-work near completion, Deepening Extension drilling ongoing, building PGM assay capability in-house
- The Company's new HIG Mill installation was completed in July and commissioning is currently underway. The Company expects the HIG Mill to be fully operational during the third quarter with a resulting improvement in copper recoveries expected during the second half of 2020.
- The full-scale testing of the Company's ore-sorting plant is nearing completion and has been operating according to schedule. Data analysis and review of potential economic impact from this test-program remains ongoing, and the results of the program are expected during the third quarter.
- Five drill rigs continue to systematically drill the Deepening Extension zone of the Pilar Mine, and engineering studies for the inclusion of this zone into the Company's updated mine plan (expected Q4 2020) are progressing on schedule.
- The Company completed the installation and integration of multi-element analysis in its on-site laboratory to analyze internally for PGMs. The unit is expected to reduce turn-around time for PGM sample results and allow for systematic testing for PGMs throughout the Curaçá Valley.
- Corporate Highlights – Continued capital management and improved liquidity position
- Ended the second quarter with strong liquidity position of approximately $51.6 million in cash and cash equivalents.
OPERATING AND FINANCIAL HIGHLIGHTS
ADJUSTED EBITDA & NET INCOME (LOSS) RECONCILIATION
While the Company's production guidance for 2020 continues to remain unchanged, cash cost and capital expenditure guidance for 2020 was previously updated to reflect the significant change in USD:BRL foreign exchange rates and precious metal prices. Additional information is outlined below and further detailed in the Company's press releases dated January 15, 2020 and May 7, 2020.
Production guidance remains unchanged. Copper production from the Curaçá Valley operations for 2020 is expected to come from ore mined from the Pilar and Vermelhos underground mines. Production from the Pilar Mine is expected to contribute a total of approximately 1.4 million tonnes grading 1.40% copper while production from the Vermelhos Mine is expected to contribute a total of approximately 750,000 tonnes grading 3.50% copper resulting in a blended mill head grade of approximately 2.15% copper.
 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 SEDAR filings for complete risk factors, including the AIF (defined below).
Operating Cost Guidance
The Company's original guidance for 2020 had assumed a USD:BRL foreign exchange rate of 4.00, gold price of $1,450 per ounce and silver price of $17.00 per ounce. In recognition of the significant change in foreign exchange rates and precious metal prices during the first quarter of 2020, the Company previously updated its operating cost guidance assuming a USD:BRL foreign exchange rate of 4.90, gold price of $1,700 per ounce and silver price of $15.00 per ounce.
 C1 Cash Costs of copper produced (per lb.) and C1 Cash Costs of gold produced (per oz.) are non-IFRS measures – see the Notes section of this press release for a discussion of non-IFRS measures.
Capital Expenditure Guidance
The Company's original capital expenditure guidance for 2020 had assumed a USD:BRL foreign exchange rate of 4.00. In recognition of the significant change in foreign exchange rates during the first quarter of 2020, the Company previously updated its capital cost guidance assuming a USD:BRL foreign exchange rate of 4.90. Capital expenditures are presented below in USD millions.
 Pilar Mine and Caraíba Mill Complex capital expenditure guidance for 2020 includes completion of the high-intensity grinding mill and operation of the ore-sorting pilot plant.
 Exploration capital expenditure guidance for 2020 has been forecast through September of 2020 and, as with prior guidance, is dependent, in part, on future exploration success and subject to further review and revision.
Financial results of the Company are prepared in accordance with IFRS. The Company utilizes certain non-IFRS measures, including C1 cash cost of copper produced (per lb), C1 cash costs of gold produced (per ounce), EBITDA, Adjusted EBITDA, Adjusted net income (loss) attributable to owners of the Company, Adjusted earnings (loss) per share, net debt and working capital, which are not measures recognized under IFRS. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
C1 cash cost of copper produced (per lb.)
C1 cash cost of copper produced (per lb) is the sum of production costs, net of capital expenditure development costs and by-product credits, divided by the copper pounds produced. C1 cash costs reported by the Company include treatment, refining charges, offsite costs, and certain tax credits relating to sales invoiced to the Company's Brazilian customer on sales. By-product credits are calculated based on actual precious metal sales (net of treatment costs) during the period divided by the total pounds of copper produced during the period. C1 cash cost of copper produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company's operating mining unit, and is widely reported in the mining industry as benchmarks for performance, but does not have a standardized meaning and is disclosed in addition to IFRS measures.
C1 cash cost of gold produced (per ounce)
C1 cash cost of gold produced (per ounce) is the sum of production costs, net of capital expenditure development costs and silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. C1 cash cost of gold produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company's operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.
Earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA
EBITDA represents earnings before interest expense, income taxes, depreciation, and amortization. Adjusted EBITDA includes further adjustments for non-recurring items and items not indicative to the future operating performance of the Company. The Company believes EBITDA and adjusted EBITDA are appropriate supplemental measures of debt service capacity and performance of its operations.
Adjusted EBITDA is calculated by removing the following income statement items:
- Foreign exchange loss (gain)
- Share based compensation
- Loss on debt settlement
Adjusted Net Income (Loss) attributable to owners of the Company and Adjusted Earnings (Loss) Per Share attributable to owners of the Company
The Company uses the financial measure "Adjusted net income (loss) attributable to owners of the Company" and "Adjusted earnings (loss) per share attributable to owners of the Company" to supplement information in its consolidated financial statements. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, the Company and certain investors and analysts use this information to evaluate the Company's performance. The Company excludes non-cash and unusual items from net earnings to provide a measure which allows the Company and investors to evaluate the operating results of the underlying core operations.
During the period, the following non-cash or unusual adjustments to calculated adjusted net income (loss):
- Share based compensation
- Unrealized foreign exchange loss (gain) on USD denominated debt in MCSA
- Unrealized loss (gain) on foreign exchange derivative contracts, net of tax
- Loss on debt settlement
- Unrealized loss (gain) on interest rate derivative contracts
Net debt is determined based on cash and cash equivalents, restricted cash and loans and borrowings as reported in the Company's consolidated financial statements. The Company uses net debt as a measure of the Company's ability to pay down its debt.
Working capital is determined based on current assets and current liabilities as reported in the Company's consolidated financial statements. The Company uses working capital as a measure of the Company's short-term financial health and operating efficiency.
CONFERENCE CALL DETAILS
The Company will hold a conference call on Friday, August 7, 2020 at 11:30 am Eastern time (8:30 am Pacific time) to discuss these results.
Friday, August 7, 2020
11:30 am Eastern time (8:30 am Pacific time)
North America: 1-800-319-4610,
North America: 1-800-319-6413,
This press release should be read in conjunction with the unaudited condensed consolidated interim financial statements and management's discussion and analysis ("MD&A") for the three and six month period ended June 30, 2020 available on the Company's website www.erocopper.com and on SEDAR (www.sedar.com).
ABOUT ERO COPPER CORP
Ero, headquartered in Vancouver, B.C., is focused on copper production growth from the Vale do Curaçá Property, located in Bahia, Brazil. The Company's primary asset is a 99.6% interest in the Brazilian copper mining company, Mineração Caraíba S.A. ("MCSA"), 100% owner of the Vale do Curaçá Property with over 40 years of operating history in the region. The Company currently mines copper ore from the Pilar and Vermelhos underground mines. In addition to the Vale do Curaçá Property, MCSA owns 100% of the Boa Esperança development project, an IOCG-type copper project located in Pará, Brazil and the Company owns 97.6% of the NX Gold Mine, an operating gold and silver mine located in Mato Grosso, Brazil. Additional information on the Company and its operations, including technical reports on the Vale do Curaçá, Boa Esperança and NX Gold properties, can be found on the Company's website (www.erocopper.com) and on SEDAR (www.sedar.com).
The disclosure of scientific or technical information in this press release was reviewed and approved by Emerson Ricardo Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a "qualified person" within the meanings of National Instrument 43-101, Standards of Disclosure for Mineral Projects ("NI 43-101").
ERO COPPER CORP.
Signed: "David Strang"
For further information contact:
CAUTION REGARDING FORWARD LOOKING INFORMATION AND STATEMENTS This Press Release contains "forward-looking information" within the meaning of applicable Canadian securities laws. Forward-looking information includes statements that use forward-looking terminology such as "may", "could", "would", "will", "should", "intend", "target", "plan", "expect", "budget", "estimate", "forecast", "schedule", "anticipate", "believe", "continue", "potential", "view" or the negative or grammatical variation thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, statements with respect to the Company's expected operations at the Vermelhos and Pilar Mines as well as at the NX Gold Property, drilling plans, plans for the Company's exploration program, timing of any updated mineral resource and reserve updates and technical reports, the Company's ability to service its ongoing obligations, the Company's future production outlook, cash costs, capital resources, expenditures, the impact of new accounting standards and amendments on the Company's financial statements, and current global macroeconomic uncertainty stemming from the onset of Covid-19 pandemic and its impact on the Company's business, financial condition, results of operations, cash flows and prospects.
Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management's experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this Press Release including, without limitation, assumptions about: favourable equity and debt capital markets; the ability to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Company's properties and assets; future prices of copper and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any mineral reserve and mineral resource estimates; the geology of the Vale do Curaçá Property, NX Gold Mine and the Boa Esperanҫa Property being as described in the technical reports for these properties; production costs; the accuracy of budgeted exploration and development costs and expenditures; the price of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to operate in a safe, efficient and effective manner; work force continues to remain healthy in the face of prevailing epidemics, pandemics or other health risks, political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favourable terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour stability; stability in financial and capital goods markets; availability of equipment and critical supplies, spare parts and consumables; positive relations with local groups and the Company's ability to meet its obligations under its agreements with such groups; and satisfying the terms and conditions of the Company's current loan arrangements. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.
Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. Such risks include, without limitation the risk factors listed under the heading "Risk Factors" in the Annual Information Form of the Company for the year ended December 31, 2019, dated March 12, 2020 (the "AIF").
Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking information, there may be other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended.
The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained herein. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.
Forward-looking information contained herein is made as of the date of this press release and the Company disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.
Unless otherwise stated, information of a scientific or technical nature in respect of the Vale do Curaçá Property included in this press release is based upon the Vale do Curaçá technical report entitled "2019 Updated Mineral Resources and Mineral Reserves Statements of Mineração Caraíba's Vale do Curaçá Mineral Assets, Curaçá Valley", dated November 25, 2019 with an effective date of September 18, 2019, prepared by Rubens Jose De Mendonça, MAusIMM, of Planminas – Projectos e Consultoria em Mineração Ltd. ("Planminas"), Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, and Bernardo Horta de Cerqueira Viana, MAIG, all of GE21 Consultoria Mineral Ltda. ("GE21"), and each a "qualified person" and "independent" of the Company within the meanings of NI 43-101. Information of a scientific or technical nature in respect of the NX Gold Mine included in this press release is based upon the NX Gold technical report entitled "Mineral Resource and Mineral Reserve Estimate of the NX Gold Mine, Nova Xavantina", dated February 3, 2020 with an effective date of September 30, 2019, prepared by Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, and Paulo Roberto Bergmann, FAusIMM, each of GE21 and a "qualified person" and "independent" of the Company within the meanings of NI 43-101.
Cautionary Notes Regarding Mineral Resource and Reserve Estimates In accordance with applicable Canadian securities regulatory requirements, all mineral reserve and mineral resource estimates of the Company disclosed or incorporated by reference in this press release have been prepared in accordance with NI 43-101 and are classified in accordance with the CIM Standards.
Mineral resources which are not mineral reserves do not have demonstrated economic viability. Pursuant to the CIM Standards, mineral resources have a higher degree of uncertainty than mineral reserves as to their existence as well as their economic and legal feasibility. Inferred mineral resources, when compared with Measured or Indicated mineral resources, have the least certainty as to their existence, and it cannot be assumed that all or any part of an Inferred mineral resource will be upgraded to an Indicated or Measured mineral resource as a result of continued exploration. Pursuant to NI 43-101, Inferred mineral resources may not form the basis of any economic analysis. Accordingly, readers are cautioned not to assume that all or any part of a mineral resource exists, will ever be converted into a mineral reserve, or is or will ever be economically or legally mineable or recovered.