ERO.TO · 2020-05-07 12:00:00

Ero Copper Announces First Quarter Results, Improved Operating and Capital Cost Guidance for 2020

Financials

TSX: ERO

1 Ero Copper Corp

MAY 7, 2020

Ero Copper Announces First Quarter Results, Improved Operating and Capital Cost Guidance

for 2020

(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 months ended March 31, 2020. Management

will host a conference call tomorrow, Friday, May 8, 2020, at 11:30 a.m. Eastern to discuss the

results. Dial-in details for the call can be found near the end of this press release.

HIGHLIGHTS

• First quarter copper production of 10,657 tonnes of copper;

• Record C1 cash costs* of $0.71 per pound of copper produced contributing to record

quarterly cash flow from operations of $37.3 million during the three month period ended

March 31, 2020;

• First quarter gold and silver production at the NX Gold Mine of 7,866 ounces of gold and

4,868 ounces of silver at C1 cash costs* of $594 per ounce of gold produced;

• Generated $33.4 million in Adjusted EBITDA* during the three month period ended March

31, 2020;

• Adjusted net income attributable to owners of the Company * of $20.8 million ($0.23 per

share on a diluted basis) during the three month period ended March 31, 2020;

• Ended the first quarter with strong liquidity position of $45.5 million;

• Reiterated full year production guidance for 2020; and,

• Updated full-year capital and operating cost guidance to reflect a weaker USD:BRL foreign

exchange rate, significantly reducing C1 cash cost* guidance and the USD equivalent of

the Company’s planned, and materially unchanged, capital program by approximately $16

million, on average, vs. original guidance.

Commenting on the results, David Strang, President & CEO, stated, “Despite the significant global

macroeconomic headwinds and challenges that emerged during the first quarter of 2020, our

operations have and continue to perform well thus far into 2020. I would like to recognize the

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2 Ero Copper Corp

tremendous effort across our organization to mitigate the impact s of COVID -19. Our mine-site

management teams have worked tirelessly to support the continuity and underlying performance

of our operations and, more importantly, ensure the health and well -being of our employees,

contractors, their families and local comm unities. Front and center in these efforts entail s the

purchase and delivery of over 5,000 COVID-19 testing kits, a portion of which have been donated

to regional hospitals and medical clinics across our operational footprint along with critically

needed PPE and medical supplies. Corporately, the restructuring of our senior secured debt which

included the deferral of principal payments until March, 2022 and the draw-down of our lines of

credit have well-positioned the Company to withstand unforeseen challenges that may arise as a

result of COVID-19.

The underlying strength of our business, and its benefit from the significant depreciation of the

Brazilian Real versus the U.S. Dollar is best reflected in our record quarterly cash flow from

operations of $37.3 million and record low C1 cash costs of $0.71 per pound of copper produced.

Our GAAP profitability was adversely impacted by the requirement to provide a fair market value

assessment of our term foreign exchange contracts that have remaining lives of up to two years.

While the current “mark-to-market” valuation is a reflection of the global dislocation caused by

COVID-19 impacting the pricing and volatility of the Brazilian Real against the U.S. Dollar, the

projected benefits of a weaker Brazilian Real on our operating business significantly outweigh

these fair market value assessments.

While production guidance remains unchanged, we have taken i nto consideration the significant

devaluation of the Brazilian Real with respect to revising operating and capital cost guidance for

the remainder of 2020. We have lowered our C1 cash cost* guidance range to $0.70 to $0.85 per

pound copper produced from $0.85 to $0.95 per pound copper produced. We are also providing

a revised range of $56 million to $ 68 million for our capital cost guidance at MCSA , excluding

exploration. For NX Gold, we have lowered our C1 cash cost* guidance range to $425 to $525

per ounce of gold produced from $475 to $575 per ounce of gold produced and are providing a

revised capital cost guidance range of $7 million to $9 million, excluding exploration.”

*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

COVID-19 OPERATIONAL UPDATE

On March 11, 2020, the World Health Organization declared t he COVID-19 outbreak a global

pandemic. The Company has been closely monitoring developments of the COVID-19 outbreak

since February 2020. While the Company has had no material disruption to operations, supply

chains or sales channels as a result of the COVID -19 pandemic to date , it has implemented

preventative measures and continues to engage in active operational and financial contingency

planning to prudently manage the potential impact of the pandemic on its operations.

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3 Ero Copper Corp

OPERATIONS & EXPLORATION HIGHLIGHTS

 Mining & Milling Operations – 2020 off to a strong start

• 607,959 tonnes processed grading 1.95% copper producing 10,657 tonnes of copper

in concentrate after metallurgical recoveries that averaged 89.8% at the Company’s

Curaçá Valley operations;

• The Company’s 97.6% owned NX Gold Mine processed 36,211 tonnes of ore grading

7.76 grams per tonne gold, resulting in the production of 7,866 ounces of gold and

4,868 ounces of silver as by- product after metallur gical recoveries that averaged

87.1% during the first quarter of 2020; and

 Exploration Activities – continue to operate one of the most comprehensive exploration

programs globally, on schedule, at significantly reduced USD cost

• Pilar District

 Exploration activity within the Pilar District, where twelve 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 400 meters and over an

average thickness of approximately 15 to 20 meters with localized thicknesses

of up to 50 meters. Within the total strike length, a higher -grade continuous

zone with a strike-length of approximately 400 to 500 meters is emerging in the

central and northern segments of the target area. The zone remains open to the

north and to depth. Results during the period support the potential to

meaningfully extend the mine life while maintaining an elevated grade profile

from the Pilar Mine . Five drill rigs will continue to systematically drill the

Deepening Extension zone through the balance of the year.

• 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, the extension of massive-sulphide mineralization down-

plunge within the Siriema conduit and testing new regional targets identified

during the Company’s regional airborne survey and subsequent data

compilation work of the broader Vermelhos System – a north- south trend

encompassing the Vermelhos Mine, East Zone, Siriema N8/N9 deposit, and

several high priority targets that extends over ten kilometers in strike length.

• NX Gold Mine

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4 Ero Copper Corp

 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 a s 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 newly interpreted miner al systems

within the portfolio of targets defined by the Company’s comprehensive

targeting work. Each of the new systems has an average strike length of 5

kilometers and contain multiple priority drill targets. While preliminary results

are encouraging, a dditional detail on these ongoing exploration programs is

expected during the second half of the year.

 In addition, t he first regional exploration effort within the broader NX Gold

Mine property commenced during the period.

 Growth Projects Remain Largely on Track – on-schedule delivery and installation of

HIG Mill, ore-sorting project progression, Deepening Extension drilling ongoing

• HIG Mill remains on schedule for delivery and installation by the end of Q2 2020;

however, the commissioning timeline remains uncertain due to global travel

restrictions as a result of COVID-19.

• A six-month full-scale test of the Company’s recently installed ore-sorting plant to

evaluate the potential to improve mill head -grades from a variety of deposits

throughout the Curaçá Valley remains ongoing. Results of the comprehensive test

program are expected during the second half of the year.

• Five drill rigs are systematically drilling the Deepening Extension z one of the Pilar

Mine, and a pre-feasibility study for the inclusion of this zone into the Company’s

updated mine plan (expected Q4 2020) is progressing on schedule.

 Updated Capital and Operating Cost Guidance – now reflecting a weaker Brazilian

Real

• While the Company’s capital programs for 2020 are materially unchanged from prior

guidance, the Company has revised its USD:BRL foreign exchange rate assumption

for the balance of 2020, reducing the USD equivalent of these planned programs.

• Capital cost guidance has been revised to between $58 to $68 million at MCSA,

excluding exploration, from previous guidance of $74 million, with an additional

revised exploration spend of between $20 and $25 million through September of 2020

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5 Ero Copper Corp

for the same planned meterage as prior guidance of $28 million. NX Gold capital

guidance has been revised to between $9 to $12 million, including exploration.

• Operating cost guidance has been lowered to between $0.70 and $0.85 per pound of

copper produced and $425 to $525 per ounce of gold produced for MCSA and NX

Gold, respectively.

 Corporate Highlights – Prudent capital management and strong liquidity position

• Amended the Company’s seni or secured credit facilities during the period. Benefits

of the amendment include a 25 to 50 basis point reduction in the Company’s cost of

borrowing and the deferral of scheduled principal payments for two years, now

commencing March 2022.

• The Company bolstered its liquidity position during the period by drawing down its

existing USD and BRL denominated credit facilities of $14.0 million and R$72.3

million, respectively.

• Ended the quarter with strong liquidity position of approximately $45.5 million in cash

and cash equivalents, including restricted cash.

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6 Ero Copper Corp

OPERATING AND FINANCIAL HIGHLIGHTS

3 months ended

Mar. 31, 2020

3 months ended

Dec. 31, 2019

3 months ended

Mar. 31, 2019

Operating Highlights (MCSA Operations)

Ore Processed (tonnes) 607,959 589,065 530,133

Grade (% Cu) 1.95 2.16 2.19

Cu Production (tonnes) 10,657 11,526 10,645

Cu Production (000 lbs) 23,495 26,411 23,468

Cu Sold in Concentrate (tonnes) 10,432 11,595 10,033

Cu Sold in Concentrate (000 lbs) 22,999 25,562 22,118

C1 Cash cost of copper produced (per lb)(1) 0.71 0.80 0.91

Gold (NX Gold Operations)

Au Production (ounces) 7,866 6,043 10,119

C1 Cash cost of gold produced (per ounce) (1) 594 980 486

Financial Highlights ($millions, except per share amounts)

Revenues $67.7 $75.7 $72.0

Gross profit (loss) $30.7 $31.1 $32.6

EBITDA(1) ($50.6) $34.3 $37.2

Adjusted EBITDA(1) $33.4 $31.2 $39.3

Cash flow from operations $37.3 $35.9 $25.1

Net income (loss) ($53.0) $16.3 $15.5

Net income (loss) attributable to owners of the Company ($52.8) $45.2 $15.3

Net income (loss) per share attributable to owners of the

Company – Basic

($0.62) $0.53 $0.18

Net income (loss) per share attributable to owners of the

Company – Diluted ($0.62) $0.49 $0.17

Adjusted net income (loss) attributable to owners of the

Company(1) $20.8 $40.7 $15.7

Adjusted net earnings (loss) per share attributable to

owners of the Company(1) – Basic $0.24 $0.47 $0.19

Adjusted net earnings (loss) per share attributable to

owners of the Company(1) – Diluted $0.23 $0.44 $0.17

Cash and Cash Equivalents $44.3 $21.5 $19.5

Working Capital (Deficit)(1) ($12.4) ($4.9) ($0.7)

Net Debt(1) ($140.1) ($136.4) ($133.1)

Footnotes

[1] EBITDA, Adjusted EBITDA, Adjusted net income (loss) attributable to owners of the Company, Adjusted earnings (loss) per share,

Net Debt, Working Capital, C1 Cash Cost of copper produced (per lb) and C1 Cash Cost of gold produced (per ounce) are non-

IFRS measures – see the Notes section of this press release for a discussion on non-IFRS Measures.

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7 Ero Copper Corp

ADJUSTED EBITDA & NET INCOME (LOSS) RECONCILIATION

2020– Q1

Adjusted EBITDA $ 33,404

Adjustments:

Unrealized foreign exchange loss on USD denominated debt in MCSA (26,873)

Unrealized foreign exchange loss on derivative contracts (52,655)

Realized foreign exchange loss on derivative contracts (2,651)

Share based compensation and other (1,792)

EBITDA $ (50,567)

Adjusted net income (loss) $ 20,834

Adjustments for non-cash items (attributable to owners of the Company):

Unrealized foreign exchange loss on USD denominated debt in MCSA (26,766)

Net unrealized foreign exchange loss on derivative contracts (43,081)

Share based compensation (2,049)

Unrealized loss on interest rate derivative (1,691)

Reported net income attributable to owners of the Company $ (52,753)

2020 OUTLOOK

While the Company’s production guidance for 2020 remains unchanged, cash cost and capital

expenditure guidance for 2020 has been updated to reflect the significant change in USD:BRL

foreign exchange rates and precious metal prices as a result of the COVID -19 pandemic .

Additional information is outlined below and further detailed in the Company’s press release dated

January 15, 2020.

Production Guidance

Production guidance remains unchanged from prior guidance. 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.

2020[1]

Curaçá Valley Operations

Tonnes Processed 2,150,000

Copper Grade (% Cu) 2.15%

Copper Recovery (%) 91.0%

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8 Ero Copper Corp

Cu Production Guidance (tonnes) 41.0 – 43.0

NX Gold Operations

Tonnes Processed 150,000

Gold Grade (gpt) 9.00

Gold Recovery (%) 90.0%

Au Production Guidance (000 ounces) 38.0 – 40.0

Footnotes:

[1] 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.

Operating Cost Guidance

The Company’s original guidance for 2020 ha d 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 metals during the first quarter of 2020,

the Company has 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.

2020 Guidance 2020 Revised Guidance

Curaçá Valley C1 Cash

Cost Guidance (US$/lb)[1]

$0.85 - $0.95 $0.70 - $0.85

NX Gold Mine C1 Cash

Cost Guidance (US$/oz)[1]

$475 - $575 $425 - $525

Footnotes:

[1] 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 has updated its operating cost guidance assuming a

USD:BRL foreign exchange rate of 4.90. Capital expenditures are presented below in USD

millions.

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