ERO.TO · 2021-05-04 12:00:00

Ero Copper reports record first quarter copper production and financial results

Financials

TSX: ERO

1 Ero Copper Corp

MAY 4, 2021

(all amounts in US dollars, unless otherwise noted)

Vancouver, British Columbia – Ero Copper Corp. (TSX: ERO) (“Ero” or the “Company” )

today is pleased to announce its financial results for the three months ended March 31, 2021.

Management will host a conference call tomorrow, Wednesday , Ma y 5, 2021, at 11:30 a.m.

Eastern time to discuss the results. Dial -in details for the call can be fo und near the end of this

press release.

HIGHLIGHTS

• Record quarterly copper production of 12,638 tonnes and record quarterly C1 cash costs(*)

of $0.49 per pound of copper produced driven by strong operational performance including

higher grade versus budget at both Pilar and Vermelhos underground mine;

• Strong quarterly gold production of 9,451 ounces from the Santo Antonio Vein at the NX

Gold mine at C1 cash costs (*) of $487 per ounce of gold produced and A ll-in Sustaining

Costs(*) of $643 per ounce of gold produced;

• Record quarterly adjusted EBITDA(*) and cash flow from operations of $86.7 million and

$62.1 million, respectively;

• Adjusted net income attributable to owners of the Company (*) of $56.3 million ($0.61 per

share on a diluted basis);

• Total cash and cash equivalents of $ 84.6 million, a $22.1 million quarter -on-quarter

improvement, and;

• Reiterating full-year production, operating cost and capital expenditure guidance for 2021.

Commenting on the results, Da vid Strang, CEO, stated, “ We have started the year off with

considerable momentum, achieving record quarterly copper production and financial

performance, a notable accomplishment considering the challenging operati ng environment our

Brazilian colleagues continue to face in mitigating the impacts of COVID-19. As a Company, we

are proud of the efforts our team is making to provide critical support to our local communities ,

and this will remain a top priority this year . At the same time, w e are successfully advancing all

of our growth initiatives , which, upon completion, will serve to contribute to the long-term and

sustainable future of our mines and the regions in which we operate.

“As evidenced by our most recent exploration release, we are making strides in further showcasing

the potential and optionality of the Curaçá Valley. So far in 2021, our teams have identified one

new discovery beneath the Vermelhos Mine and two new mineralized systems in the Curaçá Valley

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that have the potential to both extend mine life and support higher mill throughput rates in the

future. The discovery beneath the Vermelhos Mine , known as the ‘Novo Zone’, is a high- grade

lens that has the potential to improve life -of-mine grades in the near -term and increase overall

mine life of the Vermelhos Mine.

“We have also made significant progress around the ongoing optimization initiatives of our Boa

Esperanҫa Project and expect to provide an update on what this opportunity looks like during the

third quarter. As a reminder, the 2017 feasibility study outlined a low-capital project producing

an average of approximately 21,000 tonnes of payable copper per year over a 7.5 year mine life,

resulting in a 32.7% internal rate of r eturn. We expect to improve upon this significantly in our

2021 update.

“Other growth projects, including exploration at our NX Gold Mine , with ten drill rigs in

operation, and our Platinum Group Metals study, continue to progress despite extended backlogs

of assay results at third- party assay labs associated with the COVID -19 pandemic. With strong

tailwinds building around a de -carbonized future, which is heavily dependent on copper, we are

well positioned as a Company to drive incremental shareholder value through low capital -

intensity growth projects across our portfolio.”

*Earnings before interest, taxes, depreciation and amortization (“ EBITDA”), Adjusted EBITDA,

Adjusted net income attributable to owners of the Company, Adjusted net income per share

attributable to owners of the Company, C1 Cash Costs per pound of copper produced, C1 Cash

Costs per ounce of gold produce d and All-in Sustaining Costs (“AISC”) per ounce of gold

produced are non- IFRS measures – see the Notes section of this press release for additional

information. C1 Cash Costs per pound of copper produced are net of by-product credits from metal

produced at the MCSA Mining Complex. AISC per ounce of gold produced are net of by-product

credits from metal produced at the NX Gold Mine.

OPERATIONS & EXPLORATION HIGHLIGHTS

 Mining & Milling Operations – record operating performance driven by high copper

grades

• The MCSA Mining Complex processed 597,594 tonnes of ore grading 2.30% copper,

producing record quarterly 12,638 tonnes of copper in concentrate after metallurgical

recoveries of 92.0%.

• The NX Gold Mine processed 37,613 tonnes grading 8.26 grams per tonne, producing

9,451 ounces of gold and 5,794 ounces of silver as a by -product after metallurgical

recoveries of 94.7%.

 Exploration Activities at the MCSA Mining Complex – aggressive exploration program

generating promising results

• Regional Exploration Program

 Two new mineralized systems identified, each measuring between 800 meters and

2.2 kilometers in strike length.

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 Six geochemistry teams, four ground gravity teams and three ground induced

polarization teams dedicated to refining drill locations within these new systems.

 Additional exploration activity throughout the Curaçá Valley on other untested

high-priority target areas remains ongoing.

• In-Mine and Near Mine Exploration Programs

 Drilling below the Deepening Extension Zone of the Pilar Mine has ident ified

high-grade extensions, including the deepest intercept drilled to date, located

approximately 150 meters below the limit of the 2020 inferred mineral resource

shell.

 A newly discovered high- grade lens, known as the “Novo Zone”, has been

identified approximately 200 meters beneath the main Vermelhos orebodies.

 A near -development, high- grade structure located 15 meters south of existing

development within the Toboggan orebody of the Vermelhos Mine was also

identified by recent exploration activity.

• Past Producing Mine Re-Evaluation

 Focused on evaluating potential for development of high-grade targets within fully

permitted, past producing mines in the Curaçá Valley.

 Drilling underway at Lagoa da Mina, the northern portion of the Angicos Mine

(within the Surubim District) and at Suçuarana North (within the Pilar District).

 Additional exploration activities targeting high -grade mineralization beneath the

Surubim Mine is expected to commence in Q2 2021.

 Corporate Highlights – strong balance sheet supportive of organic growth initiatives

• Conclusion of ongoing studies on the potential optimization of the Boa Esperança

Project is expected in early Q3. The 2017 feasibility study outlined a low -capital

intensity project producing an average of approximately 21,000 tonnes of payable

copper per year over a 7.5-year mine life, resulting in a 32.7% internal rate of return.

The Company expects to improve upon this in the 2021 update.

• As previously disclosed, t he Compa ny amended its US$75 million senior secured

amortizing non-revolving credit facility and US$75 million senior secured revolving

credit facility (collectively the “Prior Facilities”) with a US$150 million senior

secured revolving credit facility payable in a bullet at maturity, on March 31, 2025

(the “Revolving Credit Facility”) . The amendment reduces the Company’s cost of

borrowing depending on the Company’s consolidated leverage ratio, and eliminates

principal payments previously due in 2022, 2023 and 2024 under the Prior Facilities.

Additional detail is provided later in this press release.

• The Company continues to have no material disruption to operations, supply chains or

sales channels as a result of the COVID -19 pandemic. The Company has taken

extraordinary measures to mitigate the possible impact of COVID-19 on its workforce

and operations and to provide critical support to local communities in Brazil ranging

from the donation of medical supplies and COVID-19 test kits to food assistance for

families impacted by the pandemic.

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OPERATING AND FINANCIAL HIGHLIGHTS

3 months ended

Mar. 31, 2021

3 months ended

Dec. 31, 2020

3 months ended

Mar. 31, 2020

Operating Highlights

Copper (MCSA Operations)

Ore Processed (tonnes) 597,594 483,447 607,959

Grade (% Cu) 2.30 2.26 1.95

Cu Production (tonnes) 12,638 10,018 10,657

Cu Production (000 lbs) 27,863 22,086 23,495

Cu Sold in Concentrate (tonnes) 12,469 10,265 10,432

Cu Sold in Concentrate (000 lbs) 27,488 22,629 22,999

C1 Cash Cost of Cu Produced (per lb)(1) $0.49 $0.69 $0.71

Gold (NX Gold Operations)

Au Production (oz) 9,451 10,789 7,866

C1 Cash Cost of Au Produced (per oz)(1) $487 $405 $594

AISC of Au Produced (per oz) (1) $643 $608 $750

Financial Highlights ($ in millions, except per share amounts)

Revenues $122.5 $91.2 $67.7

Gross Profit $82.8 $58.3 $30.7

EBITDA(1) $55.2 $91.3 ($50.6)

Adjusted EBITDA(1) $86.7 $67.2 $33.4

Cash Flow from Operations $62.1 $38.6 $37.3

Net Income (loss) $32.1 $66.3 ($53.0)

Net income (loss) attributable to owners of the Company $31.7 $65.8 ($52.8)

Per share (basic) $0.36 $0.75 ($0.62)

Per share (diluted) $0.34 $0.71 ($0.62)

Adj. net income attributable to owners of the Company(1) $56.3 $37.4 $20.8

Per share (basic) $0.64 $0.43 $0.24

Per share (diluted) $0.61 $0.40 $0.23

Cash and Cash Equivalents $84.6 $62.5 $44.3

Working Capital (Deficit)(1) $63.5 $35.8 ($12.4)

Net Debt(1) $74.5 $105.6 $140.1

Footnotes

(1) EBITDA, Adjusted EBITDA, Adjusted net income (loss) attributable to owners of the Company, Adjusted net

income (loss) per share attributable to owners of the Company, Net Debt, Working Capital (Deficit), C1 cash cost

of copper produced (per lb), C1 cash cost of gold produced (per ounce) and AISC 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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ADJUSTED EBITDA & NET INCOME (LOSS) RECONCILIATION

($ in thousands)

3 months ended

Mar. 31, 2021

Adjusted EBITDA $86,694

Adjustments:

Unrealized foreign exchange gain (loss) on USD denominated debt in MCSA (7,831)

Unrealized foreign exchange gain (loss) on derivative contracts (16,951)

Realized foreign exchange gain (loss) on derivative contracts (5,711)

Share based compensation and other (478)

Incremental costs in response to COVID-19 pandemic (556)

EBITDA $55,167

Adjusted net income attributable to owners of the Company $56,335

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

Unrealized foreign exchange gain (loss) on USD denominated debt in MCSA (7,800)

Unrealized foreign exchange gain (loss) on derivative contracts, net of tax (14,299)

Unrealized gain on interest rate derivative 415

Share based compensation (2,346)

Incremental costs in response to COVID-19 pandemic (556)

Reported net income attributable to owners of the Company $31,749

CREDIT FACILITIES AMENDMENT DETAILS

As previously disclosed, the Company amended its Credit Agreement with The Bank of Nova

Scotia (“Scotiabank”) and Bank of Montreal (“BMO”) on March 16, 2021 to amend the Prior

Facilities with the Revolving Credit Facility, payable in a bullet at maturity on M arch 31, 2025.

Benefits of the amendment include a reduction of up to 25 basis points in the Company’s cost of

borrowing, depending on the Company’s consolidated leverage ratio.

The Revolving Credit Facility will bear interest on a sliding scale at a rate of LIBOR plus 2. 25%

to 4.25% based on the Company’s consolidated leverage ratio at the time. Commitment fees for

any undrawn portion of the Revolving Credit Facility will also be on a sliding scale between 0.56%

to 1.06%.

The Revolving Credit Facility includes standard and customary terms and conditions with respect

to fees, representations, warranties, and financial covenants that remain unchanged from prior

amendments. Scotiabank is Joint Lead Arranger, Sole Bookrunner and Administrative Agent and

BMO is Joint Lead Arranger and Syndication Agent.

A copy of the amendment to the Credit Agreement has been filed on SEDAR (www.sedar.com).

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2021 PRODUCTION OUTLOOK

The Company is reaffirming its 2021 production guidance. Copper production for 2021 is expected

to be equally weighted between the first and second hal ves of the year with lower Q2 and Q3

copper production due to preventative mill maintenance scheduled dur ing those periods as the

Company prepares for expanded operations, including the restart of the Surubim open pit mine in

H2 2021. Gold production from NX Gold for 2021 is expected to come from ore mined from the

Santo Antonio Vein.

2021 Guidance(1)

MCSA Mining Complex

Tonnes Processed 2,700,000

Copper Grade (% Cu) 1.75%

Copper Recovery (%) 93.0%

Cu Production Guidance (tonnes) 42.0 – 45.0

NX Gold Mine

Tonnes Processed 167,000

Gold Grade (gpt) 7.20

Gold Recovery (%) 92.0%

Au Production Guidance (000 ounces) 34.5 – 37.5

(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, including the Annual Information Form for the year ended December 31, 2020 and

dated March 16, 2021 (the “AIF”), for complete risk factors.

2021 CASH COST GUIDANCE

The Company is reaffirming its 2021 cash cost guidance, which assumes a USD:BRL foreign

exchange rate of 5.00, gold price of $1,750 per ounce and silver price of $20.00 per ounce.

2021 Guidance

MCSA Mining Complex C1 Cash Cost Guidance (US$/lb)(1) $0.75 – $0.85

NX Gold Mine C1 Cash Cost Guidance (US$/oz)(1) $500 – $600

NX Gold Mine All-in Sustaining Cost (AISC) Guidance (US$/oz)(1) $875 – $975

(1) C1 Cash Costs and AISC are a non-IFRS measures – see the Notes section of this press release for additional

information.

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2021 CAPITAL EXPENDITURE GUIDANCE

The Company is reiterating its 2021 capital expenditure guidance , which assumes a USD:BRL

foreign exchange rate of 5.00 and has been presented below in USD millions.

MCSA Operations 2021 Guidance

Pilar Mine and Caraíba Mill Complex (excluding Deepening Extension Project) $45.0 – $50.0

Deepening Extension Project $12.5 – $15.0

Vermelhos Mine & District(1) $14.0 – $16.0

Surubim Open Pit Mine $10.0 – $12.0

Boa Esperanҫa Project $1.0 – $1.5

Capital Expenditure Guidance $82.5 – $94.5

Curaçá Valley Exploration $30.0 – $35.0

NX Gold Mine 2021 Guidance

Capital Expenditure Guidance $13.0 – $15.0

Exploration $8.0 – $10.0

Total, NX Gold Mine $21.0 – $25.0

(1) Vermelhos District includes open pit mining infrastructure expenditures of approximately US$6.0 million in

2021.

CONFERENCE CALL DETAILS

The Company will hold a conference call on Wednesday, May 5 , 2021 at 11:30 am Eastern time

(8:30 am Pacific time) to discuss these results.

Date: Wednesday, May 5, 2021

Time: 11:30 am Eastern time (8:30 am Pacific time)

Dial in: North America: 1-800-319-4610, International: +1-604-638-5340

please dial in 5-10 minutes prior and ask to join the call

Replay North America: 1-800-319-6413, International: +1-604-638-9010

Replay Passcode: 6549

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NOTES

Non-IFRS measures

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), AISC of gold produced (per ounce), EBITDA,

Adjusted EBITDA, Adjusted net income attributable to owners of the Company, Adjusted

net income per share, net debt and working capital, which are not measures recognize d

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 standardi zed 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 o f 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 co st 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 ounce 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 re ported in

the mining industry as benchmarks for performance but does not have a standardized

meaning and is disclosed in addition to IFRS measures.

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