ERO.TO · 2022-08-02 12:00:00

Ero Copper Reports Second Quarter 2022 Operating and Financial Results Including Record Quarterly Copper and Gold Production

Financials

August 2, 2022

Ero Copper Reports Second Quarter 2022 Operating and Financial Results

Including Record Quarterly Copper and Gold Production

(all amounts in US dollars, unless otherwise noted)

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

“Company”) is pleased to announce its operating and financial results for t he three and six

months e nded June 30, 2022 . Management will host a conference call tomorrow,

Wednesday, August 3, 2022, 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.

HIGHLIGHTS

• Record quarterly copper production of 12,734 tonnes at C1 cash costs (*) of $1.24 per

pound of copper produced;

• Record quarterly gold production of 11,122 ounces at C1 cash costs (*) and All-in

Sustaining Costs ("AISC") (*) of $643 and $1,169, respectively, per ounce of gold

produced;

• Adjusted EBITDA(*) of $55.8 million and adjusted net income attributable to owners of

the Company(*) of $24.4 million ($0.27 per share on a diluted basis);

• Financial results during the period were impacted by operational challenges at the

Company's primary domestic customer that resulted in a higher allocation of sales to

the international market. The timing of sales to, and longer quotational periods with,

international customers, combined with a weakening copper price just prior to quarter-

end, resulted in a reduction to revenue of approximately $13.0 million (see "Second

Quarter Review" for more information);

• Quarterly cash flows from operations of $22.4 million also reflect an increase in

accounts receivable of $18.9 million due to the timing of concentrate shipments and

longer payment terms with international customers. Absent this increase in accounts

receivable, cash flows from operations during the quarter would have been over $40.0

million;

• Available liquidity at quarter-end was $504.9 million, including cash and cash

equivalents of $329.3 million , short-term investments of $100.6 million, and $75.0

million of undrawn availability under the Company's senior revolving credit facility;

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• Key organic growth projects advancing on schedule and on budget:

◦ At the Tucumã Project (formerly referred to as the Boa Esperança Project),

approximately 22% of planned capital expenditures were under contract as of

August 1, 2022, with another 8% in the final phases of contracting. Capital

commitments contracted and in the final phases of negotiation are within 6% of

Feasibility Study estimates;

◦ At the Caraíba Operations (formerly referred to as the MCSA Mining Complex),

equipment packages and supply contracts totaling approximately 25% of planned

capital expenditures for the new external shaft have been finalized as of August 1,

2022 at 10% below project capital estimates. The shaft sinking contract, the

largest contributor to the project's total capital spend, is in the final negotiation

phase. Upon execution of the sinking contract, capital secured under contract for

the project is expected to be approximately 70% and align with the total project

capital estimate; and,

◦ In addition to ongoing construction activities, the Company is developing a

sustainability strategy for the Tucumã Project and surrounding community. To

date, approximately $1.0 million has been earmarked for projects designed to

mitigate the environmental impact of project development and provide support for

the local community.

• Reaffirming full-year production guidance, lowering consolidated 2022 capital

expenditure guidance, and raising operating cost guidance for the year:

◦ Full-year copper production expected to be at the high-end of the 43,000 to

46,000 tonne guidance range;

◦ Full-year gold production guidance range of 39,000 to 42,000 ounces reaffirmed;

◦ Full-year consolidated capital expenditure guidance lowered by over $20 million,

from $330-$375 million to $308-$354 million, as a result of capital replanning

efforts resulting in deferrals at the Company's Caraíba Operations. The deferral of

this capital spend is not expected to impact timelines for key growth projects;

◦ Full-year C1 cash cost guidance has been increased for the Caraíba Operations to

$1.20 to $1.35 (previously $1.05 to $1.15) per pound of copper produced to

reflect elevated international concentrate sales , which are expected to continue

through the remainder of the year, as well as the impact of inflation in the cost of

key consumables and a strong BRL versus the US dollar in H1 2022; and,

◦ Full-year cost guidance ranges for the Xavantina Operations (formerly referred to

as the NX Gold Mine) have be updated to reflect the aforementioned impact of

inflation and BRL strength in H1 2022:

– C1 cash cost guidance revised to $600 to $700 (previously $500 to $600)

per ounce of gold produced; and,

– AISC guidance revised to $1,000 to $1,100 (previously $925 to $1,025) per

ounce of gold produced.

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“Our second quarter delivered record operational performance across our assets and saw the

successful execution of important milestones critical to our growth strategy,” said David

Strang, Chief Executive Officer. “Underpinning our record quarterly production results were

new monthly records set for production rates, development rates, asset efficiency and

availability, among others. Following a challenging first quarter operating environment, I

want to congratulate our on-site teams for setting new high watermarks that showcase the

capabilities of our assets and people.

“Across our key growth projects, construction and development activities are progressing on

schedule and well within contingency levels at this time. Our team's adherence to the original

capital expenditure estimates for major equipment line items and work packages that have

been secured on these projects to date is remarkable given the significant inflationary

headwinds that the mining industry has faced since the beginning of 2022.

“Despite our record operating performance and outstanding project execution during the

quarter, our financial results were impacted by operational challenges at our primary

domestic smelting customer, which resulted in changes to our copper concentrate sales

channels that are expected to continue through the balance of the year."

“Primarily as a result of higher allocation of sales to international customers and elevated

input costs in the first half of the year across our business units, we have adjusted our full-

year operating cost guidance ranges. Offsetting these increases, proactive capital

management reviews with our team during the quarter identified over $20 million of capital

deferrals that will not impact our business strategy yet will support continued balance sheet

strength during this period of elevated market and copper price volatility.”

*These are non-IFRS measures and do not have a standardized meaning prescribed by IFRS

and might not be comparable to similar financial measures disclosed by other issuers. Please

refer to the Company’s discussion of Non-IFRS measures in its Management’s Discussion and

Analysis for the three and six months ended June 30, 2022 and the Reconciliation of Non-

GAAP Measures section at the end of this press release.

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SECOND QUARTER REVIEW

• Mining & Milling Operations

◦ The Caraíba Operations processed 801,425 tonnes of ore grading 1.74% copper,

producing a record 12,734 tonnes of copper in concentrate during the quarter after

metallurgical recoveries of 91.2%.

◦ The Xavantina Operations processed 57,291 tonnes grading 6.59 grams per tonne,

producing a record 11,122 ounces of gold after metallurgical recoveries of 91.6%

and 7,306 ounces of silver as a by-product.

• Organic Growth Projects

◦ At the Tucumã Project, the Company continued to advance critical-path

workstreams during the period and subsequent to quarter-end. Highlights include:

– Approximately 22% of planned capital expenditures under contract as of

August 1, 2022, with another 8% in the final phases of contracting;

– Capital commitments contracted and in the final phases of negotiation

within 6% of Feasibility Study estimates;

– Significant advances made on all road upgrades, including pit access and

completion of community bypass road infrastructure;

– Completion of approximately 75% of planned pre-production vegetation

suppression required for pre-stripping activities to commence;

– Purchase of the ball mill for the Project;

– Site earth works initiated subsequent to quarter-end; and,

– Installation of site drainage expected to be completed by end of October

2022, ahead of the rainy season.

◦ At the Caraíba Operations, the Company made meaningful progress on its "Pilar

3.0" initiative, which encompasses various projects that jointly are designed to

create a two-mine system at the Pilar Mine targeting higher sustained production

levels. These projects include (i) construction of a new external shaft to access the

Deepening Extension Zone, (ii) Project Honeypot, which is expected to support

higher production volumes from the upper levels of the Pilar Mine, (iii) an

expansion of the Caraíba Mill to 4.2 million tonnes per annum, and (iv) the recently

completed Cooling Project. Select highlights include:

– Equipment packages and supply contracts totaling approximately 25% of

planned capital expenditures for the new external shaft finalized as of

August 1, 2022 at 10% below budget;

– Shaft sinking contract, which will bring estimated shaft capital secured

under contract to approximately 70%, in the final negotiation phase. Upon

execution, capital commitments under contract expected to align with

original estimates;

– Engineering and procurement related to shaft sinking were completed

during the quarter with the shaft sinking contract anticipated to be finalized

during the third quarter;

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– Completed construction of the concrete batch plant during the period and

commenced commissioning activities subsequent to quarter-end;

– Engineering and design work related to the expansion of the Caraíba Mill

continued during the second quarter with the ball mill installation contract

finalized subsequent to quarter-end;

– Aggressively advanced drilling efforts within the Project Honeypot area, the

results of which are expected to be included in the Company's year-end

mineral reserve and resource estimates; and,

– Completed the Cooling Project's second and final phase, with hand-over to

operations occurring in April 2022 at better-than-design performance.

• Impact of Increased Sales of Copper Concentrate to International Market

◦ Historically, the Company has had limited exposure to movements in copper prices

on provisional invoices due to its majority allocation of concentrate sales to

domestic customers with which the Company has favorable payment terms.

However, during the second quarter, operational challenges at the Company's

primary domestic customer resulted in a higher allocation of sales to the

international market. Longer quotational periods with international customers,

combined with a weakening copper price just prior to quarter-end, resulted in a

reduction to revenue of approximately $13.0 million during the period.

◦ Quarterly cash flows from operations of $22.4 million were also impacted by an

increase in accounts receivable of $18.9 million due to the timing of concentrate

shipments and longer payment terms with international customers.

◦ These concentrate sales changes, including related impacts on payment terms, are

expected to continue through the end of 2022. Allocation of concentrate sales

between domestic and international customers is expected to revert to historical

levels in 2023 assuming competitive pricing terms.

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OPERATING AND FINANCIAL HIGHLIGHTS

3 months

ended

June 30, 2022

3 months

ended

Mar. 31, 2022

3 months

ended

June 30, 2021

6 months

ended

June 30, 2022

6 months

ended

June 30, 2021

Operating Highlights

Copper (Caraíba Operations)

Ore Processed (tonnes) 801,425 596,230 553,992 1,397,655 1,151,586

Grade (% Cu) 1.74 1.78 2.13 1.76 2.22

Cu Production (tonnes) 12,734 9,784 10,898 22,518 23,536

Cu Production (000 lbs) 28,073 21,570 24,026 49,643 51,889

Cu Sold in Concentrate (tonnes) 12,948 10,045 10,094 22,993 22,562

Cu Sold in Concentrate (000 lbs) 28,546 22,145 22,253 50,691 22,253

C1 cash cost of Cu produced (per lb)(1) $ 1.24 $ 1.31 $ 0.72 $ 0.63 $ 0.49

Gold (Xavantina Operations)

Au Production (oz) 11,122 8,796 10,377 19,918 19,828

C1 cash cost of Au Produced (per oz)(1) $ 643 $ 638 $ 499 $ 641 $ 494

AISC of Au produced (per oz)(1) $ 1,169 $ 1,092 $ 660 $ 1,135 $ 652

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

Revenues $ 114.9 $ 108.9 $ 120.7 $ 223.8 $ 243.2

Gross profit 50.7 61.0 83.7 111.7 166.5

EBITDA(1) 53.9 78.1 112.0 132.0 167.2

Adjusted EBITDA(1) 55.8 62.4 85.5 118.2 172.2

Cash flow from operations 22.4 44.0 85.1 66.4 147.2

Net income 24.1 52.5 84.0 76.6 116.0

Net income attributable to owners of the Company 23.8 52.1 83.4 75.9 115.2

Per share (basic) 0.26 0.58 0.95 0.84 1.31

Per share (diluted) 0.26 0.57 0.89 0.83 1.24

Adjusted net income attributable to owners of the

Company(1) 24.4 33.0 53.5 57.3 109.8

Per share (basic) 0.27 0.37 0.61 0.63 1.25

Per share (diluted) 0.27 0.36 0.57 0.62 1.18

Cash, cash equivalents, and short-term investments 429.9 365.5 137.7 429.9 137.7

Working capital(1) 417.7 443.7 118.9 417.7 118.9

Net (cash) debt(1) (10.2) (54.4) 19.2 (10.2) 19.2

(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 (Cash) Debt, Working Capital, 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. These measures do not have a standardized meaning prescribed by IFRS and

might not be comparable to similar financial measures disclosed by other issuers. Please refer to the

Company’s discussion of Non-IFRS measures in its Management’s Discussion and Analysis for the three and

six months ended June 30, 2022 and the Reconciliation of Non-GAAP Measures section at the end of this

press release.

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2022 GUIDANCE(*)

The Company is reaffirming its full-year production guidance, lowering consolidated 2022

capital expenditure guidance, and raising operating cost guidance for the year.

At its Caraíba Operations, the Company continues to guide to the high-end of its reaffirmed

2022 copper production guidance range of 43,000 to 46,000 tonnes. As previously noted,

copper production is expected to be roughly equally weighted between the first and second

halves of the year with mining of the initial Project Honeypot stope (RC03) at the Pilar Mine

expected to support a continuation of strong mined and processed copper grades into Q3

2022. At the Xavantina Operations, higher gold grades are expected to drive modestly higher

gold production during the second half of the year.

The Company is lowering its consolidated 2022 capital expenditure guidance by over $20

million, from $330-$375 million to $308-$354 million, as a result of capital replanning

efforts and deferrals at the Caraíba Operations. The deferral of this capital spend is not

expected to impact timelines of the Company's key growth projects.

The Company is raising its full-year operating cost guidance ranges due to the impact of

inflation in the cost of key consumables and a stronger BRL versus the US dollar during H1

2022 as well as an expected continuation of elevated copper concentrate sales to

international markets in H2 2022. The Company's revised 2022 copper C1 cash cost

guidance range is $1.20 to $1.35 (originally $1.05 to $1.15) per pound of copper produced.

The Company is also increasing its 2022 gold C1 cash costs and AISC guidance ranges to

$600 to $700 (previously $500 to $600) and $1,000 to $1,100 (previously $925 to $1,025),

respectively, per ounce of gold produced for its Xavantina Operations.

2022 PRODUCTION AND COST GUIDANCE(*)

The Company's cost guidance for 2022 assumes a USD:BRL foreign exchange rate of 5.30, a

gold price of $1,725 per ounce and a silver price of $20.00 per ounce for H2 2022.

Original Revised

Caraíba Operations

Copper Production (tonnes) 43,000 - 46,000 Unchanged

C1 Cash Cost Guidance (US$/lb)(1)

$1.05 - $1.15 $1.20 - $1.35

Xavantina Operations

Gold Production (ounces) 39,000 - 42,000 Unchanged

C1 Cash Cost Guidance (US$/oz)(1)

$500 - $600 $600 - $700

All-in Sustaining Cost (AISC) Guidance (US$/oz)(1)

$925 - $1,025 $1,000 - $1,100

(1) These are non-IFRS measures and do not have a standardized meaning prescribed by IFRS and might not be

comparable to similar financial measures disclosed by other issuers.

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2022 CAPITAL EXPENDITURE GUIDANCE(*)

The Company's capital expenditure guidance for 2022 assumes a USD:BRL foreign exchange

rate of 5.30 for H2 2022 and has been presented below in USD millions.

Original Revised

Caraíba Operations

Growth $125 - $140 $95 - $110

Sustaining $80 - $90 $85 - $95

Exploration $25 - $30 Unchanged

Total, Caraíba Operations $230 - $260 $180 - $205

Tucumã Project

Growth $70 - $80 Unchanged

Exploration $5 - $6 Unchanged

Total, Tucumã Project $75 - $86 Unchanged

Xavantina Operations

Growth $0 - $1 $2 - $4

Sustaining $16 - $18 Unchanged

Exploration $9 - $10 $10 - $11

Total, Xavantina Operations $25 - $29 $28 - $33

Company Total

Growth $195 - $221 $167 - $194

Sustaining $96 - $108 $101 - $113

Exploration $39 - $46 $40 - $47

Total, Company $330 - $375 $308 - $354

(*) 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 and EDGAR filings, including the Company's most recent Annual Information

Form ("AIF"), for complete risk factors.

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