ERO.TO · 2020-08-06 12:00:00

Ero Copper Reports Second Quarter Results

Financials

TSX: ERO

1 Ero Copper Corp

AUGUST 6, 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 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.

HIGHLIGHTS

• 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

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2 Ero Copper Corp

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 t o 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 c ompleted 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 recentl y highlighted by our second- quarter Deepening Extension z one results

where we continue to intercept thick and high- grade mineralization. W e 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

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3 Ero Copper Corp

 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 a s well as testing down- plunge extensions of the

Santo Antonio Vein.

• Regional Exploration

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4 Ero Copper Corp

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

Mine property commenced during the first half of 2020.

 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 z one 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.

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5 Ero Copper Corp

OPERATING AND FINANCIAL HIGHLIGHTS

3 months

ended

June 30,

2020

3 months

ended

March 31,

2020

6 months

ended

June 30,

2020

3 months

ended

June 30,

2019

6 months

ended

June 30,

2019

Operating Highlights (MCSA Operations)

Ore Processed (tonnes) 627,071 607,959 1,235,030 717,479 1,247,612

Grade (% Cu) 1.98 1.95 1.97 1.62 1.86

Cu Production (tonnes) 11,178 10,657 21,835 10,473 21,118

Cu Production (000 lbs) 24,643 23,495 48,138 23,089 46,558

Cu Sold in Concentrate (tonnes) 10,586 10,432 21,018 10,931 20,964

Cu Sold in Concentrate (000 lbs) 23,339 22,999 46,338 24,100 46,218

C1 Cash Cost of copper produced (per lb)(1) $0.65 $0.71 $0.68 $1.04 $0.97

Gold (NX Gold Operations)

Au Production (oz) 8,739 7,866 16,605 9,917 20,036

C1 Cash Cost of gold produced (per ounce)(1) $437 $594 $511 $517 $501

Financial Highlights ($millions, except per share amounts)

Revenues $70.8 $67.7 $138.5 $76.5 $148.5

Gross profit $39.5 $30.7 $70.2 $32.1 $64.7

EBITDA(1) $23.4 ($50.6) ($27.2) $34.9 $72.1

Adjusted EBITDA(1) $42.4 $33.4 $75.9 $36.4 $75.7

Cash flow from operations $42.5 $37.3 $79.8 $37.3 $62.4

Net income (loss) $7.7 ($53.0) ($45.3) $15.3 $30.7

Net income (loss) attributable to owners of the

Company

$7.5 ($52.8) ($45.2) $15.1 $30.4

Net income (loss) per share attributable to

owners of the Company (Basic)

$0.09 ($0.62) ($0.53) $0.18 $0.36

Net income (loss) per share attributable to

owners of the Company (Diluted) $0.08 ($0.62) ($0.53) $0.17 $0.34

Adjusted net income (loss) attributable to

owners of the Company(1) $20.3 $20.8 $41.1 $15.3 $31.0

Adjusted net income (loss) per share

attributable to owners of the Company(1)

(Basic)

$0.24 $0.24 $0.48 $0.18 $0.37

Adjusted net income (loss) per share

attributable to owners of the Company(1)

(Diluted)

$0.22 $0.23 $0.45 $0.17 $0.34

Cash and Cash Equivalents $51.6 $44.3 $51.6 $33.5 $33.5

Working Capital (Deficit)(1) ($25.7) ($12.4) ($25.7) $5.6 $5.6

Net Debt(1) ($130.9) ($140.1) ($130.9) ($121.1) ($121.1)

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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.

ADJUSTED EBITDA & NET INCOME (LOSS) RECONCILIATION

2020– Q2

Adjusted EBITDA $ 42,448

Adjustments:

Unrealized foreign exchange loss on USD denominated debt in MCSA (2,996)

Unrealized foreign exchange loss on derivative contracts (8,485)

Realized foreign exchange loss on derivative contracts (4,363)

Share based compensation and other (3,201)

EBITDA $ 23,403

Adjusted net income (loss) $ 20,253

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

Unrealized foreign exchange loss on USD denominated debt in MCSA (2,984)

Unrealized loss (gain) on foreign exchange derivative contracts, net of tax (7,151)

Share based compensation (2,723)

Unrealized gain on interest rate derivative contracts 131

Reported net income attributable to owners of the Company $ 7,526

2020 OUTLOOK

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 release s dated January 15, 2020 and May 7,

2020.

Production Guidance

Production guidance remains unchanged. Copper production from the Curaçá Valley operations

for 2020 is expected to come from ore mined f rom 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.

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7 Ero Copper Corp

2020[1]

Curaçá Valley Operations

Tonnes Processed 2,150,000

Copper Grade (% Cu) 2.15%

Copper Recovery (%) 90.0%

Cu Production Guidance (000 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, 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.

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 previously updated its capital cost guidance assuming a

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

millions.

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8 Ero Copper Corp

Curaçá Valley Operations 2020 Guidance

Revised 2020 Guidance

Pilar Mine and Caraíba Mill Complex[1] 58.0 45.0 – 55.0

Vermelhos Mine 16.0 11.0 – 13.0

Boa Esperanҫa Project 0.2 0.2 – 0.2

Capital Expenditure Guidance 74.2 56.2 – 68.2

Curaçá Valley Exploration[2] 28.0 20.0 – 25.0

NX Gold Operations 2020 Guidance Revised 2020 Guidance

Capital Expenditure Guidance 5.7 7.0 – 9.0

Exploration[2] 3.5 2.0 – 3.0

Total, NX Gold 9.2 9.0 – 12.0

Footnotes:

[1] 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.

[2] 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.

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), 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 mea sures

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 char ges,

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

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