ERO.TO · 2019-08-08 12:00:00

Ero Copper Reports Second Quarter Results and Increases 2019 Production Guidance

Production Results Financials

TSX: ERO

Ero Copper Corp

AUGUST 8, 2019 NR:19-11

(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 and six months ended June 30, 2019.

Management will host a conference call tomorrow, Friday, August 9, 2019, 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

• Second quarter copper production of 10,473 tonnes of copper resulting in 21,118 tonnes of

total copper produced during the first half of 2019;

• C1 cash costs* of $1.04 and $0.97 per pound of copper produced during the three and six

month period ended June 30, 2019, respectively;

• Second quarter production at the NX Gold Mine of 9,917 ounces of gold at C1 cash costs*

of $517 per ounce of gold produced resulting in total production of 20,036 ounces of gold

at C1 cash costs of $501 per ounce of gold produced during the first half of 2019;

• Generated $36.4 and $75.7 million in Adjusted EBITDA* and $37.3 and $62.4 million in

cash flow from operations during the three and six month period ended June 30, 2019,

respectively;

• Adjusted net income attributable to owners of the Company * of $15.3 and $31.0 million

($0.17 and $0.34 per share on a diluted basis) during the three and six month period ended

June 30, 2019, respectively;

• Ended the second quarter with an improved cash position of $35.7 million; and,

• Increasing full-year production guidance outlook for 2019 by 2,000 tonnes of copper to

between 38,000 and 40,000 tonnes of copper and guiding to the low-end of the Company’s

C1 cash cost* guidance range (US$1.00 to US$1.10 per pound of copper produced).

Commenting on the second quarter results, Noel Dunn, Executive Chairman stated, “As we look

at the performance of the Company during the first half of 2019, it is r emarkable how far this

TSX: ERO

Ero Copper Corp

organization has come in such a short period of time. From an operational perspective, in the first

half of 2019 we have produce d over 75% of the copper that we produced during the full year in

2018 and more than all of the copper we produced in 2017. Our revised production guidance

outlook for 2019 now calls for nearly double the production volumes of just two years ago – a

remarkable accomplishment and I’d like to thank all our employees and stakeholders for their

continued support in realizing this achievement.

From a corporate perspective, the Company today sits with a significantly improved balance sheet

and the strongest overall liquidity position we have had since the closing of our IPO in the fourth

quarter of 2017. This is a reflection of both the low -cost nature of our business , and more

fundamentally, the continued execution and delivery of our growth strategy.”

David Strang, President and CEO, added “Specifically during the second quarter, I would like to

highlight the operational outperformance across our business units. At Pilar and Vermelhos, this

was highlighted by significant quarter-on-quarter increase s in tonnes mined while grades

continued to show positive reconciliation against our production plan and model – particularly at

Vermelhos. At R22W, c ontinuity of the orebody extended well beyond what was originally

envisioned, allowing us to add nearly 100,000 tonnes of ore to the mine plan, and we will continue

to process the remaining R22W stockpiles into the third quarter.

At our milling operations, we continued to see the benefit of several low -cost improvement

initiatives which have contributed to two consecutive quarters of recoveries over 90%. Comparing

these results to 2017 and 2018, we have seen an improvement in recoveries of between 3% to 4%,

which we expect will be improved further on c ompletion of our regrind circuit once operational

during the second quarter of 2020. The combination of outperformance in tonnes mined, overall

stability of our mining operations and improved metallurgical performance thus far in 2019 have

all contributed to our improved guidance outlook for the year.

As we look to the balance of 2019, w e are increasing our production guidance range by 2,000

tonnes of copper to between 38,000 and 40,000 tonnes for the year. While we are maintaining our

C1 cash cost guidance range, with the increase in production and favorable prevailing exchange

rates, we expect full year costs to be at the low end of the range . With respect to capital

expenditures, we are increasing our budget for exploration based upon the successes to date and

to reflect an aggressive plan to step-out regionally in the second half of the year. During the first

half of 2019, we drilled just over 100,000 meters and expect to drill approximately 200,000 meters

by year end. Minor incremental capital adjustments at Pilar and Vermelhos are primarily related

to advancing underground development to both enhance operational flexibility and increase

production volumes in 2019 and 2020. In addition, we recently signed an agreement for the

TSX: ERO

Ero Copper Corp

purchase and delivery of a 200,000 tonnes per annum ore sorting plant which we expect to be

commissioned during the fourth quarter of this year.

On exploration, over the past several quarters we have steadily increased our exploration efforts

throughout the Curaçá Valley where we now have 27 drill rigs operating. Drilling during the first

half of 2019 was predominately focused on near-mine infill and extensional drilling in advance of

our updated technical report and mine plan, expected to be completed early in the fourth quarter,

and we are just beginning to step-out away from our existing operations into the more than fifty

regional targets identified during our data-driven targeting work. Initial drilling results from the

first of these targets, Siriema, were recently announced and give us confidence that we will

continue to turn promising exploration targets into successful discoveries and ultimately,

successful satellite operations in due course. With our strong balance sheet and overall liquidity

position we are better positioned today than ever to execute on this strategy.”

*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 – outperformance during first half of 2019

• 717,479 tonnes of ore grading 1.62% copper processed during the second quarter

producing 10,473 tonnes of copper in concentrate after average metallurgical

recoveries of 90.2%.

 Second quarter 2019 results compare favorably to results from the entire

first half of 2018 when 817,078 tonnes of ore grading 1.51% copper were

processed producing 10,530 tonnes of copper in concentrate after

metallurgical recoveries of 85.6%.

• Strong operating performance from Vermelhos, with 176,704 tonnes grading 2.46%

copper mined during the period, contributed to the significant increase in total tonnes

mined and processed.

 Total Vermelhos production of 315,938 tonnes of ore grading 3.20% copper

mined during the six month period ended June 30, 2019 as a result of

successful ramp-up following commissioning of the mine in October 2018.

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Ero Copper Corp

• The Company’s 97.6% owned NX Gold Mine processed 41,538 tonnes of ore grading

8.06 grams per tonne gold, resulting in the production of 9,917 ounces of gold and

6,057 ounces of silver as by -product after metallurgical recoveries that averaged

92.1% during the second quarter of 2019.

 Exploration Activities – wheels in motion for making new regional discoveries

• Vermelhos District

 Exploration in the Vermelhos District, where 1 3 drill rigs are currently

operating, is focused on near-mine expansion as well as drilling a north-

northeast mineralized trend encompassing the Vermelhos Mine, East Zone, N8

Deposit , the recently announced Siriema discovery and several high -priority

regional targets located over a strike length of approximately 5.5 kilometers.

• Pilar District

 Exploration activity within the Pilar District, where 1 4 drill rigs are currently

operating, continues to focus on previously announced discoveries of the West

Limb, Deepening Extension and the recently announced Baraúna discovery.

Drilling has also identified a high-grade zone of mineralization within the South

Extension and drilling within the mine continues to demonstrate mineralization

remains open to depth and to the south. The Company continues to drill test

several regional targets within the Pilar District south of the Pilar Mine

identified during the Company’s data compilation and targeting work.

• NX Gold Mine

 At the NX Gold Mine, where 7 drill rigs are currently operating, exploration

efforts are focused on the recently announced Santo Antonio discovery located

between the Bras and Buracão veins in advance of the mine’s updated NI 43-

101 compliant technical report and mine plan, expected to be completed during

the fourth quarter.

• Regional Programs

 With the Company’s regional data compilation and targeting work complete,

and drilling for the Company’s updated N I 43-101 compliant technical report

and mine plan substantively completed, the Company is starting to step -out

away from its existing operations to evaluate more than fifty high priority

regional targets throughout the Curaçá Valley . The first of these target areas,

Siriema, located approximately 1.5 kilometers south of the Vermelhos Mine,

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Ero Copper Corp

was recently announced and drilling to target additional high-grade massive-

sulphide breccia mineralization within this zone is underway.

 Corporate Highlights – strengthened liquidity , well positioned to execute on growth

strategy

• Ended the second quarte r of 2019 with $35.7 million cash position (including

restricted cash) compared to $19.3 million (including restricted cash) at the end of the

second quarter of 2018.

• During the second quarter, the Company successfully refinanced a loan held by the

Company’s subsidiary, Mineração Caraíba S.A. (“MCSA”), by extending its existing

credit facility. The credit limit of the revolving credit facility was increased by $20

million to $70 million . As at the end of the quarter, the Company had a remaining

$14.0 million undrawn on its secured, revolving credit facility in Canada , plus a n

additional R$60 million in available undrawn lines of credit in Brazil.

TSX: ERO

Ero Copper Corp

OPERATING AND FINANCIAL HIGHLIGHTS

3 months

ended

June 30,

2019

3 months

ended

March 31,

2019

6 months

ended

June 30,

2019

3 months

ended

June 30,

2018

6 months

ended

June 30,

2018

Operating Highlights (MCSA Operations)

Ore Processed (tonnes) 717,479 530,133 1,247,612 500,952 817,078

Grade (% Cu) 1.62 2.19 1.86 1.35 1.51

Cu Production (tonnes) 10,473 10,645 21,118 5,684 10,530

Cu Production (000 lbs) 23,089 23,468 46,558 12,532 23,214

Cu Sold in Concentrate (tonnes) 10,931 10,033 20,964 6,569 10,665

Cu Sold in Concentrate (000 lbs) 24,100 22,118 46,218 14,482 23,512

C1 Cash Cost of copper produced (per lb)(1) 1.04 0.91 0.97 1.49 1.55

Gold (NX Gold Operations)

Au Production (oz) 9,917 10,119 20,036 10,159 19,577

C1 Cash Cost of gold produced (per ounce)(1) $517 $486 $501 $519 $537

Financial Highlights ($millions, except per share amounts)

Revenues $76.5 $72.0 $148.5 $61.0 $100.7

Gross profit $32.1 $32.6 $64.7 $15.9 $24.4

EBITDA(1) $34.9 $37.2 $72.1 $0.1 $13.7

Adjusted EBITDA(1) $36.4 $39.3 $75.7 $27.4 $41.0

Cash flow from operations $37.3 $25.1 $62.4 $24.7 $27.9

Net income (loss) attributable to owners of the

Company

$15.1 $15.3 $30.4 ($18.2) ($19.5)

Net income (loss) per share attributable to owners

of the Company (Basic)

$0.18 $0.18 $0.36 ($0.22) ($0.23)

Net income (loss) per share attributable to owners

of the Company (Diluted) $0.17 $0.17 $0.34 ($0.22) ($0.23)

Adjusted net income (loss) attributable to owners of

the Company(1) $15.3 $15.7 $31.0 $1.3 ($0.7)

Adjusted net income (loss) per share attributable

to owners of the Company(1) (Basic) $0.18 $0.19 $0.37 $0.02 ($0.01)

Adjusted net income (loss) per share attributable

to owners of the Company(1) (Diluted) $0.17 $0.17 $0.34 $0.01 ($0.01)

Cash and Cash Equivalents $33.5 $19.5 $33.5 $17.1 $17.1

Working Capital (Deficit)(1) $5.6 ($0.7) $5.6 ($7.3) ($7.3)

Net Debt(1) ($121.1) ($133.1) ($121.1) ($110.7) ($110.7)

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Ero Copper Corp

Footnotes

[1] EBITDA, Adjusted EBITDA, Adjusted net income (loss), Adjusted net income (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

2019 – Q2

Adjusted EBITDA $ 36,395

Adjustments:

Loss on debt settlement (1,783)

Unrealized foreign exchange gain on USD denominated debt in MCSA 1,574

Unrealized foreign exchange gain on derivative contracts 9

Realized foreign exchange loss on derivative contracts (18)

Share based compensation and other (1,274)

EBITDA $ 34,903

Adjusted net income $ 15,310

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

Loss on debt settlement (1,776)

Unrealized foreign exchange gain on USD denominated debt in MCSA 1,568

Unrealized foreign exchange gain on derivative contracts 9

Reported net income attributable to owners of the Company $ 15,111

OUTLOOK

Based upon strong operational performance to date, the Company is updating its production and

capital expenditure guidance for 2019. While C1 cash cost guidance range remains unchanged,

due to improved production outlook and favorable prevailing foreign exchange rates, the

Company expects full year performance to be at the low end of its guidance range.

Production & Cash Costs:

Previous 2019 Guidance[1] Revised 2019 Guidance[1]

Tonnes Processed Sulphides 2,050,000 2,250,000

Copper Grade (% Cu) 2.00% 1.95%

Copper Recovery (%) 88.0% 90.0%

Cu Production Guidance (tonnes) 36.0 – 38.0 38.0 – 40.0

C1 Cash Cost Guidance (US$/lb)[2] $1.00 – $1.10 $1.00 – $1.10

TSX: ERO

Ero Copper Corp

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 fil ings for

complete risk factors.

[2] C1 cash costs of copper produced (per lb.) is a non-IFRS measures – see the Notes section of this press release for a discussion

of non-IFRS measures.

Capital Expenditures:

The Company’s revised capital expenditure guidance for 2019 assumes a USD:BRL foreign

exchange rate of 3.80 (previous guidance assumed a USD:BRL foreign exchange rate of 3.70) and

has been presented below in USD millions.

Revised capital expenditure guidance reflects increased exploration drilling, with the Company

now expecting to drill approximately 200,000 meters by year -end, as well as on additional

development at Pilar and Vermelhos to enhance operational flexibility and production volumes in

2019 and 2020. In addition, an agreemen t is in place for the purchase and delivery of a 200,000

tonne per annum ore sorting plant that is expected to be commissioned during the fourth quarter

of 2019.

Previous 2019 Guidance Revised 2019 Guidance

Pilar Mine 42.0 44.0

Vermelhos 18.0 19.0

Boa Esperanҫa 2.0 1.0

Capital Expenditure Guidance 62.0 64.0

Exploration[1] 20.0 26.0

Footnotes:

[1] Exploration capital expenditure 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, A djusted net

income (loss), 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 investor s 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

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