ERO.TO · 2018-11-08 12:00:00

Ero Copper Reports Third Quarter Results

Financials

TSX: ERO

Ero Copper Corp

NOVEMBER 8, 2018 NR:18-16

(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 nine months ended September

30, 2018. Management will host a conference call tomorrow, Friday, November 9, 2018, at 11:30

a.m. Eastern to discuss the results. Dial in det ails for the call can be found near the end of this

press release.

HIGHLIGHTS

• Third quarter copper production of 7,792 tonnes of copper;

• Third quarter C1 Cash Costs* of $0.99 per pound of copper produced;

• Generated $24.8 million in Adjusted EBITDA* during the three month period ended

September 30, 2018;

• Cash flow from operations of $22.6 million during the three month period ended September

30, 2018;

• Adjusted net income * attributable to owners of the Company of $8.3 million, $0.09 per

share on a diluted basis during the three month period ended September 30, 2018;

• Ended the third quarter with total cash position of $22.7 million; and,

• Improved full year production guidance to 28.0 to 29.0 thousand tonnes (“kt”) of copper

from 25.5kt to 27.5kt previously and lowered full year C1 Cash Cost* guidance to US$1.10

to US$1.20 per pound of copper produced from US$1.30 to US$1.40 per pound of copper

produced for 2018.

“Our operational results from the third quarter of 2018 reflect the considerable ramp- up in

production activities we guided for the second half of the year . Overall, we saw significant

quarter-on-quarter increases in production volumes from Pilar underground and Surubim open

pit operations as well as the first contributions from our newly constructed Vermelhos

underground mine , which was completed ahead of schedule . The acceleration of Vermelhos,

combined with incremental production from Surubim has allowed us to meaningfully improve our

full year production and cash cost guidance.

TSX: ERO

Ero Copper Corp

At Pilar, the benefits of the capital investments we committed to making earlier this year continue

to result in increased efficiency and productivity which contributed to a 20% quarter-on-quarter

improvement in our per tonne operating cost metric from underground mining. Open pit

production from Surubim continued to perform well and is expected to provide additional

incremental production through the balance of the year.

At Vermelhos, our newest mine, mining and processing of the first ore from the UG1 mining area

commenced during the quarter , while development of the first operating stopes within the main

orebodies continued to advance ahead of schedule, and we expect to commence mining the main

orebodies during the fourth quarter . The mine’s construction and execution, approximately four

months ahead of schedule and on budget, is a testament to the quality of our development team in

Brazil and gives us increased confidence in our ability to turn new discoveries within the Curaçá

Valley into operating mines quickly and at low cost.

On exploration, we completed our mid-year resource update , and the results – over a 100%

increase in both mineral resources and mineral reserves – speak to the Company’s continued focus

on driving shareholder value through exploration results and resource and reserve expansion .

With the resource update complete, drill programs have shifted focus towards extensions of

previously announced near-mine discoveries including the West Lim b of the Pilar Mine and the

new east zone of the Vermelhos Mine as well as new regional drill programs . In addition, our

district-wide airborne geophysical survey designed to target high- grade mineralization

throughout the Curaçá Valley was completed during the quarter. Data interpretation and priority

targeting remains ongoing and initial drill testing is underway .” commented David Strang,

President & CEO of Ero.

The Company’s financial statements for the period were impacted by non-cash adjustments related

to movements of the Brazilian Real (“BRL”) against the US dollar during the period, particularly

as it relates to the translation of US dollar debt held by the Company’s subsidiary, Mineração

Caraíba S.A. (“MCSA”) into BRL – its functional currency. Accordingly, the Company believes

that Adjusted EBITDA and Adjusted net gain (loss) are better reflection s of the Company’s

underlying performance.

*EBITDA, Adjusted net income (loss), and C1 Cash Cost of copper produced (per lb) 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 – strongest quarter to date

TSX: ERO

Ero Copper Corp

• Strongest production quarter to date with a total of 668.3kt mined grading 1.39%

copper during the three month period ended September 30, 2018, a 35% increase when

compared to second quarter of 2018;

• During the quarter, 663.4kt of ore was processed at an average grade of 1.38% copper

resulting in 7,792 tonnes of copper production after metallurgical recover ies that

averaged 84.9% over the period; and,

• 6,542 tonnes of copper in concentrate sold during the quarter.

 Vermelhos Mine – on budget and completed approximately 4 months ahead of schedule

• Mined 63.2kt of ore grading 2.62% copper during the period;

• Continued to advance overall development, opening up new production areas with

1,135 total meters of development completed during the period; and,

• Production from the main Vermelhos orebodies expected during the fourth quarter.

 Exploration Activities – exploration activities highlighted by Vermelhos discovery and

regional program focus

• Vermelhos District

 A new discovery announced during the period, located east and approximately

140 meters below all previously identified mineral resources and planned

infrastructure of the mine was highlighted by drill hole FVS-261 that intersected

76.7 meters grading 2.20% copper, including 15.0 meters grading 3.06% copper

and 10.0 meters grading 5.74% copper. The intercept is significant as it is

interpreted to represent a new sub -vertical zone of mineralization extending

from surface to approximately 400 meters below surface and to date has been

intersected over a horizontal distance of approximately 350 meters ( see the

Company’s press release dated September 25, 2018 for additional information

on the new Vermelhos discovery). Currently five exploration drill rigs are

operating at Vermelhos.

• Pilar District

 Exploration activities continue to focus on extensions to the Deepening as well

as extensions and infill of the recently announced West Limb Discovery (see

the Company’s press release dated May 17, 2018 for additional information on

the West Limb discovery). All Pilar exploration targets are within or adjacent

to existing Pilar underground mine infrastructure. Currently, eight underground

and two surface drill rigs are operating at Pilar.

• Surubim District

TSX: ERO

Ero Copper Corp

 Drilling activities continue to focus on evaluating new target areas adjacent to

the Surubim open pit mine. Currently two exploration drill rigs are operating

within the district.

• Regional Programs

 The Company’s airborne geophysical survey , comprised of both

electromagnetic and gravity components , was completed the period. Data

interpretation and prioritization of drill targets remains ongoing, and initial drill

testing is underway . There is one exploration drill rig targeting regional

exploration targets.

TSX: ERO

Ero Copper Corp

OPERATING AND FINANCIAL HIGHLIGHTS

3 months

ended

September

30, 2018

3 months

ended

June 30,

2018

9 months

ended

September

30, 2018

3 months

ended

September

30, 2017

9 months

ended

September

30, 2017(1)

Operating Highlights (MCSA Operations)

Ore Processed (tonnes) 663,359 500,952 1,480,437 540,882 1,318,838

Grade (% Cu) 1.38 1.35 1.45 1.23 1.29

Cu Production (tonnes)(2) 7,792 5,684 18,321 5,793 14,799

Cu Production (000 lbs)(2) 17,178 12,532 40,392 12,771 32,625

Cu Sold in Concentrate (tonnes) 6,542 6,569 17,207 5,642 14,271

Cu Sold in Concentrate (000 lbs) 14,423 14,482 37,935 12,438 31,462

C1 Cash cost of copper produced (per

lb)(3)(4) 0.99 1.49 1.31 1.37 1.42

Financial Highlights ($millions, except per share amounts)

Revenues $37.0 $47.3 $112.4 $33.0 $77.6

Gross profit (loss) $15.6 $11.6 $32.2 $5.5 $7.6

EBITDA(3) $22.4 ($2.6) $26.9 $17.6 $23.3

Adjusted EBITDA(3) $24.8 $23.6 $54.7 $10.7 $18.5

Cash flow from (used in) operations $22.6 $22.7 $46.3 $6.8 $5.6

Net income (loss) attributable to owners

of the Company

$9.8 ($16.9) ($11.2) $18.3 $2.9

Net income (loss) per share attributable

to owners of the Company – Basic

$0.12 ($0.20) ($0.13) $0.32 $0.06

Net income (loss) per share attributable

to owners of the Company – Diluted $0.11 ($0.20) ($0.13) $0.29 $0.05

Adjusted net income (loss) attributable

to owners of the Company(3) $8.3 $2.6 $6.1 $11.4 ($2.0)

Adjusted net earnings (loss) per share

attributable to owners of the Company(3)

– Basic

$0.10 $0.03 $0.07 $0.20 ($0.04)

Adjusted net earnings (loss) per share

attributable to owners of the Company(3)

– Diluted

$0.09 $0.03 $0.07 $0.18 ($0.04)

Cash and Cash Equivalents $20.5 $17.1 $20.5 $14.9 $14.9

Working Capital (Deficit)(3) ($15.8) ($7.3) ($15.8) ($4.1) ($4.1)

Net Debt(3) ($118.9) ($121.9) ($118.9) ($151.3) ($151.3)

Footnotes

[1] Ero was incorporated on May 16, 2016. MCSA was acquired December 12, 2016. Operations did not commence until the first

quarter of 2017

[2] Includes 1,250 tonnes of copper from the gallery development and trial mining of the newly constructed Vermelhos underground

mine

TSX: ERO

Ero Copper Corp

[3] EBITDA, Adjusted EBITDA, Adjusted net income (loss), Adjusted net earnings (loss) per share, Net Debt, Working Capital and C1

Cash Cost of copper produced (per lb) are non- IFRS measures – see the Notes section of this press release for a discussion on

non-IFRS Measures

[4] Starting in 2018, the Company included the costs of treatment, refining and sales costs and credits related to the sale of copper

concentrate in its C1 Cash Cost calculation

ADJUSTED EBITDA & NET INCOME (LOSS) RECONCILIATION

While the reporting currency of the Company is US dollars, and the majority of the Company’s

debt is denominated in US dollars, the US dollar denominated debt is held by MCSA whose

functional currency is BRL. On consolidation, the quarter-on-quarter translation of the US dollar

debt into BRL results in a non-cash adjustment to the income statement, as detailed below:

2018 – Q3

Adjusted EBITDA $ 24,808

Adjustments:

Unrealized foreign exchange loss on USD denominated debt in MCSA $ (2,459)

Unrealized Foreign exchange loss on derivative contracts 3,901

Realized Foreign exchange loss on derivative contracts (5,420)

Other 1,569

EBITDA $ 22,399

Adjusted net income (loss) $ 8,320

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

Unrealized foreign exchange loss on USD denominated debt in MCSA (2,449)

Unrealized foreign exchange loss on derivative contracts 3,885

Reported net income attributable to owners of the Company $ 9,756

REVISED 2018 GUIDANCE

The Company is updating its production and cash cost guidance for the full year 2018 as outlined

below. The revised guidance reflects the accelerated completion of the Vermelhos Mine and the

resulting contributions of UG1 and first production from the main Vermelhos orebodies during the

fourth quarter of 2018, as well as additional incremental production from the Surubim open pit

mine through the end of the year.

TSX: ERO

Ero Copper Corp

2018 Production and Cash Cost Guidance[1]:

Previous Guidance Revised Guidance

Tonnes Processed Sulphides 2,000,000 2,200,000

Copper Grade (% Cu) 1.50% 1.50%

Copper Recovery (%) 86.0% 86.0%

Cu Production Guidance (000 tonnes) 25.5 – 27.5 28.0 – 29.0

C1 Cash Cost Guidance (US$/lb)[3] $1.30 – $1.40 $1.10 – $1.20

Footnotes:

[1] Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estim ates, grade and

continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s SEDAR filings for

complete risk factors including, without limitation, the Annual Information Circular of the Company for the year ended December 31,

2017, dated March 28, 2018 (the “AIF”).

[3] 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.

As is evidenced in the Company’s third quarter performance and in the Company’s revised

guidance, production continues to be weighted towards the second half of the year due to the

commissioning of the Vermelhos Mine as well as mine sequencing at Pilar and Surubim. Updated

cash cost guidance for 2018 considers actual performance, expenditures and the prevail ing USD:

BRL foreign exchange rate, gold price of US$1,250 per ounce and silver price of US$17.50 per

ounce. C1 Cash Cost guidance has been updated to include treatment and refining charges

(“TC/RCs”), offsite transportation costs and certain tax benefits that are passed through to

customers on invoicing. These adjustments have been included in C1 Cash Cost disclosure since

the first quarter of 2018. Capital expenditure guidance for the year remains unchanged.

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),

EBITDA, Adjusted 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

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 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.

TSX: ERO

Ero Copper Corp

C1 Cash Cost of copper produced (per lb.)

C1 Cash cost of copper produced (per lb) is the sum of production costs (excluding the

capitalized pre- production mining costs at Vermelhos) , 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 of 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.

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

EBITDA

EBITDA represents earni ngs before interest expense, income taxes, depreciation, and

amortization. Adjusted EBITDA includes further adjustments for non-recurring items and

items not indicative to the future operating performance of the Company. The Company

believes EBITDA and adjusted EBIT DA are appropriate supplemental measures of debt

service capacity and performance of its operations.

Adjusted EBITDA is calculated by removing the following income statement items:

- Gain on debt settlement

- Foreign exchange gain (loss)

Adjusted Net Income (Loss) and Adjusted Earnings (Loss) Per Share

The Company uses the financial measure “Adjusted net income (loss)” and “Adjusted

earnings (loss) per share” to supplement information in its consolidated financial

statements. The Company believes that, in addition to conventional measures prepared in

accordance with IFRS, the Company and certain investors and analysts use this information

to evaluate the Company’s performance. The Company excludes non- cash and unusual

items from net earnings to provide a measure which allows the Company and investors to

evaluate the operating results of the underlying core operations.

During the period, the following non-cash or unusual adjustments to calculated adjusted

net income (loss):

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