ERO.TO · 2019-11-05 12:00:00

Ero Copper Reports Third Quarter Results, Further Increases 2019 Production Guidance

Production Results Financials

TSX: ERO

Ero Copper Corp

NOVEMBER 5, 2019 NR:19-16

(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, 2019. Management will host a conference call tomorrow, Wednesday, November 6, 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

• Third quarter copper production of 9,674 tonnes of copper resulting in 30,792 tonnes of

total copper produced year-to-date in 2019;

• C1 cash costs* of $1.01 and $0.99 per pound of copper produced during the three and nine-

month period ended September 30, 2019, respectively;

• Generated $27.3 and $102.9 million in Adjusted EBITDA* and $29.5 and $91.9 million in

cash flow from operations during the three and nine-month period ended September 30,

2019, respectively;

• Net income attributable to owners of the Company of $16.3 and $46.7 million ($0.18 and

$0.51 per share on a diluted basis) during the three and nine-month period ended September

30, 2019; respectively;

• Adjusted net income attributable to owners of the Company * of $10.2 and $41.2 million

($0.11 and $0.45 per share on a diluted basis) during the three and nine-month period ended

September 30, 2019, respectively;

• Transitional quarter at the NX Gold Mine with 4,356 ounces of gold produced at C1 cash

costs* of $1,169 per ounce as the last exposed ore within the Brás vein was mined and

development of the new Santo Antonio vein advanced in preparation for mining in the

fourth quarter. Year-to-date production totalled 24,391 ounces of gold at C1 cash costs* of

$621 per ounce;

• Increase full-year copper production guidance outlook for 2019 by an additional 2,000

tonnes of copper to between 40,000 and 42,000 tonnes and reiterate C1 cash cost* guidance

range for the full year to be at the low-end of the Company’s guidance range, between

TSX: ERO

Ero Copper Corp

$1.00 and $1.10 per pound of copper produced. At NX Gold, the Company expects an

improved operating outlook for fourth quarter of 2019, forecasting approximately 7,500

ounces of gold production at C1 cash costs* of approximately $700 per ounce.

Commenting on the results, David Strang, President and CEO , stated, “During the third quarter

we saw continued strong operating performance at MCSA. Based upon this performance, we are

increasing copper production guidance again for the full year. This increase is, in part, driven by

the outstanding contribution of the Vermelhos mine. Looking forward, w e anticipate grades

processed during the fourth quarter to increase resulting in a blended full-year mill head-grade

of approximately 1.95% copper.

At our NX Gold Mine, the decline in production during the third quarter occurred as we concluded

mining activities within the Brás vein and advanced development into the newly discovered Santo

Antonio vein in preparation for mining in the fourth quarter . Based on drilling to date, we see

multiple years of mine life from Santo Antonio, with additional exploration upside, as well as

elevated production levels, at low cost, commencing in the fourth quarter of this year. An updated

National Instrument 43- 101 compliant mineral resource and reserve estimate, detailing these

plans will be announced prior to year end.

On the corporate side , our finance and legal teams continue to deliver accretive results for the

Company. During the period, MCSA was notified of a favourable court ruling which confirmed

MCSA’s outstanding claim to a historic tax credit related to prior overpayment resulting in the

Company formally recognizing an R$89.9 million (approximately $22 million) tax credit, that will

be used to offset future taxes payable in 2020 and 2021.

On exploration, our drill programs are primarily focused on the investigation of high-priority

regional exploration targets throughout the Curaçá Valley.”

*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 – continued strong performance in 2019 at MCSA and

improved full year guidance

• 587,915 tonnes of ore grading 1.84% copper processed during the third quarter

producing 9,674 tonnes of copper in concentrate after metallurgical recoveries of

89.2%.

TSX: ERO

Ero Copper Corp

 Total of 1.8 million tonnes of ore processed grading 1.86% copper

producing 30,792 tonnes of copper in concentrate after metallurgical

recoveries that averaged 90.4% during the nine -month period ended

September 30, 2019.

• Strong operating performance from Vermelhos, highlighted by a significant quarter -

on-quarter increase in grades mined with 176,183 tonnes grading 3.84% copper mined

during the period – a 56% increase in grade compared to the prior period.

 Total Vermelhos production of 492,122 tonnes of ore grading 3.43% copper

mined during the nine-month period ended September 30, 2019.

• As a result of transitioning mining activities from the Brás vein into the new Santo

Antonio vein, the Company’s 97.6% owned NX Gold Mine processed 34,813 tonnes

of ore grading 4.51 grams per tonne gold during the period, producing 4,356 ounces

of gold and 2,909 ounces of silver as by- product after metallurgical recoveries that

averaged 86.2% during the third quarter of 2019.

 Total of 115,068 tonnes of ore grading 7.23 grams per tonne gold processed

producing 24,391 ounces of gold and 15,326 ounces of silver after

metallurgical recoveries that averaged 91.2% during the nine-month period

ended September 30, 2019.

 Expect a production rebalance to commence in the fourth quarter with

approximately 7,500 ounces of gold production forecast during the period,

resulting in total 2019 production of approximately 32,000 ounces gold.

 Exploration Activities – shift in focus to regional exploration targets

• Vermelhos District

 Regional greenfield drilling within the Vermelhos District, where 1 5 drill rigs

are operating (one additional rig on year end maintenance) , is currently

targeting several high- priority exploration targets identified during the

Company’s comprehensive targeting work. These targets extend over

approximately 10 kilometers of anomalous soil geochemistry and induced

polarization (“IP”) anomalies.

• Pilar District

 Exploration activity within the Pilar District, where 1 0 drill rigs are currently

operating (one additional rig on year end maintenance) , continues to focus on

infill and extensional drilling of high-grade zones that the Company has yet to

fully delineate within the Pilar underground mine. These zones are highlighted

by recent drill results from the Deepening zone, located down -plunge to the

TSX: ERO

Ero Copper Corp

north and along strike to the south of known mineralization. In addition, drilling

at Pilar will seek to further delineate the area surrounding recent results in the

South Extension zone, which is located at higher levels of the mine south of the

planned mining blocks of MSB South.

• NX Gold Mine

 At the NX Go ld Mine, three exploration drill rigs are currently operating on

extensions of the recently announced Santo Antonio vein and testing for

continuity of the Brás vein. Additionally, the first comprehensive regional

exploration program is underway.

 Corporate Highlights – Unlocking value with resolution of historic tax credit and strong

overall liquidity at quarter end

• During the third quarter, the Company s uccessfully recognized an outstanding claim

of a historic tax credit, totalling R$89.9 million (approximately $22 million), related

to prior overpayment. This credit is expected to offset future taxes payable in 2020

and 2021.

• As at the end of the quarter, the Company had a total cash position of $23.6 million

(including restricted cash) plus $14.0 million undrawn on its secured, revolving credit

facility in Canada and an additional R$77.5 million in available undrawn lines of credit

in Brazil.

TSX: ERO

Ero Copper Corp

OPERATING AND FINANCIAL HIGHLIGHTS

3 months

ended

Sep. 30,

2019

3 months

ended

June 30,

2019

9 months

ended

Sep. 30,

2019

3 months

ended

Sep. 30,

2018

9 months

ended

Sep. 30,

2018

Operating Highlights (MCSA Operations)

Ore Processed (tonnes) 587,915 717,479 1,835,527 663,359 1,480,437

Grade (% Cu) 1.84 1.62 1.86 1.38 1.45

Cu Production (tonnes) 9,674 10,473 30,792 7,792 18,322

Cu Production (000 lbs) 21,327 23,089 67,884 17,178 40,392

Cu Sold in Concentrate (tonnes) 10,200 10,931 31,164 6,542 17,207

Cu Sold in Concentrate (000 lbs) 22,487 24,100 68,705 14,423 37,935

C1 Cash Cost of copper produced (per lb)(1) 1.01 1.04 0.99 0.99 1.31

Gold (NX Gold Operations)

Au Production (oz) 4,356 9,917 24,391 10,223 29,800

C1 Cash Cost of gold produced (per ounce)(1) $1,169 $517 $621 $471 $515

Financial Highlights ($millions, except per share amounts)

Revenues $60.6 $76.5 $209.2 $47.3 $148.0

Gross profit $21.3 $32.1 $86.0 $18.9 $43.2

EBITDA(1) $35.1 $34.9 $107.2 $20.8 $34.5

Adjusted EBITDA(1) $27.3 $36.4 $102.9 $24.2 $65.2

Cash flow from operations $29.5 $37.3 $91.9 $31.1 $59.0

Net income (loss) attributable to owners of the

Company

$16.3 $15.1 $46.7 $5.2 ($14.4)

Net income (loss) per share attributable to owners

of the Company (Basic)

$0.19 $0.18 $0.55 $0.06 ($0.17)

Net income (loss) per share attributable to owners

of the Company (Diluted) $0.18 $0.17 $0.51 $0.06 ($0.17)

Adjusted net income (loss) attributable to owners of

the Company(1) $10.2 $15.3 $41.2 $3.7 $3.1

Adjusted net income (loss) per share attributable

to owners of the Company(1) (Basic) $0.12 $0.18 $0.48 $0.04 $0.04

Adjusted net income (loss) per share attributable

to owners of the Company(1) (Diluted) $0.11 $0.17 $0.45 $0.04 $0.04

Cash and Cash Equivalents $21.7 $33.5 $21.7 $20.5 $20.5

Working Capital (Deficit)(1) $6.4 $5.6 $6.4 ($15.8) ($15.8)

Net Debt(1) ($133.4) ($121.1) ($133.4) ($118.9) ($118.9)

Footnotes

TSX: ERO

Ero Copper Corp

[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 – Q3

Adjusted EBITDA $ 27,255

Adjustments:

Tax recovery of value added taxes 21,584

Unrealized foreign exchange loss on USD denominated debt in MCSA (9,597)

Unrealized foreign exchange loss on derivative contracts (1,404)

Realized foreign exchange loss on derivative contracts (58)

Loss on gold hedge contracts (1,514)

Share based compensation and other (1,160)

EBITDA $ 35,106

Adjusted net income $ 10,173

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

Net tax recovery of value added taxes 17,783

Unrealized foreign exchange loss on USD denominated debt in MCSA (9,559)

Unrealized loss on gold hedge contracts (719)

Unrealized foreign exchange loss on derivative contracts (1,398)

Reported net income attributable to owners of the Company $ 16,280

OUTLOOK

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

and capital expenditure guidance for 2019. While the C1 cash cost guidance range remains

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

the Company expects full year C1 cash costs to fall at the low-end of the guidance range, around

$1.00 per pound of copper produced.

Production & Cash Costs:

Prior 2019 Guidance[1] Revised 2019 Guidance[1]

Tonnes Processed Sulphides 2,250,000 2,350,000

Copper Grade (% Cu) 1.95% 1.95%

Copper Recovery (%) 90.0% 90.0%

Cu Production Guidance (tonnes) 38.0 – 40.0 40.0 – 42.0

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 filings 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 3.90 (previous guidance assumed a USD:BRL foreign exchange rate of 3.80) and

has been presented below in USD millions.

Revised capital expenditure guidance reflects increased exploration expenditures, with the

Company now e xpecting to drill approximately 2 20,000 meters by year -end, as well as on

additional development at the Pilar and Vermelhos mines to enhance operational flexibility and

production volumes in 2019 and 2020. In addition, delivery of a 200,000 tonne per annum ore

sorting plant, purchased in the third quarter, is underway. The plant is expected to be commissioned

during the fourth quarter of 2019.

Prior 2019 Guidance Revised 2019 Guidance

Pilar Mine $ 44.0 $ 45.0

Vermelhos 19.0 20.0

Boa Esperanҫa 1.0 1.0

Capital Expenditure Guidance $ 64.0 $ 66.0

Exploration $ 26.0 $ 30.0

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), 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, 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.

C1 cash cost of gold produced (per ounce)

C1 cash cost 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 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 doe s 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:

- Tax recovery of value added taxes

- Loss on debt settlement

- Foreign exchange loss

- Loss on gold hedge contracts

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