Ero Copper Q1 2026 Earnings Call - Leverage Hits Target as FX Hedges Shield Bottom Line

Operator: Thank you for standing by. This is the conference operator. Welcome to the Ero Copper 1st quarter 2026 operating and financial results conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Farooq Hamed, VP, Investor Relations. Please go ahead.

Farooq Hamed, VP, Investor Relations, Ero Copper: Thank you, operator. Good morning, and welcome to Ero Copper’s first quarter earnings call. Our operating and financial results were released yesterday afternoon and are available on our website, along with our financial statements and MD&A for the 3 months ended March 31, 2026. A corresponding earnings presentation can be downloaded directly from the webcast and is also available in the Presentation section of our website. Joining me on the call today are Makko DeFilippo, President and Chief Executive Officer, Wayne Drier, Executive Vice President and Chief Financial Officer, Gelson Batista, Executive Vice President and Chief Operating Officer, and Courtney Lynn, Executive Vice President, External Affairs and Strategy. Before we begin, I’d like to remind everyone that today’s discussion will include forward-looking statements, which involve risks and uncertainties that may cause actual results to differ materially.

For a detailed discussion of these risks and their potential impact on our business, please refer to our most recent annual information form available on our website, as well as on SEDAR and EDGAR. Unless otherwise noted, all figures discussed today are in US dollars. With that, I’ll now turn the call over to Makko DeFilippo.

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: Thank you, Farooq. Good morning. These days, it is difficult to know exactly what each morning’s news will bring. Let me start by saying I appreciate all of you dialing in for this. Before diving into the quarter, I wanted to share 3 observations on the back of several weeks of travel throughout Brazil, New York, Boston, comparing notes with Wayne from Cesco and a recent trip to Washington, D.C., all of which have implications for our sector and are highly relevant for Ero. First, we see broad enthusiasm for copper, backstopped by tight supply and a serious lack of quality development assets at a time where there is a structural shift occurring across the copper demand landscape. Second, sector-wide cost inflation is not only topical, it is a ground truth reality.

While we are better inflated than many of our peers, and I’ll come back to that shortly, we’re not immune from it. Third, and perhaps most relevant for our business, is that Brazil is getting a lot of attention. The world has woken up to Brazil’s deep capital markets, its economic diversity, resource production capacity, and its relative strategic positioning in an increasingly complex world. Capital inflows into Brazil have, unsurprisingly against this backdrop, resulted in a considerable strengthening of the Brazilian real against the US dollar, which has a direct impact on our business. These observations matter because a lot of our work and strategy over the past year has been focused on making sure that Ero is as well-positioned as possible to benefit from these copper market tailwinds, advancing our long-term growth strategy while protecting our bottom line from cost and currency pressures.

I see this happening in 3 ways. First, our operating portfolio prominently features the right mix of commodities at the right time in the sector, and we are developing an extremely high-quality long-term asset in Furnas. Second, our operations do not rely on sulfuric acid. A considerable portion of our production base is from underground, and we operate in Brazil, where power is majority sourced from renewables, there are well-established local supply chains, and diesel is subsidized. Third, with Brazil in the global spotlight, initiatives we undertook last year, particularly around foreign exchange rate risk management, are serving to offset cost impacts from the rapid strengthening of the BRL we have seen so far this year. Circling back to Q1, from my perspective, this is the first quarter that shows our portfolio of investments and risk management in action.

It shows where those investments are delivering and where there is more progress to come. Before I turn the call to Gelson and Wayne to cover the details on our Q1 performance, I want to offer some perspective on what a difference a year makes. Looking back on the last 12 months, our consolidated copper production is up nearly 40%, and gold sales volumes, when including gold concentrates, are up 77% year-over-year. Quarterly revenue and adjusted EBITDA over the same period are up 110 and 100% respectively. Our focus on debt reduction has resulted in year-over-year decreases in net debt of approximately $70 million, while our leverage ratio has reached targeted levels of 1x, down markedly from approximately 2.4x this time last year.

Most importantly, over the past year, we have put considerable focus on transforming safety across our operations. A few weeks ago, while in Brazil, I was with our teams at Tucumã to mark a significant milestone. four years without a lost time injury, representing more than 11 million hours worked from the moment we first broke ground. This milestone is rare in our business. I am cognizant it was earned shift by shift, and it belongs to our entire organization, past and present. Operationally during the quarter, our mines tracked largely to plan across our copper operations, Q1 production and cost performance have us well-positioned against full-year guidance. At Xavantina, Q1 was the trough quarter we expected due to necessary ventilation and cooling investments as we advance that operation forward.

With that work substantially completed by the end of April, we expect to see mining rates and throughput show a step change increase in the second half of the year, supporting full-year gold production and cost guidance. Gelson will speak to this in more detail. As Wayne will discuss, our financial results in Q1 were bolstered by strong copper and gold prices, while our foreign exchange risk management program helped to mitigate some of the external cost pressures we are seeing elsewhere across the sector. With that, and to ensure sufficient time for questions, I will turn the call over to Gelson, who will walk you through our operational performance, our production outlook for the remainder of the year, and an update on key projects.

Gelson Batista, Executive Vice President and Chief Operating Officer, Ero Copper: Thank you, Marco. Good morning, everyone. As Marco said at the outset, the work we have done across our operations is starting to come through in the numbers. At Caraíba, new throughput in Q1 exceeded 1 million tons. I would highlight this is the only second quarter in the history where we have achieved that level, with the first being Q4 of last year following the completion of our debottlenecking program. Copper production declined from Q4 on lower head grades, reflecting plant stop sequencing at Pilar and reduced our feed from the Surubi open pit, where heavier than average rainfall in January and February constrained mining rates. Caraíba’s C1 cash cost for the quarter of $2.79 per pound reflected these operational dynamics, as well as the impact of a stronger BRL.

Looking ahead at Caraíba, we expect process tons and grade in Q2 to be broadly similar to Q1, with strong production in the second half, driven by a normalization of mining rates and access to deeper and higher grade benches at Surubi. As well as higher grades and tonnage from Pilar and Vermelhos due to plant stop sequencing. Q1 cash costs are expected to decline in step with high grades in the third and fourth quarters, supporting our reaffirmed full-year cost guidance. At Tucumã, copper production decreased modestly from Q4 on lower process grades, partially offset by higher throughput. Tucumã Q1 cash cost for the quarter was $1.97 per pound, in line with our expectations as well as full-year guidance. Looking to the balance of the year at Tucumã, we expect processed tons to increase from Q1 levels, with processed copper grades projected to moderate.

As a result, production is expected to be slightly weighted towards the second half on higher throughput, with Q1 cash costs expected to be relatively stable for the year, supporting our reaffirmed full-year guidance at Tucumã. With respect to Tucumã’s tailings filtration circuit, we have 2 initiatives on the way to unlock further capacity and increase overall throughput. First, as you know, we have placed orders for 3 new modular tailings filters. We continue to expect delivery of these units on-site during the 3rd quarter and for them to be operational during the 4th quarter. We are in the process of adding additional filter plates to each of our 3 existing filter presses, which the fulfillment of orders placed this time last year. The expansion of our existing installations will result in an increase in the capacity of each installed filter press by approximately 7%.

Taken together, these two initiatives are expected to meaningfully increase Tucumã’s total tailings filtration capacity and allow us to achieve a significant increase in plant throughput as we exit 2026. To reiterate, while there continues to be potential for these two initiatives to deliver throughput benefit in later part of the year, they are not reflected in our 2026 guidance. At Xavantina, this quarter was transitional as we completed necessary upgrades of our ventilation and cooling infrastructure required to support higher mining rates going forward, particularly as the mine gets deeper. While this investment impacted 1st quarter gold production and costs, we expected Q1 to be the weakest gold production quarter of the year due to this critical infrastructure work alongside additional ground support investments made to enhance operational performance beginning in the 2nd quarter.

Looking to the remainder of the year, we expect mining rates and throughput to pick up through the end of Q2 and maintain higher rates in Q3 and Q4. As a result, we expect 60%-65% of Xavantina’s production to be in the second half, with costs declining significantly from Q1 levels and allowing us to maintain our full-year operating production and cost guidance at Xavantina. We also sold approximately 4,300 ounces of gold and concentrate in Q1. Concentrate sales volumes declined from Q4 due to the rainy season, which impacts our ability to dry the material before transporting to port. We expect gold concentrate sales volumes to benefit significantly from the drier condition we are experiencing now. Currently on site, we have approximately 12,000 tons of concentrate in the drying phase.

As we have outlined on page 9 in our results presentation, while we are now firmly in the dry season, we are in the process of finalizing the installation of an industrial dryer and a mobile filter press to proactively support continuity of concentrate sales through the next rainy season. With that, I’ll turn the call over to Wayne to walk through our financial results.

Dalton Baretto, Analyst, Canaccord Genuity2: Thank you, Gelson, and good morning all. Revenue in the first quarter was $263.2 million, up from $125.1 million in Q1 2025, driven by stronger copper production from both Caraíba and Tucumã, higher realized prices for both copper and gold, and the contribution of gold concentrate sales at Xavantina. Our consolidated copper C1 cash cost for the quarter was $2.39 per pound, up approximately 8% year-over-year. This increase reflects, in part, a stronger Brazilian real against the US dollar, which impacted our reported C1 costs in Q1 by approximately $0.06 per pound relative to our budgeted 5.40 BRL rate.

This Real impact was fully offset on a cash flow basis by the $7.3 million realized gain from our foreign exchange hedge program during the period. Page 8 of our results presentation shows the movement of the Brazilian real so far this year against our existing foreign exchange collars, which protects our cash flows below the 5.54 level. If the Real remains at current levels, the impacts on reported C1 cash costs would be offset by an estimated realized foreign exchange gain of approximately $45 million-$50 million for the full year. From an absolute cost perspective, we are reasonably well-insulated for the reasons Marco mentioned earlier.

As you can see on page 7 of our results presentation, which lays out our consolidated operating cost structure, the ongoing Middle East conflict has the potential, all else being equal, to add $0.05-$0.10 per pound to operating costs if key inputs such as diesel, consumables, road transport, and ocean freight stay at current levels. That said, we are not seeing any supply-related shortages at this time. Turning to earnings, adjusted EBITDA doubled year-over-year to $125.2 million for Q1. Adjusted net income attributable to shareholders was $72.4 million or $0.69 per share on a fully diluted basis.

From a balance sheet perspective, we ended the first quarter with $91.2 million of cash and $55 million available under our senior revolving credit facility for a total available liquidity of $146 million. We continued to deleverage our balance sheet with net debt of $491 million at the end of Q1, an $11 million decrease compared to year-end 2025, and a $70 million year-over-year decrease. Combined with significantly higher 12-month trailing EBIT, EBITDA, this resulted in a material improvement in our net debt leverage ratio, which decreased to approximately 1 times from 2.4 times at the end of Q1 2025. Our top capital allocation priority remains the continued deleveraging of our balance sheet.

Having reached our target net debt leverage ratio of 1 times, the $145 million currently drawn on our revolver is our next focus for debt reduction. Beyond deleveraging, we are funding our internal growth projects and over time, expect to begin returning capital to shareholders. As we advance these objectives, we look forward to providing the market with additional color on our broader capital return framework. With that, I’ll pass the call back to Marco for some closing remarks.

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: Thank you, Wayne. Before we open up to questions, two things I would like to leave everyone with this morning. First, we are focused on executing against our reaffirmed full-year operational guidance. The first quarter was aligned with our expectations, with our copper business achieving approximately 24% of our consolidated midpoint on the full year, which we still expect to be back half-weighted. At Xavantina, we completed a necessary long-term investment in ventilation and cooling and are ramping up concentrate sales volumes now that we are in the dry season. Second, we’ve now drilled more than 60,000 meters at Furnas, and it’s worth reminding everyone that PEA, as strong as it is, only reflects the first 28,000 meters. We are planning a mid-year update on our exploration results since then, plus progress on key PFS work streams. Stay tuned for that.

With that operator, we will open the line up for Q&A.

Operator: Thank you. The first question comes from Fahad Tariq with Jefferies. Please go ahead.

Fahad Tariq, Analyst, Jefferies: Hi. Thanks for taking my question. You mentioned quite a bit about Brazil and the dynamics there. Can you just talk about what you’re seeing in terms of labor inflation?

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: Yeah, thanks. Thank you for the question. I think more broadly speaking, I’ll give a bit of nuance about our labor negotiations, which happen annually in the fall. Those are typically set around the standard inflation rate. Going back to last year, in the fall, we negotiated on average, a 5% increase on labor year on year. If you go back over the last, you know, 10 years, this was historically absorbed by the depreciation of the Brazilian real. Obviously, as Wayne alluded to, and we spoke in the prepared remarks, the BRL strengthened significantly and hence the hedge program that we put in place to help offset some of that inflation. 5% was the negotiated rate last year in the fall.

Fahad Tariq, Analyst, Jefferies: Okay, great. Just staying on the topic of just input cost, the slide is really helpful, so thanks for presenting that. Any issues on supply? The cost part I understand, but are there any concerns around any of these input supplies coming into Brazil?

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: No concerns at this time. We monitor that pretty closely. Our organization lived through both COVID and a trucker strike in the past several years, and so we’ve been able to dust off those playbooks and proactively build up key consumables as a risk mitigation across all of our assets. That’s something that we continue to monitor pretty closely. As I said, deep knowledge across the organization, what to do in these type of environments. We proactively increased our reserve of imported consumables into Brazil. Again, we see no issues at this time.

Fahad Tariq, Analyst, Jefferies: Okay, great. Thanks so much.

Operator: The next question comes from Orest Wowkodaw with Scotiabank. Please go ahead.

Dalton Baretto, Analyst, Canaccord Genuity0: Hi, good morning. The comment earlier about that there’s currently, I think, 12,000 tons of gold concentrate drying. Is that indicative of what you expect to sell in Q2? I’m wondering if you could provide any guidance for the year with respect to contained ounces in the gold concentrate.

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: Yes. Thank you, Orest. Both great questions. We do have 12,000 tons drying. As we saw in our Q1 performance, and looking back at Q4, the rate of drying and transportation, is a function of the sunny days during the month. As you can see on the slide 9 that we prepared showing average rainfall, obviously May, you know, May, June, July, and August have very low rainfall on average, you know, less than 10 millimeters. We’re expecting to ramp up sales volume pretty meaningfully here in Q2. In terms of giving the exact amount, it’s gonna be predicated by the amount of sunny days during that time period. Hesitant to do that for obvious reasons.

When I look ahead to Q4, as Gelson Batista mentioned and as shown on slide 9, we did make progress on some installations of equipment we ordered last year to help ensure continuity of deliveries and shipments through next year’s rainy season. Again, for reasons that I think everyone on this call is well aware, we’re unable to provide forward-looking guidance on concentrate sales. What I can tell you is that we have seen nothing to date in terms of grade that suggests anything different from the resource that we put out on the sampled volume. We still see, you know, right around 1 ounce per ton or a bit higher as being the benchmark there. As I said, haven’t seen any evidence that the grades are lower.

Again, giving exact delivery schedule and timing, still requires additional sampling from the material that we’re extracting, and then obviously additional weather, favorable sunny weather to get that support.

Dalton Baretto, Analyst, Canaccord Genuity0: Thanks for the color, Makko. As a follow-up, as your free cash flow starts to accelerate here, I think Wayne Drier talked about the revolver being the first focus in terms of paying that down. You know, can you walk us through your thinking on cadence after that with respect to either debt reduction or capital returns?

Dalton Baretto, Analyst, Canaccord Genuity2: Thanks, Orest. I mean, obviously we’ve achieved our net leverage ratio, as I said, at 1 times. Obviously bringing the revolver down further will reduce that leverage even further. I think as we start to think about Furnas and, you know, the longer medium-term plans that for that asset or that project, we know we will keep in mind what those potential requirements are. I would say all things else being equal in this price environment, the free cash flow generation is gonna accelerate meaningfully, and hopefully we’ll be in a position here, you know, in the not too distant future to talk about our plans for, you know, returning capital to shareholders.

Dalton Baretto, Analyst, Canaccord Genuity0: Thanks. Look forward to that.

Operator: The next question comes from Stefan Ioannou with Cormark Securities. Please go ahead.

Dalton Baretto, Analyst, Canaccord Genuity1: Yeah, thanks very much. Just wondering, is there any updates or color on just how the shaft project’s going at Pilar?

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: Yeah. Great, Stefan. I’ll jump in and then Gelson Batista can carry off if I miss any details here. Shaft is progressing well. As we discussed last quarter, we’ve now finalized the completion of the second leg, so we’re starting the third and final leg of the shaft, which is a very important connection for us that was completed this year. Still targeting the shaft, reaching shaft bottom at the end of this year or early into next year. That’s really the critical path for that project. When you look at the surface installation, substantively complete the underground installation of conveyors and crusher chambers, you know, or the excavations are complete. We’re installing that equipment very soon. We’re in the process now. We’re pretty happy with the progress.

As I said, critical path for us is reaching shaft bottom, at the tail end of this year or early next year, so that we can transition from sinking into transitioning that shaft over to the operational phase.

Dalton Baretto, Analyst, Canaccord Genuity1: Great. Thanks very much, guys.

Operator: The next question comes from Mateus Moreira with Bradesco BBI. Please go ahead.

Mateus Moreira, Analyst, Bradesco BBI: Hi. Thank you for taking my questions. First question on your sales versus production gap for copper specifically. I noticed that sales for the quarter came above production figures for both Caraíba and Tucumã. I was just wondering how should we think about the gap between sales and production going forward? That’s the first question.

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: Thanks for the question. Look, obviously, sales and production for us do, on a quarterly basis, vary slightly. You know, if you look at the volume of concentrate we produce, it’s not as significant as some of the larger copper producers. We sell in 10,000 ton lots. Depending on the timing of when we invoice and we close a lot, you can see some inventory buildup. We did have inventory build in the back end of Q4, which was sold early in Q1. You know, that timing will always vary just depending on how we assemble our lots. I mean, obviously we try our very best to sell everything we produce, but sometimes the timing just doesn’t work.

Mateus Moreira, Analyst, Bradesco BBI: That’s clear. Moving to Tucumã, I mean, regarding the tailings filtration capacity at Tucumã, how has that been progressing? You previously shared that the equipment has been ordered and was in manufacturing. I just wondering, is there any updates there?

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: Yes. Gelson spoke to equipment is being manufactured. We still expect delivery here in the third quarter. That remains on track, so we’re doing work on site now to prepare for those deliveries, and we expect them to be operational in the fourth quarter. I think the most probably salient point for this call is that, you know, that is not reflected in our full year guidance. I think we’ve made that abundantly clear, but to stress it is not included in our full year guidance. So far remains on track to be operational in the fourth quarter. As I said in our last quarterly call, it’s very important that that equipment’s operational for 2027, not included in 2026 guidance.

Mateus Moreira, Analyst, Bradesco BBI: Okay, that’s clear. Thank you very much.

Operator: The next question comes from Dalton Baretto with Canaccord Genuity. Please go ahead.

Dalton Baretto, Analyst, Canaccord Genuity: Thanks. Good morning, guys. Marco, I thought I heard you say in your comments that your travels took you through Washington D.C. I’m wondering if you can add some context around that. You know, what sort of discussions you’re having, given that your assets are in Brazil, anything that you can wrap around that. Thanks.

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: Thanks, Dalton. I was in D.C., as you can probably imagine, being an operating company, a well-established operating company in Brazil, and the focus on diversifying supply chains across the western world, including Canada and the United States, there’s a big focus on investments into strategically aligned countries. You’ve seen the U.S. government and the Canadian government enact critical minerals programs. We were invited to participate in a discussion around that. I think at this point, Dalton, there’s not much more to say than that. I think the reality is, it’s an exciting time to be producing copper. It’s an exciting time to be producing copper in Brazil and to be building a business in Brazil.

We take the relationships with our government partners in Brazil, Canada, and the U.S. very seriously. We’re invited to participate in critical minerals events. We show up in force to do that.

Dalton Baretto, Analyst, Canaccord Genuity: Got it. Thanks for that. I wanted to ask about Paranapanema and how they’re doing these days, and whether, you know, given the rise in shipping costs and, you know, everything that’s going on, whether that’s becoming, you know, an option to place more concentrate there. Thanks.

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: Look, it’s Paranapanema is its own organization. They’re working through some of the challenges they have. Obviously, it’s a public company, so they disclose what they’re doing there. I think the reality in today’s market is that the attention on Paranapanema is really one that’s more strategic in nature. You know, for our business, the change in global TCRCs has, you know, offset the cost benefit of shipping locally to the local smelter.

I think when you’re looking forward at the future of PMA, and there continues to be a lot of interest, in ramping up that operation, I think it’s really around the strategic nature of that asset being one of the few smelters in the world and one of the few smelters, in the Western world. As I said, we continue to monitor what happens there. We don’t see it as being a huge benefit or impediment to our businesses in any way. Obviously, it’s down the road from us, so we’d like to see, you know, continued movement and progress on that. As I said, there’s quite a bit of interest in getting PMA back up and running full steam ahead. We closely monitor the situation there.

Dalton Baretto, Analyst, Canaccord Genuity: Thanks, Marco.

Operator: The next question comes from Guilherme Rosito with Bank of America. Please go ahead.

Guilherme Rosito, Analyst, Bank of America: Thank you. Can you guys hear me?

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: Yes.

Guilherme Rosito, Analyst, Bank of America: Perfect. Thank you for taking my questions. My first one is on cost. Marco, I know you guys mentioned mine was very clear with the sensitivities and hedges, so that’s really appreciated. As we look to all the trends that we’re starting at first quarter at a high level, like higher than we were expecting for Xavantina, for instance, which I know, understand is according to plan. You know, BRL is BRL 4.90. We have pressures from potentially chemicals, fuel surcharges. I’m just wondering, when you look to the distribution of probabilities, does it make more sense for us to expect costs closer to the higher end of your C1 guidance versus the midpoint? My second question is just maybe if you could comment a bit on the discussions around the mine shift law here in Brazil, what has evolved, what not.

As we approach elections, do you think there’s still time for any change to be made into this year, or is it now a next year story as elections approach and we don’t have any climate to prove anything? Thank you.

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: Thanks. Thank you for the questions. Both very good ones. On the cost side, look, I think, you know, when it comes to cost being elevated in Q1, particularly at Xavantina, but also at Caraíba, you know, I would point to the second half waiting. We do expect all else being equal for cost to fall back down in line. Xavantina being the biggest outlier, but again, almost pure denominator volume-based when you look at the impact of C1 versus the full year guide. As Wayne outlined and as we’ve shown on slide 7, I believe, of the webcast presentation, the implied impact on diesel consumables that are diesel linked right now at steady state is about $0.05-$0.10.

That’s part of the reason that we do provide a cost guidance range, is there’s uncertainty around those. With respect to the BRL, your guess is as good as mine. In fact, it’s probably better than mine at this point. I think what we can say is that we’ve protected our business against a floor of BRL 5.54, and that’s really the most important message for the BRL. Again, all else being equal and ignoring foreign exchange, given that $0.05-$0.10 impact that we’re seeing, notwithstanding the various gives and take both on byproduct credits and on FX, I think it’s reasonable to assume that we’d be trending at present moment towards the high end of the cash cost guidance range.

Again, we have a number of months ahead of us, and it’s a very, very volatile time. I think it’s really too early to give a clear steer one way or another. We do see costs coming down pretty meaningfully as production volumes ramp up in the second half of the year. On shift change, for context, for the rest of the people on this call, there’s a movement happening in Brazil right now and some legislation being proposed in Congress to eliminate the six by one shift schedule. What that means in practical terms is that most of our operators, like all industrial operations in Brazil or most industrial operations, operate six days on, one day off, and on a six-hour shift basis.

The proposal is to, I would say, more closely align with conventional shift schedules, meaning that, towards 8 hours, that incremental underground time would be a gain for us. I think it would be a gain for our workforce, quite frankly. It’s one of those rare opportunities where you have a proposal at the federal level that is good for companies, good for our workforce. In fact, when you look at what we’ve done over the last 12 months, all of our surface operations operate on 12-hour shifts. We’ve made some of those changes within the last 6 months, and the feedback from our operators has been fantastic. We’d really like to see that legislation get passed through and change.

Obviously, there’s a few roadblocks and hurdles to that getting passed. Difficult to say whether it’s this year or next year. Given the positive momentum that we’re seeing, not only within our own operations, but Brazil more broadly, we’re hopeful that that shift change gets implemented or that legislation gets passed. Again, not including our guidance, it’s more of a longer-term benefit. Again, when I look at the continuity of shift change, I look at the feedback from our employees where we have made those changes, and moving people to a 4 day on, 4 day off rotation has just been such a positive change, not only for operations, but also for quality of life for our workforce. Really love to see it happen.

Again, I think it would be a nice boost to productivity. We’re not relying on it for our guidance for this year.

Guilherme Rosito, Analyst, Bank of America: All right. Thanks, Marco. If only I had a good guess for the BRL. Thank you for answering the question. Bye.

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: If you do, please let us know.

Operator: The next question comes from Anita Soni with CIBC. Please go ahead.

Anita Soni, Analyst, CIBC: Hi, Marco and team. Thanks for taking my question. I think that most of them have been asked and answered, I just wanted to get a little bit of detail on the grade profile at Xavantina into the back half of the year. I just wanna understand how those costs will come down from the level that they were in Q1.

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: Thank you, Anita. The main difference we see is really in the 2 halves, so stronger grades second half. I think really when you look at, you know, the 1st half and is really about the change in volume from Q1 to Q2. We expect grades to be relatively similar with a step up in the 2nd half. I would say full year still very closely aligned with reserve grade. We don’t, you know, see a major delta in terms of overall reserve grade for, you know, for this year’s production. Obviously, that depends a lot on sequence. We’ve got in aggregate, you know, near close to 1 million ounces of reserves when you include the resources, when you include all categories. There’s a lot of material there relative to our 1-year production.

We see grades this year, full year on a blended basis, being fairly well aligned with our reserve grade.

Anita Soni, Analyst, CIBC: Okay. Just in terms of the recovery rates, is that kind of the level at around 81%, or would that also improve into the back half of the year? Just trying to get an understanding where recovery is going.

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: Yeah. Yeah. Thank you, Anita. We see that improving for a couple reasons. First quarter, we did replace some equipment that was aging in our operations, so we put in a new Falcon concentrator, gravity concentrator, that we expect to increase performance, and we were seeing that. We also are getting a little bit higher throughput volumes, which tends to stabilize the operation, and also a little bit higher grades. You know, when we look out to the rest of the year, we see recoveries normalizing in the high 80s at this grade profile. While that may be different from prior years, say that, obviously it depends on the amount of organic carbon that’s coming in feed.

We see the high eighties for this year as being the right number to look at on a normalized basis.

Anita Soni, Analyst, CIBC: Okay. As you go into next year, that would it climb to say the 90%, or is that the high 80s where we should have it?

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: Yeah. Look, we’re putting in considerable effort this year to improve operations. I think our target still remains, you know, low 90s. That’s for sure still our target. We have a few initiatives ongoing to help achieve that. I would say stay tuned for that. We hope to be talking around some of those objectives and plans at Xavantina on our Capital Markets Day in the fall.

Anita Soni, Analyst, CIBC: Thank you very much.

Operator: The next question comes from Emerson Vieira with Goldman Sachs. Please go ahead.

Emerson Vieira, Analyst, Goldman Sachs: Hello. Good morning, team. Can you hear me?

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: Barely, to be honest.

Emerson Vieira, Analyst, Goldman Sachs: Is it better now?

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: Yes. Just speak slowly, and I think we’ll be able to. It’ll come through.

Emerson Vieira, Analyst, Goldman Sachs: All right. All right. Thanks for the time, guys. Just on Xavantina, I just want to understand what is your guys’ expectations for gold production comparing to the guidance. I mean, it’s pretty clear that grades should improve as well as throughput because you’re getting access to the higher stilts, right? Even so, I mean, the change in production should be quite material to deliver on the low end of the guidance. Just trying to understand here, if you guys think that Xavantina gold production is now more skewed to the low end of the guidance. This is the first question. Just a second one on Tucumã. I mean, it’s also pretty clear that we should see an improvement in second Q, just looking at, I mean, second half.

Just looking at 2Q specifically, I mean, what are your expectations for throughput in grades, given that, I mean, grades should decline materially by the second half, but on the other hand, the throughput should also improve. So just specifically on 2Q for Tucumã and on Xavantina’s group production guidance, please. Thank you.

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: Yeah. When we think about Xavantina, I think it’s important looking at throughput volume and I hear what you’re saying on the step-up. I would look at Q4, really the second half of last year in terms of throughput volume and what we achieved there, as being, you know, aligned with our expectation. Obviously, a little bit of a step-up given some of the work we’re doing now in development. When I look at the second half of April, into May and the development rates that we’re achieving, as well as some of the productivity in preparing stopes and having better access to higher grade, we still see ourselves firmly within that guidance range. I understand the nature of the question.

If we felt the guidance was at risk, then obviously we’d be talking about a different guidance range. We still feel comfortable with where we’re at, particularly looking at second half of April and the first few days in May here. I hope that addresses the question on Xavantina. At Tucumã, in terms of grade, when I think about the full year, I think you used the word material decrease in grade, but we’re looking at a, you know, a fairly elevated grade profile for the whole year. We were at 1.66 in Q1. Full year average, we’re still looking around 1.4.

You know, you can look at the rate of decline there, and I would argue that it’s still very high grade across the full year.

Emerson Vieira, Analyst, Goldman Sachs: All right. Very clear. Thank you.

Operator: This concludes the question and answer session. I would like to turn the conference back over to Makko DeFilippo for any closing remarks. Please go ahead.

Makko DeFilippo, President and Chief Executive Officer, Ero Copper: Thank you everyone for joining us this morning. Thank you for the questions. As always, we appreciate the thoughtful dialogue. We’re available for any follow-up questions. Please feel free to reach out to our investor relations team directly. We will make ourselves available as needed as always. Lastly, just a reminder that we have our Ero Capital Markets Day, September 14th, that we are hosting in São Paulo. Look forward to seeing many of you there. Thank you again. Have a great day, everyone.

Operator: This brings to a close today’s conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.