Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $51.5 million and adjusted net income attributable to owners of the company of $18.6 million, or $0.18 per share on a diluted basis, compared to Q1 2024 [18] - Operating cash flow for the second quarter was $14.7 million, reflecting solid production and favorable market conditions [10] - C1 cash costs for copper production decreased to $2.16 per pound, driven by lower treatment charges and a stronger U.S. dollar against the Brazilian Real [9][18] Business Line Data and Key Metrics Changes - At Caraiba, copper production increased by 9.6% to 8,867 tons in concentrate, with tons processed up 12.2% quarter-on-quarter [7] - Xavantina operations saw gold production of 16,555 ounces, with tons processed up 6.9% quarter-on-quarter and unit operating costs below budget at $428 C1 cash costs per ounce [9] - The Tucuma Project achieved first saleable copper concentrate production in mid-July, with expectations to reach commercial production levels by the end of Q3 [5][12] Market Data and Key Metrics Changes - The strengthening of the U.S. dollar against the Brazilian Real increased from 5.01 on March 31 to 5.55 on June 30, benefiting operating costs but resulting in non-cash unrealized foreign exchange losses [18] - The company secured a blending treatment charge of just over $5 per ton for copper concentrate, significantly lower than the previous average of nearly $80 per ton [8][9] Company Strategy and Development Direction - The company is focused on doubling copper production next year and advancing its long-term growth strategy, highlighted by a definitive agreement with Vale Base Metals on the Furnas Copper Project [5][6] - The ramp-up of the Tucuma Project is a priority, with plans to shift focus to the Furnas project after completion of Tucuma's construction [15] - The company aims to deleverage its balance sheet while maintaining exploration budgets, reallocating resources to the Furnas project without significant changes to overall exploration expenses [26] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced during the quarter, including a fatal incident at Caraiba Operations, emphasizing a commitment to safety [4] - The company expects consolidated copper production to increase sequentially each quarter, driven by the ramp-up at Tucuma and higher mined grades at Carajás [10] - Full-year unit operating costs are projected to be lower than originally budgeted, with a reduction in gold C1 cash cost guidance by $100 to a range of $450 to $550 per ounce [11] Other Important Information - The company is on track to publish a maiden resource estimate for the Furnas project later this year, following extensive environmental studies and validation programs [6][15] - The ramp-up expenditures guidance for Tucuma has been increased due to early mining and associated costs, reflecting a revised tax position [14][58] Q&A Session Summary Question: Can you provide more details on the ramp-up at Tucumã? - The ramp-up is progressing well, with concentrate grades above expectations and recovery rates near design targets, achieving 40% to 50% of design throughput capacity [23] Question: Will there be financials related to Tucumã before reaching commercial production? - In Q3, some costs will be expensed as revenue is generated, but until commercial production is reached, only a portion of costs will be expensed [25] Question: What is the focus for 2025 regarding free cash flow? - The focus will be on deleveraging the balance sheet, with no significant changes expected in the overall exploration budget [26] Question: Can you confirm if there was a seismic event at Caraiba? - Yes, there was a seismic event, but it was unrelated to the fatality incident, and operations were temporarily evacuated as a precaution [28][29] Question: What are the grade expectations for the second half of the year at Caraiba? - The expectation is for a higher proportion of high-grade stopes, leading to improved grades compared to the first half of the year [31] Question: What is the strategy for the Furnas project? - The company plans to approach Furnas as an underground mine, requiring infill drilling and extending the deposit to depth [51]
Ero Copper(ERO) - 2024 Q2 - Earnings Call Transcript