Ero Copper(ERO) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported cash flows from operations of $17.2 million and adjusted net income attributable to owners of the company of$ 16.8 million or $0.16 per share on a diluted basis [62] - C1 cash costs averaged$ 2.30 per pound produced during the quarter, expected to decrease throughout the year due to projected increases in copper grades and production [56][44] - The company reaffirmed its full-year production guidance of 42,000 to 47,000 tons, with production expected to be weighted towards the second half of the year [56][44] Business Line Data and Key Metrics Changes - At Xavantina operations, gold production increased to 18,234 ounces, a rise of approximately 47% compared to Q1 2023, with C1 cash costs averaging $395 per ounce, below the full-year guidance [43][44] - The Caraiba operations processed approximately 853,000 tons, up over 5% compared to Q4, despite a planned decrease in mined and processed copper grades [44] - Average processed copper grades were reported at 1.08%, with production of 8,091 tons after recoveries of approximately 88% [75] Market Data and Key Metrics Changes - Copper prices rallied to their highest levels in nearly two years, driven by rising demand expectations and a constrained supply outlook [53] - The company locked in two-year TC/RC terms in the low teens on roughly one-third of projected concentrate production, enhancing its pricing strategy [53][28] Company Strategy and Development Direction - The company is focused on completing the Tucuma project, which is approximately 97% complete, with initial production expected in early Q3 2024 [42][48] - There are plans for a potential second concentrated plant in the northern part of the project, although this is still in preliminary evaluation stages [8] - The company aims to maintain its position as one of the lower-cost producers of copper globally by accessing high-grade ore bodies [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving 80% of nameplate capacity at Tucuma by the end of Q3, with a standard ramp-up rate expected over nine months [26][48] - The company highlighted a strong safety culture, with over five million hours of work completed without lost time injuries [54] - Management acknowledged macro and geopolitical uncertainties affecting gold prices, which have reached all-time highs, benefiting the company's operations [41] Other Important Information - The company entered into a$ 50 million non-priced copper prepayment facility, providing cost-effective capital in a favorable copper market [33] - A favorable move in foreign exchange led to a realized gain on foreign exchange hedges of $2.1 million [62] - The company is evaluating nickel exploration opportunities, with a focus on being strategic and disciplined in its approach [100][90] Q&A Session Summary Question: What is the expected throughput for Caraiba in 2024? - Management indicated that achieving nearly four million tons of throughput is reasonable, with expectations for average grades to improve [38] Question: Are there any delays in underground development at Caraiba? - Management confirmed that issues related to underground development are largely behind them, with strong development rates and production expected [15] Question: What are the critical path items for the Tucuma ramp-up? - Key items include electrical installations, automation, and minor piping, with significant progress already made [19][20] Question: What are the terms for concentrate offtake in the second half of the year? - Management mentioned favorable concentrate treatment and refining charges locked in for about one-third of production, with terms in the low-teens [28] Question: When will the definitive agreement for the Furnas project be finalized? - Management stated that the agreement is imminent and is being finalized with Vale [30] Question: What is the expected sustaining capital for the first year of Tucuma operations? - Management anticipates minimal sustaining capital in the first year, with most costs expensed [102]