Ero Copper Corp. ((TSE:ERO)) has held its Q4 earnings call. Read on for the main highlights of the call.
Ero Copper Corp’s recent earnings call painted a mixed picture of strong production and financial performance, tempered by operational challenges and market volatility. The company celebrated record copper production and improved metal prices, which bolstered cash flow and adjusted EBITDA. However, issues such as the ramp-up challenges at Tucuma, increased costs, and foreign exchange volatility were also highlighted as significant concerns. Ero Copper is focusing on addressing these issues while planning for future growth.
Record Copper Production and Improved Metal Prices
Ero Copper reported a milestone achievement with record copper production in the fourth quarter, which significantly contributed to robust cash flow and adjusted EBITDA. The company generated $60.8 million in cash flow from operations for the quarter and $145.4 million for the full year. Adjusted EBITDA was reported at $59.1 million for the quarter and $216.2 million for the year, underscoring the positive impact of improved metal prices on financial performance.
Successful Ramp-Up and Higher Grades at Tucuma
The Tucuma project was a highlight, completed on schedule without any lost time injuries. The mining operations have been progressing ahead of schedule, with higher than expected grades from the infill drill program. The process plant has consistently achieved or exceeded design net recoveries and concentrate grades, marking a successful ramp-up phase.
Strengthened Liquidity Position
Ero Copper has bolstered its financial flexibility by amending its existing credit facility, increasing total commitments from $150 million to $200 million. This move included securing a 25 basis point reduction in the applicable margin on drawn funds at certain leverage ratios. The pro forma available liquidity at year-end stood at $140.4 million, reflecting a strengthened liquidity position.
Challenges in Tucuma Ramp-Up
Despite the successes, the Tucuma project faced significant challenges, including a multi-week power outage caused by an extreme weather event and ongoing intermittent power quality issues. Additionally, material flow constraints and damage to one of the three tailings filters impacted the project’s operating flexibility.
Increased Costs and Lower Production Guidance
Ero Copper anticipates higher C1 cash costs due to conservative foreign exchange assumptions and lower grades at Caraiba. The company expects production in the first quarter to be the softest of the year at both Caraiba and Xavantina, attributed to operational adjustments and investments.
Foreign Exchange Volatility Impact
The company reported realized losses of $5.9 million for the quarter and $8.2 million for the year on foreign exchange hedges. This volatility impacted adjusted net income by approximately $0.06 per share for the quarter and $0.08 per share for the year, highlighting the financial impact of foreign exchange fluctuations.
Forward-Looking Guidance
Looking ahead, Ero Copper outlined its strategic priorities for 2025, focusing on achieving commercial production at Tucuma, deleveraging the balance sheet, advancing long-term growth initiatives, and initiating shareholder returns. The company aims to achieve a net debt leverage ratio of 1.5 times, influenced by copper prices and operating margins. Despite operational challenges, the company expects improved plant reliability and production increases beginning in the second quarter, aligning with its reaffirmed full-year guidance.
In summary, Ero Copper Corp’s earnings call reflected a strong production and financial performance, despite facing operational challenges and market volatility. The company’s focus on resolving these issues and planning for future growth remains a priority, with forward-looking strategies aimed at enhancing production and financial stability.