Ero Copper’s Shareholder Return Timelines Clash With Debt Paydown Priorities in 2026 Earnings Calls

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Date of Call: Aug 6, 2026

Financials Results

• Revenue: $284.3 million, up 8% from the first quarter

Guidance:

• Copper C1 cash costs expected to decline sequentially through the remainder of the year.
• Full-year consolidated copper C1 cash cost guidance maintained.
• Javanchina mine gold production expected to be at low end of maintained guidance range; C1 cash cost guidance updated to $1,100 to $1,350 per ounce, all-in-sustaining cost guidance updated to $2,200 to $2,700 per ounce.
• Consolidated capital expenditure guidance increased by $10 million to $285 million to $330 million, including new power line at Javanchina.

Business Commentary:

Operational and Financial Performance:

• AeroCopper reported a 50% increase in cash flow from operations quarter-on-quarter to $138 million, and adjusted EBITDA increased to $144 million.
• The improvement was driven by operational momentum and commodity price tailwinds.

Debt Reduction and Leverage Improvement:

• Net debt was reduced by $38 million during Q2, bringing the net debt leverage ratio down to 0.8 times.
• Strong cash generation enabled significant progress in leveraging the balance sheet, with an additional $25 million repaid in July, totaling $60 million in 2026.

Production and Cost Guidance:

• Copper operations produced 17,315 tons of copper in Q2 at a consolidated cash cost of $2.42 per pound.
• The company maintained full-year production and cost guidance, with expectations of stronger performance in the second half due to investments in infrastructure and operational improvements.

Gold Production and Concentrate Sales:

• Javanchina mine produced more than 20,000 ounces of gold in Q2, with a 170% quarter-over-quarter increase.
• This was supported by improved mining rates and increased contributions from historic gold concentrates, with sales volumes significantly increasing in June and July.

Capital Expenditure and Project Advancements:

• Capital expenditure guidance was increased by $10 million to include a new power line at Javanchina.
• The investment is expected to strengthen site infrastructure and reduce power transmission costs, with the project on track for completion by year-end.

Sentiment Analysis:

Overall Tone: Positive

• CEO stated 'our strategy is working' and highlighted 'solid financial performance,' 'stronger cash generation,' 'significant progress on leveraging our balance sheet,' and being 'positioned for a strong second half of 2026.' CFO noted 'cash flow from operations increased nearly 50% quarter-on-quarter' and 'adjusted EBITDA increased to $144 million.'

Q&A:

• Question from Matthew Murphy (BMO Capital Markets): Can you just remind me what expansion was completed and then what timeline are you currently looking at for adding these filters in the second half?
  Response: The expansion completed was adding filtration plates to existing filters, improving capacity by ~8%. Three modular filters are expected to arrive on-site in Q3 and be installed/operational in Q4.

• Question from Matthew Murphy (BMO Capital Markets): And then, Javentina, the addition of a dryer and filter press, what could that do for your Q3 concentrate sales?
  Response: Management declined to provide specific guidance but noted June and July achieved >7,000 ounces of gold each month, indicating positive performance for Q3 and the rest of the year.

• Question from Guillermo Rosito (Bank of America): What makes you so confident that you're reaching guidance? And what are your priorities in terms of capital allocation?
  Response: Confidence stems from improved development and mining rates at Javanchina accessing higher-grade ore and strong gold concentrate sales. Capital allocation priority is completing revolver paydown ($95M remaining) before considering shareholder returns.

• Question from Craig Hutchinson (TD Cowen): On Tucumã, have you done some drilling and is there potential to see measured indicated resources come into the mine plan?
  Response: An updated technical report on Tucumã is expected to be published this year.

• Question from Emerson Vieira (Goldman Sachs): Will TCRC renegotiations continue to provide offsets in the second half?
  Response: Benefit from renegotiated contracts will be spread over the remainder of the year, with some potentially flowing to Tucumã in H2.

• Question from Emerson Vieira (Goldman Sachs): What was the exit throughput at Tucumã and what could be increments in H2?
  Response: Throughput maintained between 250-260k tons per month in Q2, including 250k tons in July with 5 days of downtime. Encouraged by progress, with expectations to support H2 guidance.

• Question from Craig Hutchinson (TD Cowen): On Gervantina concentrate, where are we on the remaining 80% of stockpiles and when next update?
  Response: Unable to provide specific update as it is not supported by a 43-101 estimate; however, strong sales are expected through at least mid-2027.

• Question from Stefan Ioano (Cormark Securities): Can we interpolate Q2 C1 and ASIC costs for Javanchina concentrate gold as a steady state run rate?
  Response: Costs are mostly variable (transport) with little further reduction opportunity; margins remain healthy at ~$4,200 gold.

• Question from Oris Walkadow (Scotiabank): What is the update on the shaft sinking project at Caraiba and timeline?
  Response: Shaft is ~1,100m deep; sinking rate improving. Objective is to reach shaft bottom by year-end, with capital spend ~halfway through the annual budget and minimal inflationary pressure.

• Question from Rafael Barcelos (Bradesco BBI): Update on Pilar shaft productivity gains and timing? How do you balance shareholder remuneration vs. capital allocation for Furnas?
  Response: Pilar shaft expected to significantly improve productivity (full benefit in 2028). Capital allocation priority is completing revolver paydown before considering shareholder returns; focus remains on executing own portfolio.

Contradiction Point 1

Shareholder Return Timeline

Contradiction on when to expect an update on shareholder distribution policies.

Emerson Vieira (Goldman Sachs) - Emerson Vieira (Goldman Sachs)

2026Q2: The priority remains paying down the remaining $95 million of the revolver. Shareholder return discussions will come later after this milestone is achieved. - Marco DiFilippo(CEO)

"With strong cash and revolver paydown, will there be an update on shareholder distribution policies by 30-40% of next year?" - Emerson Vieira (Goldman Sachs)

2026Q2: The timeline for a shareholder return program depends on commodity price tailwinds and operational performance... The company will provide more clarity later in the year after achieving the second milestone of paying down the revolver. - Makko DeFilippo(CEO)

Contradiction Point 2

Capital Allocation Priority and Shareholder Returns

Contradiction on the timing for paying down debt versus considering shareholder returns.

Emerson Vieira (Goldman Sachs) - Emerson Vieira (Goldman Sachs)

2026Q2: The priority is completing the revolver paydown ($95M remaining). Shareholder return discussions will come later after this milestone is achieved. - Marco DiFilippo(CEO)

"With the strong cash position and revolver paydown, will the company update its shareholder distribution policies by 30-40% of next year?" - Orest Wowkodaw (Scotiabank)

2026Q1: The next focus is reducing the $145 million drawn on the revolver... In this price environment, free cash flow generation is expected to accelerate meaningfully, potentially allowing the company to discuss plans for returning capital to shareholders in the not-too-distant future. - Wayne Dreyer(CFO)

Contradiction Point 3

Tucumã Tailings Filtration Capacity Impact on Guidance

Contradiction on whether the new tailings filtration capacity is factored into the 2026 guidance.

Craig Hutchinson (TD Cowen) - Craig Hutchinson (TD Cowen)

2026Q2: A technical report for Tucumã is expected to be published this year. - Marco DiFilippo(CEO)

Are there plans to update the Tucumã reserve report considering recent time and price changes, and will measured/indicated resources be included in the mine plan? - Mateus Moreira (Bradesco BBI)

2026Q1: The new modular tailings filters... will increase capacity by ~7% per existing press. This improvement is not reflected in the 2026 full-year guidance. - Makko DeFilippo(CEO)

Contradiction Point 4

Timeline for Sales from the Javanchina Gold Concentrate Stockpile

Contradiction on the expected duration for selling the unsampled stockpile.

Craig Hutchinson (TD Cowen) - Craig Hutchinson (TD Cowen)

2026Q2: No forward-looking guidance can be provided... However, strong sales in June/July are expected to continue through at least mid-2027. - Marco DiFilippo(CEO)

What is the update on the remaining 80% of the Javanchina gold concentrate stockpile that hasn't been sampled? - Orest Wowkodaw (Scotiabank)

2025Q4: Sales are expected to be very modest in Q1 2026 due to the rainy season, then ramp up aggressively in Q2 and Q3. The timeline aligns with guidance of sales through mid-2027, give or take a month. - Marco DiFilippo(CEO)

Contradiction Point 5

Capital Allocation Priority for Shareholder Returns

Contradiction on the timing for initiating shareholder return discussions.

Guillermo Rosito (Bank of America) - Guillermo Rosito (Bank of America)

2026Q2: The priority is completing the revolver paydown ($95M remaining). Shareholder return discussions will come later after this milestone is achieved. - Marco DiFilippo(CEO)

Considering the strong cash position and revolver paydown, will there be an update on shareholder distribution policies by 30-40% of next year? - Fahad Tariq (Jefferies)

2025Q4: Steps for potential capital return: 1) Achieve net debt leverage <1x, 2) Pay down the $155M drawn on the revolver, 3) Engage with top shareholders. - Marco DiFilippo(CEO)

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