Q4 2023 Ero Copper Corp Earnings Call
Okay.
Thank you for standing by this is the conference operator welcome to the Arrow go sorry, Arrow copper fourth quarter and full year 2023, operating and financial results Conference call.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Ero Gold, sorry, Ero Copper fourth quarter and full year 2023 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. To join the question queue, you may press star, then one on your telephone keypad.
All participants are in listen only mode and the conference is being recorded.
The presentation there'll be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you May signal, an operator by pressing Star then zero.
Operator: Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Courtney Lynn, Senior Vice President of Corporate Development, Industrial Relations, and Sustainability. Please go ahead. Thank you, operator. Good morning and welcome to Ero Copper's fourth quarter and full year 2023 earnings call. Our operating and financial results were released yesterday afternoon and are available on our website, as are our financial statements and MD&A for the 3 and 12 months ended December 31st, 2023. On the call with me today are David Strang, Ero's co-founder and chief executive officer, Makko DeFilippo, president and chief operating officer, and Wayne Drier, chief financial officer.
I would now like to turn the conference over to Courtney Lynn Senior Vice President of corporate development Investor Relations and sustainability. Please go ahead.
Thank you operator.
Good morning, and welcome to Arrow, Copper's fourth quarter and full year 2023 earnings call.
Our operating and financial results were released yesterday afternoon and are available on our website as are our financial statements and MD&A for the three and 12 months ended December 31st 2023.
On the call with me today are David Strang, <unk> co founder and Chief Executive Officer, Mako easily Bowe, President and Chief operating Officer, and Wayne Drier Chief Financial Officer.
We will be making forward looking statements that involve risks and uncertainties for much actual results may differ materially.
Courtney R. B. Lynn: We will be making forward-looking statements that involve risks and uncertainties for which actual results may differ materially. We would refer you to our most recent annual information form, available on our website, CDAR and EDGAR, for a discussion of the risk factors of our business and their potential impact on future performance. As a reminder, and unless otherwise noted, all amounts are in U.S. dollars. I will now pass the call over to David Strang.
We would refer you to our most recent annual information form available on our website SEDAR and Edgar for a discussion of the risk factors of our business and their potential impact on future performance.
As a reminder, unless otherwise noted all amounts are in U S dollars I will now pass the call over to David Strang.
Thank you Courtney and thank you all for joining us today.
David Maxwell Strang: Thank you, Courtney, and thank you all for joining us today. 2023 was a cornerstone year for our company. Highlighted by significant accomplishments across our organic growth initiatives. In addition to making significant strides towards doubling copper production to approximately 100,000 tons in 2025, we achieved targeted gold production levels of nearly 60,000 ounces following the successful completion of Javantina's NX60 initiative. I'm pleased to share an update on our Tukama project, which Makko will elaborate on, where we've surpassed 90% physical completion while maintaining our forecast capital expenditure guidance of $310 million. I'm also happy to report that commissioning is advancing smoothly. We completed dry commissioning of the crushing circuit in February, beating our timeline by one month, and expect to put the first ore through the mill in April. We have also made significant progress on the Pilar 3.0 initiative at our Kariba operation.
2023 was a cornerstone for our company.
Is it by significant accomplishments across our organic growth initiatives.
In addition to making significant strides towards doubling couple of production to approximately 100000 tons in 2025.
We achieved targeted gold production levels of nearly 60000 ounces. Following the successful completion of the 17 as an X 60 initiative.
I'm pleased to share an update on our it took them a project, which Michael will elaborate on where we've passed 90% physical completion, while maintaining our forecast capital expenditure guidance of $310 million.
Okay.
I'm also happy to report that commissioning is advancing smoothly.
We completed dry commissioning of the crushing circuit in February beating out timeline by one month and expect to put first ore through the mill in April.
We also made significant progress on the below a 3.0 initiative how are you.
Operations.
David Maxwell Strang: This included the completion of the mill expansion project, where we achieved design capacity prior to year end, and the initiation of main shaft sinking at the new external shaft in December, following the completion of supporting surface infrastructure. While these growth initiatives or growth investments drove elevated capital expenditures in 2023, they have also started to reflect positively on our cash flows from operations. More specifically, record gold production drove a meaningful expansion of operating margins at the Javantina operations that contributed to a $20 million year-on-year increase in consolidated Eurogroup cash flow from operations, which totaled $163 million.
This included completion of the mill expansion project, where we achieve design capacity prior to year end.
And the initiation of main shaft sinking at the new external shock in December.
Following the completion of supporting surface infrastructure.
While these growth initiatives and our growth investments drove elevated capital expenditures in 2023. They have also started to reflect positively in our cash flows from operations.
Most specifically record gold production drove a meaningful expansion of operating margins at the <unk>. The operations that contributed to a 20 million year on year increase in consolidated era group cash flow from operations, which totaled $163 million.
At 2023 financial performance also reflects the opportunistic implementation of risk mitigation measures throughout the year.
David Maxwell Strang: 2023 financial performance also reflects the opportunistic implementation of risk mitigation measures throughout the year, including an expanded foreign exchange hedge program that yielded realized gains of over $11 million and helped to soften the impact of a stronger Brazilian REI against the U.S. dollars. We took an additional proactive measure during the fourth quarter amid a challenging macroeconomic landscape that drove short-term copper price uncertainty. And both stood on a balance sheet with a bought deal equity finance.
Including an expanded foreign exchange hedge program that you.
Realized gains of $11 million and helped to soften the impact of a stronger Brazilian real.
The U S dollar.
We took an additional proactive measure during the fourth quarter amid a challenging macro economic landscape that drove short term copper price uncertainty.
And bolstered our balance sheet with a bought deal equity financing.
David Maxwell Strang: This offering generated net proceeds totaling approximately $104 million and contributed to our year-end liquidity position of $262 million. Since the offering in early November, the copper market outlook has improved with supply and demand fundamentals now signaling supply deficits in 2024 and 2025. The shift is being reflected in the copper price as well as copper concentrate treatment and refining charges, which have dropped to their lowest level since 2013.
This operating offering generated net proceeds totaling approximately $104 million and contributed to our year end liquidity position of $262 million.
Since the offering in early November the copper market outlook has improved with supply demand fundamentals now signaling supply deficits in 2024 and 2025.
The shift is being reflected in the copper price as well as copper concentrate treatment and refining charges, which have dropped to the lowest level since 2013.
David Maxwell Strang: Seizing this opportunity, we are proactively securing smelting terms for the majority of our concentrate production through the end of 2025. These developments come at a favorable time as we approach initial production at Tukama. With capital expenditures on this project winding down through the first half of this year, we're approaching an exciting inflection point in our consolidated copper production and cash flow profile. We also look forward to finalizing a definitive earning agreement with Valley Based Metals on the Firmass Copper Project. With the necessary paperwork progressing smoothly, we expect to embark on the first phase of drilling later this year. Before turning the call over to Makko for a deeper dive into our project execution, I will briefly touch on our operating performance. At the Catahiba Operations, we process 3.2 million tons of ore per year.
Seizing this opportunity we are proactively securing smelter terms for the majority of our concentrate production through the end of 2025.
These developments come at a favorable time as we approach initial production to come out.
With capital expenditures on this project winding down through the first half of this year, we are approaching an exciting inflection point in our consolidated copper production and cash flow profile.
We also look forward to finalizing a definitive earning agreement with Vale base metals on the firm asked couple of project.
With the necessary paperwork progressing smoothly, we expect to embark on a close phase of drilling later this year.
Before turning the call over to Marco for a deeper dive into our project execution.
Briefly touch on our operating performance.
At the counter you bought operations, we processed $3 2 million tonnes of ore during the year.
David Maxwell Strang: While this represented an impressive increase of approximately 13% compared to 2022, fourth quarter and full year mill throughput volumes slightly missed our targets due to approximately one week of additional unplanned downtime related to the completion of the mill expansion project. However, processed copper grades and metallurgical recoveries were in line with our expectations, averaging 1.49% and 91.4%, respectively, and resulting in full year copper production of 43,857 tons of copper in concentrate, including 11,760 tons of copper in concentrate in the fourth quarter. Regarding our C1 cash costs at Kariba, we reported $1.75 for the fourth quarter and $1.80 for the full year.
This represented an impressive increase of approximately 13% compared to 2022 fourth quarter and full year mill throughput volumes slightly missed up targets due to approximately one week of additional unplanned downtime related to the completion of the mill expansion project.
However process process copper grades and metallurgical recoveries were in line with our expectations, averaging 1.49% and 91, 4%, respectively, and resulting in full year copper production of 43857 tonnes of copper in concentrate including <unk>.
7000, and 760 tonnes of copper and concentrate in the fourth quarter.
Regarding I'll see one cash cost cutting, but we reported $1 75 for the fourth quarter and $1 80 for the full year.
David Maxwell Strang: These figures reflect our new C1 Cash Cost Calculation methodology that was updated in light of changes to Carderiba's Copper Concentrate sales channel. While Wayne will provide more insights on this methodology change, I want to note that the impact on our C1 reported... on our reported C1 cash costs is counterbalanced by an equivalent increase in reported realized copper prices. As we quickly approach the end of the first quarter, the cadence of production and cash costs is aligned with our expectations. More specifically, Caribas production is expected to be lowest in the first quarter, with processed copper grades projected to be the lowest for the year, and processed tonnage expected to increase between 5 and 10 percent compared to the fourth quarter. Consequently, we expect C1 cash costs to be the highest in the first quarter of this year.
These figures reflect a new C. One cash cost calculation methodology that was updated in light of changes to comedy because copper concentrate sales channels.
Well Wayne will provide more insights on this methodology change I want to note that the impact on our C. One reported.
On a reported C. One cash cost is counterbalanced by an equivalent increase in reported realized copper prices.
Okay.
As we quickly approach the end of the first quarter.
The cadence of production and cash cost is aligned with our expectations.
More specifically how do you best production is expected to be <unk>.
Lois in the first quarter with process copper grades projected to be the lowest for the year.
Tonnage expected to increase between five and 10% compared to the fourth quarter.
Consequently, we expect to see one cash cost to be the highest in the first quarter of this year.
Turning to our 17 of operations, we reported another stellar quarter.
David Maxwell Strang: Turning to our Javentina operations, we reported another stellar quarter, capping a year of record gold production and record operating margins, thanks to contributions from the new Matinho vein. Grossest gold grades continued to exceed our expectations during the fourth quarter, averaging over 17 grams per ton and resulting in production of 16,867 ounces at C1 cash costs and all in sustaining costs of $413 and $991 per ounce, respectively. For the full year, production was up 39% compared to 2022, driven by a nearly 100% increase in processed gold grade. This resulted in four-year production of 59,222 ounces at C1 cash costs and all-in sustaining costs of $422 and $957 per ounce, respectively.
Capping a year of record gold production and record operating margins. Thanks to contributions from the new Martin year vein.
Closest gold grades continued to exceed our expectations during the fourth quarter, averaging over 17 grams per tonne and resulting in production of 16867 ounces at sea, one cash costs and all in sustaining cost of $413.
$991 per ounce respectively.
For the full year production was up 39% compared to 2022, driven by nearly 100% increase in process gold grades.
This resulted in full year production of 59222 ounces as seaborne cash costs and all in sustaining cost of $422 and $957 per ounce respectively.
Yeah.
David Maxwell Strang: As we progress through the first quarter, we continue to observe positive grade reconciliations, with mined gold grades at 7 Trentina trending above 15 grams per pound. Consequently, our expectations around the cadence of full-year production remain consistent with our previously issued guidance, with the first quarter anticipated to deliver the highest quarterly production levels in 2024. I'll now hand the call over to Makko to provide more comprehensive details on our project execution, after which, Wayne will touch on our financial results. Thank you, David, and good morning, everyone.
As we progress through the first quarter, we continued to absorb observed positive grade reconciliations with mine gold grades at Chevron Tina trending above 15 grams per tonne.
Consequently, our expectations around the cadence of full year production remains consistent with our previously issued guidance with the first quarter anticipated to deliver the highest quarterly production levels in 2024.
I'll now hand, the call over to Marco to provide more current preemptive detail on our project execution after.
After which Wayne will touch on our financial results.
Thank you David and good morning, everyone. Highlighting what was said earlier, we have continued to make outstanding progress across the entirety of our project portfolio.
Makko DeFilippo: Highlighting what was said earlier, we've continued to make outstanding progress across the entirety of our project portfolio. Starting at Tucum, where we continue to make huge strides across all workstreams throughout the project, our most notable achievement to date is reaching 4 million hours without a lost time. Our primary goal at Tsukama is to deliver the project safely, and our performance to date demonstrates the commitment of our site teams and construction partners in achieving this goal. As David mentioned, we completed the construction and commissioning of our crushing circuit, as well as our screening and conveyance systems, in order to place the first crushed ore on the reclaimed stockpile approximately one month ahead of schedule. On the milling and flotation side, mechanical equipment is installed, and completion testing is well underway.
Starting at two come off where we continued to make huge strides across all work streams throughout the project. Our most notable achievement to date is reaching 4 million hours without a lost time incident or.
Our primary goal to come off is to deliver the project safely and our performance to date demonstrates the commitment of our site teams and construction partners in achieving this goal.
As David mentioned, we completed the construction and commissioning of our crushing circuit as well as our screening and conveyance systems in order to place first crushed ore on the reclaim stockpile approximately one month ahead of schedule.
On the milling and floatation side mechanical equipment is installed and completion testing is well underway. The last piece of milling equipment. Our high intensity grinding mill is currently in route to site from Salvador and its delivery onsite remains fully aligned with our project execution schedule.
Makko DeFilippo: The last piece of milling equipment, our high-intensity grinding mill, is currently en route to site from Salvador, and its delivery on site remains fully aligned with our project execution schedule. We are currently focused on completing piping, cabling, instrumentation, and ancillary installations around the mill and flotation areas, and we're preparing to run the first ore through the mill in April. During the month of May, we expect to complete the commissioning of the flotation circuit as well as the high-intensity grinding mill to initiate integrated commissioning across the whole project in June. On the mining side, we continue to progress well ahead of schedule. The continued outperformance by our mining contractor allowed us to close February with approximately 25,000 tons of ore in the run-of-mine stockpile and an additional 70,000 tons of stripped ore in the mine ready to be blasted. We currently expect to have over 300,000 tons of ore available in the run-of-mine stockpile by the end of the first quarter.
We are currently focused on completing piping cabling.
<unk>.
And ancillary installations around the mill and flotation areas.
Pairing to run first ore through the mill in April.
During the month of May we expect to complete the commissioning of the flotation circuit as well as the high intensity grinding mill to initiate integrated commissioning across the whole project in June.
On the mining side, we continue to progress well ahead of schedule the.
The continued outperformance by our mining contractor has allowed us to close February February with approximately 25000 tons of ore in the run of mine stockpile and an additional 70000 tons stripped or in the mine ready to be blasted.
We currently expect to have over 300000 tonnes of ore available on a run of mine stockpile by the end of the first quarter.
Makko DeFilippo: If I take a step back from the details for a moment and think about the major components required for a successful ramp-up of any project, we are extremely well positioned. On site, we have completed all power infrastructure, our water reservoir is full, we have an ore stockpile ready to be processed, our equipment installations are on track, and we are ahead of our commissioning schedule. In addition, we have hired all of our site operational leadership and currently have more than 60% of our operational workforce contracted through our existing partnership with Sinai.
If I take a step back from the details for a moment and think about the major component parts required for a successful ramp up of any project, we are extremely well positioned.
Onsite, we have completed all power infrastructure, our water reservoir is full.
We have an ore stockpile ready to be processed or equipment installations are on track. We are ahead of our commissioning schedule.
And then in addition, we have hired all of our site operational leadership and currently have more than 60% of our operational workforce contracted through our existing partnership with C&I.
Makko DeFilippo: In short, we feel we are in a strong and enviable position to have a successful ramp. We anticipate reaching commercial production, which we define as 80% of nameplate capacity, by the end of the third quarter, and this ramp-up curve is aligned with our guidance for the year. As we announced in our January update, our total direct project capital estimate for completion of the Tukoma project was updated to approximately $310 million from $305 to reflect the impact of a stronger BRL in the fourth quarter, and this remains unchanged. At our Cariba operations, the execution of our Polar 3.0 initiative delivered two important milestones during the fourth quarter, as David touched on. At the Cariva Mill, we completed the integration of the expansion circuit in December and achieved design capacity of over 12,600 tons per day, or approximately 4.2 million tons per year, just prior to year end.
In short we feel we're in a strong and enviable enviable position.
To have a successful ramp up.
We anticipate reaching commercial production, which we define as 80% of nameplate capacity by the end of the third quarter and this ramp up curve is aligned with our guidance for the year.
As we announced in our January update our total direct project capital estimate for completion of the Tacoma project was updated to approximately $310 million from 305 to reflect the impact of a stronger Bureau in the fourth quarter and this remains unchanged.
At our Colorado operations, the execution of our pillar 3.0 initiative delivered two important milestones during the first quarter as David touched on.
At the car, even though we completed the integration of the expansion circuit in December and achieve design capacity of over 12600 tonnes per day or approximately 4.2 million tons per year, just prior to year end.
At the shaft project of the pillar mine, we initiated the main sink phase of the project just prior to year end as planned following completion and commissioning of the headframe personnel and stage winders as well as supporting surface infrastructure. We are currently remain the second and longest raise bore leg of the shaft.
Makko DeFilippo: At the Pillar Mine shaft project, we initiated the main sink phase of the project just prior to year-end, as planned, following completion and commissioning of the headframe, personnel, and stage winders, as well as supporting surface infrastructure. We are currently reaming the second and longest raised bore leg of the shaft, which we expect to complete by the end of the second quarter. Civil works are currently underway to set up the third and deepest raised bore leg of the shaft, which we expect to complete during the second half of this year. All underground development and infrastructure installations for the ore handling system of the new shaft are progressing on schedule.
Which we expect to complete by the end of the second quarter.
Civil works are currently underway to set up the third and deepest raised bore leg of the shaft, which we expect to complete during the second half of this year.
All underground development and infrastructure installations for the ore handling system of the new shaft are progressing on schedule.
At our expected average daily development rate, we anticipate reaching a depth of over 600 meters by year end and the project remains on track for shaft handover to operations in Q4 of 2026.
Lastly, touching briefly on our partnership with valid base metals on the furnaces project in parallel with finalizing definitive agreements. We have already initiated baseline studies and have commenced a QA QC program on the historic drill database.
Makko DeFilippo: At our expected average daily development rate, we anticipate reaching a depth of over 600 meters by year-end, and the project remains on track for shaft handover to operations in Q4 of 2026. Lastly, touching briefly on our partnership with Valley Based Metals on the Furnace Project, in parallel with finalizing definitive urban agreements, we have already initiated baseline studies and have commenced a QAQC program on the Historic Drill Database. Barring any requirement for twin hole drilling, we expect to be in a position to issue the first NI-43-101 resource estimate during the second half of this. I will now turn the call over to Wayne to discuss our financial results. Thank you, Makko.
Barring any requirement for twin hole drilling we expect to be in a position to issue. The first ni 43, 101 resource estimate during the second half of this year.
I will now turn the call to Wayne to discuss our financial results.
Thank you Micah as Dave highlighted our financial results for both the fourth quarter and full year positively reflected the execution of our growth strategy, particularly at the <unk> operations.
At the same time, we navigated persistent macroeconomic challenges, including copper price volatility and at BRL that was stronger than we projected at the beginning of 2023.
In line with our prudent financial approach, we took decisive steps to protect our cash flows with an expansion of our foreign exchange hedge program beginning in the third quarter.
Wayne Drier: As Dave highlighted, our financial results for both the fourth quarter and full year positively reflected the execution of our growth strategy, particularly at the Chiamantina operations. At the same time, we faced persistent macroeconomic challenges, including copper price volatility and a BRL that was stronger than we projected at the beginning of 2023. In line with our prudent financial approach, we took decisive steps to protect our cash flows with an expansion of our foreign exchange hedge program beginning in the third quarter. This resulted in realized gains of $4.2 million in the fourth quarter and $11.4 million for the full year and contributed to fourth quarter and full year cash flow from operations of $49.4 million and $163.1 million, respectively. Adjusted net income attributable to the owners of the company for the quarter and year were $20.7 million and $82.8 million, respectively, or $0.21 and $0.87 per share on a diluted basis.
This resulted in realized gains of $4 $2 million in the fourth quarter and $11 $4 million for the full year and contributed to fourth quarter and full year cash flow from operations of $49 $4 million and $163 $1 million respectively.
Adjusted net income attributable to the owners of the company for the quarter and year with $27 million and $82 $8 million, respectively, or 21, and 87 cents per share on a diluted basis.
It's worth noting that during the quarter, we recorded approximately $3 million.
Downs related to obsolete inventory and fixed assets this negatively impacted our earnings by approximately <unk>.
As we closed the year the total notional value of our foreign exchange derivative position, including Bud zero cost collars and Ford contracts exceeded $375 million.
These hedges, which cover nearly all of our Brazilian real denominated operating expenses and the majority of our major capital expenditures in 2024 have a weighted average floor and ceiling.
Ford.
499, and 536% respectively.
Wayne Drier: It's worth noting that during the quarter, we recorded approximately $3 million of write-downs related to obsolete inventory and fixed assets. This negatively impacted our earnings by approximately $0.03. As we close the year, the total notional value of our foreign exchange derivative position, including both euro-cost collars and Ford contracts, exceeded $375 million. These hedges, which cover nearly all of our Brazilian real denominated operating expenses and the majority of our major capital expenditures in 2024, have a weighted average floor and ceiling of $750 million. $4.99 and $5.36, respectively.
Of the total hedge program approximately $115 million allocated for major capital project expenditures with a weighted average floor and ceiling of 513 and $5 22, respectively.
Yeah.
With respect to the major projects that took them a project as a case in point, where we are observing a declining monthly capital expenditures as we near the end of construction.
Although we anticipate our total capital expenditures for the year to be weighted towards the first half a strong financial position, including available balance sheet liquidity of approximately 262 million at year end.
Cash flow from operations during the first half of this year that are projected to be consistent with the second half of 2023 insurers.
We equipped to support these investments.
Wayne Drier: Of the total hedge program, approximately $115 million is allocated for major capital project expenditures, with a weighted average floor and ceiling of 513 and 522, respectively. With respect to the major projects, the Tukama project is a case in point where we are observing a decline in monthly capital expenditures as we near the end of construction. Although we anticipate our total capital expenditures for the year to be weighted towards the first half, our strong financial position, including available balance sheet liquidity of approximately $262 million at year-end and cash flow from operations during the first half of this year, which is projected to be consistent with the second half of 2023, ensures we are fully equipped to support these investments. I'll pass the call back to David to share some closing thoughts.
I will now pass the call back to David to share some closing thoughts.
Thank you Wayne and thank you, everyone, who joined the call today.
Before we proceed to the question and answer session.
Want to extend my deepest gratitude to our teams in Brazil and here in Canada for their continued commitment and hard work in executing on both our operating plan now organic growth strategies.
With that I will now hand, the call back to the operator to open the line for questions.
Thank you well now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad now here at Cowen acknowledging it cool.
Speakerphone, please pick up your home coffee quite prevalent.
King.
To withdraw your question. Please press Star then two.
Our first question comes from.
Wow.
Capital. Please go ahead.
Thanks, operator, thanks for taking my questions.
Michael you talked about this 60% number.
With respect to labor hiring and just wondering for clarification is that the number that we should think about sort of for the permanent and operational workforce and and I'd like to know your thoughts on whether or not you're seeing any pressures on sort of the rate of hiring or see wage rates as we think about legal costs. The libra.
Wayne Drier: Thank you, Wayne, and thank you to everyone who joined the call today. Before we proceed to the question and answer session, I want to extend my deepest gratitude to our teams in Brazil and here in Canada for their continued commitment and hard work in executing on both our operating plan and our organic growth strategy. With that, I will now hand the call back to the operator to open the line for questions. Thank you. We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad.
Component of those operating costs.
Yeah. Thanks for the question of I I missed the first part about the 60%, but maybe just to kind of illustrate some of the key factors here. So.
It's important to note that on the mining side, we are using contract mining. So our component of the workforce is really related to the plant the administration and the operational support areas such as the lab security warehousing et cetera. So it's a smaller component of the total workforce.
Operator: You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. The first question comes from Ralph Profitti with Ape Capital. Please go ahead. Operator, thanks for taking my question. Um, Makko, you talked about this 60% number with respect to labor hiring. And just wondering for clarification, is that the number that we should think about sort of for the permanent and operational workforce? And I'd like to know your thoughts on whether or not you're seeing any pressures on the rate of hiring or, say, wage rates as we think about labor costs, the labor component that goes on. Yeah, thanks for the question.
The 60% that we've contracted.
To date is in partnership with the National Labor Development Authority Sinai and there are facilitating the training for the operation of the project.
We will continue to increase that number as we wrap up here I think the main objective for US was in focus at this stage was really on the operational leadership, which would be our managers, our coordinators and supervisors and all those rules are 100% fulfilled.
In terms of inflation in labor.
It continues to be a topical I think across the whole industry.
We've obviously reflected what the current labor rates are in our guidance for the second half of the year that you come out project and don't anticipate any variation. This year, obviously as we look ahead.
Operator: I missed the first part about 60%. But maybe just to kind of illustrate some of the key factors here. So, it's important to note that on the mining side, we are using contract mining, so our component of the workforce is really related to the plant, the administration, and the operational support areas, such as the lab, security, warehousing, etc. So it's a smaller component of the total workforce.
It depends on the overall inflation picture not only in Brazil, but also throughout the broader mining industry.
I'm, just kind of a David Strang, just add a little bit more to that to make sure everybody understands when we who was talking about with regards to C&I.
So as macro rightly pointed out.
The most significant focus in the short term has been on hiring a leadership team, which is now well in place when we talk about Sinai semi is this wonderful organization in Brazil, which is a a.
Makko DeFilippo: The 60% that we've contracted to date is in partnership with the National Labor Development Authority, SENAI, and they're facilitating the training for the operation of the project. We'll continue to increase that number as we ramp up here. I think the main objective for us was, and focus at this stage was really on the operational leadership, which would be our managers, our coordinators, and supervisors, and all those roles are 100% fulfilled. In terms of inflation and labor, you know, I think it continues to be topical, I think, across the whole industry. We've obviously reflected what the current labor rates are in our guidance for the second half of the year for the TUCOMOP project and don't anticipate any variation this year.
A parastatal organization that is involved in the training of local people to be able to do.
Increased skills and provide them with the skills to be able to operate and and two functions.
On the mining operations in Brazil.
Arming activities other industrial applications, we are drawing our workforce, primarily from the town of Tacoma and the local communities, where there is excess.
The available labor pool.
It's our focus to make sure that our labor pool is drawn from the local communities as much as possible and some good for goodness mining contractor has given us a very strong pathway and how they have done it and working with Tonight in terms of hiring the workforce that is running up trucks excavators and other.
Makko DeFilippo: Obviously, as we look ahead, it depends on the overall inflation picture, not only in Brazil but also throughout the broader mining industry. I'm just going to, David Strang, just add a little bit more to that to make sure everybody understands who we're talking about with regard to Senai. So, as Makko rightly pointed out, the most significant focus in the short term has been on hiring our leadership team, which is now well in place. When we talk about SINAI, SINAI is this wonderful organization in Brazil, which is a parastatal organization that is involved in the training of local people to be able to do increased skills and provide them with the skills to be able to operate and do functions in mining operations in Brazil, farming activities, and other industrial applications.
Equipment in the mine for the last almost two years. So we are very confident with regards to the work that <unk> doing in terms of working with us in partnership to identify a local workforce and higher up that team to be ready for us.
Executing on commercial production in the third quarter.
Okay. Thanks, that's a excellent for clarity, David and Michael I do have a follow up just coming coming back and switching gears to the furnace exploration budget of 6 million I'm. Just wondering is that for the full six 128000 meters.
And I think just for clarification. The clock has not started ticking on that initial phase one right because we have not yet signed the DFS.
That's exactly right. The clock has not started ticking until we are until we sign the definitive agreement. Our objective for this year is to start drilling in the second half of the year. So it won't cover the full first phase of the program.
David Maxwell Strang: We are drawing our workforce primarily from the town of Tukama and the local communities, where there is an excess of available labor pool. It's our focus to make sure that our labor pool is drawn from the local communities as much as possible. And Fugundes, our mining contractor, has given us a very strong pathway and how they have done it in working with Sinai in terms of hiring the workforce that has been running our trucks, our excavators, and other equipment in the mine for the last almost two years. So we are very confident with regard to the work that Sinai is doing in terms of working with us in partnership to identify a local workforce and hire up that team to be ready for us to execute on commercial That's excellent for clarity, David and Makko.
What that covers is the work that we're doing now are we you know and in parallel with working to sign the definitive agreement, which is which is progressing well.
We've with with our partners at Vale base metals have mobilized a team to site to start several work streams as I mentioned, including the baseline environmental studies.
And then parallel starting our QA QC program. So what you see in the budget for this year is the execution of the initial leg work I would say on the project to make sure that we're in a good position to start drilling in the second half and mostly the second half drilling for for the project.
Makko DeFilippo: I do have a follow-up question just coming back and switching gears to the Furnace Exploration Budget, http://TheBusinessProfessor.com. I'm just wondering, is that for the full phase 1 28,000 meters? And I think, just for clarification, the clock has not started ticking on that initial phase one, right? Because we have not yet signed. That's exactly right.
This year, thanks, very much thanks very much for your answers.
The next question is from Gordon Lawson with paradigm capital. Please go ahead.
Hey, good morning, and thank you for taking my question can.
Can you please elaborate on the development work.
In terms of ongoing and expected production from Tina.
Operator: The clock has not started ticking until we sign the definitive earner agreement. Our objective for this year is to start drilling in the second half of the year, so it won't cover the full first phase of the program. What that covers is the work that we're doing now, in parallel with working to sign the definitive earner agreement, which is progressing well. We've, with our partners at Valley Based Metals, mobilized the team to site to start several workstreams, as I mentioned, including the baseline environmental studies and, in parallel, starting our QAQC program. So what you see in the budget for this year is the execution of the initial legwork, I would say, on the project to make sure that we're in a good position to start drilling the second half, and mostly the second half drilling for the project. Thanks very much. The next question is from Gordon Lawson with Paradigm Capital. Please go ahead.
O'neal gains through 2024 is it just trying to get done.
Unclear picture on H, one versus H to wait and watch.
Yeah. Good question I'd say that are you know in our what.
What we did for this year's guidance as we've.
We continue to assume that the grades mined revert to our long term block model grades, which has been reflected in our guidance I'd say that we continue to see here in the first quarter or the first few months phase.
Favorable grade reconciliations most notably in the <unk> vein.
So obviously that has a potential impact in terms of waiting.
But right now it's you know our guidance range was split 50 50 for first half second half.
Again, we are seeing a positive grade reconciliation in the first two months.
So we will.
To to.
I guess I hope for that but haven't planned for it through the balance of the year.
Yeah, Let me, let me elaborate a little bit on that.
Makko DeFilippo: Hey, good morning, and thank you for taking my question. Can you please elaborate on the development work at Seventina in terms of ongoing and expected production from the Matina and Santo Antonio veins through 2024? Is it just trying to get a clear picture of H1 versus H2 waves and such?
In terms of the drilling activity that we did when we discovered the <unk> vein and brought that into a resource that was ready to be mined.
Following standard work that you do.
With regards to gold we had a couple of intercepts.
Intersected this high grade area.
Due to the extreme high grade nature of it we top cut.
Makko DeFilippo: Yeah, good, good question. I'd say that, you know, in our, what we did for this year's guidance is we've continued to assume that the grades might revert to our long-term block model grades, which has been reflected in our guidance. I'd say that we continue to see here in the first quarter of the first few months favorable grade reconciliations, most notably in the Matina vein. So, obviously, that has a potential impact in terms of weighting.
Those intercepts.
As such the Mecca's pointed out.
We are not going to change our guidance.
Nor are we going to adjust our resource estimate to reflect this high grade zone, we continued to encounter it.
Through the middle of the vein structure, we do not know how long it will continue to go.
Obviously, everybody always hopes that is gonna be longer greater for longer.
But we are not going to be adjusting our resource.
David Maxwell Strang: But right now, our guidance range was split 50-50 for first half and second half. Again, we are seeing positive grade reconciliation in the first two months. So we'll continue to, I guess, hope for that, but we haven't planned for it through the balance of the year. Let me elaborate a little bit on that. In terms of the drilling activity we did when we discovered the Metina vein and brought that into a resource that was ready to be mined, following the standard work that you do with regard to gold, we had a couple of intercepts that intersected this high-grade area, and due to the extremely high-grade nature of it, we top-cut it. Those intercepts.
For that so guidance is as we said based upon a nine to 10 Gram a estimate for the year, but we are during the first quarter. So far this year continued to see grades well in excess of 15 grams per tonne.
Yeah.
Okay, that's great thanks very much.
Albert you Kareena.
Just let me clarify.
Good numbers.
The restatement of the treatment charges.
Going back to 2022, it looks like a doubling.
On how you're reporting that now can you just.
Help me.
Help explain how to get there.
Gordon, It's Wayne I don't know the 'twenty two numbers in front of me, but I think.
Really the only difference we've had is is that we.
David Maxwell Strang: As such, and Makko pointed out, we are not going to change our guidance. Nor are we going to adjust our resource estimate to reflect this high-grade zone, as we continue to encounter it through the middle of the vein structure.
Q4, 'twenty three we're now including the freight the sea freight that was charged by our customers as part of its treatment refining and other costs and this was previously presented as a reduction in our realized copper price, which is in line with the GAAP reporting.
David Maxwell Strang: We do not know how long it will continue to go. Obviously, everybody always hopes it's going to be longer, greater for longer, but we are not going to be adjusting our resources for that. So guidance is, as we said, based upon our 9 to 10 gram estimate for the year, but we are, during the first quarter so far this year, continuing to see grades well in excess of 15 grams a ton.
So.
In terms of 'twenty, two what you'd have to go back and look at the change in the realized price there as well.
Okay.
I see okay, so, but I mean that all ties together.
Hum.
The exclusion of the.
Forex hedging I'm also a part of it.
Okay.
Or attention.
The hedging yes.
We don't have we don't think we show both methodologies I think.
Gordon Lawson: Okay, that's great. Thanks very much. Over to Karima, if you can just help me clarify the math on the new numbers, the restatement of treatment charges, going back to 2022, it looks like a doubling on how you're reporting that now. Can you just help me explain how to get there? Gordon, it's Wayne.
We bought this we show without the hedging and then with the hedging obviously that the headline numbers without hedging.
We all that were.
Reporting.
Okay. Just wanted to make just want to make sure I understood. Thanks very much.
Once again, if you have a question. Please press Star then one.
The next question is from the Sun.
Carmax Securities. Please go ahead.
Wayne Drier: I don't have the 22 numbers in front of me, but I think really that the only difference we've had is that, effective Q4'23, we're now including the freight, the sea freight that was charged by our customers as part of treatment, refining, and other costs. And this was previously presented as a reduction in our realized copper price, which is in line with the GAAP reporting. So, you know, in terms of 22, you have to go back and look at the change in the realized price there as well. I see, okay, so I mean that all ties together, and it's uh... The exclusion of the 4x hedging is also a part of it, http://TheBusinessProfessor.com. The hedging, yeah, we don't have it, we show both methodologies. I think we show without the hedging and then with the hedging, obviously, the headline number is without the hedging that we are reporting.
Yeah. Thanks, very much guys, Hey, Greg Glenn you got my question on the 17th so that's great to hear about the grade may continue.
For longer it would be nice just well I gotcha and any comments on that on where the nickel exploration is that these days.
Yeah, Stefan and thanks, Thanks for asking about the.
We continue to work with regards to accumulating land positions.
On the trend that we've identified.
We.
Continued to wait for the government to initiate the auction process.
Our latest guidance from the government was that process was going to start during March but in a conversation I had with.
The head of the A&M, which is the government agency that runs it suggests that they may be delayed by up to 30 days.
So with respect to our nickel exploration.
Our work continues to be very much dedicated in terms of identifying the trend.
Wayne Drier: Okay, just wanted to make sure I understood that. Thanks very much. Once again, if you have a question, please press star then 1. The next question is from Stefan Ioannou from Cormark Securities. Please go ahead. Yeah, thanks very much guys. Gordon got my question on the 17, so that's great to hear about the grade. For more information,
Which is now going.
Multiple to tends to in excess of 100 kilometers.
In strike length on which we are seeing nickel mineralization expressed that surface in Boston.
Structures.
Our drilling work, though.
We are doing more work too in my mind to get a better return on the drill bit and what I mean by that with regards to that is I think it's fair to say that we could drill 0.5% nickel material here till the cows come home the question about it from our minds.
Operator: Yeah, Stefan, and thanks for asking about that. We'll continue the work. With regard to accumulating land positions on the trend that we've identified, we continue to wait for the government to initiate the auction process. Our latest guidance from the government was that the process was going to start during March, but a conversation I had with the head of A&M, which is a government agency that runs it, suggests that that may be delayed by up to 30 days.
Are we able to better identify P drilling those areas that are more prospective for higher grade as you know we have encountered nickel grades up to 7% a massive sulfide structures and wed like and if we continue to work in growth Nicole exploration is to figure out.
Sort of equation.
David Maxwell Strang: So, with respect to our nickel exploration, our work continues to be very much dedicated in terms of identifying the trend, which is now going, you know, multiple to tens to in excess of 100 kilometers in strike length, on which we are seeing nickel mineralization expressed at surface in Gossen-type structures. Drilling work, though, we are doing more work to, in my mind, get a better return on the drill bit. And what I mean by that, with regard to that, is I think it's fair to say that we could drill 0.5% nickel material here till the cows come home. The question about it in our mind is, are we able to better identify pre-drilling those areas that are more prospective for higher grades?
So I think the best we can tell you now is we continue to evaluate it continues to grow.
We think we may be onto something that may be generational.
In terms of size.
And that we will hopefully be able to.
And I know, it's been a bit of a broken record because of the delays of government.
Be able to talk about this in much greater detail in the second half of the year. That's the best guidance I can give you right now.
That's very helpful and it's still very exciting so thanks for that appreciate it.
This concludes the question and answer session I'd like to turn the conference back over to David Chang for any closing remarks.
Thank you operator, and thanks again, everybody for coming on this call. This is now I think a six year a year and full year.
David Maxwell Strang: As you know, we have encountered nickel grades up to 7% in massive sulfide structures. And we'd like, and if we continue to work and grow nickel exploration, to figure out that sort of equation. So I think the best we can tell you now is that we continue to evaluate it. It continues to grow. We think we may be on to something that may be generational.
Copper and he has been a.
Testing gear from the standpoint of investing in our future and we really look forward to this year as we transformed our company into a multi multi mine copper producer.
And one that.
Continues to look to grow our business in Brazil into the future as always we are always available for additional questions. You may have that you did not necessarily want to have on the call.
David Maxwell Strang: And that, We will hopefully be able to, and I know it's been a bit of a broken record because of the delays in government, talk about this in much greater detail in the second half of the year. That's the best guidance I can give you right now.
Stefan Ioannou: That's very helpful, and it's still very exciting, so thanks for that. I appreciate it. BF-WATCH TV 2021. This concludes the question and answer session.
Please feel free to contact Courtney myself Wayne on macro and Bruna at your earliest convenience and with that we'd like to thank you again for joining thank you bye bye.
Thanks Jordan.
David Maxwell Strang: I'd like to turn the conference back over to David Strang for any closing remarks. Thank you, operator. And thanks again, everybody, for coming on this call. This is now, I think, our sixth year at year-end for Ero Copper. And it has been a fantastic year from the standpoint of investing in our future. And we really look forward to this year as we transform our company into a multi-mine copper producer and one that continues to look to grow our business in Brazil into the future.
Conference call you may disconnect your lines.
You for participating and have a pleasant day.
Yeah.
Yes.
[music].
Yeah.
Yeah.
Operator: As always, we are always available for additional questions you may have that you did not necessarily want to have on the call. And please feel free to contact Courtney, myself, Wayne, or Makko and Bruna at your earliest convenience. And with that, we'd like to thank you again for joining us. Thank you. Bye-bye. This brings to an end today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
Yeah.
Yeah.
[music].
Yeah.
Yeah.
Hum.
[music].
Sure.
[music].