Ero Copper Corp. (NYSE:ERO) Q3 2025 Earnings Call Transcript

Ero Copper Corp. (NYSE:ERO) Q3 2025 Earnings Call Transcript November 5, 2025

Operator: Thank you for standing by. This is the conference operator. Welcome to the Ero Copper Third Quarter 2025 Operating and Financial Results Conference Call [Operator Instructions] The conference is being recorded [Operator Instructions] I would now like to turn the conference over to Farooq Hamed, VP, Investor Relations. Please go ahead.

Farooq Hamed: Thank you, operator. Good morning, and welcome to Ero Copper’s Third Quarter Earnings Call. Our operating and financial results were released yesterday afternoon and are available on our website, along with our financial statements and MD&A for the 3 and 9 months ended September 30, 2025. A corresponding earnings presentation can be downloaded directly from the webcast and is also available in the Presentations section of our website. Joining me on the call today are Makko DeFilippo, President and Chief Executive Officer; Wayne Drier, Executive Vice President and Chief Financial Officer; Gelson Batista, Executive Vice President and Chief Operating Officer; and Courtney Lynn, Executive Vice President, External Affairs and Strategy.

Before we begin, I’d like to remind everyone that today’s discussion will include forward-looking statements, which involve risks and uncertainties that may cause actual results to differ materially. For a detailed discussion of these risks and their potential impact on our business, please refer to our most recent annual information form available on our website as well as on SEDAR and EDGAR. Unless otherwise noted, all figures discussed today are in U.S. dollars. With that, I’ll now turn the call over to Makko DeFilippo.

Makko Defilippo: Thank you, Farooq, and thank you all for taking the time to join us this morning. Speaking for everyone on this side of today’s conference call, it is an exciting time over here at Ero. During our last quarterly update and in conversations with many stakeholders since then, we have been speaking to the fundamental transformation that has been underway at Ero this year. This work has continued to drive sequential improvements in quarterly performance and unlock new value drivers across our portfolio. These efforts are clearly evident in our Q3 results and in our Xavantina release yesterday. I will speak to both on today’s call while ensuring we have sufficient time for questions. Yesterday, before market opened, we announced the result of a dedicated behind-the-scenes effort we initiated late last year to create value from within our portfolio, specifically at the Xavantina operations.

This work entailed sampling, metallurgical testing, characterization and commercialization of stockpiled gold concentrates that have been produced in small but high-grade quantities since processing operations began over a decade ago. These efforts have culminated in the announcement of a maiden inferred resource of 24,000 tonnes grading approximately 37 grams per tonne, containing 29,000 ounces of gold. The estimate was based on detailed sampling of approximately 20% of the concentrate stockpile volume. Late last month, just shy of 1 year since we laid out the initial work plan for this initiative with our teams, we commenced shipping gold concentrate, resulting in our first invoice this week, which Wayne will speak to in more detail. Looking ahead, we expect to sell between 10,000 and 15,000 tonnes of concentrate during Q4 2025 at an operating cost of approximately $300 to $500 per ounce of gold.

At approximately 90% to 95% payability after deductions and treatment charges, this means in practical terms that we expect to significantly accelerate the deleveraging of our business, one of our core objectives for 2025. Sampling campaigns are ongoing to better quantify the remaining gold concentrate in stockpile, and we expect to sell the full volume over the next 12 to 18 months, resulting in what we expect to be a significant boost to gold sales and financial performance. Before I jump back into the quarter itself, I’ll just address what is likely the first question many of you have. How did October go? And how does that compare to underlying operational guidance ranges. While 1 month doesn’t make a quarter, and we have a considerable amount of daylight between now and December 31, I am pleased to report that every single operation in our portfolio achieved not just 2025 calendar year monthly records for productivity and production, but they achieved all-time historic monthly records in October, beating some set many years ago.

Starting at Caraíba, we built on the momentum of a solid Q3 and during the month of October, achieved all-time record mine tonnages from each of the Pilar, Vermelhos and Surubim mines. New high watermarks across all of our mines at Caraíba supported all-time record monthly mill throughput of just over 400,000 tonnes, implying an annualized run rate well beyond our installed capacity. We achieved this result on the back of a successful debottlenecking exercise that was initiated early this year and completed during the third quarter at effectively 0 cost. Q4 at Caraíba is off to a good start with over 3,500 tonnes of copper produced in October, on par with our best month so far this year. At Tucumã, sequential improvement in throughput volumes and grades following another sequential quarter of nearly 20% growth in copper production drove a new monthly record in October of approximately 3,300 tonnes of copper produced.

Last but not least, at Xavantina, we produced just shy of 7,000 ounces of gold in October, excluding any benefits from our new concentrate sales operation. This is a particularly noteworthy result when you consider that our average quarterly production during the first half of the year was also 7,000 ounces. This result reflects the considerable effort we have put into successfully mechanizing Xavantina to make it safe and more productive. I’m very proud of what Rodrigo Fidelis and his team and the whole broader team at Xavantina have been doing to achieve these results. More broadly speaking, we have spent a lot of time this year changing the way we do things, challenging the status quo, incentivizing improvement and optimization across our organization and focusing on health and safety in order to drive productivity and operational excellence.

The build we saw from a challenging first half of the year across the group, the green shoots in July and August, momentum from August into September and breaking all-time records in September and October has been energizing, and we expect many more production records to be broken over the coming months and years. I’m deeply proud of the work we are doing to achieve these results, proud of our global leadership team for their commitment and thankful to our operational leadership for achieving these results while consistently improving our consolidated safety performance. That was a long detour to our third quarter results, but hopefully, that clears up the question queue. Getting back to the quarter itself, Q3 was another record for Ero on consolidated copper production due to increased contributions from Tucumã, up nearly 20% for the second consecutive quarter.

As we look to Q4 and as evidenced by my commentary on October, we continue to build on our strengths here and are expecting Q4 to be the strongest production quarter of the year across all 3 of our operations. At Caraíba, plant throughput levels reached a quarterly volume record, supported by sequentially higher mining rates across all 3 mines in the complex, momentum we have carried so far into Q4. Grade declined as expected in the quarter as we switched our center of mass to the upper levels of the Pilar mine and received more ore from the Surubim pit, a strategy shift that was discussed at length last quarter. We expect to continue to benefit from higher throughput levels going forward, the result of a multi-quarter debottlenecking effort in order to drive higher copper production.

We expect strong production in Q4 to allow us to achieve the low end of our annual production guidance, and we expect cash costs to decline from Q3 levels during Q4, supporting our full year C1 cash costs in the lower half of our range. At Tucumã, production in the third quarter increased 19%, driven by the continued ramp-up of throughput at the mill, up approximately 37% quarter-on-quarter, partially offset by lower planned grades. As we look to Q4, we expect continued progress in increasing throughput levels, along with higher grades in the mine to drive the strongest production of the year. We’re off to a good start in October and expect strong production in Q4 to allow us to achieve the low end of our annual production guidance. We have adjusted our full year C1 cash cost guidance at Tucumã to reflect higher-than-expected maintenance and freight costs incurred during Q3, which will be partially offset by the expected improvements in underlying costs in Q4.

At Xavantina, production increased by approximately 17% quarter-on-quarter as the mine began to benefit from our investments in mechanization during the first half of the year. We mined over 50,000 tonnes of ore in Q3, a level we haven’t achieved since 2022. Looking ahead into Q4, as I touched on in my October commentary, we expect higher mine tonnage, higher tonnes processed and higher grade stopes to significantly drive higher gold production in Q4, which will allow us to achieve the lower end of gold production guidance and meet full year cost guidance ranges at Xavantina. At Furnas, a central part of our growth strategy, physical work streams on site progressed well through the end of October. We have now completed approximately 50,000 meters of drilling, completing the drilling obligations set out in the agreement for both the Phase 1 and Phase 2 programs.

The Phase 1 program completed early this year was drilled in support of an updated mineral resource estimate and preliminary economic analysis. Technical work streams to support the preliminary economic analysis remain ongoing, and we are on track to complete this study during the first half of next year. The drilling completed under Phase 2 of the agreement will be used in time to support the development of a pre-feasibility study. We currently do not anticipate slowing the drill program at Furnas based on the success of these programs and early insights into potential project economics. We set out this year to turn around and stabilize our operations, achieve commercial production at Tucuma, delever our balance sheet, aggressively advance long-term growth initiatives at Furnas and in due course, initiate returns to shareholders.

Transformative work is nonlinear, but seeing the momentum we have carried and the results flow through to an incredible September and October makes me confident we are on the right path. Every area of our business is doing its part to achieve these goals and create additional value for all of our stakeholders out of what we believe is a truly remarkable asset portfolio. I am thankful as ever for the continued support and belief in our vision for Ero. To ensure we have sufficient time for Q&A, I will leave it there and pass the call to Wayne, who will provide more detail on our financial results.

Wayne Drier: Thank you, Makko. Our third quarter financial results reflected a 24% increase in copper concentrate sales at Tucuma, which, together with stronger copper and gold prices during the period drove revenue to $177 million or $14 million higher when compared to the second quarter. At the same time, operating costs increased due to expected lower mined and process grades at Caraíba and a change in the accounting treatment at Tucuma following the declaration of commercial production on July 1, 2025. As a reminder, ramp-up costs are no longer capitalized and depletion, depreciation and amortization began to be recognized at the operation. As a result, adjusted EBITDA totaled $77.1 million in the third quarter and adjusted net income attributable to owners of the company was $27.9 million or $0.27 per share.

Our liquidity position at quarter end stood at $111 million, including $66.3 million in cash and cash equivalents and $45 million of undrawn availability under our revolving credit facility. We continue to deleverage our balance sheet, paying down $9 million on our copper prepayment facility during the quarter. Combined with higher 12-month trailing EBITDA, this resulted in further improvement in our net debt leverage ratio, which decreased to 1.9x at the end of Q3 from 2.1x in Q2 and 2.5x at the end of 2024. With performance expected to be strongest across all 3 of our operations in the fourth quarter and additional cash flow from Xavantina’s gold concentrate sales, we expect to materially accelerate deleveraging in the coming months. Since the beginning of Q4, we’ve already shipped 3,000 tonnes of gold concentrate at an invoiced value of approximately $10 million, providing early momentum towards that goal.

As for our foreign exchange hedge program, our total notional position at quarter end was $290 million, consisting of 0 cost collars with a weighted average floor and ceiling of BRL 5.59 and BRL 6.59 per dollar, respectively. These extend through December 2026. The real trended stronger and below our collar range during the quarter, resulting in a realized gain of $2 million on these hedges. I’ll now pass the call back to Makko for some closing remarks.

Makko Defilippo: Thank you, Wayne. Before we move into the Q&A session, I want to take a moment here to reiterate our commitment to delivering on our strategy at Ero, the one that we set out in January of this year. Thank you for your continued support in our company. We look forward to speaking with you in the new year. With that, I’ll now turn the call back to the operator to open the line for questions.

Q&A Session

Operator: [Operator Instructions] The first question comes from Fahad Tariq with Jefferies.

Fahad Tariq: On Xavantina, on the gold concentrate, maybe it’s too early to tell, but how should we be thinking about the remaining 80% that has not been sampled yet? Is the assumption — would it be a fair assumption to assume that the concentrates are homogenous and that it could be maybe close to 144,000 ounces of contained gold?

Makko Defilippo: Yes. Thank you for the question. I think everyone in this call is capable of dividing the 29,000 ounces by 0.2. We’re very excited about the opportunity and what it means for our company, but I think it’s too early to say exactly what that remaining volume will be. We fundamentally just need to do the work. As I — as we outlined in our prepared remarks and in the news release yesterday, we do expect to sell the full volume over the next 12 to 18 months, which should be a very significant boost to our financial performance. But in terms of outlining specific densities and grades for the volumes that have yet to be sampled, very difficult to do.

Fahad Tariq: Okay. And then maybe just switching gears to just Brazil costs in general. One of your maybe mining peers, but more on the gold side has talked about significant labor contractor inflation — yes, labor and contractor inflation in Brazil specifically. Just curious if you’ve seen anything that’s been popping up on that.

Makko Defilippo: Yes. Look, also a great question. Let’s take a step back and look over the last 8 years because I think context is important. What we saw from effectively 2017 until last year is that the rate of inflation in Brazil was outpaced by the depreciation of the currency. So I don’t know what commentary or what company that came from. But it’s fair to say that in U.S. dollar terms, inflation is still running high in Brazil. We do see that in our labor agreements. We see that in our contractor pricing. And over the last 2 years, we have not benefited as much from a depreciating BRL as we did in prior years, right, from 2017 to 2022. As Wayne outlined, one of our strategies to help mitigate that is to put in cost of collars on the foreign exchange, which we have put in place for a portion of our spend next year with a floor that’s higher than this year or at a weaker level than this year to help offset some of the inflation that we’re seeing.

But again, I think whenever we talk about inflation cost in Brazil, it’s important to overlay what’s happening in the currency and our efforts to help mitigate that. We have a number of initiatives that we spoke to in the past that we call our full potential exercise. It’s a combined effort from operations and procurement to continually seek as our business has grown over the past 2 years with integrating Tucuma and now the mechanization of Xavantina to enter into longer-dated contracts across the group. And we have seen cost reductions on a — at a — I don’t want to say at a significant level, but at least enough to offset the inflation that we’re seeing in our business. So we’re going to continue that work. Again, it’s fundamental to the long-term protection of our operating margins, and we’ll continue that work in the future.

Operator: The next question comes from Guilherme Rosito with Bank of America.

Guilherme Rosito: So my first one is on the value creation strategy in Xavantina. I just want to understand like regarding the timing, why have you guys announced it now and not before? Just given when you look at the cash OpEx of these concentrates, they look super accretive even under lower gold prices. Of course, it is even more now that prices are close to $4,000. So maybe just if you could expand on why doing it now and not before, it was a matter of time and having the capability to take a look at that. And also, if you guys see potential for doing that to your other operations, which especially Caraíba, which has been running for some time and maybe has something in terms of concentrate stockpile or maybe the waste on the dams. And then finally, on Tucumã, just a quick question. How are you guys seeing the operating rates throughout 2026 between quarters? When are you expecting now to reach nameplate capacity in throughput?

Makko Defilippo: Perfect. Thank you. We’ll go through those one by one. Thank you very much. So the value creation opportunity at Xavantina, it’s worth stressing this is not an initiative that began in earnest when gold price hit $4,000 an ounce. This is something that we’ve known about for a few years. I was involved in my prior role in an engineering exercise to recover value from this material. We did quite a bit of engineering work a few years ago. and we had mixed results during that time. And so we — as you’ll probably appreciate, we’re fairly busy over the last few years building Tucumã. And so they sat on the back burner. With the change in leadership that we had this year, both on site and throughout our technical group, there was a few key initiatives that we outlined in late last year that were chased down in earnest.

This was one of those initiatives. Again, the work that to unlock the value wasn’t simply a matter of selling concentrate. It involved a significant effort in sampling, material characterization, metallurgical testing and a big effort from our commercial team to arrive at the point that we did just a few weeks ago. So I would say that the — as a value creation initiative, it looked great when we started this and gold price was at $3,000 an ounce. It looks obviously fantastic at $4,000 an ounce, but the run-up in gold price was circumstantial with respect to timing. As I said, we started this in [ earnest ] late last year. So hopefully, that answers your first question. With respect to other opportunities across our portfolio in terms of creating value, I’d say we have a number of opportunities in terms of creating value from our operations.

We’re looking at a few things, one of which I’ll talk about in a minute, which is at Tucuma. At Caraíba, look, we need to do the work. It’s it’s hard for me to say what other opportunities we have there. We need to do the work to determine if there’s residual value at that operation. Obviously, we’ve spent the first half of this year focused on health and safety, operational excellence, detailed planning, health and safety across that — across all of our assets and some of the value initiatives that we’re working on, we’re pretty excited about include some activities at Caraíba, but too early to say if that will be something similar. I don’t expect the same level of opportunity. But for sure, we’re chasing a few other high-value opportunities across the group.

Tucuma 2026, the last question that you asked there. Look, — we are seeing a continued ramp-up in our production rates and throughput levels at Tucuma. We’re really encouraged by the progress coming out of September and October. We have a lot more work to do, as I outlined, until December 31 at midnight. It’s fair to say that our — the improvements that we’ve been able to make since January, February, March to now are significant. But we see those improvements as reaching terminal velocity on throughput volume because of our filtration system. So we are looking right now at adding additional filtration capacity to help alleviate that bottleneck or at least take the step-up in the rate of improvement. That work is happening right now. I wouldn’t expect there to be a reaching design capacity until the second half of next year at this stage, but we’ll talk about that more in January when we come out with our guide for the year.

We are working on a lot of initiatives. In fact, last week, we had a mobile filter press arrive on site. And so we’re pretty excited about getting that operating to help us break through some of the last challenges. It’s important to note, we’re not talking about large dollar investments, number one. Number two, I think silver lining here is that when you look across the rest of the asset, our crushing circuit, our grinding circuit, our flotation circuit is performing exceptionally well. And so with Gelson here and the whole team, we’re looking well beyond the 4 million tonnes a year and how we can maximize the installed asset that we have as part of a debottlenecking exercise. That is an important factor when you think about the longer-term production profile at Tucumã coming off later in the mine life.

If we can increase throughput levels with a relatively modest investment, that will obviously go a long ways to stabilizing production volumes over the long term. So stay tuned, more information on that to come. Hopefully, that answers your question on Tucumã.

Operator: The next question comes from Emerson Vieira with Goldman Sachs.

Emerson Vieira: I have 2 sets of questions. The first one on the gold concentrate sales. Can you guys please share with us what is the expected time line to sample the remaining 80% of the total stockpile volume, please? And the second one on the gold side, I just want to understand if this concentrate sales is also subject to the same conditions that the company has with Royal Gold. By that, I mean, should we assume that 25% of those 24,000 ounces shall be delivered at 40% of spot prices? And moving on to Tucumã. Can you guys share with us what has been done? And what are the next steps on the ongoing improvement of the tailings filtration circuit? And also following on Tucumã, looking at the guidance and taking recoveries and grades from [ 3Q ] as a reference, the company’s throughput — I mean, Tucuma’s throughput actually should almost double in the 4Q, so you can reach the 30,000 tonnes guidance.

But I understand that grade should improve and throughput has been ramping up through the quarter. So can you share with us what was the throughput figure for September maybe or any latest update on throughput figures, please? That’s it.

Makko Defilippo: One second, I’m just writing down your last question, so I get them all. I think we’re — yes, thanks for the question, Emerson. So starting to go through your first question, gold concentrate sales, what’s the timing on the remaining volumes on sampling. But the practical reality here is that we did a large amount of work on the volume that was available to be sampled. We need to sell that volume before we continue sampling, and that’s obviously what we’re doing, as Wayne alluded to. Our objective is to do that as fast as possible. The reality is that we have a planned resource and reserve schedule. We believe at this point that our sales of concentrate volumes will supersede the rate of our resource update timing.

And so what that means from a practical perspective is that we’ll provide clarity on a quarterly basis in arrears for the concentrate volumes that we’ve sold next year. And we’ll talk about that more next year in our guidance with respect to giving some more directional levels on the quarterly cadence of concentrate sales. As Wayne said, and I mentioned, the first sale occurred this week. So we’d like to get a few more weeks and months of sales here going before we talk about the cadence for next year. So stay tuned on that side. But as I said, the practical reality is that we’re going to ship and sell as much and as quickly as we can and do that safely. And that means that we’ll be providing updates quarterly in arrears as we go forward. But again, provide some additional forward-looking information on our guidance for next year in January.

Are the — second question, are concentrate sales subject to the stream? Yes, they are. That’s a pretty conventional term across all streaming agreements, so nothing unusual there. But the stream gold from concentrate sales or the gold from concentrate sales will be subject to the streaming agreement. We have a great relationship with Royal Gold. They’ve been an incredible partner for the growth and vision of Xavantina over the years, all the way from their first investment. And so we’re really pleased that these deliveries will help to accelerate the effectively pay down to the Stage 3, which is an effective 6% stream tail. And if you want more information on that, you can look at the streaming agreements that we have filed on SEDAR. But effectively, it will help accelerate to the next phase, which is a step down from the 25% gold deliveries.

And then Tucumã filtration capacity, what planned — what is planned, what’s been done, what’s ongoing and throughput level clarity. So as I mentioned early on, we do see this continued rate of improvement. It is slowing down, as I said, reaching terminal velocity on the rate of change, and that’s just a function of requiring — it looks like we’ll require some additional filtration capacity. As I mentioned, a few months ago, we mobilized the mobile filter press on site. So that’s being ramped up and operating now, which should help relieve a little bit of additional capacity. Gelson and the team are doing additional engineering work and looking at alternative sources for incremental tailings capacity to help break through that rate of change and get throughput volumes up.

As you mentioned, we’re still looking ahead on the back of a solid October, as I mentioned, we see that grades and recoveries are performing well. We expect that to continue into Q4, helping us to achieve the low end of our guidance range at 30,000 tonnes of copper for the year. On the throughput level itself, as I said, we are seeing continued improvement. We saw improvement in September, October. We expect to have a good month in November and December as well. I think on the last conference call, I mentioned sort of exit velocity around 80% of our design throughput. We might undershoot that by a little bit, but we’ve been able to continue to have high-grade feed from the mine that will help support production levels in Q4. Gelson, I don’t know if there’s anything you want to add on the specific work streams for the filtration capacity.

Gelson Batista: Well, thanks, Makko. Thanks for the question as well. I mean you’ve mentioned before about sequential improvement in Tucuma. I think this is the progress for the entire year. There are various things on debottlenecking. We engage experts. They’ve been helping us for some time now and also optimization in the plant, but it varies from mostly on the filtration plant, but small things in the mill as well and the grinding system and also the thickener. So this is ongoing, and we’ll see the results in 2026.

Operator: The next question comes from Craig Hutchison with TD Cowen.

Craig Hutchison: Just on Xavantina, it sounds like it’s a good start to Q4. But can you give us some guidelines in terms of what the mining rates are maybe on a quarterly basis? And as you kind of move into next year, what is your capability now that you have the mechanized equipment? And maybe just as a follow-up question, what should we think about in terms of the grades as we kind of move into next year given the updated reserves you guys have, which I think is just under 7 grams a tonne.

Makko Defilippo: Yes. Thank you, Craig. When it comes to Xavantina, there’s a few things to note there. Maybe step back just a minute before I talk about specific rates. One of our objectives for the strategy at Xavantina this year, obviously, unlock value from gold concentrate sales. So check that mark, check that off the list. The second was to really extend the known limits of mineralization in the mine. And I think that was reflected really well in our resource update, specifically with the very significant increase in measured indicated resources and inferred resources. Our target was to uncover 1 million ounces. That was our objective. And when you look at what we put out yesterday, I think it’s fair to say that we achieved that objective of 1 million ounces.

Some of the last drill holes in the underground mine. We’re looking at a recent intercept this morning that came out a few weeks ago, 15 meters at 11 to 12 grams per tonne. So we’re seeing a significant increase in the potential for Xavantina, and that makes us very excited. So again, coming back to the strategy for the year, mechanize the mine, make it safer, extend the limits of mineralization. Obviously, over the next few years, we’ve started this work now. We need to do additional infill drilling to confirm those resources, which are not yet mineral reserves. But we’ve been really happy with the effort on mechanization and what that means for Xavantina. We talked a little bit about mining rates in Q3. Obviously, you can see that from an ore process perspective, big increase, right?

So going up to 50,000 tonnes mined and processed during Q3. That implies a rate just over 15,000 tonnes. We’ve been able to at least match that in October, much higher grades, just a function of where we are in the ore body coming in at — coming in at about 17 grams per tonne in October. So very high grade. When we think about the variability in that deposit still exists, the mechanization has allowed us to increase the mining rate substantially and do it at a lower cost while making it more productive and safer at the same time.

Craig Hutchison: Okay. 17 grams per tonne in October, well, okay. And then, I mean, obviously, probably not sustainable at those grades, but into next year, I guess, we’ll look for updates with respect to those grades as well.

Makko Defilippo: Yes. Look, Craig, I mean, I think if you go back in history and you look at what we’ve been able to do, again, we do get volatility month-on-month that tends to smooth out over a quarterly basis. So we’re still expecting high grades in Q4, just as — in particular, as a result of the excellent performance in October, some of the areas that we have available to mine. Again, we’re doing at a lower cost today. We’re doing it safer. And so I’m incredibly proud of the team at Xavantina for what they’ve been able to do this year.

Operator: The next question comes from Anita Soni with CIBC World Markets.

Anita Soni: Just a couple of follow-ups to Craig’s questions on Xavantina. So in terms of the — I guess I was just looking for a split in the new reserve estimate, how much of it is sublevel stoping and how much of it is your typical room and pillar as a percentage?

Makko Defilippo: Yes. Thank you. There is very little remaining room and pillar mining. It’s going to be immaterial in the context of our total reserves. We’re 100% focused on sublevel stoping. There’s a little bit of residual room and pillar, but the overall majority is going to be sublevel stoping.

Anita Soni: Okay. So then when we look at the cutoff, I guess, in the cutoff analysis on resources, which is generally a little less conservative than what you would have on reserves, I think you used a consolidated mining and processing number of USD 107 — is that a — I mean, what should we be thinking about in terms of mining costs and processing — I mean processing costs, I guess, will be the same, but the mining cost, what kind of savings would we get versus the mining costs that you’re delivering right now?

Makko Defilippo: Yes. Thanks. Good question. We look at this in detail. I’d say that we’re early days on mechanization. [indiscernible] back to, the original plan was to complete the mechanization of the mine by June of next year. It was such a resounding success. We accelerated that time line. Our last Jack Lake mining crew left site in September, and so we’re 100% mechanized. I think to give a specific cost reduction number is probably a bit immature given that we’re still optimizing. But what we’ve seen so far, again, I wouldn’t peg this for the long term, but something in the order of 30% to 35% reduction in mining costs is what we’ve seen so far in terms of BRL per tonne. Obviously, it’s going to impact by FX and a few other variables there, but so far, about a 30% reduction in mining unit cost.

Anita Soni: Okay. And so can you just tell me what the processing costs are right now?

Makko Defilippo: I don’t have that right in front of me. We can certainly follow up on the call, yes after the call.

Anita Soni: Okay. And then just one last question. A bit on the — it’s on the Matinha vein. As I look at what — how the resource went to reserve, it’s more than the 23% dilution that you were — that I think you guys were using in the estimate. Can someone provide some color on what happened with that specific vein? I think the other vein looks — the San Antonio vein looks kind of in line with the 23% dilution that you were talking about. But this one went from 11 gram per tonne in resources down to 6.65. So that’s kind of close to half or 40% down. So is there anything in particular there that I should be thinking about?

Makko Defilippo: Yes. Obviously, the right, the 23% is average across. I think when you get to specifics, and we can address this offline, too. I think it’s probably a better form. But when you look at the planned stopes that we have with sublevel stoping, they’re obviously larger than room and pillar. And so that tends to increase planned dilution when you look at any kind of variability in the ore body in terms of its orientation, dip, any contours, you tend to pull in more planned dilution when you’re using larger stopes. And so again, that 23% is the average across the ore body. So we can talk more specifically about the Matinha vein and some of the impacts there in the update offline. But hopefully, that gives you kind of a rough sense of what we’re looking at.

Anita Soni: Yes. And then just a last question. Are you going to file a 43-101 on this one? Or did you do it already? I’m sorry, I’m on the road right now.

Makko Defilippo: Yes. No worries. No, we will within 45 days of the — when the news release went out yesterday. So expect that before year-end.

Operator: The next question comes from Roald Ross with Clarksons Securities.

Roald Ross: Congrats also on the record production. I wanted to ask about the costs this quarter and maybe some commentary if there are any cost pressures in the business right now. So on Caraíba, it appears to be an 8% increase in mining costs and 28% increase in processing costs, while at Xavantina, there seems to be a jump in sustaining CapEx, so is there a trend of increasing costs or any color to add to that increase?

Makko Defilippo: No, none other than what we outlined in the call. Obviously, we did increase production volumes a lot at Caraíba, which had an impact. But if you normalize that for volume, I think you see that it’s pretty comparable quarter-on-quarter. Obviously, we had a higher grade in Q2. So Q3 was a bump up. We expect that to come down in Q4, as I outlined on the call at Caraíba. Xavantina, I think there’s some timing differences there on capital. So I wouldn’t read too much into that in terms of increasing cost. I think I commented on one of the earlier questions about inflation in Brazil. That’s a reality of all operations, I think not just in Brazil, but globally, quite frankly, and we’re working hard to make sure that we offset that — those inflationary pressures with hedges on the BRL so we can protect our operating margins going into next year.

Roald Ross: Okay. Great. Second and final question also. It appears that the company is in a phase now where everything is sort of centered on getting Tucuma at the nameplate capacity. But after sort of achieving that later next year, how would you describe the vision of the company and sort of the next phase of the company? I expect that the furnace growth leg is a bit further into the future. How would you describe sort of that next phase for Ero?

Makko Defilippo: No, that’s exactly right. I mean I know we don’t get asked a lot about it a lot anymore. But when you look across our portfolio, we still have a number of value-generative projects that are ongoing or in process. Gelson and I were on site at Caraíba over the weekend and reviewing the progress on our shaft project to access a higher-grade zone in the Pilar mine, which we think will transform the productivity and obviously, margins for that asset when that comes online in 2027. That’s a big investment that we’ve committed to. We’ve been working that over a number of years. The shaft right now is about 870 meters below surface. And right now, it takes about 5 minutes to get down to that level in the kibble compared to almost an hour driving down the ramp.

So that will make a very significant improvement in our company later on in 2027. Xavantina to that part of the portfolio. Obviously, big value creation exercise, incredibly proud of what we’ve been able to do there, not just in terms of unlocking value from gold concentrates, but also the mechanization of the mine. If you look at the planning and effort and execution of that — those investments and that project, it’s been a big success this year. And again, very proud of the work that we’re doing there. We do see with keeping that 1 million ounce target in mind, we see opportunities there to eventually increase production. Obviously, that needs additional studies. There’s ventilation, there’s drilling, there’s development involved in that and some infrastructure.

And so we’re working on studies to help support that for the future. But clearly, with 1 million-ounce potential and growing. Again, I mentioned some of those deeper drill holes and the very strong mineralization we continue to see in San Antonio. We for sure see opportunity to expand that operation. That’s something that we’re working on for the next year. And then you hit on the head for us. It looks like a very compelling opportunity. Obviously, we’re working hard right now on the preliminary economic analysis and the drilling, which we remains on track for the first half of next year. So if I take a big step back, I’ve had the distinct privilege of being the first employee at Ero Copper 9 years ago and to watch what’s happened this year and see our teams firing on all cylinders here at the end of Q3 and early into Q4.

It’s been an incredible year of transformation and pretty exciting to see the results that we’ve been able to produce. As I said, nothing is a guarantee or a layout for sure. We have a lot of daylight between now and December 31. But when I look at beyond December 31 in this year, I’m incredibly excited about the legwork that we’ve done and where we’re heading.

Operator: [Operator Instructions] Since there are no more questions, this concludes the question-and-answer session. I would like to turn the conference back over to Makko DeFilippo for any closing remarks. Please go ahead.

Makko Defilippo: Yes. Thank you, everyone. Thank you for participating. For those of you that are traveling back from various site visits, safe travels. I look forward to following up over the coming days and weeks and giving an update on our outlook for 2026 early in the new year. Thank you very much.

Operator: This brings to a close today’s conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.