Tucumã Project, Carajás Mineral Province, Pará State, Brazil
(January 2024)
In This Report
2
Our Portfolio
3
2023 Highlights
4
Letter from the CEO
7
Management’s Discussion & Analysis
44 Consolidated Financial Statements
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Our Portfolio
CANADA
7
1
Caraíba Operations
Location: Bahia, Brazil
Ownership: 99.6%
Stage: Operating
2023 Copper Production: 43,857 tonnes
2023 C1 Cash Costs: US$1.80/lb
2
Xavantina Operations
Location: Mato Grosso, Brazil
Ownership: 97.6%
Stage: Operating
2023 Gold Production: 59,222 ounces
2023 C1 Cash Costs: US$422/oz
2023 All-in Sustaining Costs: US$957/oz
3
Tucumã Project
Location: Pará, Brazil
Ownership: 99.6%
Stage: Commissioning
(first production expected in H2 2024)
4
Furnas*
Location: Pará, Brazil
5
6
7
Brazil Corporate Office (São Paulo)
Brazil Corporate Office (Belo Horizonte)
Canada Corporate Office (Vancouver)
BRAZIL
3 4
2
1
6
5
* Remains subject to negotiation and execution of the
definitive agreement. For more information on the
Company’s plans to earn a 60% interest in the Furnas
Copper Project, please see its press release dated
October 30, 2023.
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2023 Highlights
Execution of Growth Strategy
• Near- to Medium-Term Growth
• We completed the NX60 initiative at the
Xavantina Operations, where production from
the new Matinha vein contributed to record gold
production
• We achieved 85% physical completion at
the Tucumã Project, where initial production
remains on schedule to commence in the
second half of 2024
• We completed the Caraíba mill expansion in
prior to year-end, increasing annual throughput
capacity from 3.2 to 4.2 million tonnes
• Also at the Caraíba Operations, we completed
pre-sink surface infrastructure for the Pilar
Mine’s new external shaft and initiated main
shaft sinking
• Long-Term Growth
• We announced a binding letter of intent with
Vale Base Metals to earn a 60% interest in the
Furnas copper project, located in the Carajás
Mineral Province of Para State, Brazil*
• We advanced our nickel sulphide exploration
program at the Caraíba Operations, where
drilling in 2023 continued to delineate the
Umburana System and test additional
nickel targets
Operating Highlights
• At the Caraíba Operations, mill throughput
volumes increased 12.8% compared to 2022,
resulting in production of 43,857 tonnes of
copper in concentrate for the year
• At the Xavantina Operations, processed gold
grades and gold production increased 98.8% and
38.8%, respectively, compared to 2022, driving
record gold production of 59,222 ounces
Financial highlights
• Cash flow from operations were $163.1 million,
representing an increase of nearly $20 million
compared to 2022
• Total capital expenditures of $489.5 million
reflect the ongoing execution of our organic
growth strategy
• We fortified our balance sheet with a bought deal
equity financing in November 2023, generating
net proceeds of $104.3 million
• Available liquidity at year-end was $261.7 million,
including cash and cash equivalents of $111.7 million
and $150.0 million of undrawn availability under
our senior secured revolving credit facility
Environmental, Social and Governance (ESG)
• Our Caraíba and Xavantina Operations received
ISO 9001, ISO 14001 and ISO 45001 certifications
• We launched a project to implement work-
readiness technology at the Caraíba Operations,
with completion expected in 2024
• We completed a renovation and expansion of the
polyclinic that serves the communities and region
surrounding our Caraíba Operations
• In partnership with The National Service for
Industrial Training, a Brazilian non-profit
organization focused on technical and vocational
education, we established training programs
for the Tucumã Project’s workforce of over
2,000 employees and contractors
• We expanded our partnership with Royal Gold
on “Project Hope”, which is aimed at supporting
at-risk youth (between ages 7 and 17) from the
communities surrounding our Xavantina Operations
* Remains subject to negotiation and execution of the definitive agreement. For more information on the Company’s plans to earn a 60% interest in the Furnas Copper Project,
please see its press release dated October 30, 2023.
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Letter from the CEO
“Ero Copper stands at an exciting juncture, poised
to capitalize on the investments made over the
past few years, translating them into substantial
returns for our shareholders. This achievement is
a testament to the collective effort of our team,
to whom I extend my deepest gratitude.”
David Strang - Chief Executive Officer
2023 was a cornerstone year for Ero Copper,
underpinned by significant accomplishments across
our organic growth initiatives. These successes
were not without challenges as we faced persistent
macroeconomic uncertainty characterized by
continued cost inflation and copper price volatility
as well as a strong Brazilian real (“BRL”) against
the U.S. dollar during the year. Nevertheless,
our proactive implementation of risk mitigation
measures, including our expanded foreign exchange
hedge program, allowed us to navigate these
challenges effectively, culminating in strong financial
performance, including $163 million in cash flow
from operations.
Strategic Growth Accomplishments
In addition to making significant strides towards
doubling copper production to approximately
100,000 tonnes in 2025, we achieved targeted gold
production levels of nearly 60,000 ounces following
the successful completion of our NX60 initiative at
our Xavantina Operations. This strategic execution
has begun to reflect positively in our financial
performance, with Xavantina reporting record
operating margins that contributed to a $20 million
year-on-year increase in consolidated cash flow
from operations. However, we expect the most
dramatic shift in our cash flow profile to occur in
2024 as capital expenditures at our Tucumã Project
decrease in the first half of the year and production
commences in the second half with commissioning
of operations.
Significant progress was also achieved at the
Caraíba Operations through the completion of the
mill expansion project, a key element of our Pilar 3.0
initiative. This initiative is designed to create a two-
mine system at the Pilar Mine, supporting an annual
ore production capacity of approximately 3.0 million
tonnes. Another essential milestone reached under
this initiative this year was the advancement of
construction on the new external shaft. With the
supporting surface infrastructure completed, we
initiated the main shaft sinking phase in December
2023, as planned, and remain on track to complete
construction by the end of 2026.
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Investing in the Future
Balance Sheet Strength
Throughout 2023, we continued to invest in our
longer-term growth initiatives, including our
dedicated nickel sulphide exploration program at
the Caraíba Operations, where drilling in 2023
continued to delineate the Umburana System and
test additional nickel targets. With approximately
11,500 meters of nickel exploration drilling planned
for 2024, we look forward to demonstrating the
Curaçá Valley’s potential to be a globally significant
magmatic sulphide district for both copper
and nickel.
In October 2023, we also announced a binding
letter of intent with Vale Base Metals (“VBM”) to
earn a 60% interest in Furnas copper project
(“Furnas”), located in the Carajás Mineral Province
of Pará State, Brazil. To earn this 60% interest, we
have committed to solely fund exploration and
engineering work over a five-year period following
the execution of a definitive earn-in agreement and
have granted VBM a free carry of up to 11% on future
construction capital expenditures. We believe Furnas
is a world-class project and are delighted to partner
with VBM on this exciting opportunity.
To support the continued execution of our growth
strategy, we have maintained a parallel focus on
balance sheet strength and market risk mitigation.
In 2023, this included an expansion of our foreign
exchange hedge program, which was instrumental
in countering the volatility of the Brazilian real
and yielded hedge gains totaling $11.4 million.
Our proactive measures to fortify our financial
position also included a bought deal financing in
the fourth quarter that generated net proceeds of
$104.3 million bought deal financing in the fourth
quarter. This decision, driven by short-term copper
price uncertainty, was met with strong support
from our shareholders and contributed to a year-
end liquidity position of over $260 million, inclusive
of a fully undrawn $150 million senior secured
credit facility.
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Aligning Around Global Decarbonization
Despite recent copper price volatility, we remain
encouraged by the robust fundamentals of the
copper market, closely tied to global decarbonization
efforts. Copper’s essential role in electrification
and renewable energy highlights its crucial part in
achieving a low-carbon future.
Brazil’s leadership in renewable energy provides us
with a unique advantage in producing low carbon-
intensity copper, reinforcing our commitment to
sustainability and environmental stewardship.
Our ongoing dedication to these principles is detailed
in our annual sustainability report, published in
August 2023, and further exemplified by our
alignment with key global initiatives and standards.
His contributions as a founding Board member
and as Chair of the Audit Committee throughout
his Board tenure have been instrumental to our
success. At the same time, I am excited to welcome
Mr. Faheem Tejani to Ero Copper’s Board, following
his appointment in November 2023. Mr. Tejani’s
extensive financial expertise and board experience,
notably with Pretium Resources prior to its
acquisition by Newcrest Mining, will be invaluable
to our organization.
Looking ahead, Ero Copper stands at an exciting
juncture, poised to capitalize on the investments
made over the past few years, translating them
into substantial returns for our shareholders. This
achievement is a testament to the collective effort
of our team, to whom I extend my deepest gratitude.
Closing Remarks
As I reflect on the past year, I am grateful for
the contributions of our board members, and
would like to specifically recognize Mr. Matthew
Wubs who will not be seeking re-election at the
upcoming Annual General Meeting of Shareholders.
David Strang
Chief Executive Officer
March 14, 2024
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M a n a g e m e n t ’ s D i s c u s s i o n
a n d A n a l y s i s
F o r t h e Y e a r E n d e d D e c e m b e r 3 1 , 2 0 2 3
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E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Table of Contents
MANAGEMENT’S DISCUSSION AND ANALYSIS
9
BUSINESS OVERVIEW
OTHER DISCLOSURES
10 HIGHLIGHTS
13 REVIEW OF OPERATIONS
13 The Caraíba Operations
14 The Xavantina Operations
15 2024 GUIDANCE
23 Liquidity, Capital Resources,
and Contractual Obligations
25 Management of Risks and Uncertainties
28 Other Financial Information
29 Accounting Policies, Judgments and Estimates
30 Capital Expenditures
18 REVIEW OF FINANCIAL RESULTS
31 Alternative Performance (NON-IFRS)
18 Review of quarterly results
20 Review of annual results
22 Summary of quarterly results for most recent
eight quarters
Measures
39 Disclosure Controls and Procedures and
Internal Control over Financial Reporting
40 Notes and Cautionary Statements
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MANAGEMENT’S DISCUSSION AND ANALYSIS
This Management’s Discussion and Analysis (“MD&A”) has been prepared as at March 7, 2024 and
should be read in conjunction with the audited consolidated financial statements of Ero Copper Corp.
(“Ero”, the “Company”, or “we”) as at, and for the year ended December 31, 2023, and related notes
thereto, which are prepared in accordance with International Financial Reporting Standards (“IFRS”) as
issued by the International Accounting Standards Board (the “IASB”). All references in this MD&A to
“Q4 2023” and “Q4 2022” are to the three months ended December 31, 2023 and December 31,
2022, respectively, and all references to "Fiscal 2023" and "Fiscal 2022" are to the years ended
December 31, 2023 and December 31, 2022, respectively. All dollar amounts are expressed in United
States (“US”) dollars and tabular amounts are expressed in thousands of US dollars, unless otherwise
indicated. References to “$”, “US$”, “dollars”, or “USD” are to US dollars, references to “C$” are to
Canadian dollars, and references to “R$” or “BRL” are to Brazilian Reais.
This MD&A refers to various alternative performance (Non-IFRS) measures, including copper C1 cash
cost, copper C1 cash cost including foreign exchange hedges, realized copper price, gold C1 cash cost,
gold all-in sustaining cost (“AISC”), realized gold price, EBITDA, adjusted EBITDA, adjusted net
income attributable to owners of the Company, adjusted net income per share attributable to owners
of the Company, net (cash) debt, working capital and available liquidity. Please refer to the section
titled "Alternative Performance (Non-IFRS) Measures" for a discussion of non-IFRS measures.
This MD&A contains “forward‐looking statements” that are subject to risk factors set out in a
cautionary note contained at the end of this MD&A. The Company cannot assure investors that such
statements will prove to be accurate, and actual results and future events may differ materially from
those anticipated in such statements. The results for the periods presented are not necessarily
indicative of the results that may be expected for any future period. Investors are cautioned not to
place undue reliance on such forward-looking statements. All information contained in this MD&A is
current and has been approved by the Board of Directors of the Company (the “Board”) as of March 7,
2024, unless otherwise stated.
BUSINESS OVERVIEW
Ero is a high-margin, high-growth, low carbon-intensity copper producer with operations in Brazil and
corporate headquarters in Vancouver, B.C. The Company's primary asset is a 99.6% interest in the
Brazilian copper mining company, Mineração Caraíba S.A. ("MCSA"), held indirectly through its
wholly-owned subsidiary, Ero Brasil Participaçoes Ltda.. MCSA is the 100% owner of the Company's
Caraíba Operations, which are located in the Curaçá Valley, Bahia State, Brazil, and the Tucumã
Project, an IOCG-type copper project located in Pará, Brazil. The Company also owns 97.6% of NX
Gold S.A. ("NX Gold") which owns the Xavantina Operations, comprised of an operating gold and
silver mine located in Mato Grosso, Brazil. Additional information on the Company and its operations,
including technical reports on the Caraíba Operations, Xavantina Operations and Tucumã Project, can
be found on the Company's website (www.erocopper.com), on SEDAR+ (www.sedarplus.ca), and on
EDGAR (www.sec.gov). The Company’s shares are publicly traded on the Toronto Stock Exchange
and the New York Stock Exchange under the symbol “ERO”.
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Ero Copper Corp. December 31, 2023 MD&A | Page 1
HIGHLIGHTS
Operating Information
Copper (Caraíba Operations)
Ore Processed (tonnes)
Grade (% Cu)
Cu Production (tonnes)
Cu Production (lbs)
2023 - Q4
2023 - Q3
2022 - Q4
2023
2022
812,202
806,096
745,850
3,231,667
2,864,230
1.59
1.46
1.84
1.49
1.76
11,760
10,766
12,664
43,857
46,371
25,926,281
23,734,026
27,918,071
96,687,638
102,229,718
Cu Sold in Concentrate (tonnes)
11,429
10,090
13,301
42,595
46,816
Cu Sold in Concentrate (lbs)
Cu C1 Cash Cost(1)(2)
Gold (Xavantina Operations)
Ore Processed (tonnes)
Grade (g / tonne)
Au Production (oz)
Au C1 Cash Cost(1)
Au AISC(1)
25,196,731
22,243,586
29,323,118
93,905,643
103,211,464
$
1.75 $
1.92 $
1.59 $
1.80 $
1.55
34,416
17.18
16,867
31,446
18.72
17,579
39,715
136,002
189,743
10.17
11,786
15.13
59,222
7.61
42,669
$
$
413 $
991 $
371 $
445 $
422 $
560
844 $
1,096 $
957 $
1,124
Financial information ($ in millions, except per share amounts)
Revenues
Gross profit
EBITDA(1)
Adjusted EBITDA(1)
Cash flow from operations
Net income
Net income attributable to owners of the
Company
- Per share (basic)
- Per share (diluted)
Adjusted net income attributable to owners
of the Company(1)
- Per share (basic)
- Per share (diluted)
Cash, cash equivalents and short-term
investments
Working capital(1)
Available liquidity(1)
Net debt(1)
$
116.4 $
105.2 $
116.7 $
427.5 $
41.9
73.7
50.3
49.4
37.1
36.5
0.37
0.37
20.7
0.21
0.21
111.7
25.7
261.7
314.5
35.5
28.3
42.9
41.9
2.8
2.5
0.03
0.03
17.3
0.19
0.18
87.6
32.8
237.6
331.8
52.7
53.6
53.2
34.0
22.5
22.2
0.24
0.24
22.2
0.24
0.24
317.4
263.3
392.4
100.7
156.8
208.7
183.5
163.1
94.3
92.8
0.99
0.98
82.8
0.88
0.87
111.7
25.7
261.7
314.5
426.4
187.2
208.3
198.3
143.4
103.1
101.8
1.12
1.10
83.5
0.92
0.91
317.4
263.3
392.4
100.7
(1) Please refer to the section titled "Alternative Performance (Non-IFRS) Measures" within this MD&A.
(2) Copper C1 cash cost including foreign exchange hedges was $1.59 in Q4 2023 (Q4 2022 - $1.59) and $1.68 in Fiscal
2023 (2022 - $1.67).
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Ero Copper Corp. December 31, 2023 MD&A | Page 2
Fourth Quarter and Full-Year 2023 Highlights
Quarterly and full-year operating and financial results reflect continued execution of the
Company's organic growth strategy
• The Caraíba Operations produced 43,857 tonnes of copper in concentrate for the year,
including 11,760 tonnes during Q4 2023
◦ Mill throughput volumes increased 12.8% year-on-year to over 3.2 million tonnes
◦
Processed copper grades and metallurgical recoveries were in-line with expectations,
averaging 1.49% and 91.4%, respectively, for the year
◦ Although the Caraíba mill expansion design capacity was achieved near year-end,
copper production was impacted by approximately one week of additional unplanned
downtime related to the integration of the expansion circuit
• Copper C1 cash costs(1) for the fourth quarter and full year were $1.75 and $1.80, respectively,
per pound produced. Including the benefit of realized gains on designated foreign exchange
hedges, fourth quarter and full-year copper C1 cash costs(1) were $1.59 and $1.68,
respectively
• The Xavantina Operations delivered fourth quarter gold production of 16,867 ounces, resulting
in record full-year gold production of 59,222 ounces
◦
Processed gold grades increased 98.8% to average 15.13 grams per tonne ("gpt") for
the year, more than offsetting lower year-on-year mill throughput volumes
• Gold C1 cash costs(1) and AISC(1) for the fourth quarter were $413 and $991, respectively,
bringing full-year gold C1 cash costs(1) and AISC(1) to $422 and $957, respectively
•
Fourth quarter and full-year financial results reflect the continued execution of the Company's
organic growth strategy, including completion of the NX60 initiative, which resulted in record
full-year operating margins at the Xavantina Operations
◦ Net income attributable to the owners of the Company for the quarter and year were
$36.5 million ($0.37 per share on a diluted basis) and $92.8 million ($0.98 per share on
a diluted basis), respectively
◦ Adjusted net income attributable to the owners of the Company(1) for the quarter and
year were $20.7 million ($0.21 per share on a diluted basis) and $82.8 million ($0.87
per share on a diluted basis), respectively
Fourth quarter and full-year adjusted EBITDA(1) were $50.3 million and $183.5 million,
respectively
◦
• The Company's management team prudently elected to fortify its balance sheet with a bought
deal equity financing in November 2023 in light of an uncertain macroeconomic environment.
Net proceeds from the transaction of $104.3 million contributed to available liquidity at year-
end of $261.7 million, including $111.7 million in cash and cash equivalents plus $150.0
million of undrawn availability under the Company's senior secured revolving credit facility
(1) Please refer to the section titled "Alternative Performance (Non-IFRS) Measures" within this MD&A.
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Ero Copper Corp. December 31, 2023 MD&A | Page 3
Significant milestones achieved across key organic growth initiatives
• The Company continued to make significant construction progress on its Tucumã Project,
achieving over 90% physical completion as of February 2024. With production of copper
concentrate on schedule to commence in H2 2024, the Company's transition from construction
to commissioning is underway. Key milestones include:
◦
◦
Site fully energized in January 2024 following commissioning of the main substation
and completion of the 16-kilometer power line tie-in with the national grid
Pre-stripping activities continue to track ahead of schedule with approximately 25,000
tonnes of sulphide ore stockpiled for process plant commissioning as at the end of
February 2024
◦ Mechanical completion and sub-component commissioning (lubrication, hydraulic,
electrical, instrumentation and automation systems) continues to progress on schedule
◦ Dry commissioning of the crushing circuit, encompassing the primary and secondary
crushers as well as screening and conveyance systems, was completed in February
2024, approximately one month ahead of schedule
◦
◦
The total direct project capital estimate remains approximately $310 million
To date, the Tucumã Project has recorded no lost-time injuries with over three million
hours of work completed since 2022
• At the Caraíba Operations, the Company made important advancements on its Pilar 3.0
initiative during the quarter. This initiative aims to transform the Pilar Mine into a two-mine
system capable of sustaining annual ore production levels of approximately 3.0 million tonnes.
◦
◦
The Caraíba mill expansion, which is expected to increase mill throughput capacity from
3.2 to 4.2 million tonnes per annum, was successfully completed in December 2023
with design capacity achieved by year-end
Following the completion of the head-frame, winders and supporting surface
infrastructure, the main shaft sinking phase for the Pilar Mine's new external shaft
commenced as planned in December 2023. The new external shaft component of the
Pilar 3.0 initiative is fully contracted, and projected capital expenditures are within
budget
• The Xavantina Operations' NX60 initiative was successfully completed in 2023. As a result, the
Company achieved record gold production for the year and expects to sustain annual gold
production levels of 55,000 to 60,000 ounces moving forward.
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Ero Copper Corp. December 31, 2023 MD&A | Page 4
REVIEW OF OPERATIONS
The Caraíba Operations
Copper
Ore mined (tonnes)
Ore processed (tonnes)
Grade (% Cu)
Recovery (%)
Cu Production (tonnes)
Cu Production (lbs)
2023 - Q4
2023 - Q3
2022 - Q4
2023
2022
886,271
794,102
802,466
3,341,121
2,851,516
812,202
806,096
745,850
3,231,667
2,864,230
1.59
91.0
1.46
91.6
1.84
92.3
1.49
91.4
1.76
91.9
11,760
10,766
12,664
43,857
46,371
25,926,281
23,734,026
27,918,071
96,687,638
102,229,718
Concentrate grade (% Cu)
Concentrate sales (tonnes)
Cu Sold in concentrate (tonnes)
33.3
34,332
11,429
33.9
30,751
10,090
33.9
33.7
33.4
36,865
131,002
140,133
13,301
42,595
46,816
Cu Sold in concentrate (lbs)
25,196,731
22,243,586
29,323,118
93,905,643
103,211,464
Realized copper price
Copper C1 cash cost
Copper C1 cash cost including foreign
exchange hedges
$
$
$
3.52 $
3.65 $
3.54 $
3.64 $
1.75 $
1.92 $
1.59 $
1.80 $
3.60
1.55
1.59 $
1.77 $
1.59 $
1.68 $
1.67
The Caraíba Operations achieved strong quarterly copper production of 11,760 tonnes in concentrate,
bringing full-year copper production to 43,857 tonnes in concentrate. Higher processed tonnage and
copper grades during the quarter resulted in a 9.2% increase in copper production compared to Q3
2023 and contributed to a 8.9% decrease in copper C1 cash costs. Including realized gains on
designated foreign exchange hedges, the quarter-on-quarter improvement in unit copper C1 cash
costs was 10.2%.
For the full year, mill throughput volumes increased 12.8%, helping to mitigate the impact of a
planned decrease in mined and processed copper grades in 2023 compared to 2022. Despite this
increase in processed tonnage, copper production decreased 5.4% year-on-year. Moreover, the
strengthening of the BRL against the U.S. dollar, in comparison to 2022, contributed to a 16.1% rise in
copper C1 cash costs for the year. However, after accounting for realized gains from designated
foreign exchange hedges, the overall increase in full-year copper C1 cash costs was a marginal 0.6%.
Tonnes of ore mined in Q4 2023 included:
• Pilar: 471,695 tonnes grading 1.76% copper (vs. 456,444 tonnes at 1.48% copper in Q3 2023)
• Vermelhos: 248,349 tonnes at 1.59% copper (vs. 222,102 tonnes at 1.88% copper in Q3
2023)
• Surubim: 166,227 tonnes at 0.68% copper (vs. 115,556 tonnes at 0.71% copper in Q3 2023)
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Ero Copper Corp. December 31, 2023 MD&A | Page 5
For the full year, tonnes of ore mined included:
• Pilar: 1,870,330 tonnes grading 1.56% copper (vs. 1,628,110 tonnes at 1.76% copper in 2022)
• Vermelhos: 902,643 tonnes at 1.71% copper (vs. 901,306 tonnes at 2.09% copper in 2022)
• Surubim: 568,148 tonnes at 0.72% copper (vs. 322,100 tonnes at 0.60% copper in 2022)
Contributions from the three mines resulted in total ore mined during the quarter of 886,271 tonnes
grading 1.51% copper (vs. 794,102 tonnes at 1.48% copper in Q3 2023). For the full year, total ore
mined was 3,341,121 tonnes grading 1.46% copper (vs. 2,851,516 tonnes at 1.73% copper in 2022).
The Caraíba Operations are expected to produce 42,000 to 47,000 tonnes of copper in concentrate in
2024, with higher mill throughput volumes expected to offset a planned decrease in mined and
processed copper grades. Copper production levels are expected to be lowest in Q1 2024 and equally
weighted between H1 and H2 of 2024.
The Company's full-year copper C1 cash cost guidance range is $1.80 to $2.00. This range assumes
an exchange rate of 5.00 BRL per U.S. dollar and 100% of copper concentrate sales to international
customers. For more information on updates relative to previous 2024 C1 cash cost projections,
please see the section below titled "2024 Guidance".
Exploration activities during Q4 2023 at the Caraíba Operations continued to focus on advancing the
Company's full-year exploration objectives of (i) delineating extensions of nickel mineralization
identified within the Umburana system, (ii) drill testing regional nickel and copper targets in the
Vermelhos district, and (iii) extending high-grade mineralization within the upper levels of the Pilar
Mine and at the Vermelhos Mine.
The Xavantina Operations
Gold
Ore mined (tonnes)
Ore processed (tonnes)
2023 - Q4
2023 - Q3
2022 - Q4
2023
2022
34,417
31,277
39,755
135,982
189,783
34,416
31,446
39,715
136,002
189,743
Head grade (grams per tonne Au)
Recovery (%)
17.18
88.7
18.72
92.9
10.17
90.7
15.13
89.5
7.61
92.0
Gold ounces produced (oz)
16,867
17,579
11,786
59,222
42,669
Silver ounces produced (oz)
9,907
10,994
7,050
37,674
27,885
Gold sold (oz)
Silver sold (oz)
Realized gold price(1)
Gold C1 cash cost
Gold AISC
18,479
15,457
10,583
57,949
41,951
9,618
10,296
7,123
35,655
27,876
$
$
$
1,820 $
1,902 $
1,750 $
1,867 $
1,807
413 $
371 $
445 $
422 $
560
991 $
844 $
1,096 $
957 $
1,124
(1) Realized Au price includes the effect of ounces sold under the stream arrangement with Royal Gold. See "Realized Gold
Price" section of "Non-IFRS Measures" for detail.
1 4
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Ero Copper Corp. December 31, 2023 MD&A | Page 6
The Xavantina Operations delivered record 2023 gold production of 59,222 ounces, with Q4 2023
contributing 16,867 ounces. Gold production remained elevated during the quarter due to a 9.4%
increase in processed tonnage compared to Q3 2023 as well as a continuation of strong mined and
processed gold grades. As a result, gold C1 cash costs remained near record low levels at $413 for
the quarter, while gold AISC was $991.
For the full year, gold production increased 38.8% compared to 2022, reflecting the successful
completion of the NX60 initiative. Consequently, the Xavantina Operations reported record-low full-
year gold C1 cash costs of $422 as well as gold AISC of $957.
The Xavantina Operations are expected to produce 55,000 to 60,000 ounces of gold in 2024 with
higher mill throughput levels expected to offset lower mined and processed gold grades. The
Company anticipates production to be slightly weighted towards H1 2024 with processed gold
grades and production expected to be highest in Q1 2024.
Consequently, gold C1 cash costs are projected to be lowest in Q1 2024, with full-year C1 cash costs
expected to average between $550 and $650. The gold AISC guidance range for 2024 is $1,050 to
$1,150.
Exploration activities at the Xavantina Operations during the quarter continued to focused on testing
the down plunge extension of the Santo Antônio vein at depth as well as drill testing the ENE-strike
extension of the Xavantina vein system and other regional parallel vein systems.
2024 Guidance
The Company's 2024 production guidance reflects the ongoing execution of its organic growth
strategy, including the completion of the Xavantina Operations' NX60 initiative as well as the
anticipated completion of the Tucumã Project, which remains on track to commence production in H2
2024. As a result, the Company expects to deliver consolidated copper production of 59,000 to
72,000 tonnes in concentrate and gold production of 55,000 to 60,000 ounces.
The Company's 2024 copper C1 cash cost guidance on a consolidated basis is $1.50 to $1.75. This
range incorporates several key updates relative to previous 2024 C1 cash cost projections:
• The foreign exchange rate has been adjusted from 5.30 to 5.00 BRL per U.S. Dollar, reflecting
the BRL's continued strength
• Guidance includes higher concentrate treatment and refining charges based on Q4 2023
levels, which have shown a favorable downward trend year-to-date
• Consumable cost assumptions have been refreshed higher to align with consumable pricing
observed in Q4 2023
• The Company has assumed the Caraíba Operations will export 100% of its copper concentrate
in 2024, up from the 50% previously assumed
Furthermore, in light of changes to the Caraíba Operations' copper concentrate sales channels, the
Company has updated its copper C1 cash cost calculation methodology(1). This impact of this change
on copper C1 cash costs will be offset by an equal increase in reported realized copper prices.
At the Xavantina Operations, the gold C1 cash cost guidance range of $550 to $650 reflects improved
fixed cost efficiencies driven by higher expected gold production, partially offsetting the impact of
planned decreases to mined and processed gold grades. The gold AISC guidance range for 2024 is
$1,050 to $1,150.
(1) Please refer to the section titled "Alternative Performance (Non-IFRS) Measures" within this MD&A.
1 5
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Ero Copper Corp. December 31, 2023 MD&A | Page 7
2024 Production and Cost Guidance
The Company's updated cost guidance for 2024 assumes a foreign exchange rate of 5.00 BRL per
USD, a gold price of $1,900 per ounce and a silver price of $23.00 per ounce.
Consolidated Copper Production (tonnes)
Caraíba Operations
Tucumã Operations
Total
Consolidated Copper C1 Cash Costs(1) Guidance
Caraíba Operations
Tucumã Operations
Total
The Xavantina Operations
Au Production (ounces)
Gold C1 Cash Cost(1) Guidance
Gold AISC(1) Guidance
42,000 - 47,000
17,000 - 25,000
59,000 - 72,000
$1.80 - $2.00
$0.90 - $1.10
$1.50 - $1.75
55,000 - 60,000
$550 - $650
$1,050 - $1,150
Note: Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade
and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s
most recent Annual Information Form and Management of Risks and Uncertainties in this MD&A for complete risk
factors.
(1) Please refer to the section titled "Alternative Performance (Non-IFRS) Measures" within this MD&A.
2024 Capital Expenditure Guidance
2024 capital expenditures are expected to decrease to a range of $299 to $349 million due to the
anticipated completion of the Tucumã Project, which is on track to commence production in the second
half of the year. As a result, capital spend is expected to be weighted towards the first half of 2024.
The Company's capital expenditure guidance includes an estimated $30 to $40 million allocated to
consolidated exploration programs. This allocation includes approximately $20 million designated for
drilling activities at the Caraíba Operations, including expenditures related to the Curaçá Valley nickel
exploration program. Additionally, the Company has budgeted approximately $6 million for the first
phase of work at the Furnas Project.
The 2024 capital expenditure guidance assumes an exchange rate of 5.10 USD:BRL for the Tucumã
Project based on designated foreign exchange hedges with a weighted average ceiling and floor of
5.10 and 5.23 USD:BRL, respectively. All other capital expenditures assume an exchange rate of 5.00
USD:BRL. Figures presented in the table below are in USD millions.
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Ero Copper Corp. December 31, 2023 MD&A | Page 8
Caraíba Operations
Growth
Sustaining
Total, Caraíba Operations
Tucumã Project
Growth
Capitalized Ramp-Up Costs
Sustaining
Total, Tucumã Project
Xavantina Operations
Growth
Sustaining
Total, Xavantina Operations
Consolidated Exploration Programs
Company Total
Growth
Capitalized Ramp-Up Costs
Sustaining
Exploration
Total, Company
$80 - $90
$100 - $110
$180 - $200
$65 - $75
$4 - $6
$2 - $5
$71 - $86
$3 - $5
$15 - $18
$18 - $23
$30 - $40
$148 - $170
$4 - $6
$117 - $133
$30 - $40
$299 - $349
1 7
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Ero Copper Corp. December 31, 2023 MD&A | Page 9
REVIEW OF FINANCIAL RESULTS
The following table provides a summary of the financial results of the Company for Q4 2023 and Q4
2022. Tabular amounts are in thousands of US dollars, except share and per share amounts.
Revenue
Cost of sales
Gross profit
Expenses
General and administrative
Share-based compensation
Income before the undernoted
Finance income
Finance expense
Foreign exchange gain
Other expenses
Income before income taxes
Income tax expense
Current
Deferred
Net income for the period
Other comprehensive gain
Foreign currency translation gain
Comprehensive income
Three months ended December 31,
Notes
2023
2022
1
2
3
4
5
6
7
$
116,414 $
116,667
(74,560)
41,854
(12,160)
(477)
29,217
1,989
(63,953)
52,714
(14,049)
(4,123)
34,542
5,041
(5,284)
(12,290)
24,871
(5,326)
45,467
(6,833)
(1,582)
(8,415)
$
37,052 $
4,569
(1,850)
30,012
(7,146)
(394)
(7,540)
22,472
26,074
$
63,126 $
23,398
45,870
Net income per share attributable to owners of the
Company
Basic
Diluted
Weighted average number of common shares outstanding
Basic
Diluted
$
$
0.37 $
0.37 $
0.24
0.24
98,099,791
91,522,358
98,482,755
92,551,916
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Ero Copper Corp. December 31, 2023 MD&A | Page 10
REVIEW OF FINANCIAL RESULTS
Notes:
The following table provides a summary of the financial results of the Company for Q4 2023 and Q4
2022. Tabular amounts are in thousands of US dollars, except share and per share amounts.
Revenue
Cost of sales
Gross profit
Expenses
General and administrative
Share-based compensation
Income before the undernoted
Finance income
Finance expense
Foreign exchange gain
Other expenses
Income before income taxes
Income tax expense
Current
Deferred
Net income for the period
$
37,052 $
Other comprehensive gain
Foreign currency translation gain
Comprehensive income
Net income per share attributable to owners of the
Weighted average number of common shares outstanding
Company
Basic
Diluted
Basic
Diluted
Three months ended December 31,
Notes
2023
2022
$
116,414 $
116,667
1
2
3
4
5
6
7
(5,284)
(12,290)
(74,560)
41,854
(12,160)
(477)
29,217
1,989
24,871
(5,326)
45,467
(6,833)
(1,582)
(8,415)
(63,953)
52,714
(14,049)
(4,123)
34,542
5,041
4,569
(1,850)
30,012
(7,146)
(394)
(7,540)
22,472
26,074
$
63,126 $
23,398
45,870
$
$
0.37 $
0.37 $
0.24
0.24
1. Revenues from copper sales in Q4 2023 was $83.2 million (Q4 2022 - $98.3 million) on sale of 25.2 million lbs of
copper (Q4 2022 - 29.3 million lbs) at an average realized price of $3.52 (Q4 2022 - $3.54) per lb. The decrease in
copper revenues was primarily attributed to less copper sold, as production and head grades were lower compared to
the same quarter of the prior year due to mining sequence.
Revenues from gold sales in Q4 2023 was $33.2 million (Q4 2022 - $18.4 million) on sale of 18,479 ounces of gold (Q4
2022 - 10,583 ounces) at an average realized price of $1,820 per ounce (Q4 2022 - $1,750 per ounce). The increase in
gold revenues was attributable to both higher realized gold price and an increase in sales volume, as production and
head grades increased significantly compared to the same quarter of the prior year.
2. Cost of sales for Q4 2023 from copper sales was $60.2 million (Q4 2022 - $55.5 million) which primarily comprised of
$17.8 million (Q4 2022 - $12.8 million) in depreciation and depletion, $13.7 million (Q4 2022 - $11.5 million) in salaries
and benefits, $10.2 million (Q4 2022 - $10.0 million) in materials and consumables, $7.9 million (Q4 2022 - $6.7
million) in maintenance costs, $6.5 million (Q4 2022 - $8.0 million) in contracted services, $2.7 million (Q4 2022 - $2.6
million) in utilities, and $2.6 million (Q4 2022 - $2.6 million) in sales expenses, partially offset by a $1.4 million increase
(Q4 2022 - $0.8 million decrease) in inventories. The increase in cost of sales in Q4 2023 as compared to Q4 2022 was
primarily attributable to a 9% increase in tonnes processed, as well as higher depreciation and depletion due to overall
higher depletable asset base, and higher labour costs from wage and other benefit increases resulting from new union
contracts. Lower grades of ore processed also resulted in an increase in the cost per pound sold.
Cost of sales for Q4 2023 from gold sales was $14.4 million (Q4 2022 - $8.5 million) which primarily comprised of $6.7
million (Q4 2022 - $3.5 million) in depreciation and depletion, $2.6 million (Q4 2022 - $1.6 million) in salaries and
benefits, $1.6 million (Q4 2022 - $1.5 million) in contracted services, $1.7 million (Q4 2022 - $1.4 million) in materials
and consumables, $0.7 million (Q4 2022 - $0.4 million) in maintenance costs, and $0.6 million (Q4 2022 - $0.5 million)
in utilities. The increase in cost of sales as compared to Q4 2022 was primarily due to higher depreciation and depletion
attributed to an increase in production as well as depreciable asset base. These increases were more than offset by the
68% increase on grades of ore mined which reduced the cost per ounce sold.
3. General and administrative expenses for Q4 2023 was primarily comprised of $5.4 million (Q4 2022 - $6.3 million) in
salaries and consulting fees, $2.5 million (Q4 2022 - $2.5 million) in office and administration expenses, $2.5 million (Q4
2022 - $3.3 million) in incentive payments, $0.5 million (Q4 2022 - $0.7 million) in accounting and legal costs, and $0.9
million (Q4 2022 - $1.2 million) in other costs. The decrease in general and administrative expenses was mainly
attributed to decreases in incentive payments and consulting fees.
4. Finance expense for Q4 2023 was $5.3 million (Q4 2022 - $12.3 million) and is primarily comprised of interest on loans
and borrowings of $0.1 million (Q4 2022 - $5.2 million), accretion of deferred revenue of $0.7 million (Q4 2022 - $0.8
million), accretion of asset retirement obligations of $0.7 million (Q4 2022 - $0.5 million), lease interest of $0.6 million
(Q4 2022 - $0.2 million), and other finance expense of $3.2 million (Q4 2022 - $5.5 million). In addition, $7.0 million
(Q4 2022 - $1.9 million) in interest was capitalized to projects in progress. The overall decrease in finance expense was
attributable to higher interest expense being capitalized as a result of higher capital expenditures on construction
projects as compared to the same quarter in the prior year, partially offset by a credit loss provision recognized on
accounts and note receivable.
5. Foreign exchange gain for Q4 2023 was $24.9 million (Q4 2022 - $4.6 million gain). This amount is primarily comprised
of foreign exchange gain on USD denominated debt of $11.2 million (Q4 2022 - $1.0 million gain) in MCSA for which
the functional currency is the BRL, unrealized foreign exchange gain on derivative contracts of $9.9 million (Q4 2022 -
$3.0 million gain), and realized foreign exchange gain on derivative contracts of $4.2 million (Q4 2022 - $0.1 million
gain), partially offset by other foreign exchange losses of $0.4 million (Q4 2022 - $0.5 million gains). The unrealized
foreign exchange gain on USD denominated debt and on derivative contracts was a result of the strengthening of the
BRL against the USD during the period.
98,099,791
91,522,358
98,482,755
92,551,916
6.
In Q4 2023, the Company recognized $8.4 million in income tax expense (Q4 2022 - tax expense of $7.5 million). The
increase in tax expense was primarily a result of an increase in income before taxes as compared to the same quarter of
the prior year.
7. The foreign currency translation gain is a result of a fluctuation of the BRL against the USD during Q4 2023, which
weakened from approximately 5.01 BRL per US dollar at the beginning of Q4 2023 to approximately 4.84 BRL per US
dollar by the end of the quarter, when translating the net assets of the Company’s Brazilian subsidiaries to USD for
presentation in the Company’s consolidated financial statements.
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Ero Copper Corp. December 31, 2023 MD&A | Page 11
Ero Copper Corp. December 31, 2023 MD&A | Page 10
The following table provides a summary of the financial results of the Company for Fiscal 2023 and
2022. Tabular amounts are in thousands of US dollars, except share and per share amounts.
Revenue
Cost of sales
Gross profit
Expenses
General and administrative
Share-based compensation
Income before the undernoted
Finance income
Finance expense
Foreign exchange gain
NX Gold stream transaction fees
Other expenses
Income before income taxes
Income tax expense
Current
Deferred
Net income for the period
Other comprehensive gain
Foreign currency translation gain
Year ended December 31,
Notes
2023
2022
2021
1
2
3
4
5
6
7
$
427,480 $
426,392 $
489,915
(270,635)
(239,217)
(171,057)
156,845
187,175
318,858
(52,429)
(49,459)
(38,846)
(9,218)
(7,931)
(7,848)
95,198
12,465
129,785
10,295
(25,822)
(33,223)
34,612
19,910
—
(4,102)
—
(384)
272,164
2,991
(12,159)
(21,968)
(1,219)
(2,889)
112,351
126,383
236,920
(15,992)
(15,043)
(2,055)
(8,273)
(18,047)
(23,316)
(22,428)
(11,860)
(34,288)
$
94,304 $
103,067 $
202,632
52,656
29,897
(24,252)
Comprehensive income
$
146,960 $
132,964 $
178,380
Net income per share attributable to owners
of the Company
Basic
Diluted
Weighted average number of common
shares outstanding
Basic
Diluted
$
$
0.99 $
0.98 $
1.12 $
1.10 $
2.27
2.21
94,111,548
90,789,925
88,602,367
94,896,334
92,170,656
90,963,452
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Ero Copper Corp. December 31, 2023 MD&A | Page 12
Notes:
1. Revenues from copper sales in Fiscal 2023 was $320.6 million (Fiscal 2022 - $351.4 million), which included the sale of
93.9 million lbs of copper compared to 103.2 million lbs of copper for Fiscal 2022. The decrease in revenues was
primarily attributed to less copper sold. Revenue in the prior year also included $6.0 million of copper concentrates
acquired from one of the Company's customers to settle accounts receivables in arrears and sold to a different customer.
Revenues from gold sales in Fiscal 2023 was $106.9 million (Fiscal 2022 - $75.0 million), which included the sale of
57,949 ounces of gold at a realized price of $1,867 per ounce, compared to 41,951 ounces of gold sold at a realized
price of $1,807 per ounce in for Fiscal 2022. The increase in revenues was primarily attributable to higher sales volume
and gold prices compared to the prior year.
2. Cost of sales for Fiscal 2023 from copper sales was $224.2 million (Fiscal 2022 - $202.3 million) which primarily
consisted of $62.0 million (Fiscal 2022 - $47.1 million) in depreciation and depletion, $51.4 million (Fiscal 2022 - $42.2
million) in salaries and benefits, $38.1 million (Fiscal 2022 - $36.2 million) in materials and consumables, $26.9 million -
(Fiscal 2022 - $26.3 million) in contracted services, $28.9 million (Fiscal 2022 - $24.4 million) in maintenance costs,
$11.2 million (Fiscal 2022 - $10.7 million) in utilities, and $9.0 million (Fiscal 2022 - $8.9 million) in sales expenses. The
increase in cost of sales was primarily attributed to a 13% increase in tonnes processed, as well as higher depreciation
and depletion due to overall higher depletable asset base, and higher labour costs from wage and other benefit
increases resulting from new union contracts. Lower grades of ore processed also resulted in an increase in the cost per
pound sold.
Cost of sales for Fiscal 2023 from gold sales was $46.5 million (Fiscal 2022- $36.9 million) which primarily comprised
of $19.5 million (Fiscal 2022 - $11.6 million) in depreciation and depletion, $9.2 million (Fiscal 2022 - $8.0 million) in
salaries and benefits, $6.2 million (Fiscal 2022 - $6.1 million) in materials and consumables, $6.0 million (Fiscal 2022 -
$6.3 million) in contracted services, $2.3 million (Fiscal 2022 - $2.4 million) in utilities, and $2.1 million (Fiscal 2022 -
$2.0 million) in maintenance costs. Although tonnes processed decreased, there was an increase in cost of sales
primarily attributed to higher depreciation and depletion as a result of an increase in production and depreciable asset
base. These increases were more than offset by the 98% increase on grades of ore mined which reduced the cost per
ounce sold.
3. General and administrative expenses for Fiscal 2023 was primarily comprised of $29.3 million (Fiscal 2022 - $24.3
million) with respect to salaries and consulting fees, $9.0 million (Fiscal 2022 - $9.3 million) in office and administrative
expenses, $6.9 million (Fiscal 2022 - $8.2 million) in incentive payments, $3.7 million (Fiscal 2022 - $4.9 million) in
other general and administrative expenses, and $2.0 million (Fiscal 2022 - $2.4 million) in accounting and legal fees.
The increase in general and administrative expenses in Fiscal 2023 was primarily attributable to increases in salaries
and consulting fees to support overall growth in operations and various operational excellence initiatives.
4. Finance expense for Fiscal 2023 was $25.8 million (Fiscal 2022 - $33.2 million) and was primarily comprised of interest
on loans at the corporate head office of $11.3 million (Fiscal 2022 - $20.4 million), accretion of deferred revenue of $3.0
million (Fiscal 2022 - $3.4 million), accretion of the asset retirement obligations of $2.7 million (Fiscal 2022 - $2.2
million), lease interest of $1.5 million (Fiscal 2022 - $0.7 million), and other finance expense of $7.3 million (Fiscal 2022
- $6.5 million). In addition, $17.0 million (Fiscal 2022 - $6.2 million) in interest was capitalized to projects in progress.
The overall decrease in finance expense was primarily attributable to higher interest capitalized as a result of capital
expenditures incurred on various qualifying projects, partially offset by an increase in lease interest as well as expected
credit loss on PMA's accounts and note receivable.
5. Foreign exchange gain for Fiscal 2023 was $34.6 million (Fiscal 2022 - $19.9 million gain). This amount was primarily
comprised of a foreign exchange gain on USD denominated debt of $18.7 million (Fiscal 2022 - $3.9 million gain) in
MCSA for which the functional currency is the BRL, realized foreign exchange gain on derivative contracts of $11.4
million (Fiscal 2022 - $12.5 million loss), and a foreign exchange gain on unrealized derivative contracts of $7.6 million
(Fiscal 2022 - $33.1 million gain), partially offset by other foreign exchange losses of $3.1 million (Fiscal 2022 - $4.6
million losses). The fluctuation in foreign exchange gains/losses were primarily a result of increased volatility of the
USD/BRL foreign exchange rates. During Fiscal 2023, the BRL strengthened 7.8% against the USD.
6.
In Fiscal 2023, the Company recognized an $18.0 million income tax expense (Fiscal 2022 - $23.3 million), The decrease
was primarily a result of a decrease in income before income taxes, partially offset by an increase in withholding tax on
intercompany interest and dividends.
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Ero Copper Corp. December 31, 2023 MD&A | Page 13
7. The foreign currency translation income is a result of the strengthening of the BRL against the USD during Fiscal 2023
when translating the net assets of the Company’s Brazilian subsidiaries to USD for presentation in the Company’s
consolidated financial statements.
SUMMARY OF QUARTERLY RESULTS
The following table presents selected financial information for each of the most recent eight quarters.
Tabular amounts are in millions of US Dollars, except share and per share amounts.
Dec. 31,(1)
Sep. 30,(2)
Jun. 30,(3) Mar. 31,(4) Dec. 31,(5)
Sep. 30,(6)
Jun. 30,(7) Mar. 31,(8)
2023
2023
2023
2023
2022
2022
2022
2022
$
$
$
$
$
$
116.4 $
105.2 $
104.9 $
101.0 $
116.7 $
85.9 $
114.9 $
108.9
(74.6) $
(69.7) $
(65.5) $
(60.8) $
(64.0) $
(63.1) $
(64.3) $
(47.9)
41.9 $
35.5 $
39.4 $
40.1 $
52.7 $
22.8 $
50.7 $
61.0
37.1 $
2.8 $
29.9 $
24.5 $
22.5 $
4.0 $
24.1 $
52.5
0.37 $
0.03 $
0.32 $
0.26 $
0.24 $
0.04 $
0.26 $
0.58
0.37 $
0.03 $
0.32 $
0.26 $
0.24 $
0.04 $
0.26 $
0.57
98,099,791 93,311,434
92,685,916 92,294,045
91,522,358
90,845,229
90,539,647
90,238,008
98,482,755 94,009,268
93,643,447 93,218,281
92,551,916
91,797,437
91,850,321
92,050,104
Selected Financial
Information
Revenue
Cost of sales
Gross profit
Net income for period
Income per share
attributable to the owners
of the Company
- Basic
- Diluted
Weighted average number
of common shares
outstanding
- Basic
- Diluted
Notes:
1. During Q4 2023, the Company recognized net income of $37.1 million compared to $2.8 million in the preceding
quarter. The increase was primarily attributable to foreign exchange gains of $24.9 million compared to foreign
exchange losses of $13.9 million in the preceding quarter. The change in foreign exchange gain or loss was primarily
driven by volatility of the Brazilian Real against the US Dollar during the respective periods.
2. During Q3 2023, the Company recognized net income of $2.8 million compared to $29.9 million in the preceding
quarter. The decrease was primarily attributable to foreign exchange losses of $13.9 million compared to foreign
exchange gain of $15.1 million in the preceding quarter. The change in foreign exchange gain or loss was primarily
driven by volatility of the Brazilian Real against the US Dollar during the respective periods.
3. During Q2 2023, the Company recognized net income of $29.9 million compared to $24.5 million in the preceding
quarter. The increase was primarily attributable to an increase in foreign exchange gain and the recognition of an
unrealized gain in copper derivative contracts.
4. During Q1 2023, the Company recognized net income of $24.5 million compared to $22.5 million in the preceding
quarter. The increase was primarily attributable to an increase in foreign exchange gain, a reduction in general and
administrative expenses, and a reduction in finance expense. In the prior quarter, the Company recognized a $3.3 million
expected credit loss provision.
5. During Q4 2022, the Company recognized net income of $22.5 million compared to $4.0 million in the preceding
quarter. The increase was primarily attributable to a $29.9 million increase in gross profit as a result of 13% increase in
copper production, partially offset by higher share-based payment expenses and a $3.3 million expected credit loss
provision recognized in relation to payment arrangement with PMA.
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Ero Copper Corp. December 31, 2023 MD&A | Page 14
6. During Q3 2022, the Company recognized net income of $4.0 million compared to $24.1 million in the preceding
quarter. The decrease was primarily attributable to a $27.9 million decrease in gross profit as a result of 12% lower
production, reduced copper and gold realized prices, and provisional pricing adjustments on copper concentrate sold in
the prior quarter.
7. During Q2 2022, the Company recognized net income of $24.1 million compared to $52.5 million in the preceding
quarter. The decrease was primarily attributable to volatility in foreign exchange gains or losses driven by the
strengthening of the BRL against the USD in the quarter, which resulted in $3.3 million of foreign exchange losses
compared to $18.7 million of foreign exchange gains in the preceding quarter and a $10.3 million decrease in gross
profit as a result of reduced copper and gold realized prices and overall inflationary pressure on cost of sales. The
increase in copper produced and sold was mostly offset by a provisional pricing adjustment.
8. During Q1 2022, the Company recognized net income of $52.5 million compared to $60.2 million in the preceding
quarter. The decrease was primarily attributable to a $23.4 million decrease in gross profit as a result of reduced copper
and gold sales volume, and overall inflationary pressure on cost of sales. Production and throughput for the quarter was
adversely impacted by employee absenteeism due to COVID-19 and the seasonal influenza virus. The decrease in gross
profit was partially offset by foreign exchange gains driven by the strengthening of the BRL against the USD in the
quarter, which resulted in $18.7 million of foreign exchange gains compared to $4.4 million of foreign exchange losses
in the preceding quarter.
LIQUIDITY, CAPITAL RESOURCES, AND CONTRACTUAL OBLIGATIONS
Liquidity
As at December 31, 2023, the Company held cash and cash equivalents of $111.7 million and
available liquidity of $261.7 million. Cash and cash equivalents were primarily comprised of cash held
with reputable financial institutions and are invested in highly liquid short-term investments with
maturities of three months or less. The funds are not exposed to liquidity risk and there are no
restrictions on the ability of the Company to use these funds to meet its obligations.
Cash and cash equivalents have decreased by $66.0 million since December 31, 2022. The
Company’s cash flows from operating, investing, and financing activities during 2023 are summarized
as follows:
•
Cash used in investing activities of $308.2 million, including:
◦
◦
◦
net of:
◦
$447.2 million of additions to mineral property, plant and equipment;
$13.5 million of additions to exploration and evaluation assets; and
$40.0 million of short-term investment purchases;
$192.5 million in proceeds from short-term investments and interest received.
Partially offset by:
• Cash from operating activities of $163.1 million, primarily consists of:
$208.7 million of EBITDA (see Non-IFRS Measures);
$9.6 million of derivative contract settlements; and
$2.4 million of additional advances from the NX Gold Precious Metal Purchase
Agreement;
◦
◦
◦
net of:
◦
$36.8 million of unrealized foreign exchange gains;
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Ero Copper Corp. December 31, 2023 MD&A | Page 15
◦
◦
◦
$5.6 million of income taxes paid;
$3.3 million of provision settlements; and
$8.4 million of net change in non-cash working capital items.
• Cash from financing activities of $77.8 million, primarily consists of:
$104.3 million of net proceeds from equity offering;
$14.9 million of new loans and borrowings, net of transaction costs; and
$11.2 million of proceeds from exercise of stock options.
$27.5 million of interest paid on loans and borrowings;
$11.9 million of lease payments; and
$7.8 million of principal repayments on loans and borrowings.
◦
◦
◦
net of:
◦
◦
◦
As at December 31, 2023, the Company had working capital of $25.7 million and available liquidity of
$261.7 million.
Capital Resources
At December 31, 2023, the Company had available liquidity of $261.7 million, including $111.7
million in cash and cash equivalents and $150.0 million of undrawn availability under its senior
secured revolving credit facility. Subsequent to December 31, 2023, the Company drew $20 million
on the credit facility.
The Company’s primary sources of capital are comprised of cash from operations, and cash and cash
equivalents on hand. The Company continuously monitors its liquidity position and capital structure
and, based on changes in operations and economic conditions, may adjust such structure by issuing
new common shares or new debt as necessary. Taking into consideration expected cash flow from
existing operations and amounts available under its senior revolving credit facility of $130 million as
of the date of this MD&A, management believes that the Company has sufficient working capital and
available liquidity to fund its planned operations and activities, including the capital expenditures to
complete the Tucumã Project, and other initiatives, for the foreseeable future.
In 2023, the senior credit facility was amended to increase its limit from $75.0 million to
$150.0 million with maturity extended from March 2025 to December 2026 ("Amended Senior Credit
Facility"). The Amended Senior Credit Facility bears interest on a sliding scale of SOFR plus an
applicable margin of 2.00% to 4.50% depending on the Company's consolidated leverage ratio.
Commitment fees for the undrawn portion of the Amended Senior Credit Facility is also based on a
sliding scale ranging from 0.45% to 1.01%.
In relation to its loans and borrowings, the Company is required to comply with certain financial
covenants. As of the date of the consolidated financial statements, the Company is in compliance with
these covenants. The loan agreements also contain covenants that could restrict the ability of the
Company and its subsidiaries, MCSA, Ero Gold, and NX Gold, to, among other things, incur additional
indebtedness needed to fund its respective operations, pay dividends or make other distributions,
make investments, create liens, sell or transfer assets or enter into transactions with affiliates. There
are no other restrictions or externally imposed capital requirements of the Company.
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Ero Copper Corp. December 31, 2023 MD&A | Page 16
$5.6 million of income taxes paid;
$3.3 million of provision settlements; and
$8.4 million of net change in non-cash working capital items.
• Cash from financing activities of $77.8 million, primarily consists of:
$104.3 million of net proceeds from equity offering;
$14.9 million of new loans and borrowings, net of transaction costs; and
$11.2 million of proceeds from exercise of stock options.
$27.5 million of interest paid on loans and borrowings;
$11.9 million of lease payments; and
$7.8 million of principal repayments on loans and borrowings.
◦
◦
◦
◦
◦
◦
◦
◦
◦
net of:
As at December 31, 2023, the Company had working capital of $25.7 million and available liquidity of
$261.7 million.
Capital Resources
on the credit facility.
At December 31, 2023, the Company had available liquidity of $261.7 million, including $111.7
million in cash and cash equivalents and $150.0 million of undrawn availability under its senior
secured revolving credit facility. Subsequent to December 31, 2023, the Company drew $20 million
The Company’s primary sources of capital are comprised of cash from operations, and cash and cash
equivalents on hand. The Company continuously monitors its liquidity position and capital structure
and, based on changes in operations and economic conditions, may adjust such structure by issuing
new common shares or new debt as necessary. Taking into consideration expected cash flow from
existing operations and amounts available under its senior revolving credit facility of $130 million as
of the date of this MD&A, management believes that the Company has sufficient working capital and
available liquidity to fund its planned operations and activities, including the capital expenditures to
complete the Tucumã Project, and other initiatives, for the foreseeable future.
In 2023, the senior credit facility was amended to increase its limit from $75.0 million to
$150.0 million with maturity extended from March 2025 to December 2026 ("Amended Senior Credit
Facility"). The Amended Senior Credit Facility bears interest on a sliding scale of SOFR plus an
applicable margin of 2.00% to 4.50% depending on the Company's consolidated leverage ratio.
Commitment fees for the undrawn portion of the Amended Senior Credit Facility is also based on a
sliding scale ranging from 0.45% to 1.01%.
In relation to its loans and borrowings, the Company is required to comply with certain financial
covenants. As of the date of the consolidated financial statements, the Company is in compliance with
these covenants. The loan agreements also contain covenants that could restrict the ability of the
Company and its subsidiaries, MCSA, Ero Gold, and NX Gold, to, among other things, incur additional
indebtedness needed to fund its respective operations, pay dividends or make other distributions,
make investments, create liens, sell or transfer assets or enter into transactions with affiliates. There
are no other restrictions or externally imposed capital requirements of the Company.
Contractual Obligations and Commitments
The Company has a precious metals purchase agreement with RGLD Gold AG ("Royal Gold"), a
wholly-owned subsidiary of Royal Gold, Inc., whereby the Company is obligated to sell a portion of its
gold production from the Xavantina Operations at contract prices.
Refer to the "Liquidity Risk" section for further information on the Company's contractual obligations
and commitments.
MANAGEMENT OF RISKS AND UNCERTAINTIES
The Company thoroughly examines the various financial instruments and risks to which it is exposed
and assesses the impact and likelihood of those risks. These risks may include credit risk, liquidity risk,
currency risk, commodity price risk and interest rate risk. Where material, these risks are reviewed and
monitored by the Board.
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial
instrument fails to meet its contractual obligations and arises principally from the Company’s
receivables from customers. The carrying amount of the financial assets below represents the
maximum credit risk exposure as at December 31, 2023 and December 31, 2022:
Cash and cash equivalents
Short-term investments
Accounts receivable
Derivatives
Note receivable
Deposits and other assets
December 31,
2023
December 31,
2022
$
111,738 $
—
5,710
11,254
17,413
8,472
177,702
139,700
10,289
3,237
20,630
3,985
$
154,587 $
355,543
The Company invests cash and cash equivalents and short-term investments with financial
institutions that are financially sound based on their credit rating.
The Company’s exposure to credit risk associated with accounts receivable is influenced mainly by the
individual characteristics of each customer.
In November 30, 2022, Paranapanema S/A ("PMA"), one of the Company's customers in Brazil, filed
for bankruptcy protection. According to PMA, the action was attributed to working capital challenges
following an operational halt at one of their facilities. Progress was noted in August 2023 when PMA
and its creditors agreed on a judicial recovery plan, which subsequently received approval from the
judicial recovery court in November 2023. As a preferred supplier to PMA, the Company has entered
into a note receivable arrangement with PMA. The arrangement is excluded from the judicial recovery
process and provides the Company with certain judicial guarantees. According to the note receivable
Ero Copper Corp. December 31, 2023 MD&A | Page 16
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Ero Copper Corp. December 31, 2023 MD&A | Page 17
arrangement, repayment is structured over 24 monthly installments beginning in March 2024, with an
annual interest rate equivalent to Brazil's CDI rate of approximately 11.65%.
Foreign exchange currency risk
At December 31, 2023, the gross amount of accounts and note receivable from PMA was
$25.2 million (December 31, 2022 - $23.9 million). After adjusting for credit loss provision and
present value discount of $7.7 million (December 31, 2022 - $3.3 million), the amortized cost of the
note receivable at December 31, 2023 was $17.4 million (December 31, 2022 - $20.6 million), of
which $8.3 million (December 31, 2022 - $10.2 million) was classified as current and $9.1 million
(December 31, 2022 - $10.4 million) as non-current.
Liquidity risk
Liquidity risk is the risk associated with the difficulties that the Company may have meeting the
obligations associated with financial liabilities that are settled with cash payments or with another
financial asset. The Company's approach to liquidity management is to ensure as much as possible
that sufficient liquidity exists to meet their maturity obligations on the expiration dates, under normal
and stressful conditions, without causing unacceptable losses or with risk of undermining the normal
operation of the Company.
The table below shows the Company's maturity of non-derivative financial liabilities on December 31,
2023:
Non-derivative financial
liabilities
Carrying
value
Contractual
cash flows
Loans and borrowings (including
Up to
12
months
1 - 2
years
3 - 5
years
More than
5 years
interest)
$ 426,233 $
593,991 $
37,743 $
34,468 $
82,781 $ 438,999
Accounts payable and accrued
liabilities
120,704
120,704
120,704
—
—
Other non-current liabilities
8,524
23,436
—
10,166
12,640
Leases
Total
19,603
19,579
10,929
5,521
3,019
$ 575,064 $
757,710 $ 169,376 $
50,155 $
98,440 $ 439,739
—
630
110
As at December 31, 2023, the Company has capital commitments, which is net of advances to
suppliers, of $122.6 million through contracts and purchase orders which are expected to be incurred
over a six-year period. In the normal course of operations, the Company may also enter into long-term
contracts which can be cancelled with certain agreed customary notice periods without material
penalties.
The Company also has derivative financial asset for foreign exchange collar contracts and copper
derivative contracts whose notional amounts and maturity information are disclosed below under
foreign exchange currency risk, interest rate risk, and price risk.
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Ero Copper Corp. December 31, 2023 MD&A | Page 18
Ero Copper Corp. December 31, 2023 MD&A | Page 19
The Company’s subsidiaries in Brazil are exposed to exchange risks primarily related to the US dollar.
In order to minimize currency mismatches, the Company monitors its cash flow projections considering
future sales expectations indexed to US dollar variation in relation to the cash requirement to settle
the existing financings.
The Company's exposure to foreign exchange currency risk at December 31, 2023 relates to $17.2
million (December 31, 2022 – $11.7 million) in loans and borrowings of MCSA denominated in US
dollars and Euros. In addition, the Company is also exposed to foreign exchange currency risk at
December 31, 2023 on $342.2 million of intercompany loan balances (December 31, 2022 - $148.2
million) which have contractual repayment terms. Strengthening (weakening) in the Brazilian Real
against the US dollar at December 31, 2023 by 10% and 20%, would have increased (decreased) pre-
tax net income by $35.8 million and $71.7 million, respectively. This analysis is based on the foreign
currency exchange variation rate that the Company considered to be reasonably possible at the end of
the year and excluding the impact of the derivatives below. The analysis assumes that all other
variables, especially interest rates, are held constant.
The Company may use certain foreign exchange derivatives, including collars and forward contracts,
to manage its foreign exchange risks. A summary of the Company's foreign exchange derivatives at
December 31, 2023 is summarized as follows:
Purpose
Denomination
average floor
forward price
Maturities
Notional
Amount
Weighted
average cap /
Weighted
Operational costs
$232.5 million
USD/BRL
Capital expenditures
$144.5 million
USD/BRL
Total
$377.0 million
USD/BRL
4.96
5.10
5.01
5.38
5.23
5.33
Jan 2024 - Dec 2024
Jan 2024 - Dec 2024
Jan 2024 - Dec 2024
The aggregate fair value of the Company's foreign exchange derivatives was a net asset of $11.3
million (December 31, 2022 - asset of $3.2 million). The fair values of foreign exchange contracts
were determined based on option pricing models, forward foreign exchange rates, and information
provided by the counter party.
The change in fair value of foreign exchange collar contracts was a gain of $7.6 million for the year
ended December 31, 2023 (a gain of $33.1 million for the year ended December 31, 2022), which has
been recognized in foreign exchange gain.
In addition, during the year ended December 31, 2023, the Company recognized a realized gain of
$11.4 million (realized loss of $12.5 million for the year ended December 31, 2022), respectively,
related to the settlement of foreign currency forward collar contracts.
Interest rate risk
interest rate paid.
The Company is principally exposed to the variation in interest rates on loans and borrowings with
variable rates of interest. Management reduces interest rate risk exposure by entering into loans and
borrowings with fixed rates of interest or by entering into derivative instruments that fix the ultimate
arrangement, repayment is structured over 24 monthly installments beginning in March 2024, with an
annual interest rate equivalent to Brazil's CDI rate of approximately 11.65%.
Foreign exchange currency risk
At December 31, 2023, the gross amount of accounts and note receivable from PMA was
$25.2 million (December 31, 2022 - $23.9 million). After adjusting for credit loss provision and
present value discount of $7.7 million (December 31, 2022 - $3.3 million), the amortized cost of the
note receivable at December 31, 2023 was $17.4 million (December 31, 2022 - $20.6 million), of
which $8.3 million (December 31, 2022 - $10.2 million) was classified as current and $9.1 million
(December 31, 2022 - $10.4 million) as non-current.
Liquidity risk
2023:
liabilities
interest)
liabilities
Leases
Total
penalties.
Liquidity risk is the risk associated with the difficulties that the Company may have meeting the
obligations associated with financial liabilities that are settled with cash payments or with another
financial asset. The Company's approach to liquidity management is to ensure as much as possible
that sufficient liquidity exists to meet their maturity obligations on the expiration dates, under normal
and stressful conditions, without causing unacceptable losses or with risk of undermining the normal
operation of the Company.
The table below shows the Company's maturity of non-derivative financial liabilities on December 31,
Non-derivative financial
Carrying
Contractual
value
cash flows
months
1 - 2
years
3 - 5
years
More than
5 years
Up to
12
Loans and borrowings (including
Accounts payable and accrued
$ 426,233 $
593,991 $
37,743 $
34,468 $
82,781 $ 438,999
Other non-current liabilities
8,524
23,436
—
10,166
12,640
120,704
120,704
120,704
—
—
—
630
110
19,603
19,579
10,929
5,521
3,019
$ 575,064 $
757,710 $ 169,376 $
50,155 $
98,440 $ 439,739
As at December 31, 2023, the Company has capital commitments, which is net of advances to
suppliers, of $122.6 million through contracts and purchase orders which are expected to be incurred
over a six-year period. In the normal course of operations, the Company may also enter into long-term
contracts which can be cancelled with certain agreed customary notice periods without material
The Company also has derivative financial asset for foreign exchange collar contracts and copper
derivative contracts whose notional amounts and maturity information are disclosed below under
foreign exchange currency risk, interest rate risk, and price risk.
Ero Copper Corp. December 31, 2023 MD&A | Page 18
The Company’s subsidiaries in Brazil are exposed to exchange risks primarily related to the US dollar.
In order to minimize currency mismatches, the Company monitors its cash flow projections considering
future sales expectations indexed to US dollar variation in relation to the cash requirement to settle
the existing financings.
The Company's exposure to foreign exchange currency risk at December 31, 2023 relates to $17.2
million (December 31, 2022 – $11.7 million) in loans and borrowings of MCSA denominated in US
dollars and Euros. In addition, the Company is also exposed to foreign exchange currency risk at
December 31, 2023 on $342.2 million of intercompany loan balances (December 31, 2022 - $148.2
million) which have contractual repayment terms. Strengthening (weakening) in the Brazilian Real
against the US dollar at December 31, 2023 by 10% and 20%, would have increased (decreased) pre-
tax net income by $35.8 million and $71.7 million, respectively. This analysis is based on the foreign
currency exchange variation rate that the Company considered to be reasonably possible at the end of
the year and excluding the impact of the derivatives below. The analysis assumes that all other
variables, especially interest rates, are held constant.
The Company may use certain foreign exchange derivatives, including collars and forward contracts,
to manage its foreign exchange risks. A summary of the Company's foreign exchange derivatives at
December 31, 2023 is summarized as follows:
Purpose
Notional
Amount
Denomination
Weighted
average floor
Weighted
average cap /
forward price
Operational costs
$232.5 million
USD/BRL
Capital expenditures
$144.5 million
USD/BRL
Total
$377.0 million
USD/BRL
4.96
5.10
5.01
5.38
5.23
5.33
Maturities
Jan 2024 - Dec 2024
Jan 2024 - Dec 2024
Jan 2024 - Dec 2024
The aggregate fair value of the Company's foreign exchange derivatives was a net asset of $11.3
million (December 31, 2022 - asset of $3.2 million). The fair values of foreign exchange contracts
were determined based on option pricing models, forward foreign exchange rates, and information
provided by the counter party.
The change in fair value of foreign exchange collar contracts was a gain of $7.6 million for the year
ended December 31, 2023 (a gain of $33.1 million for the year ended December 31, 2022), which has
been recognized in foreign exchange gain.
In addition, during the year ended December 31, 2023, the Company recognized a realized gain of
$11.4 million (realized loss of $12.5 million for the year ended December 31, 2022), respectively,
related to the settlement of foreign currency forward collar contracts.
Interest rate risk
The Company is principally exposed to the variation in interest rates on loans and borrowings with
variable rates of interest. Management reduces interest rate risk exposure by entering into loans and
borrowings with fixed rates of interest or by entering into derivative instruments that fix the ultimate
interest rate paid.
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Ero Copper Corp. December 31, 2023 MD&A | Page 19
The Company is principally exposed to interest rate risk through Brazilian Real denominated bank
loans of $2.4 million. Based on the Company’s net exposure at December 31, 2023, a 1% change in
the variable rates would not materially impact its pre-tax annual net income.
Price risk
The Company may use derivatives, including forward contracts, collars and swap contracts, to manage
commodity price risks.
At December 31, 2023, the Company had provisionally priced sales that are exposed to commodity
price changes. Based on the Company’s net exposure at December 31, 2023, a 10% change in the
price of copper would have changed $2.5 million.
At December 31, 2023, the Company has entered into zero-cost copper derivative contracts on 1,000
tonnes of copper per month from January 2024 to June 2024, representing approximately 25% of
estimated production volumes over the period. As of December 31, 2023, the fair value of these
contracts was a net liability of $0.6 million (December 31, 2022 - liability of $0.6 million). The fair
value of copper collar contracts was determined based on option pricing models, forward copper price
and information provided by the counter party.
During the year ended December 31, 2023, the Company recognized an unrealized loss of $0.1
million ($nil for the year ended December 31, 2022) and a realized loss of $1.8 million ($nil for the
year ended December 31, 2022) in relation to its copper hedge derivatives in other income or loss.
For a discussion of additional risks applicable to the Company and its business and operations,
including risks related to the Company’s foreign operations, the environment and legal proceedings,
see “Risk Factors” in the Company’s AIF.
OTHER FINANCIAL INFORMATION
Off-Balance Sheet Arrangements
As at December 31, 2023, the Company had no material off-balance sheet arrangements.
Outstanding Share Data
As of March 7, 2024, the Company had 102,759,852 common shares issued and outstanding.
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Ero Copper Corp. December 31, 2023 MD&A | Page 20
ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES
Critical Accounting Judgments and Estimates
The preparation of consolidated financial statements in conformity with IFRS requires management to
make judgments, estimates and assumptions about future events that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Although these estimates are based on management’s best
knowledge of the amount, events or actions, actual results may differ from these estimates.
The Company’s material accounting policies and accounting estimates are contained in the Company’s
consolidated financial statements for the year ended December 31, 2023. Judgements have been
made in the determination of the functional currency of the Company and its subsidiaries and in the
assessment of the probability of cash outflow related to legal claims and contingent liabilities. Certain
of accounting policies, such as derivative instruments, deferred revenue, carrying amounts of mineral
properties and associated mine closure and reclamation costs, provision for mine closure and
reclamation costs, income tax including tax uncertainties, and expected credit losses involve critical
accounting estimates. Certain of these estimates are dependent on mineral reserves and resource
estimates. Changes in estimates of mineral reserves and resources could impact depreciation and
depletion rates, asset carrying amounts and the provisions for mine closure and reclamation costs. The
Company estimates its mineral reserves and resources based on information compiled by competent
individuals. Estimates of mineral reserves and resources are used in the calculation of depreciation,
depletion and determination, when applicable, of the recoverable amount of CGUs, and for forecasting
the timing of reclamation and closure cost expenditures. There are numerous uncertainties inherent in
estimating mineral reserves, and assumptions that are valid at the time of estimation may change
significantly when new information becomes available. Changes in the estimation methodology,
forecasted prices of commodities, exchange rates, production costs or recovery rates may change the
economic status of mineral reserves and may, ultimately, result in changes in the mineral reserves.
Management continuously reviews its estimates, judgments and assumptions on an ongoing basis
using the most current information available. Revisions to estimates are recognized prospectively.
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Ero Copper Corp. December 31, 2023 MD&A | Page 21
CAPITAL EXPENDITURES
The following table presents capital expenditures at the Company’s operations on an accrual basis
and are net of any sales and value-added taxes.
Caraíba Operations
Growth
Sustaining
Exploration
Deposit on Projects
Total, Caraíba Operations
Tucumã Project
Growth
Exploration
Deposit on Projects
Total, Tucumã Project
Xavantina Operations
Growth
Sustaining
Exploration
Deposit on Projects
Total, Xavantina Operations
Corporate and Other
Sustaining
Exploration
Deposit on Projects
Total, Corporate and Other
Consolidated
Growth
Sustaining
Exploration
Deposit on Projects
Total, Consolidated
2023
2022
$
148,808 $
78,473
30,408
(8,523)
63,477
88,356
34,786
22,524
$
249,166 $
209,143
189,006
813
15,687
47,382
6,108
5,938
$
205,506 $
59,428
2,944
16,251
8,546
(174)
3,248
14,487
13,038
—
$
27,567 $
30,773
933
6,325
4
—
7,149
6
$
7,262 $
7,155
$
340,758
95,657
46,092
6,994
114,107
102,843
61,081
28,468
$
489,501 $
306,499
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Ero Copper Corp. December 31, 2023 MD&A | Page 22
ALTERNATIVE PERFORMANCE (NON-IFRS) MEASURES
The Company utilizes certain alternative performance (non-IFRS) measures to monitor
its
performance, including copper C1 cash cost, copper C1 cash cost including foreign exchange hedges,
realized copper price, gold C1 cash cost, gold AISC, realized gold price, EBITDA, adjusted EBITDA,
adjusted net income attributable to owners of the Company, adjusted net income per share, net (cash)
debt, working capital and available liquidity. These performance measures have no standardized
meaning prescribed within generally accepted accounting principles under IFRS and, therefore,
amounts presented may not be comparable to similar measures presented by other mining companies.
These non-IFRS measures are intended to provide supplemental information and should not be
considered in isolation or as a substitute for measures of performance prepared in accordance with
IFRS. The tables below provide reconciliations of these non-IFRS measures to the most directly
comparable IFRS measures as contained in the Company’s financial statements.
Unless otherwise noted, the non-IFRS measures presented below have been calculated on a
consistent basis for the periods presented.
Copper C1 Cash Cost and Copper C1 Cash Cost including Foreign Exchange Hedges
Copper C1 cash cost and copper C1 cash cost including foreign exchange hedges are non-IFRS
performance measures used by the Company to manage and evaluate the performance of its copper
mining operations.
Copper C1 cash cost is calculated as C1 cash costs divided by total pounds of copper produced during
the period. C1 cash costs comprise the total cost of production, including expenses related to
transportation, and treatment and refining charges. These costs are net of by-product credits,
incentive payments and certain tax credits associated with sales invoiced to the Company's Brazilian
customer.
Copper C1 cash cost including foreign exchange hedges is calculated as C1 cash costs, adjusted for
realized gains or losses from its operational foreign exchange hedges, divided by total pounds of
copper produced during the period. Although the Company does not apply hedge accounting in its
consolidated financial statements and recognizes these contracts at fair value through profit or loss,
the Company believes it appropriate to present cash costs including the impact of realized gains and
losses as these contracts were entered into to mitigate the impact of changes in exchange rates.
In light of changes to the Caraíba Operations' copper concentrate sales channels, effective Q4 2023,
freight parity charged by its customers is presented as part of treatment, refining and other costs
within the calculation of copper C1 cash cost. This charge was previously presented as a reduction of
realized copper price. The calculation of copper C1 cash cost for comparative periods have been
adjusted to conform with the current methodology.
While copper C1 cash cost is widely reported in the mining industry as a performance benchmark, it
does not have a standardized meaning and is disclosed as a supplement to IFRS measures.
The following table provides a reconciliation of copper C1 cash cost to cost of production, its most
directly comparable IFRS measure.
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Ero Copper Corp. December 31, 2023 MD&A | Page 23
Reconciliation:
Cost of production
Add (less):
2023 - Q4
2023 - Q3
2022 - Q4
2023
2022
2023 - Q4
2023 - Q3
2022 - Q4
2023
2022
$ 39,790 $ 39,345 $ 40,067 $ 153,187 $ 146,292
Costs per pound
Transportation costs & other
Treatment, refining, and other
1,853
7,332
1,614
6,574
2,362
9,989
6,539
9,019
28,323
36,156
By-product credits
Incentive payments
(3,394)
(3,022)
(6,103)
(12,930)
(22,282)
(1,693)
(1,609)
(1,092)
(5,668)
(3,914)
Net change in inventory
1,434
2,835
(861)
4,407
(6,040)
Foreign exchange translation and other
20
(171)
(47)
(149)
373
C1 cash costs
45,342
45,566
44,315
173,709
159,604
(Gain) loss on foreign exchange hedges
(4,185)
(3,458)
(78)
(11,417)
12,498
C1 cash costs including foreign
exchange hedges
$ 41,157 $ 42,108 $ 44,237 $ 162,292 $ 172,102
2023 - Q4
2023 - Q3
2022 - Q4
2023
2022
Realized Copper Price
Costs
Mining
Processing
Indirect
Production costs
By-product credits
$ 26,646 $ 27,258 $ 26,433 $ 102,908 $ 94,086
8,177
6,581
8,362
6,394
8,033
5,963
30,736
30,155
24,672
21,489
41,404
42,014
40,429
158,316
145,730
(3,394)
(3,022)
(6,103)
(12,930)
(22,282)
Treatment, refining and other
7,332
6,574
9,989
28,323
36,156
C1 cash costs
45,342
45,566
44,315
173,709
159,604
(Gain) loss on foreign exchange hedges
(4,185) $
(3,458) $
(78)
(11,417)
12,498
C1 cash costs including foreign
exchange hedges
$ 41,157 $ 42,108 $ 44,237 $ 162,292 $ 172,102
segment .
Total copper produced (lb, 000)
25,926
23,734
27,918
96,688
102,230
Mining
Processing
Indirect
1.03 $
1.15 $
0.95 $
1.06 $
0.92
0.32 $
0.35 $
0.29 $
0.32 $
0.29
0.25 $
0.27 $
0.21 $
0.26 $
0.21
By-product credits
(0.13) $
(0.13) $
(0.22) $
(0.13) $
(0.22)
Treatment, refining and other
0.28 $
0.28 $
0.36 $
0.29 $
0.35
Copper C1 cash costs
1.75 $
1.92 $
1.59 $
1.80 $
1.55
(Gain) loss on foreign exchange hedges
(0.16) $
(0.15) $
— $
(0.12) $
0.12
Copper C1 cash costs including foreign
exchange hedges
1.59 $
1.77 $
1.59 $
1.68 $
1.67
$
$
$
$
$
$
$
$
Realized copper price is a non-IFRS ratio that is calculated as gross copper revenue divided by pounds
of copper sold during the period. Management believes measuring realized copper price enables
investors to better understand performance based on the realized copper sales in each reporting
period.
In light of changes to the Caraíba Operations' copper concentrate sales channels, effective Q4 2023,
freight parity charged by its customers, previously presented as a reduction of realized copper price,
will be reclassified as part of copper C1 cash costs. In addition, royalty taxes are added back to reflect
gross revenue to derive realized copper price. The calculation of realized copper price for comparative
periods have been adjusted to conform with the current methodology.
The following table provides a calculation of realized copper price and a reconciliation to copper
Reconciliation:
Copper revenue ($000s)(1)
less: by-product credits
Net copper revenue
add: treatment, refining and other
add: royalty taxes
Gross copper revenue
2023 - Q4
2023 - Q3
2022 - Q4
2023
2022
$ 83,237 $ 76,136 $ 98,315 $ 320,603 $ 351,404
(3,394)
(3,022)
(6,103)
(12,930)
(22,282)
79,843
73,114
92,212
307,673
329,122
7,332
1,501
6,574
1,418
9,989
1,566
28,323
36,156
6,049
6,572
88,676
81,106
103,767
342,045
371,850
Cu Sold in concentrate (lbs)
25,197
22,244
29,323
93,906
103,211
Realized copper price
$
3.52 $
3.65 $
3.54 $
3.64 $
3.60
(1) Copper revenue includes provisional price and volume adjustments
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Ero Copper Corp. December 31, 2023 MD&A | Page 24
Ero Copper Corp. December 31, 2023 MD&A | Page 25
Costs per pound
Total copper produced (lb, 000)
25,926
23,734
27,918
96,688
102,230
2023 - Q4
2023 - Q3
2022 - Q4
2023
2022
Mining
Processing
Indirect
By-product credits
Treatment, refining and other
Copper C1 cash costs
(Gain) loss on foreign exchange hedges
Copper C1 cash costs including foreign
exchange hedges
$
$
$
$
$
$
$
$
1.03 $
1.15 $
0.95 $
1.06 $
0.92
0.32 $
0.35 $
0.29 $
0.32 $
0.29
0.25 $
0.27 $
0.21 $
0.26 $
0.21
(0.13) $
(0.13) $
(0.22) $
(0.13) $
(0.22)
0.28 $
0.28 $
0.36 $
0.29 $
0.35
1.75 $
1.92 $
1.59 $
1.80 $
1.55
(0.16) $
(0.15) $
— $
(0.12) $
0.12
1.59 $
1.77 $
1.59 $
1.68 $
1.67
Realized Copper Price
Realized copper price is a non-IFRS ratio that is calculated as gross copper revenue divided by pounds
of copper sold during the period. Management believes measuring realized copper price enables
investors to better understand performance based on the realized copper sales in each reporting
period.
In light of changes to the Caraíba Operations' copper concentrate sales channels, effective Q4 2023,
freight parity charged by its customers, previously presented as a reduction of realized copper price,
will be reclassified as part of copper C1 cash costs. In addition, royalty taxes are added back to reflect
gross revenue to derive realized copper price. The calculation of realized copper price for comparative
periods have been adjusted to conform with the current methodology.
The following table provides a calculation of realized copper price and a reconciliation to copper
segment .
Reconciliation:
Copper revenue ($000s)(1)
less: by-product credits
Net copper revenue
add: treatment, refining and other
add: royalty taxes
Gross copper revenue
2023 - Q4
2023 - Q3
2022 - Q4
2023
2022
$ 83,237 $ 76,136 $ 98,315 $ 320,603 $ 351,404
(3,394)
(3,022)
(6,103)
(12,930)
(22,282)
79,843
73,114
92,212
307,673
329,122
7,332
1,501
6,574
1,418
9,989
1,566
28,323
36,156
6,049
6,572
88,676
81,106
103,767
342,045
371,850
Cu Sold in concentrate (lbs)
25,197
22,244
29,323
93,906
103,211
Realized copper price
$
3.52 $
3.65 $
3.54 $
3.64 $
3.60
(1) Copper revenue includes provisional price and volume adjustments
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Ero Copper Corp. December 31, 2023 MD&A | Page 25
Gold C1 Cash Cost and Gold AISC
Gold C1 cash cost is a non-IFRS performance measure used by the Company to manage and evaluate
the operating performance of its gold mining segment and is calculated as C1 cash costs divided by
total ounces of gold produced during the period. C1 cash cost includes total cost of production, net of
by-product credits and incentive payments. Gold C1 cash cost is widely reported in the mining
industry as benchmarks for performance but does not have a standardized meaning and is disclosed in
supplemental to IFRS measures.
Gold AISC is an extension of gold C1 cash cost discussed above and is also a key performance
measure used by management to evaluate operating performance of its gold mining segment. Gold
AISC is calculated as AISC divided by total ounces of gold produced during the period. AISC includes
C1 cash costs, site general and administrative costs, accretion of mine closure and rehabilitation
provision, sustaining capital expenditures, sustaining leases, and royalties and production taxes. Gold
AISC is widely reported in the mining industry as benchmarks for performance but does not have a
standardized meaning and is disclosed in supplement to IFRS measures.
The following table provides a reconciliation of gold C1 cash cost and gold AISC to cost of production,
its most directly comparable IFRS measure.
Reconciliation:
Cost of production
Add (less):
Incentive payments
Net change in inventory
By-product credits
Smelting and refining
Foreign exchange translation and other
2023 - Q4
2023 - Q3
2022 - Q4
2023
2022
$
7,122 $
6,323 $
4,834 $ 25,209 $ 24,768
(386)
(320)
(167)
(1,424)
(1,117)
65
213
258
862
(248)
(240)
(199)
(827)
113
296
101
453
61
462
353
806
(119)
(613)
234
742
C1 cash costs
$
6,962 $
6,530 $
5,249 $ 24,979 $ 23,895
Site general and administrative
1,492
1,304
1,196
5,366
3,648
Accretion of mine closure and
rehabilitation provision
Sustaining capital expenditure
Sustaining lease payments
Royalties and production taxes
111
5,499
1,861
785
112
4,258
1,832
808
106
4,547
1,559
262
439
436
16,300
14,638
7,093
2,487
4,311
1,041
AISC
$ 16,710 $ 14,844 $ 12,919 $ 56,664 $ 47,969
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Ero Copper Corp. December 31, 2023 MD&A | Page 26
Costs
Mining
Processing
Indirect
Production costs
Smelting and refining costs
By-product credits
C1 cash costs
2023 - Q4
2023 - Q3
2022 - Q4
2023
2022
$
3,430 $
3,140 $
2,311 $ 12,154 $ 12,529
2,315
1,352
7,097
113
2,165
1,364
6,669
101
2,067
1,009
5,387
61
8,433
4,866
7,917
3,828
25,453
24,274
353
234
(248)
(240)
(199)
(827)
(613)
$
6,962 $
6,530 $
5,249 $ 24,979 $ 23,895
Site general and administrative
1,492
1,304
1,196
5,366
3,648
Accretion of mine closure and
rehabilitation provision
Sustaining capital expenditure
Sustaining leases
Royalties and production taxes
111
5,499
1,861
785
112
4,258
1,832
808
106
4,547
1,559
262
439
436
16,300
14,638
7,093
2,487
4,311
1,041
AISC
$ 16,710 $ 14,844 $ 12,919 $ 56,664 $ 47,969
Costs per ounce
Total gold produced (ounces)
16,867
17,579
11,786
59,222
42,669
Mining
Processing
Indirect
Smelting and refining
By-product credits
Gold C1 cash cost
Gold AISC
$
$
$
$
$
$
$
203 $
179 $
196 $
205 $
137 $
123 $
175 $
142 $
80 $
78 $
86 $
82 $
7 $
6 $
5 $
6 $
294
186
90
5
(14) $
(15) $
(17) $
(13) $
(15)
413 $
371 $
445 $
422 $
560
991 $
844 $
1,096 $
957 $
1,124
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Ero Copper Corp. December 31, 2023 MD&A | Page 27
Realized Gold Price
Realized gold price is a non-IFRS ratio that is calculated as gross gold revenue divided by ounces of
gold sold during the period. Management believes measuring realized gold price enables investors to
better understand performance based on the realized gold sales in each reporting period. The
following table provides a calculation of realized gold price and a reconciliation to gold segment
revenues, its most directly comparable IFRS measure.
(in '000s except for ounces and price per ounce)
2023 - Q4
2023 - Q3
2022 - Q4
2023
2022
NX Gold revenue
less: by-product credits
Gold revenue, net
$ 33,176 $ 29,046 $ 18,352 $ 106,877 $ 74,988
(248)
(240)
(199)
(827)
(613)
$ 32,928 $ 28,806 $ 18,153 $ 106,050 $ 74,375
add: smelting, refining, and other charges
713
588
365
2,165
1,443
Gold revenue, gross
$ 33,641 $ 29,394 $ 18,518 $ 108,215 $ 75,818
- spot (cash)
- stream (cash)
- stream (amortization of deferred
revenue)
$ 28,205 $ 23,003 $ 14,391 $ 85,724 $ 57,416
$
1,613 $
1,383 $
785 $
5,409 $
3,621
$
3,823 $
5,008 $
3,342 $ 17,082 $ 14,781
Total gold ounces sold
18,479
15,457
10,583
57,949
41,951
- spot
- stream
Realized gold price (per ounce)
- spot
- stream (cash + amortization of deferred
revenue)
- cash (spot cash + stream cash)
$
$
$
$
14,332
11,867
4,147
3,590
8,321
2,262
43,944
31,869
14,005
10,082
1,820 $
1,902 $
1,750 $
1,867 $
1,807
1,968 $
1,938 $
1,729 $
1,951 $
1,802
1,311 $
1,780 $
1,824 $
1,606 $
1,825
1,614 $
1,578 $
1,434 $
1,573 $
1,455
Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and Adjusted
EBITDA
EBITDA and adjusted EBITDA are non-IFRS performance measures used by management to evaluate
its debt service capacity and performance of its operations. EBITDA represents earnings before
finance expense, finance income, income taxes, depreciation and amortization. Adjusted EBITDA is
EBITDA before the pre-tax effect of adjustments for non-cash and/or non-recurring items required in
determination of EBITDA for covenant calculation purposes.
The following table provides a reconciliation of EBITDA and Adjusted EBITDA to net income, its most
directly comparable IFRS measure.
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Ero Copper Corp. December 31, 2023 MD&A | Page 28
Reconciliation:
Net Income
Adjustments:
Finance expense
Finance income
2023 - Q4
2023 - Q3
2022 - Q4
2023
2022
$ 37,052 $
2,811 $ 22,472 $ 94,304 $ 103,067
5,284
8,017
12,290
25,822
33,223
(1,989)
(2,976)
(5,041)
(12,465)
(10,295)
Income tax expense (recovery)
8,415
(807)
7,540
18,047
23,316
Amortization and depreciation
24,980
21,299
16,361
83,024
58,969
EBITDA(1)
$ 73,742 $ 28,344 $ 53,622 $ 208,732 $ 208,280
Foreign exchange (gain) loss
(24,871)
13,937
(4,569)
(34,612)
(19,910)
Share based compensation
Unrealized loss on copper derivatives
Incremental COVID-19 costs
Adjusted EBITDA(1)
477
955
—
(1,185)
4,123
9,218
7,931
1,814
—
—
—
115
—
—
1,956
$ 50,303 $ 42,910 $ 53,176 $ 183,453 $ 198,257
(1) Effective in 2023 Q3, EBITDA and Adjusted EBITDA have been updated to incorporate the adjustment of finance income.
EBITDA and Adjusted EBITDA for comparative periods have been updated accordingly.
Adjusted net income attributable to owners of the Company and Adjusted net income per
share attributable to owners of the Company
“Adjusted net income attributable to owners of the Company” is net income attributed to shareholders
as reported, adjusted for certain types of transactions that, in management's judgment, are not
indicative of our normal operating activities or do not necessarily occur on a recurring basis. “Adjusted
net income per share attributable to owners of the Company” (“Adjusted EPS”) is calculated as
"adjusted net income attributable to owners of the Company" divided by weighted average number of
outstanding common shares in the period. The Company believes that, in addition to conventional
measures prepared in accordance with IFRS, the Company and certain investor and analysts use these
supplemental non-IFRS performance measures to evaluate the normalized performance of the
Company. The presentation of Adjusted EPS is not meant to substitute the net income (loss) per share
attributable to owners of the Company (“EPS”) presented in accordance with IFRS, but rather it should
be evaluated in conjunction with such IFRS measures.
The following table provides a reconciliation of Adjusted net income attributable to owners of the
Company and Adjusted EPS to net income attributable to the owners of the Company, its most
directly comparable IFRS measure.
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Reconciliation:
2023 - Q4
2023 - Q3
2022 - Q4
2023
2022
Net income as reported attributable to the
owners of the Company
$
36,549 $
2,525 $
22,159 $
92,804 $ 101,831
Adjustments:
Share based compensation
477
(1,185)
4,123
9,218
7,931
Unrealized foreign exchange (gain) loss on
USD denominated balances in MCSA
Unrealized foreign exchange (gain) loss on
foreign exchange derivative contracts
Unrealized loss on copper derivative contracts
Incremental COVID-19 costs
(10,308)
9,481
(1,782)
(15,296)
25
(9,852)
951
—
7,530
1,808
—
(3,017)
(7,552)
(32,960)
—
—
115
—
—
1,944
4,726
Tax effect on the above adjustments
2,932
(2,873)
731
3,472
Adjusted net income attributable to owners of
the Company
$
20,749 $
17,286 $
22,214 $
82,761 $
83,497
Weighted average number of common shares
Basic
Diluted
Adjusted EPS
Basic
Diluted
Net Debt
98,099,791
93,311,434
91,522,358
94,111,548
90,789,925
98,482,755
94,009,268
92,551,916
94,896,334
92,170,656
$
$
0.21 $
0.19 $
0.24 $
0.88 $
0.21 $
0.18 $
0.24 $
0.87 $
0.92
0.91
Net debt is a performance measure used by the Company to assess its financial position and ability to
pay down its debt. Net debt is determined based on cash and cash equivalents, short-term
investments, net of loans and borrowings as reported in the Company’s consolidated financial
statements. The following table provides a calculation of net (cash) debt based on amounts presented
in the Company’s consolidated financial statements as at the periods presented.
Current portion of loans and borrowings
$
20,381 $
11,764 $
Long-term portion of loans and borrowings
405,852
407,656
15,703
402,354
December 31, 2023
September 30,
2023
December 31, 2022
Less:
Cash and cash equivalents
Short-term investments
(111,738)
—
(44,757)
(42,843)
(177,702)
(139,700)
Net debt (cash)
$
314,495 $
331,820 $
100,655
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Ero Copper Corp. December 31, 2023 MD&A | Page 30
Working Capital and Available Liquidity
Working capital is calculated as current assets less current liabilities as reported in the Company’s
consolidated financial statements. The Company uses working capital as a measure of the Company’s
short-term financial health and ability to meet its current obligations using its current assets.
Available liquidity is calculated as the sum of cash and cash equivalents, short-term investments and
the undrawn amount available on its revolving credit facilities. The Company uses this information to
evaluate the liquid assets available. The following table provides a calculation for these based on
amounts presented in the Company’s consolidated financial statements as at the periods presented.
Current assets
Less: Current liabilities
Working capital
December 31, 2023 September 30, 2023 December 31, 2022
$
$
199,487 $
174,113 $
392,427
(173,800)
(141,284)
(129,121)
25,687 $
32,829 $
263,306
Cash and cash equivalents
Short-term investments
Available undrawn revolving credit
facilities(1)
111,738
—
44,757
42,843
150,000
150,000
Available liquidity
$
261,738 $
237,600 $
177,702
139,700
75,000
392,402
(1) In January 2023, the Company amended its senior credit facility to increase its limit from $75.0 million to $150.0 million
and extended the maturity from March 2025 to December 2026.
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER
FINANCIAL REPORTING
The Company’s management, with the participation of the CEO and CFO, is responsible for
establishing and maintaining adequate disclosure controls and procedures (“DC&P”) and internal
control over financial reporting (“ICFR”) using Internal Control – Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") as its internal
control framework.
The Company’s DC&P are designed to provide reasonable assurance that material information related
to the Company is identified and communicated on a timely basis.
The Company’s ICFR is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance
with IFRS. Any system of ICFR, no matter how well designed, has inherent limitations and cannot
provide absolute assurance that all misstatements and instances of fraud, if any, within the Company
have been prevented or detected. The Company’s ICFR is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with IFRS.
As required by National Instrument 52-109, Certification of Disclosure in Issuers' Annual and Interim
Filings, the Company’s management, including the CEO and CFO, has evaluated the design and
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Ero Copper Corp. December 31, 2023 MD&A | Page 31
operating effectiveness of the Company’s DC&P and ICFR and concluded that the Company’s DC&P
and ICFR were effective as of December 31, 2023.
There were no changes in the Company’s DC&P and ICFR that materially affected, or are reasonably
likely to materially affect, ICFR during the year ended December 31, 2023.
NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION
Unless otherwise indicated, scientific and technical information in this MD&A relating to Ero’s
properties (“Technical Information”) is based on information contained in the following:
The report prepared in accordance with National Instrument 43-101, Standards of Disclosure for
Mineral Projects (“NI 43-101”) and entitled “2022 Mineral Resources and Mineral Reserves of the
Caraíba Operations, Curaçá Valley, Bahia, Brazil”, dated December 22, 2022 with an effective date of
September 30, 2022, prepared by Porfirio Cabaleiro Rodriguez, FAIG, Bernardo Horta de Cerqueira
Viana, FAIG, Fábio Valério Câmara Xavier, MAIG and Ednie Rafael Moreira de Carvalho Fernandes,
MAIG all of GE21 Consultoria Mineral Ltda. (“GE21”), Dr. Beck Nader, FAIG of BNA Mining Solutions
(“BNA”) and Alejandro Sepulveda, Registered Member (#0293) (Chilean Mining Commission) of NCL
Ingeniería y Construcción SpA (“NCL”) (the “Caraíba Operations Technical Report”). Each a “qualified
person” and “independent” of the Company within the meanings of NI 43-101.
The report prepared in accordance with NI 43-101 and entitled “Mineral Resource and Mineral
Reserve Estimate of the Xavantina Operations, Nova Xavantina”, dated May 12, 2023 with an effective
date of October 31, 2022, prepared by Porfirio Cabaleiro Rodriguez, FAIG, Leonardo de Moraes
Soares, MAIG and Guilherme Gomides Ferreira, MAIG, all of GE21 (the “Xavantina Operations
Technical Report”). Each a “qualified person” and “independent” of the Company within the meanings
of NI 43-101.
The report prepared in accordance with NI 43-101 and entitled “Boa Esperança Project NI 43-101
Technical Report on Feasibility Study Update”, dated November 12, 2021 with an effective date of
August 31, 2021, prepared by Kevin Murray, P. Eng., Erin L. Patterson, P.E. and Scott C. Elfen, P.E. all
of Ausenco Engineering Canada Inc. (or its affiliate Ausenco Engineering USA South Inc. in the case of
Ms. Patterson), Carlos Guzmán, FAusIMM RM CMC of NCL and Emerson Ricardo Re, MSc, MBA,
MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and
Resource Manager of the Company on the date of the report (now of HCM Consultoria Geologica Eireli
(“HCM”)) (the “Tucumã Project Technical Report”). Each of Kevin Murray, P. Eng., Erin L. Patterson, P.E.
and Scott C. Elfen, P.E., Carlos Guzmán, FAusIMM RM CMC and Emerson Ricardo Re, MAusIMM (CP),
is a “qualified person” of the Company within the meanings of NI 43-101. Each of Kevin Murray, P.
Eng., Erin L. Patterson, P.E. and Scott C. Elfen, P.E., and Carlos Guzmán, FAusIMM RM CMC are
“independent” of the Company within the meaning of NI 43-101. Emerson Ricardo Re, MAusIMM
(CP), as Resource Manager of the Company (on the date of the report and now of HCM), was not
“independent” of the Company on the date of the report, within the meaning of NI 43-101.
Reference should be made to the full text of the Caraíba Operations Technical Report, the Xavantina
Operations Technical Report and the Tucumã Project Technical Report, each of which is available for
review on the Company's website at www.erocopper.com and under the Company’s profile on
SEDAR+ at www.sedarplus.ca, and EDGAR at www.sec.gov.
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Ero Copper Corp. December 31, 2023 MD&A | Page 32
The disclosure of Technical Information in this MD&A has been reviewed and approved by Cid
Gonçalves Monteiro Filho, SME RM (04317974), MAIG (No. 8444), FAusIMM (No. 3219148) and
Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.
Cautionary Note Regarding Forward-Looking Statements
This MD&A contains “forward-looking statements” within the meaning of the United States Private
Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of
applicable Canadian securities legislation (collectively, “forward-looking statements”). Forward-
looking statements include statements that use forward-looking terminology such as “may”, “could”,
“would”, “will”, “should”, “intend”, “target”, “plan”, “expect”, “budget”, “estimate”, “forecast”,
“schedule”, “anticipate”, “believe”, “continue”, “potential”, “view” or the negative or grammatical
variation thereof or other variations thereof or comparable terminology. Forward-looking statements
may include, but are not limited to, statements with respect to the Company’s production, operating
cost and capital expenditure guidance, mineral reserve and mineral resource estimates; targeting
additional mineral resources and expansion of deposits; capital and operating cost estimates and
economic analyses (including cash flow projections), including those from the Caraíba Operations
Technical Report, the Xavantina Operations Technical Report and the Tucumã Project Technical
Report; the Company’s expectations, strategies and plans for the Caraíba Operations, the Xavantina
Operations and the Tucumã Project, including the Company’s planned exploration, development,
construction and production activities; the results of future exploration and drilling; estimated
completion dates for certain milestones; successfully adding or upgrading mineral resources and
successfully developing new deposits; the costs and timing of future exploration, development and
construction including but not limited to the Deepening Extension Project at the Caraíba Operations
and the Tucumã Project; the timing and amount of future production at the Caraíba Operations, the
Xavantina Operations and the Tucumã Project; the Company's expectations regarding planned capital
expenditures for the Tucumã Project, the Deepening Extension Project and/or the Caraíba Mill
expansion project falling within contingency levels; expectations regarding the Company's ability to
manage risks related to future copper price fluctuations and volatility; future financial or operating
performance and condition of the Company and its business, operations and properties, including
expectations regarding liquidity, capital structure, competitive position and payment of dividends;
expectations regarding future currency exchange rates; and any other statement that may predict,
forecast, indicate or imply future plans, intentions, levels of activity, results, performance or
achievements.
Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and
other factors that could cause actual results, actions, events, conditions, performance or achievements
to materially differ from those expressed or implied by the forward-looking statements, including,
without limitation, risks discussed in this MD&A and in the AIF under the heading “Risk Factors”. The
risks discussed in this MD&A and in the AIF are not exhaustive of the factors that may affect any of the
Company’s forward-looking statements. Although the Company has attempted to identify important
factors that could cause actual results, actions, events, conditions, performance or achievements to
differ materially from those contained in forward-looking statements, there may be other factors that
cause results, actions, events, conditions, performance or achievements to differ from those
anticipated, estimated or intended.
Forward-looking statements are not a guarantee of future performance. There can be no assurance
that forward-looking statements will prove to be accurate, as actual results and future events could
differ materially from those anticipated in such statements. Forward-looking statements involve
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Ero Copper Corp. December 31, 2023 MD&A | Page 33
statements about the future and are inherently uncertain, and the Company’s actual results,
achievements or other future events or conditions may differ materially from those reflected in the
forward-looking statements due to a variety of risks, uncertainties and other factors, including, without
limitation, those referred to herein and in the AIF under the heading “Risk Factors”.
The Company’s forward-looking statements are based on the assumptions, beliefs, expectations and
opinions of management on the date the statements are made, many of which may be difficult to
predict and beyond the Company’s control. In connection with the forward-looking statements
contained in this MD&A and in the AIF, the Company has made certain assumptions about, among
other things: favourable equity and debt capital markets; the ability to raise any necessary additional
capital on reasonable terms to advance the production, development and exploration of the
Company’s properties and assets; future prices of copper, gold and other metal prices; the timing and
results of exploration and drilling programs; the accuracy of any mineral reserve and mineral resource
estimates; the geology of the Caraíba Operations, the Xavantina Operations and the Tucumã Project
being as described in the respective technical report for each property; production costs; the accuracy
of budgeted exploration, development and construction costs and expenditures; the price of other
commodities such as fuel; future currency exchange rates and interest rates; operating conditions
being favourable such that the Company is able to operate in a safe, efficient and effective manner;
work force continuing to remain healthy in the face of prevailing epidemics, pandemics or other health
risks (including COVID-19), political and regulatory stability; the receipt of governmental, regulatory
and third party approvals, licenses and permits on favourable terms; obtaining required renewals for
existing approvals, licenses and permits on favourable terms; requirements under applicable laws;
sustained labour stability; stability in financial and capital goods markets; availability of equipment;
positive relations with local groups and the Company’s ability to meet its obligations under its
agreements with such groups; and satisfying the terms and conditions of the Company’s current loan
arrangements. Although the Company believes that the assumptions inherent in forward-looking
statements are reasonable as of the date of this MD&A, these assumptions are subject to significant
business, social, economic, political, regulatory, competitive and other risks and uncertainties,
contingencies and other factors that could cause actual actions, events, conditions, results,
performance or achievements to be materially different from those projected in the forward-looking
statements. The Company cautions that the foregoing list of assumptions is not exhaustive. Other
events or circumstances could cause actual results to differ materially from those estimated or
projected and expressed in, or implied by, the forward-looking statements contained in this MD&A.
Forward-looking statements contained herein are made as of the date of this MD&A and the Company
disclaims any obligation to update or revise any forward-looking statement, whether as a result of
new information, future events or results or otherwise, except as and to the extent required by
applicable securities laws.
Cautionary Notes Regarding Mineral Resource and Reserve Estimates
Unless otherwise indicated, all reserve and resource estimates included in this MD&A and the
documents incorporated by reference herein have been prepared in accordance with Canadian
NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) — CIM
Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as
amended (the “CIM Standards”). NI 43-101 is a rule developed by the Canadian Securities
Administrators that establishes standards for all public disclosure an issuer makes of scientific and
technical information concerning mineral projects. Canadian standards, including NI 43-101, differ
significantly from the requirements of the United States Securities and Exchange Commission (the
“SEC”), and reserve and resource information included herein may not be comparable to similar
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Ero Copper Corp. December 31, 2023 MD&A | Page 34
information disclosed by U.S. companies. In particular, and without limiting the generality of the
foregoing, this MD&A and the documents incorporated by reference herein use the terms “measured
resources,” “indicated resources” and “inferred resources” as defined in accordance with NI 43-101
and the CIM Standards.
Further to recent amendments, mineral property disclosure requirements in the United States (the
“U.S. Rules”) are governed by subpart 1300 of Regulation S-K of the U.S. Securities Act of 1933, as
amended (the “U.S. Securities Act”) which differ from the CIM Standards. As a foreign private issuer
that is eligible to file reports with the SEC pursuant to the multi-jurisdictional disclosure system (the
“MJDS”), Ero is not required to provide disclosure on its mineral properties under the U.S. Rules and
will continue to provide disclosure under NI 43-101 and the CIM Standards. If Ero ceases to be a
foreign private issuer or loses its eligibility to file its annual report on Form 40-F pursuant to the MJDS,
then Ero will be subject to the U.S. Rules, which differ from the requirements of NI 43-101 and the
CIM Standards.
Pursuant to the new U.S. Rules, the SEC recognizes estimates of “measured mineral resources”,
“indicated mineral resources” and “inferred mineral resources.” In addition, the definitions of “proven
mineral reserves” and “probable mineral reserves” under the U.S. Rules are now “substantially
similar” to the corresponding standards under NI 43-101. Mineralization described using these terms
has a greater amount of uncertainty as to its existence and feasibility than mineralization that has
been characterized as reserves. Accordingly, U.S. investors are cautioned not to assume that any
measured mineral resources, indicated mineral resources, or inferred mineral resources that Ero
reports are or will be economically or legally mineable. Further, “inferred mineral resources” have a
greater amount of uncertainty as to their existence and as to whether they can be mined legally or
economically. Under Canadian securities laws, estimates of “inferred mineral resources” may not form
the basis of feasibility or pre-feasibility studies, except in rare cases. While the above terms under the
U.S. Rules are “substantially similar” to the standards under NI 43-101 and CIM Standards, there are
differences in the definitions under the U.S. Rules and CIM Standards. Accordingly, there is no
assurance any mineral reserves or mineral resources that Ero may report as “proven mineral reserves”,
“probable mineral reserves”, “measured mineral resources”, “indicated mineral resources” and
“inferred mineral resources” under NI 43-101 would be the same had Ero prepared the reserve or
resource estimates under the standards adopted under the U.S. Rules.
ADDITIONAL INFORMATION
Additional information about Ero and its business activities, including the AIF, is available under the
Company’s profile at www.sedarplus.ca and www.sec.gov.
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Ero Copper Corp. December 31, 2023 MD&A | Page 35
C o n s o l i d a t e d
F i n a n c i a l S t a t e m e n t s
F o r t h e Y e a r s E n d e d
D e c e m b e r 3 1 , 2 0 2 3 a n d 2 0 2 2
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E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Ero Copper Corp.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Ero Copper Corp. (the
Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and
comprehensive income, cash flow and changes in shareholders’ equity for each of the years then ended, and the
related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company as of December 31,
2023 and 2022, and its financial performance and its cash flows for each of the years then ended, in conformity
with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023,
based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission, and our report dated March 7, 2024 expressed an
unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these consolidated financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are
free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide
a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the
consolidated financial statements that was communicated or required to be communicated to the audit
committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of
a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the
critical audit matter or on the accounts or disclosures to which it relates.
Assessment of recognition of uncertainties over income tax treatments in Brazil
As discussed in note 3(c) to the consolidated financial statements, uncertainties over income tax treatments are
evaluated on the basis of whether it is probable that they will be accepted upon examination by the relevant
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E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Ero Copper Corp.
Page 2
taxing authorities in Brazil. These uncertainties impact the amount of income taxes recognized. As discussed in
notes 2(d), the Company operates in Brazil where tax authorities may audit income tax treatments and the
resolution of such audits may span multiple years. Tax law in Brazil is complex and often subject to changes and
to varied interpretations; accordingly, the ultimate outcome with respect to income tax treatments may differ
from the amounts recognized.
We identified the assessment of recognition of uncertainties over income tax treatments in Brazil as a critical
audit matter. A high degree of subjective auditor judgment and specialized skills and knowledge was required in
assessing the Company’s judgments and estimates relating to interpretation and application of income tax law
that were used to determine these uncertain tax positions.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of an internal control related to the Company’s process to assess
uncertain tax positions. We involved tax professionals with specialist skills and knowledge who assisted in
evaluating the Company’s application of tax law and assessing its uncertain tax positions by inspecting
internally and externally prepared documentation, including correspondence with the Brazilian tax authorities
and third-party legal and tax advice received by the Company.
/s/ KPMG LLP
Chartered Professional Accountants
We have served as the Company’s auditor since 2017.
Vancouver, Canada
March 7, 2024
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E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Ero Copper Corp.
Opinion on Internal Control Over Financial Reporting
We have audited Ero Copper Corp.’s (the Company) internal control over financial reporting as of December 31,
2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated statements of financial position of the Company as of December 31,
2023 and 2022, the related consolidated statements of operations and comprehensive income, cash flow and
changes in shareholders’ equity, for each of the years then ended, and the related notes (collectively, the
consolidated financial statements), and our report dated March 7, 2024 expressed an unqualified opinion on
those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Discussion Analysis under the heading “Disclosure Controls and Procedures and Internal Control
over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
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E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Ero Copper Corp.
Page 2
/s/ KPMG LLP
Chartered Professional Accountants
Vancouver, Canada
March 7, 2024
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E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Table of Contents
CONSOLIDATED FINANCIAL STATEMENTS
50 Consolidated Statements of Financial Position
51 Consolidated Statements of Operations and Comprehensive Income
52 Consolidated Statements of Cash Flow
53 Consolidated Statements of Changes in Shareholders’ Equity
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General
54 Note 1. Nature of Operations
Statements of Earnings
81 Note 16. Revenue
54 Note 2. Basis of Preparation
82 Note 17. Cost of Sales
59 Note 3. Material Accounting Policies
82 Note 18. General and Administrative Expenses
67 Note 4. Segment Disclosure
83 Note 19. Finance Expense
Statements of Financial Position
70 Note 5. Inventories
83 Note 20. Foreign Exchange Gain
84 Note 21. Income Taxes
70 Note 6. Other Current Assets
Other Items
71 Note 7. Mineral Properties, Plant and Equipment
86 Note 22. Related Party Transactions
72 Note 8. Exploration and Evaluation Assets
86 Note 23. Financial Instruments
72 Note 9. Deposits and Other Non-current Assets
90 Note 24. Capital Management
72 Note 10. Accounts Payable and
90 Note 25. Supplemental Cash Flow Information
91 Note 26. Commitment and Contingencies
Accrued Liabilities
73 Note 11. Loans and Borrowings
74 Note 12. Deferred Revenue
75 Note 13. Provision for rehabilitation
and closure costs
76 Note 14. Other Non-current Liabilities
76 Note 15. Share Capital
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E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Ero Copper Corp.
Consolidated Statements of Financial Position
(Amounts in thousands of US Dollars)
ASSETS
Current
Cash and cash equivalents
Short-term investments
Accounts receivable
Inventories
Income tax receivable
Other current assets
Non-Current
Mineral properties, plant and equipment
Exploration and evaluation assets
Deferred income tax assets
Deposits and other non-current assets
Total Assets
LIABILITIES
Current
Accounts payable and accrued liabilities
Current portion of loans and borrowings
Current portion of deferred revenue
Income taxes payable
Current portion of derivatives
Current portion of lease liabilities
Non-Current
Loans and borrowings
Deferred revenue
Provision for rehabilitation and closure costs
Deferred income tax liabilities
Lease liabilities
Other non-current liabilities
Total Liabilities
SHAREHOLDERS’ EQUITY
Share capital
Equity reserves
Retained earnings
Equity attributable to owners of the Company
Non-controlling interests
Notes
December 31, 2023
December 31, 2022
5
6
7
8
21
9
10
11
12
23
11
12
13
21
14
15
$
111,738 $
—
5,710
42,254
500
39,285
199,487
1,251,998
29,936
1,315
28,952
1,312,201
177,702
139,700
10,289
30,955
—
33,781
392,427
755,274
15,686
—
24,689
795,649
$
$
1,511,688 $
1,188,076
120,704 $
20,381
17,159
3,997
563
10,996
173,800
405,852
58,390
26,687
10,863
8,607
18,158
528,557
702,357
271,336
(16,616)
549,530
804,250
5,081
809,331
84,603
15,703
16,580
5,435
577
6,223
129,121
402,354
69,476
22,172
6,229
4,740
11,819
516,790
645,911
148,055
(66,189)
456,726
538,592
3,573
542,165
Total Liabilities and Equity
$
1,511,688 $
1,188,076
Commitments (Notes 8, 12 and 26) ; Contingencies (Note 26); Subsequent Events (Notes 11)
APPROVED ON BEHALF OF THE BOARD:
"David Strang"
, CEO and Director
"Jill Angevine"
, Director
The accompanying notes are an integral part of these consolidated financial statements
The accompanying notes are an integral part of these consolidated financial statements
Page 1
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E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Ero Copper Corp.
Consolidated Statements of Operations and Comprehensive Income
(Amounts in thousands of US Dollars, except share and per share amounts)
Revenue
Cost of sales
Gross profit
Expenses
General and administrative
Share-based compensation
Income before the undernoted
Finance income
Finance expense
Foreign exchange gain
Other expenses
Income before income taxes
Current income tax expense
Deferred income tax expense
Income tax expense
Net income for the year
Other comprehensive gain
Foreign currency translation gain
Comprehensive income
Net income attributable to:
Owners of the Company
Non-controlling interests
Year ended December 31,
Notes
2023
2022
16
17
18
15 (e)
19
20
21
$
427,480 $
(270,635)
156,845
(52,429)
(9,218)
95,198
12,465
(25,822)
34,612
(4,102)
112,351
(15,992)
(2,055)
(18,047)
426,392
(239,217)
187,175
(49,459)
(7,931)
129,785
10,295
(33,223)
19,910
(384)
126,383
(15,043)
(8,273)
(23,316)
$
$
94,304 $
103,067
52,656
146,960 $
29,897
132,964
92,804
1,500
$
94,304 $
145,065
1,895
146,960 $
101,831
1,236
103,067
131,540
1,424
132,964
0.99 $
0.98 $
1.12
1.10
94,111,548
94,896,334
90,789,925
92,170,656
Comprehensive income attributable to:
Owners of the Company
Non-controlling interests
Net income per share attributable to owners of the Company
Basic
Diluted
Weighted average number of common shares outstanding
Basic
Diluted
$
$
$
15 (f)
15 (f)
15 (f)
15 (f)
The accompanying notes are an integral part of these consolidated financial statements
The accompanying notes are an integral part of these consolidated financial statements
Page 2
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E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Ero Copper Corp.
Consolidated Statements of Cash Flow
(Amounts in thousands of US Dollars)
Cash Flows from Operating Activities
Net income for the year
Adjustments for:
Amortization and depreciation
Income tax expense
Amortization of deferred revenue
Share-based compensation
Finance income
Finance expenses
Foreign exchange gain
Other
Changes in non-cash working capital items
Advance from NX Gold PMPA
Derivative contract settlements
Provision settlements
Income taxes paid
Cash Flows used in Investing Activities
Additions to mineral properties, plant and equipment
Additions to exploration and evaluation assets
Proceeds from short-term investments and interest received
Purchase of short-term investments
Cash Flows used in Financing Activities
Proceeds from equity offering, net of share issue costs
Lease liability payments
New loans and borrowings, net of transaction costs
Loans and borrowings repaid
Interest paid on loans and borrowings
Other finance expenses paid
Proceeds from exercise of stock options
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents - beginning of year
Year ended December 31,
Notes
2023
2022
$
94,304 $
103,067
16
25
12
15
11
11
11
83,024
18,047
(17,082)
9,218
(12,465)
25,822
(36,798)
4,236
(8,372)
159,934
2,440
9,632
(3,344)
(5,563)
163,099
(447,174)
(13,475)
192,483
(40,000)
(308,166)
104,330
(11,877)
14,889
(7,786)
(27,461)
(5,502)
11,158
77,751
1,352
(65,964)
177,702
58,969
23,316
(14,781)
7,931
(10,295)
33,223
(23,095)
(490)
(18,029)
159,816
3,207
(11,983)
(2,238)
(5,416)
143,386
(282,775)
(13,044)
9,713
(139,700)
(425,806)
—
(7,426)
401,495
(55,650)
(15,383)
(4,542)
8,805
327,299
2,694
47,573
130,129
177,702
Cash and cash equivalents - end of year
$
111,738 $
Supplemental cash flow information (note 25)
The accompanying notes are an integral part of these consolidated financial statements
The accompanying notes are an integral part of these consolidated financial statements
Page 3
5 2
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Ero Copper Corp.
Consolidated Statements of Changes in Shareholders' Equity
(Amounts in thousands of US Dollars, except share and per share amounts)
Share Capital
Equity Reserves
Notes
Number of
shares
Amount
Contributed
Surplus
Foreign
Exchange
Retained
Earnings
Total
Non-
controlling
interest
Total equity
Balance, December 31, 2021
90,204,378 $ 133,072 $
12,173 $ (107,083) $ 354,895 $ 393,057 $
2,433 $ 395,490
Income for the year
Other comprehensive income for the year
Total comprehensive income for the year
Shares issued for:
Exercise of options
Settlement of restricted share units
Settlement of performance share units
Share-based compensation
15 (e)
Dividends to non-controlling interest
—
—
—
—
—
—
1,812,558
12,618
37,099
128,598
—
—
529
1,836
—
—
—
—
—
(3,813)
(861)
—
3,686
—
—
101,831
101,831
1,236
103,067
29,709
—
29,709
188
29,897
29,709
101,831
131,540
1,424
132,964
—
—
—
—
—
—
—
—
—
—
8,805
(332)
1,836
3,686
—
—
—
—
—
(284)
8,805
(332)
1,836
3,686
(284)
Balance, December 31, 2022
92,182,633 $ 148,055 $
11,185 $ (77,374) $ 456,726 $ 538,592 $
3,573 $ 542,165
Income for the year
Other comprehensive income for the year
Total comprehensive income for the year
Shares issued for:
Equity financing, net
Exercise of options
—
—
—
—
—
—
15
9,010,000
104,330
1,333,199
15,882
Settlement of restricted share units
Settlement of performance share units
Share-based compensation
15 (e)
Dividends to non-controlling interest
61,651
160,075
—
—
868
2,201
—
—
—
—
—
—
(4,724)
(1,344)
—
3,380
—
52,261
52,261
—
—
—
—
—
—
—
92,804
92,804
52,261
1,500
395
94,304
52,656
—
92,804
145,065
1,895
146,960
—
104,330
—
—
—
—
—
11,158
(476)
2,201
3,380
—
—
—
—
—
—
(387)
104,330
11,158
(476)
2,201
3,380
(387)
Balance, December 31, 2023
102,747,558 $ 271,336 $
8,497 $ (25,113) $ 549,530 $ 804,250 $
5,081 $ 809,331
The accompanying notes are an integral part of these consolidated financial statements
Page 4
The accompanying notes are an integral part of these consolidated financial statements
5 3
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
1. Nature of Operations
Ero Copper Corp. (“Ero" or the "Company") was incorporated on May 16, 2016 under the Business Corporations
Act (British Columbia) and maintains its head office at Suite 1050, 625 Howe Street, Vancouver, BC, V6C 2T6.
The Company’s shares are publicly traded on the Toronto Stock Exchange and the New York Stock Exchange
under the symbol “ERO”.
The Company’s primary asset is its 99.6% ownership interest in Mineração Caraíba S.A. (“MCSA”), held
indirectly through its wholly-owned subsidiary, Ero Brasil Participaçoes Ltda. The Company also currently owns
a 97.6% ownership interest in NX Gold S.A. (“NX Gold”) indirectly through its wholly-owned subsidiary, Ero
Gold Corp. (“Ero Gold”).
MCSA is a Brazilian copper company which holds a 100% interest in the Caraíba Operations and the Tucumã
Project (formerly known as the Boa Esperança Project). MCSA’s predominant activity is the production and sale
of copper concentrate from the Caraíba Operations, located in Bahia, Brazil, with gold and silver produced and
sold as by-products. The Tucumã Project, which is currently under construction with production of copper
concentrate scheduled to commence in the second half of 2024, is located within the municipality of Tucumã in
the southeastern part of the state of Pará, Brazil.
NX Gold is a Brazilian gold mining company which holds a 100% interest in the Xavantina Operations and is
focused on the production and sale of gold as its main product and silver as its by-product. The Xavantina
Operations are located approximately 18 kilometers west of the town of Nova Xavantina, in southeastern Mato
Grosso State, Brazil.
2. Basis of Preparation
(a) Statement of Compliance
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and
interpretations of the International Financial Reporting Interpretations Committee.
These consolidated financial statements were authorized for issue by the Board of Directors of the Company
(the “Board”) on March 7, 2024.
(b) Basis of Presentation and Principles of Consolidation
These consolidated financial statements have been prepared on a historical cost basis except for derivative
financial instruments, which are measured at fair value through profit or loss.
These consolidated financial statements include the accounts of the Company and its subsidiaries.
Subsidiaries are entities controlled by the Company. Control over a subsidiary is defined to exist when the
Company is exposed to variable returns from involvement with an investee and has the ability to affect the
returns through power over the investee. All intercompany balances and transactions are eliminated upon
consolidation.
Since the Company does not own 100% of its interests in MCSA and NX Gold, the interest attributable to
non-controlling shareholders is reflected in non-controlling interests. Adjustments to non-controlling
interests that do not involve the loss of control are accounted for as equity transactions and adjustments are
based on a proportionate amount of the net assets of the subsidiary.
5 4
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 5
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
(c) Foreign Currency Translation
The functional currency and presentation currency of the Company is the US dollar. The monetary assets
and liabilities of the Company that are denominated in foreign currencies are translated at the rate of
exchange at the statement of financial position date while non-monetary assets and liabilities are translated
at historical rates. Revenues and expenses are translated at the exchange rates approximating those in
effect on the date of the transactions. Exchange gains and losses arising on translation are included in profit
or loss.
The functional currency of all of the Company's Brazilian subsidiaries is the Brazilian Real (“BRL”). The
assets and liabilities of its Brazilian subsidiaries are translated into the US dollar presentation currency using
the exchange rate at the statement of financial position date while revenues and expenses are translated at
the exchange rates approximating those in effect on the date of the transactions. Exchange gains and losses
arising on translation are included in a separate component of shareholders’ equity.
(d) Use of Estimates and Judgments
In preparing these financial statements, management has made judgments, estimates and assumptions that
affect the application of the Company’s accounting policies and the reported amounts of the assets,
liabilities, revenues and expenses.
The estimates and assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized
prospectively.
Critical Judgments
Functional currency
The functional currency of the Company and each of its subsidiaries is the currency of the primary economic
environment in which the entities operate. The Company has determined that the functional currency for the
Company is the US dollar while the functional currency for all of its Brazilian subsidiaries is the BRL.
Assessment of functional currency involves certain judgments to determine the primary economic
environment and the Company reconsiders the functional currency of its entities if there is a change in
events and conditions which determined the primary economic environment.
Legal claims and contingent liabilities
The recognition of legal provisions and contingent liabilities involves the assessment of claims made against
the Company and each of its subsidiaries. The recognition of a legal provision, or disclosure of a contingent
liability, involves certain judgments to determine the probability of whether a cash outflow will occur. In
making this judgment, management has assessed various criteria and also relies on the opinions of its legal
advisers to assist in making this assessment.
Key Sources of Estimation Uncertainty
The preparation of financial statements in conformity with IFRS requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and
liabilities at the date of the consolidated financial statements and the reported amounts of expenses during
the reporting periods. Actual results could differ from those estimates and such differences could be
significant. Significant estimates made by management affecting the consolidated financial statements
include:
5 5
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 6
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
Derivative instruments
The fair value of derivative instruments is determined using either present value techniques or option pricing
models that utilize a variety of inputs that are a combination of quoted prices and market-corroborated
inputs, including assumptions for forward interest and foreign exchange rates, volatilities and discount rates.
The fair value of the Company’s derivative contracts includes an adjustment for credit risk for either the
Company or the counter party as applicable. Changes in the assumptions for inputs into the models affect
the fair value of the derivatives recognized in the statement of financial position as well as the unrealized
gains or losses recognized in net income.
Carrying amounts of mineral properties and associated mine closure and reclamation costs
Changes in estimates of mineral reserves and resources could impact depreciation and depletion rates, asset
carrying amounts and the provisions for mine closure and reclamation costs. The Company estimates its
mineral reserves and resources based on information compiled by competent individuals. Estimates of
mineral reserves and resources are used in the calculation of depreciation, depletion and determination,
when applicable, of the recoverable amount of CGUs, and for forecasting the timing of reclamation and
closure cost expenditures.
There are numerous uncertainties inherent in estimating mineral reserves, and assumptions that are valid at
the time of estimation may change significantly when new information becomes available. Changes in the
estimation methodology, forecasted prices of commodities, exchange rates, production costs or recovery
rates may change the economic status of mineral reserves and may, ultimately, result in changes in the
mineral reserves.
Mine closure and reclamation costs
Significant estimates and assumptions are made in determining the provision for mine closure and
reclamation costs as there are numerous factors that will affect the ultimate liability payable. These factors
include estimation of the extent and cost of rehabilitation activities, timing of future cash flows, discount
rates, inflation rate, and regulatory requirements.
Changes in the above factors can result in a change to the provision recognized by the Company. Changes to
mine closure and rehabilitation costs are recorded with a corresponding change to the carrying amounts of
related mineral properties, plant and equipment. Adjustments to the carrying amounts of related mineral
properties, plant and equipment can result in a change to future depreciation and depletion expense.
Income taxes
The determination of the Company’s tax expense for the period and deferred tax assets and liabilities
involves significant estimation and judgment by management. In determining these amounts, management
interprets tax legislation in a variety of jurisdictions and makes estimates of the expected timing of the
reversal of deferred tax assets and liabilities. Management also makes estimates of future earnings, which
affect the extent to which potential future tax benefits may be used. The Company is subject to assessments
by various taxation authorities, which may interpret legislation differently. These differences may affect the
final amount or the timing of the payment of taxes. The Company provides for such differences where
known based on management’s best estimate of the probable outcome of these matters.
The Company operates in Brazil where tax authorities may audit income tax treatments and the resolution of
such audits may span multiple years. Tax law in Brazil is complex and often subject to changes and to varied
interpretations; accordingly, the ultimate outcome with respect to income tax treatments may differ from the
amounts recognized. The Company’s assessment of whether it is probable that uncertain income tax
treatments will be accepted by tax authorities in Brazil is a significant management judgment.
5 6
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 7
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
Deferred Revenue
Judgment and estimates were required in determining the accounting for the precious metal purchase
agreement ("PMPA") with RGLD Gold AG, a subsidiary of Royal Gold Inc. (collectively "Royal Gold"), which
is accounted for as deferred revenue in accordance with IFRS 15 Revenue from Contracts with Customers
(“IFRS 15”). As the Company’s obligation under the precious metal purchase agreement will be satisfied
through deliveries of a non-financial item (i.e. deliveries of gold ounces), rather than cash or other financial
assets, it was determined to be entered into and continued to be held for the purpose of the delivery of a
non-financial item in accordance with the Company’s expected sale or usage requirements and thus not
within the scope of IFRS 9 Financial Instruments (“own use exemption”). The determination of whether the
own use exemption applies requires management’s judgements.
Each period management estimates the cumulative amount of the deferred revenue obligation that has been
satisfied and, therefore, recognized as revenue. Key inputs into the estimate of the amount of deferred
revenue that should be recognized include the following:
a. Future gold prices were used at inception of the contract to estimate the expected total consideration to
be received under the contract including variable consideration and is used as the stand alone selling
price to allocate the consideration to each ounce of gold to be delivered to Royal Gold, and
b. Expected life of mine gold production and the timing thereof, which is estimated based on the approved
life of mine for the NX Gold mine and estimated proven and probable reserves.
Expected credit loss provision
Significant estimates and assumptions are made in determining the expected credit loss provision for
financial assets that are measured at amortized costs as there are numerous factors that will affect the
ultimate asset receivable. These factors include exposure at default, the expected recovery, the discount
rate, and the timing of expected cashflow.
(e) New Accounting Policies, Standards and Interpretations
On January 1, 2023, the Company adopted the amendment to IAS 12, Income Taxes in relation to Deferred
Tax related to Assets and Liabilities Arising from a Single Transaction. The amendments narrowed the
scope of the recognition exemption in IAS 12, relating to the recognition of deferred tax assets and liabilities,
so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and
deductible temporary differences such as leases and reclamation and closure cost provisions. The adoption
of this amendment did not have a material impact on the Company's consolidated financial statements.
The Company applied the amendments to IAS 1, Presentation of Financial Statements and IFRS Practice
Statement 2 issued by the IASB under Disclosure of Accounting Policies effective January 1, 2023. The
amendments require entities to disclose their ‘material’, rather than ‘significant’ accounting policies. The
amendments also provide guidance on the application of materiality to disclosure of accounting policies that
provide useful, entity-specific accounting policy information that users need to understand other information
in the financial statements. While the amendments did not result in any changes to the Company’s
accounting policies themselves, they impacted the accounting policy information disclosed in the Company’s
consolidated financial statements. The accounting policy information disclosed in notes 2 and 3 reflect the
Company’s material accounting policies.
5 7
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 8
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
In May 2023, IASB issued International Tax Reform - Pillar Two Model Rules which amended IAS 12 Income
Taxes. The amendments introduced a temporary mandatory exception to the recognition and disclosure
requirements relating deferred income tax assets and liabilities arising from enacted or substantively
enacted tax law that implements the Pillar Two top-up tax in the jurisdictions in which companies operate.
The Pilar Twp top up tax forms part of the Pilar Two model rules published by the Organization for
Economic Co-operation and Development ("OECD"). The objective of Pillar Two income taxes is for large
multinational enterprises to pay a minimum tax of at least 15% on income arising in each jurisdiction where
they operate. The Pilar Two top up tax has not yet been enacted in any jurisdiction in which the Company
operates. The Company has applied the temporary mandatory exception to recognizing and disclosing
information about deferred income tax assets and liabilities arising from the Pillar Two legislation and will
account for any Pillar but adoption did not have a material impact on current or deferred taxes for the year
ended December 31, 2023.
(f) Future Changes in Accounting Policies Not Yet Effective as of December 31, 2023
The following amendment to accounting standards has been issued but not yet adopted in the financial
statements:
•
•
IASB
issued Classification of Liabilities as Current or Non-current
In January 2020, the
(Amendments to IAS 1) which amended IAS 1, Presentation of Financial Statements (“IAS 1”), to
clarify the requirements for presenting liabilities in the statement of financial position. The
amendments specify that the Company must have the right to defer settlement of a liability for at
least 12 months after the reporting period for the liability to be classified as non-current. In addition,
the amendments clarify that: (a) the Company’s right to defer settlement must exist at the end of the
reporting period; (b) classification is unaffected by management’s intentions or expectations about
whether the Company will exercise its right to defer settlement; (c) if the Company’s right to defer
settlement is subject to the Company complying with specified conditions, the right exists at the end
of the reporting period only if the Company complies with those conditions at the end of the
reporting period, even if the lender does not test compliance until a later date; and (d) the term
settlement includes the transfer of the Company’s own equity instruments to the counterparty that
results in the extinguishment of the liability, except when the settlement of the liability with the
Company transferring its own equity instruments is at the option of the counterparty and such
option has been classified as an equity instrument, separate from the host liability. The amendments
are effective January 1, 2024. The adoption of these amendments is not expected to have a material
impact on the Company's consolidated financial statements.
In October 2022, the IASB issued amendment Non-current Liabilities with Covenants to IAS 1 to
clarify that covenants of loan arrangements which the Company must comply with only after the
reporting date would not affect classification of a liability as current or non-current at the reporting
date. The amendment also introduces additional disclosure requirements related to such covenants
to include: (i) the nature of the covenants and the date by which the Company must comply with the
covenants; (ii) whether the Company would comply with the covenants based on its circumstances
at the reporting date; and (iii) whether and how the Company expects to comply with the covenant
by the date on which they are contractually required to be tested.The amendments are effective
January 1, 2024. The adoption of these amendments is not expected to have a material impact on
the Company's consolidated financial statements.
5 8
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 9
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
3. Material Accounting Policies
(a) Revenue
Revenue relating to the sale of metals is recognized at the point the customer obtains control of the product
and when the Company has satisfied its performance obligations. Control is transferred when title has
passed to the purchaser, the product is physically delivered to the customer, the customer controls the risks
and rewards of ownership and the Company has a present right to payment for the product, which is
generally when the concentrate or doré is delivered to a location designated by the customer, or when gold
credits are transferred to the customer. Revenue from the sale of metals is recognized on a net basis, after
metal deductions, smelting, refining and other charges.
The sales amount is typically based on quoted market and contractual prices which are fixed at the time the
shipment is received at the customers’ premises. In certain circumstances the sales price of metals in
concentrate may be determined in a period subsequent to the date of sale (provisionally priced sales) based
on the terms of specific copper concentrate contracts. Provisionally priced sales are recognized based on an
estimate of metal contained using forward market prices corresponding with the expected date that final
sales prices will be fixed. The period between provisional pricing and final settlement can be up to one
month. The settlement receivable is recorded at fair value each reporting period by reference to forward
market prices until the date of final pricing, with the changes in fair value recorded as an adjustment to
revenue.
Deferred revenue consists of payments received by the Company in consideration for future commitments to
deliver an amount of gold equivalent to a percentage of the gold produced from its NX Gold operations. As
gold deliveries are made, the Company recognizes a portion of the deferred revenue as revenue, calculated
on a per unit basis using the total number of gold ounces expected to be delivered over the life of the mine.
The current portion of deferred revenue is based on deliveries anticipated over the next twelve months.
Interest expense on deferred revenue is recognized in finance costs as there is a significant financing
component related to the precious metal purchase agreement, resulting from a difference in the timing of
the upfront consideration received and delivery of the gold. The interest rate is based on the rate implicit in
the precious metal purchase agreement at the date of inception.
The additional consideration to be received under the precious metal purchase agreement is considered
variable, subject to changes in the total estimated gold ounces to be delivered and gold prices. Changes to
variable consideration are accounted for prospectively as a cumulative catch-up and are recorded in revenue
in profit or loss.
(b) Finance Income and Finance Expense
Finance income includes interest on cash and cash equivalents, restricted cash and financial investments,
and gains related to changes in the fair value of financial assets measured at fair value through profit or loss.
Interest income is recognized as it accrues in profit or loss, using the effective interest method.
Finance expense comprises of interest expense on loans and borrowings, accretion expense on provisions,
leases and deferred revenue, commitment fees and losses related to changes in the fair value of financial
assets measured at fair value through profit or loss and expected credit losses. Borrowing costs that are not
directly attributable to the acquisition, construction or production of a qualifying asset are recognized in
profit or loss using the effective interest method.
5 9
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 10
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
(c) Taxation
Current income tax is the expected tax payable or receivable on the taxable income or loss for the year using
tax rates enacted or substantively enacted at the reporting date.
Deferred income tax is recognized in respect of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred
income tax is measured at the tax rates that are expected to be applied to temporary differences when they
reverse, based on the tax laws that have been enacted or substantively enacted at the reporting date.
Deferred income tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable
entity. Deferred income tax is not recognized for the initial recognition of assets or liabilities in a transaction
that is not a business combination, that affects neither accounting nor taxable income or loss, and does not
give rise to equal taxable and deductible temporary differences at the time of the transaction, differences
related to investments in subsidiaries to the extent that it is probable that they will not reverse in the
foreseeable future, and taxable differences arising from the initial recognition of goodwill.
A deferred income tax asset is recognized for unused tax losses, tax credits and deductible temporary
differences, to the extent that it is probable that future taxable profits will be available against which they
can be utilized. Deferred income tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be realized.
Uncertainties over income tax treatments are evaluated on the basis of whether it is probable that they will
be accepted upon examination by the relevant taxing authorities including Brazil. These uncertainties impact
the amount of income taxes recognized. If it is determined that an uncertain income tax treatment is not
probable of being accepted, the effect of the uncertain income tax treatment is reflected in the determination
of income taxes based the most likely amount or, if there are a wide range of possible outcomes, the
expected value.
(d) Tax Incentive
The Company receives certain tax incentives in Brazil. These tax incentives are recognized in profit or loss in
the period the incentives are received or receivable and recorded against the expenditure that they are
intended to compensate.
(e) Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of consumable inventory is
determined on a weighted average acquisition cost basis. Cost of stockpile inventory, products in progress
and finished goods is determined based on a weighted average production cost basis and includes the cost
of mining and processing ore including direct labour and materials; depreciation and amortization; and an
appropriate share of production overheads based on normal operating capacity.
Net realizable value of stockpile inventory, products in progress and finished goods is the estimated selling
price in the ordinary course of business, less estimated completion costs and selling expenses. Write-downs
of inventories to net realizable value are included in the cost of sales in the period of the write-down. A
write-down of inventories is reversed in a subsequent period if there is a subsequent increase in the net
realizable value of the related inventories.
6 0
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 11
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
(f) Mineral Properties, Plant and Equipment
Mineral properties, plant and equipment is measured at acquisition or construction cost less accumulated
depreciation and accumulated impairment losses.
(i) Acquisition and disposal
The cost of mineral properties, plant and equipment include expenditures directly attributable to an asset’s
acquisition. The cost of assets constructed by Company includes the cost of materials and direct labor, any
other costs to bring the asset in the place and conditions required to be operated in the manner intended by
management including advances on long lead items, mine closure and rehabilitation costs, and borrowing
costs on qualifying assets.
When parts of mineral properties, plant and equipment have different useful lives, they are accounted for as
separate items (major components) of mineral properties, plant and equipment.
Gains and losses on disposal of mineral properties, plant and equipment are determined by comparing the
proceeds from disposal with the carrying amount of equipment and are recognized net within other income.
(ii) Subsequent costs
The cost of replacing plant and equipment is recognized in the carrying amount of the item if it is probable
that the future economic benefits embodied within the item will flow to the Company and its cost can be
measured reliably. The carrying amount of the replaced item is derecognized. The maintenance service costs
of equipment are included in profit or loss.
(iii) Development and construction-in-progress
When economically viable mineral reserves have been determined and the decision to proceed with
development has been approved, exploration and evaluation assets are first assessed for impairment, then
reclassified to construction-in-progress or mineral properties. The expenditures related to development and
construction are capitalized as construction-in-progress. Borrowing costs directly attributable to the
acquisition, construction or production of a qualifying asset that takes a substantial period of time to get
ready for its intended use are capitalized as part of construction-in-progress until the asset is substantially
ready for its intended use. Construction-in-progress is not depreciated.
Once an asset is available for use, construction-in-progress costs are reclassified to mineral properties or
plant and equipment.
Pre-production costs of removing overburden to access ore in the open pit mines and developing access
headings in the underground mines are capitalized as pre-production stripping or development costs
respectively and are included within mineral properties, plant and equipment.
(iv) Mineral properties
Mineral properties consist of the cost of acquiring and developing mineral properties. Once in production,
mineral properties are amortized on a units-of-production basis over the component of the ore body to
which they relate.
6 1
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Notes to Financial Statements | Page 12
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
(v) Stripping costs and development in the production phase
Where open pit production stripping or underground development activities do not result in inventory
produced, but does provide improved access to the ore body, the costs are classified as mineral properties
when these activities meet all of the following criteria: (1) it is probable that the future economic benefit
associated with the activity will flow to the Company; (2) the Company can estimate the mineral reserve of
the ore body for which access has been improved; and (3) the costs relating to the activity associated with
that mineral reserve can be measured reliably.
For underground mines, costs incurred to access a mineral reserve of the ore body are capitalized to mineral
properties or construction-in-progress and are depreciated on a units-of-production basis over the expected
useful life of the identified mineral reserve of the ore body to which access has been improved as a result of
the development activity. For open pit mines, stripping costs above average life of mine strip ratio (waste/
ore) are capitalized to mineral properties or construction-in-progress and are depreciated over the related
mineral reserves accessed by the stripping activity.
(vi) Depreciation
Items of mineral properties, plant and equipment are depreciated based on the estimated economic useful
life of each component as follows:
Buildings
Mining equipment
Mobile equipment & other assets
Mineral properties
Lessor of life of mine or up to 25 years
4 years
5 years
Units of production
Mine closure and rehabilitation costs
Units of production or period until remediation
Right of use assets
Shorter of the term of lease and life of asset
The depletion of mineral properties and mine closure and rehabilitation costs is determined based on the
ratio of tonnes of copper/kg of gold contained in the ore mined and total proven and probable mineral
reserve tonnes of contained copper/kg of contained gold.
Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted
if appropriate.
(g) Exploration and Evaluation Assets
Exploration and evaluation costs relate to the initial search for a mineral deposit, the cost of acquisition of a
mineral properties interest or exploration rights and the subsequent evaluation to determine the economic
potential of the mineral deposit. The exploration and evaluation stage commences when the Company
obtains the legal right or license to begin exploration. Once the legal rights or license is obtained,
exploration and evaluation expenses are capitalized as exploration and evaluation assets. Costs incurred
prior to the Company obtaining the legal rights are expensed.
When the exploration and evaluation of a mineral properties indicates that development of the mineral
properties is technically and commercially feasible, the future economic benefits are probable, and the
Company has the intention and sufficient resources to complete the development and use or sell the asset,
6 2
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Notes to Financial Statements | Page 13
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
the related costs are transferred from exploration and evaluation assets to mineral properties, plant and
equipment.
Management reviews the carrying value of capitalized exploration costs for indicators that the carrying value
is impaired at least annually and when facts and circumstances suggest that the carrying amount may
exceed the recoverable amount. The review is based on the Company’s intentions for further exploration and
development of the undeveloped property, results of drilling, commodity prices and other economic and
geological factors. Subsequent recovery of the resulting carrying value depends on successful development
or sale of the undeveloped project. If a property does not prove viable, all non-recoverable costs associated
with the project, net of any previous impairment provisions, are written off.
(h) Financial Instruments
Non-derivative financial assets
The Company classifies its financial assets in the following categories: at fair value through profit or loss
(“FVTPL”), at fair value through other comprehensive income (“FVTOCI”) or at amortized cost. The
classification depends on the purpose for which the financial assets were acquired. Management
determines the classification of its financial assets at initial recognition. Measurement and classification of
financial assets is dependent on the Company’s business model for managing the financial assets and the
contractual cash flow characteristics of the financial asset. Financial assets are derecognized when they
mature or are sold, and substantially all the risks and rewards of ownership have been transferred.
Classification and measurement
The Company has assessed the classification and measurement of its financial assets and financial liabilities
under IFRS 9 in the following table:
Financial Assets
Cash and cash equivalents
Short-term investments
Measurement Category
Amortized Cost
Amortized Cost
Trade receivables related to provisional priced sales
Fair value through profit or loss
Derivatives
Notes and other receivables
Deposits
Financial Liabilities
Trade payables
Loans and borrowings
Derivatives
Financial assets at FVTPL
Fair value through profit or loss
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Fair value through profit or loss
Financial assets carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the
income statement. Realized and unrealized gains and losses arising from changes in the fair value of the
financial asset held at FVTPL are included in profit or loss in the period in which they arise. Derivatives are
also categorized as FVTPL unless they are designated as hedges.
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Notes to Financial Statements | Page 14
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
Financial assets at amortized cost
Financial assets at amortized cost are initially recognized at fair value and subsequently carried at amortized
cost less any impairment. They are classified as current assets or non-current assets based on their maturity
date. Gains and losses on derecognition of financial assets classified amortized cost are recognized in profit
or loss.
Financial liabilities
Financial liabilities, other than derivative instruments, are recognized initially at fair value, net of transaction
costs incurred, and are subsequently measured at amortized cost. Any difference between the amounts
originally received, net of transaction costs, and the redemption value is recognized in profit and loss over
the period to maturity using the effective interest method.
Derivative instruments
Derivative instruments, including embedded derivatives in executory contracts or financial liability contracts,
are classified as at FVTPL and, accordingly, are recorded in the statement of financial position at fair value.
Unrealized gains and losses on derivatives not designated in a hedging relationship are recorded as part of
the revenue or expense item to which the derivative relates, depending on the nature of the derivative. Fair
values for derivative instruments are determined using inputs based on market conditions existing at the
balance sheet date or settlement date of the derivative. Derivatives embedded in non-derivative contracts
are recognized separately unless they are closely related to the host contract.
Short-term investments
Short-term investments are investments with original maturities between three months to one year that are
readily convertible into cash. Short-term investments are not subject to significant risk of change in fair
value.
Fair values
A number of the Company’s accounting policies and disclosures require the measurement of fair values, for
both financial and non-financial assets and liabilities.
When measuring the fair value of an asset or liability, the Company uses observable market data, as much
as possible. Fair values are classified into different levels in a hierarchy based on the inputs used in the
valuation techniques, as follows:
•
•
•
Level 1: quoted prices (without adjustments) in active markets for identical assets or liabilities.
Level 2: inputs other than Level 1 quoted prices, that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs, for assets or liabilities, that are not based on observable market information (non-
observable inputs).
The Company recognizes transfers between levels of the hierarchy of fair value at the end of the reporting
period during which the change occurred.
When applicable, additional information on the assumptions used in the fair value calculations are disclosed
in the specific notes of the corresponding asset or liability.
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Notes to Financial Statements | Page 15
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
Financial assets at amortized cost
Financial assets at amortized cost are initially recognized at fair value and subsequently carried at amortized
cost less any impairment. They are classified as current assets or non-current assets based on their maturity
date. Gains and losses on derecognition of financial assets classified amortized cost are recognized in profit
or loss.
Financial liabilities
Derivative instruments
Short-term investments
value.
Fair values
Financial liabilities, other than derivative instruments, are recognized initially at fair value, net of transaction
costs incurred, and are subsequently measured at amortized cost. Any difference between the amounts
originally received, net of transaction costs, and the redemption value is recognized in profit and loss over
the period to maturity using the effective interest method.
Derivative instruments, including embedded derivatives in executory contracts or financial liability contracts,
are classified as at FVTPL and, accordingly, are recorded in the statement of financial position at fair value.
Unrealized gains and losses on derivatives not designated in a hedging relationship are recorded as part of
the revenue or expense item to which the derivative relates, depending on the nature of the derivative. Fair
values for derivative instruments are determined using inputs based on market conditions existing at the
balance sheet date or settlement date of the derivative. Derivatives embedded in non-derivative contracts
are recognized separately unless they are closely related to the host contract.
Short-term investments are investments with original maturities between three months to one year that are
readily convertible into cash. Short-term investments are not subject to significant risk of change in fair
A number of the Company’s accounting policies and disclosures require the measurement of fair values, for
both financial and non-financial assets and liabilities.
•
•
Level 1: quoted prices (without adjustments) in active markets for identical assets or liabilities.
Level 2: inputs other than Level 1 quoted prices, that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
•
Level 3: inputs, for assets or liabilities, that are not based on observable market information (non-
observable inputs).
The Company recognizes transfers between levels of the hierarchy of fair value at the end of the reporting
period during which the change occurred.
When applicable, additional information on the assumptions used in the fair value calculations are disclosed
in the specific notes of the corresponding asset or liability.
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
(i)
Impairment
i)
Financial assets
The Company recognizes a loss allowance for expected credit losses on financial assets that are measured
at amortized cost. At each reporting date, the loss allowance for the financial asset is measured at an
amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased
significantly since initial recognition. If at the reporting date, the financial asset has not increased
significantly since initial recognition, the loss allowance is measured for the financial asset at an amount
equal to twelve months’ expected credit losses. For trade receivables the Company applies the simplified
approach to providing for expected credit losses, which allows the use of a lifetime expected loss provision.
Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the
amount of the loss decreases and the decrease can be objectively related to an event occurring after the
impairment was recognized. The expected lifetime credit loss provision for trade receivables is based on
historical counterparty default rates and adjusted for relevant forward-looking information, when required.
ii) Non-Financial assets
At each reporting date, the carrying amounts of the Company’s mineral properties, plant and equipment and
exploration and evaluation assets are reviewed to determine whether there is any indication that those
assets are impaired. If such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs
to sell and value in use, which is the present value of future cash flows expected to be derived from the
asset or its related cash generating unit. For purposes of impairment testing, assets are grouped at the
lowest levels that generate cash inflows from continuing use that are largely independent of the cash
inflows of other assets or groups of assets (the “cash-generating unit”).
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying
amount, the carrying amount of the associated assets are reduced to their recoverable amount and the
impairment loss is recognized in the profit or loss for the period.
Impairment losses recognized in prior periods are assessed at each reporting date for any indications that
the loss has decreased or no longer exists. An impairment charge is reversed through profit or loss only to
the extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of any applicable depreciation, if no impairment loss had been recognized.
When measuring the fair value of an asset or liability, the Company uses observable market data, as much
as possible. Fair values are classified into different levels in a hierarchy based on the inputs used in the
(j) Provisions
valuation techniques, as follows:
A provision is recognized when the Company has a present legal or constructive obligation as a result of a
past event that can be estimated reliably, and it is probable that an outflow of economic benefits will be
required to settle the obligation. Provisions are calculated based on the expected future cash flows
discounted, if material, at a pre-tax rate that reflects the current market assessments of the time value of
money and the risks specific to the liability. The discount is unwound over the period over which the cash
flows are expected to be incurred with the related expense included in finance expense.
The Company records the present value of estimated costs of legal and constructive obligations related to
mine closure and rehabilitation in the period in which the obligation occurs. Mine closure and rehabilitation
activities include facility decommissioning and dismantling; removal and treatment of waste materials; site
and land rehabilitation, including compliance with and monitoring of environmental regulations; and related
costs required to perform this work and/or operate equipment designed to reduce or eliminate
environmental effects. The provision is adjusted each period for new disturbances, and changes in
regulatory requirements, the estimated amount of future cash flows required to discharge the obligation, the
6 5
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 15
Notes to Financial Statements | Page 16
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
timing of such cash flows and the pre-tax discount rate specific to the liability. The unwinding of the
discount is recognized in profit or loss as a finance expense.
When the provision is initially recognized, the corresponding cost is included in the carrying amount of the
related asset and is amortized to profit or loss on a unit-of-production basis.
(k) Share-Based Compensation
The Company issues share based payment awards to to employees and consultants, including directors and
officers ("Eligible Persons"). The grant date fair value of equity settled share based payment awards is
recognized as share-based compensation, with a corresponding increase in equity, over the vesting period.
The amount recognized as an expense is based on management's best estimate of the number of equity
instruments expected to vest. The cumulative amount expensed is adjusted at the end of each reporting
period to reflect changes in the number of instruments expected to vest.
Performance share units and deferred share units are liability awards settled in cash and measured at the
quoted market price at the grant date with the corresponding expense recognized over vesting period. The
corresponding liability is adjusted for changes in fair value at each subsequent reporting date until the
awards are settled. The performance share units liability is also adjusted to reflect the number of awards for
which the related service and non-market vesting conditions are expected to be performed or satisfied.
(l) Leases
The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The
right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation
and impairment losses, and adjusted for certain re-measurements of the lease liability. The cost of the right-
of-use asset includes the amount of the initial measurement of the lease liability, any lease payments made
at or before the commencement date, less any lease incentives received, any initial direct costs; and if
applicable, an estimate of costs to be incurred by the Company in dismantling and removing the underlying
asset, restoring the site on which it is located or restoring the underlying asset to the condition required by
the terms and conditions of the lease.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, the Company’s incremental borrowing rate. The incremental borrowing rate reflects the rate of
interest that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value
in a similar economic environment with similar terms and conditions. Generally, the Company uses its
incremental borrowing rate as the discount rate.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease
payments made. It is remeasured when there is a change in future lease payments arising from a change in
an index or rate, a change in the estimate of the amount expected to be payable under a residual value
guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is
reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.
The Company does not recognize right-of-use assets and lease liabilities for leases of low-value assets and
leases with lease terms that are less than 12 months. Lease payments associated with these leases are
instead recognized as an expense over the lease term on either a straight-line basis, or another systematic
basis if more representative of the pattern of benefit.
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E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 17
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
(m) Income per Share
Basic income per share is calculated by dividing the net income attributable to common shareholders of the
Company by the weighted average number of common shares outstanding during the period. Diluted
income per common share is calculated by adjusting the weighted average number of common shares
outstanding for the effect of conversion of all potentially dilutive share equivalents, such as stock options
and share units. The dilutive effect of share options assumes that the receipt of proceeds upon exercise of
the options are used to repurchase common shares at the average market price during the period. The net
effect of the shares issued less the shares assumed to be repurchased is added to the basic weighted
average shares outstanding. For equity-settled share units (as defined herein, see note 15(d)), the common
shares to be included in the diluted per share calculation is based on the number of shares that would be
issuable if the reporting date were the end of the vesting period.
4. Segment Disclosure
Operating segments are determined by the way information is reported and used by the Company's Chief
Operating Decision Maker ("CODM") to review operating performance. The Company monitors the operating
results of its operating segments independently for the purpose of making decisions about resource allocation
and performance assessment.
For the year ended December 31, 2023, the Company’s reporting segments include its two operating mines in
Brazil, the Caraíba Operations and the Xavantina Operations, its development project, the Tucumã Project in
Brazil, and its corporate head office in Canada. Significant information relating to the Company's reportable
segments is summarized in the tables below:
6 7
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 18
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
Year ended December 31, 2023
Caraíba
(Brazil)
Xavantina
(Brazil)
Tucumã
(Brazil)
Corporate and
Other
Consolidated
Revenue
$
320,603 $
106,877 $
— $
— $
427,480
Cost of production
(153,187)
(25,209)
Depreciation and depletion
(62,032)
(19,489)
Sales expense
Cost of sales
Gross profit
Expenses
(8,953)
(1,765)
(224,172)
(46,463)
96,431
60,414
General and administrative
(31,128)
(6,550)
Share-based compensation
Finance income
Finance expenses
Foreign exchange gain (loss)
Other (expenses) income
—
5,543
—
630
(10,143)
(4,431)
34,737
(4,147)
—
111
Income (loss) before taxes
91,293
50,174
Current tax expense
(1,796)
(7,446)
Deferred tax (expense) recovery
(2,618)
563
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(178,396)
(81,521)
(10,718)
(270,635)
156,845
(14,751)
(52,429)
(9,218)
(9,218)
6,292
12,465
(11,248)
(25,822)
(125)
34,612
(66)
(4,102)
(29,116)
112,351
(6,750)
(15,992)
—
(2,055)
Net income (loss)
$
86,879 $
43,291 $
— $
(35,866) $
94,304
Capital expenditures(1)
249,166
27,567
205,506
7,262
489,501
Assets
Current
Non-current
Total Assets
Total Liabilities
$
$
$
79,463 $
23,736 $
2,016 $
94,272
199,487
883,712
96,140
315,144
17,205
1,312,201
963,175 $
119,876 $
317,160 $
111,477 $ 1,511,688
138,497 $
101,095 $
30,943 $
431,822
702,357
(1) Capital expenditures include additions to mineral properties, plant and equipment and additions to exploration and evaluation asset,
net of non-cash additions such as change in estimates to mine closure costs, capitalized depreciation expense, capitalized borrowing
costs, and additions of right-of-use assets.
During the year ended December 31, 2023, Caraíba earned revenues from four customers (December 31, 2022 -
four) while Xavantina earned revenues from two customers (December 31, 2022 - two).
6 8
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 19
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
Year ended December 31, 2022
Caraíba
(Brazil)
Xavantina
(Brazil)
Tucumã
(Brazil)
Corporate and
Other
Consolidated
Revenue
$
351,405 $
74,987 $
— $
— $
426,392
Cost of production
(146,292)
(24,768)
Depreciation and depletion
(47,051)
(11,605)
Sales expenses
Cost of sales
Gross profit
Expenses
(8,941)
(560)
(202,284)
(36,933)
149,121
38,054
General and administrative
(28,123)
(4,062)
Share-based compensation
Finance income
Finance expenses
Foreign exchange gain (loss)
Other expenses
Income (loss) before taxes
Current tax expense
Deferred tax (expense) recovery
—
4,310
(9,044)
19,812
(75)
136,001
(8,463)
(8,378)
—
1,451
(4,244)
232
(292)
31,139
(2,413)
105
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(171,060)
(58,656)
(9,501)
(239,217)
187,175
(17,274)
(49,459)
(7,931)
(7,931)
4,534
10,295
(19,935)
(33,223)
(134)
19,910
(17)
(384)
(40,757)
126,383
(4,167)
(15,043)
—
(8,273)
Net income (loss)
$
119,160 $
28,831 $
— $
(44,924) $
103,067
Capital expenditures
209,143
30,773
59,428
7,155
306,499
Assets
Current
Non-current
Total Assets
Total Liabilities
$
114,374 $
50,447 $
144 $
227,462
392,427
621,005
74,874
90,971
8,799
795,649
735,379 $
125,321 $
91,115 $
236,261 $ 1,188,076
98,904 $
106,266 $
9,595 $
431,146
645,911
$
$
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E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 20
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
5.
Inventories
Supplies and consumables
Stockpiles
Work in progress
Finished goods
6. Other Current Assets
Advances to suppliers
Prepaid expenses and other
Derivatives (Note 23)
Note receivable (Note 23)
Advances to employees
Value added taxes recoverable
December 31,
2023
December 31,
2022
$
24,270 $
23,043
5,624
917
11,443
2,125
1,234
4,553
$
42,254 $
30,955
December 31,
2023
December 31,
2022
$
306 $
4,716
11,254
8,346
944
13,719
$
39,285 $
715
6,673
3,237
10,243
667
12,246
33,781
7 0
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 21
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
7. Mineral Properties, Plant and Equipment
Buildings
Mining
Equipment
Mineral
Properties(1)
Projects in
Progress
Equipment &
Other Assets
Deposit on
Projects
Mine Closure
Costs
Right-of-Use
Assets
Total
Cost:
Balance, December 31, 2021
$
18,352 $
124,775 $
394,017 $
19,190 $
9,819 $
10,488 $
12,010 $
17,298 $
605,949
Additions
Capitalized borrowing costs
Change in estimates
Disposals
Transfers
Foreign exchange
Balance, December 31, 2022
Additions
Capitalized borrowing costs
Change in estimates
Disposals
Transfers
Foreign exchange
Balance, December 31, 2023
Accumulated depreciation:
Balance, December 31, 2021
Depreciation expense
Disposals
Foreign exchange
Balance, December 31, 2022
Depreciation expense
Disposals
Foreign exchange
Balance, December 31, 2023
Net book value, December 31, 2022
Net book value, December 31, 2023
$
$
$
$
$
885
—
—
(736)
2,280
1,257
22,038
2,672
—
—
—
10,405
2,131
62,081
125,004
—
—
(1,917)
1,512
8,004
—
—
—
8,453
26,213
194,455
553,687
47,846
98,046
—
—
(2,844)
28,566
17,466
—
—
(746)
898
45,923
64,779
6,246
—
(2,241)
26,303
(2,456)
111,821
217,988
16,983
—
(41)
57,669
15,237
8,722
31,984
—
—
(9)
185
545
19,262
3,207
—
—
(58)
2,639
1,563
—
—
(2)
(3,650)
454
39,274
107,226
—
—
(56)
(100,177)
—
—
1,354
—
—
824
14,188
—
—
3,119
—
—
3,275
1,202
11,666
305,121
—
—
6,246
1,354
(1,541)
(6,446)
—
1,026
28,449
20,019
—
—
35,083
35,867
983,174
497,004
16,983
3,119
(1,831)
(5,576)
—
2,692
—
89,489
37,246 $
285,489 $
697,808 $
419,657 $
26,613 $
49,542 $
18,509 $
49,329 $
1,584,193
(4,428) $
(25,943) $
(109,889) $
— $
(5,733) $
— $
(4,040) $
(10,488) $
(160,521)
(1,047)
(16,373)
(33,378)
734
(306)
(5,047)
(1,497)
—
(440)
1,672
(1,666)
60
(7,352)
(42,310)
(150,559)
(24,209)
(47,717)
1,613
—
(4,011)
(11,663)
—
—
—
—
—
—
—
(973)
70
(354)
(6,990)
(1,877)
52
(553)
—
—
—
—
—
—
—
(914)
—
(273)
(7,530) $
(60,215)
913 $
3,449
(662) $
(10,613)
(5,227)
(17,767)
(227,900)
(662)
—
(427)
(12,565)
(88,527)
1,372
3,037
(1,711)
(18,805)
(6,984) $
(68,917) $
(209,939) $
— $
(9,368) $
— $
(6,316) $
(30,671) $
(332,195)
16,991 $
152,145 $
403,128 $
111,821 $
12,272 $
39,274 $
8,961 $
10,682 $
755,274
30,262 $
216,572 $
487,869 $
419,657 $
17,245 $
49,542 $
12,193 $
18,658 $
1,251,998
(1)
(2)
Mineral properties include $72.4 million (2022 - $69.4 million) of costs which are not currently being depreciated.
A total of $35.1 million of exploration and evaluation assets related to the Tucumã Project were reclassified to mineral property, plant and equipment in 2022.
Page 22
7 1
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
8. Exploration and Evaluation Assets
As at December 31, 2023, the Company has $29.9 million (2022 - $15.7 million) in exploration and evaluation
assets, primarily related to three property option agreements. In order for the Company to acquire 100% of
these properties, the Company will be required to complete certain drill programs, including a minimum of
$15.5 million in exploration expenditures over the next three years. Depending on results of these exploration
programs, further option payments to complete the acquisitions is required. In the event that the Company
exercises its option to acquire 100% interest in these properties, the optioners are expected to retain net smelter
royalties of up to 1.5%.
9. Deposits and Other Non-current Assets
Value added taxes recoverable
Note receivable (Note 23)
Deposits and others
10. Accounts Payable and Accrued Liabilities
Trade suppliers
Payroll and labour related liabilities
Value added tax and other tax payable
Cash-settled equity awards (Note 15(b) and (c))
Other accrued liabilities
December 31,
2023
December 31,
2022
$
$
11,413 $
9,067
8,472
28,952 $
10,317
10,387
3,985
24,689
December 31,
2023
December 31,
2022
$
74,877 $
26,421
9,142
8,796
1,468
47,868
21,008
8,040
6,684
1,003
$
120,704 $
84,603
7 2
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 23
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
11. Loans and Borrowings
Currency
Security
Maturity
(Months)
Coupon rate
Carrying value,
including accrued interest
Principal to
be repaid
December
31,
2023
December 31,
2022
USD
USD
EUR
BRL
BRL
Unsecured
73
6.50%
$ 400,000 $ 403,274 $
402,453
Secured
15 - 43
5.00% - 8.12%
15,987
16,175
10,322
Secured
26 - 30
5.25%
Unsecured
2 - 29
nil% - 16.63%
Unsecured
35
CDI + 0.50%
998
3,279
2,365
1,000
3,409
2,375
1,372
947
2,963
Description
Senior Notes
Equipment finance loans
Equipment finance loans
Equipment finance loans
Bank loan
Total
Current portion
Non-current portion
The movements in loans and borrowings are comprised of the following:
Balance, beginning of year
$
418,057 $
$ 422,629 $ 426,233 $
418,057
$
20,381 $
15,703
$ 405,852 $
402,354
Year ended
December 31,
2023
Year ended
December 31,
2022
—
14,889
(35,247)
28,282
—
252
59,250
392,006
9,489
(71,033)
26,666
1,351
328
$
426,233 $
418,057
Proceeds from issuance of Senior Notes, net
Proceeds from new equipment finance loans
Principal and interest payments
Interest costs, including interest capitalized
Loss on debt modification
Foreign exchange
Balance, end of year
(a) Senior Notes
In February 2022, the Company issued $400 million aggregate principal amount of senior unsecured notes (the
“Senior Notes”). The Company received net proceeds of $392.0 million after transaction costs of $8.0 million.
The Senior Notes mature on February 15, 2030 and bear annual interest at 6.5%, payable semi-annually in
February and August of each year.
MCSA has provided a guarantee of the Senior Notes on a senior unsecured basis. The Senior Notes are direct,
senior obligations of the Company and MCSA, and are not secured by any mortgage, pledge or charge.
The Senior Notes are subject to the following early redemption options by the Company:
• On or after February 15, 2025, the Company has the option, in whole or in part, to redeem the Senior Notes
at a price ranging from 103.25% to 100% of the principal amount together with accrued and unpaid interest,
if any, to the date of redemption, with the rate decreasing based on the length of time the Senior Notes are
outstanding;
7 3
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 24
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
• Before February 15, 2025, the Company may redeem some or all of the Senior Notes at 100% of the
principal amount plus a “make whole” premium, plus accrued and unpaid interest, if any, to the date of
redemption; and
• At any time before February 15, 2025, the Company may redeem up to 40% of the original principal amount
of the Senior Notes with the proceeds of certain equity offerings at a redemption price of 106.50% of the
principal amount of the Senior Notes, together with accrued and unpaid interest, if any, to the date of
redemption.
Upon the occurrence of specific kinds of changes of control triggering events, each holder of the Senior Notes
will have the right to cause the Company to repurchase some or all of its Senior Notes at 101% of their principal
amount, plus accrued and unpaid interest to, but not including, the repurchase date.
The Senior Notes are recognized as financial liabilities, net of unamortized transaction costs, and measured at
amortized cost using an effective interest rate of 6.7%.
(b) Senior Credit Facility
In 2023, the Company amended its senior credit facility ("Amended Senior Credit Facility") to increase its limit
from $75.0 million to $150.0 million and extended the maturity from March 2025 to December 2026. Amounts
drawn on the Amended Senior Credit Facility bear interest on a sliding scale at a rate of SOFR plus 2.00% to
4.50% depending on the Company’s consolidated leverage ratio. Commitment fees for any undrawn portion of
the Amended Senior Credit Facility are based on a sliding scale between 0.45% to 1.01%.
The Amended Senior Credit Facility is secured by the shares of MCSA, NX Gold and Ero Gold. The Company is
required to comply with certain financial covenants. As December 31, 2023, the Amended Senior Credit Facility
remains undrawn and the Company is in compliance with the financial covenants therein.
During the year ended December 31, 2022, following the issuance of Senior Notes, the Company paid off the
remaining $50.0 million balance on its Senior Credit Facility and terminated its interest rate swap contracts for
nominal consideration. The Senior Credit Facility was amended to reduce its limit from $150.0 million to
$75.0 million, with an accordion option to increase the limit to $100.0 million at the election of the Company.
Subsequent to December 31, 2023, the Company drew down $20.0 million of the Amended Senior Credit
Facility.
12. Deferred Revenue
In August 2021, the Company entered into a precious metals purchase agreement (the “NX Gold PMPA”) with
RGLD Gold AG ("Royal Gold"), a wholly-owned subsidiary of Royal Gold, Inc., in relation to gold production from
the Xavantina Operations. The Company received upfront cash consideration of $100.0 million for the purchase
of 25% of an equivalent amount of gold to be produced from the Xavantina mine until 93,000 ounces of gold
have been delivered and thereafter decreasing to 10% of gold produced over the remaining life of the mine. The
contract will be settled by the Company delivering gold to Royal Gold. Royal Gold will make ongoing payments
equal to 20% of the then prevailing spot gold price for each ounce of gold delivered until 49,000 ounces of gold
have been delivered and 40% of the prevailing spot gold price for each ounce of gold delivered thereafter.
Additional advances may be made by Royal Gold based on the Company achieving certain milestones as set out
in the NX Gold PMPA.
7 4
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 25
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
The movements in deferred revenue during the year ended December 31, 2023 are comprised of the following:
Gold ounces delivered(1)
Balance, beginning of year
Advances
Accretion expense
Amortization of deferred revenue(2)
Balance, end of year
Current portion
Non-current portion
December 31,
2023
December 31,
2022
14,005
10,082
$
86,055 $
94,222
3,544
3,032
(17,082)
75,549 $
17,159 $
58,390
3,207
3,407
(14,781)
86,055
16,580
69,476
$
$
(1) During the year ended December 31, 2023, the Company delivered 14,005 ounces of gold (December 31, 2022 - 10,082 ounces) to
Royal Gold for average consideration of $386 per ounce (December 31, 2022 - $359 per ounce). At December 31, 2023, a cumulative
29,260 ounces (December 31, 2022 - 15,255 ounces) of gold have been delivered under the PMPA.
(2) Amortization of deferred revenue during the year ended December 31, 2023 was net of $2.5 million (December 31, 2022 - $0.3 million)
for change in estimate attributed to advances received and change in life-of-mine production estimates.
As part of the NX Gold PMPA, the Company pledged its equity interest in Ero Gold and NX Gold to Royal Gold
as collateral and provided unsecured limited recourse guarantees from Ero and NX Gold.
13. Provision for rehabilitation and closure costs
Balance, beginning of year
Change in estimates
Accretion expense
Settled
Foreign exchange
Balance, end of year
Caraíba Operations
Tucumã Project
Xavantina Operations
Total
December 31,
2023
December 31,
2022
22,172 $
19,037
3,455
2,703
(3,344)
1,701
26,687 $
1,854
2,191
(2,238)
1,328
22,172
21,372 $
18,026
1,365
3,950
558
3,588
26,687 $
22,172
$
$
$
Provision for rehabilitation and closure costs is measured using management’s assumptions and estimates for
future cash outflows in relation to mine closure and rehabilitation activities based on known disturbances as at
the reporting date, known legal requirements and cost estimates prepared by a third-party specialist.
7 5
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 26
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
Management used a pre-tax discount rates in the range of 8.50% – 9.79% (2022 – 8.50% - 11.86%) and an
inflation factor in the range of 3.50% - 3.90% (2022 – 3.25% - 5.31%) in preparing the Company’s provision for
rehabilitation and closure costs. The cash expenditures are expected to commence upon projected closure and
occur over a period of time, which for the Caraíba Operations is in a range from 2024 to 2051, for the Xavantina
Operations is 2029 to 2037, and for the Tucumã Project is from 2036 to 2041.
14. Other Non-current Liabilities
December 31,
2023
December 31,
2022
Cash-settled equity awards (Note 15(b))
$
2,549 $
Withholding, value added tax, and other taxes payable
Provision (Note 26(b))
Other liabilities
15. Share Capital
8,012
1,622
5,975
2,256
5,254
1,578
2,731
$
18,158 $
11,819
As at December 31, 2023, the Company’s authorized share capital consists of an unlimited number of common
shares without par value. As at December 31, 2023, 102,747,558 common shares were outstanding (December
31, 2022 - 92,182,633).
In November 2023, the Company completed a bought deal share offering of 9,010,000 common shares at a
price of $12.35 per common share for gross proceeds of $111.3 million, or net proceeds of 104.3 million after
share issuance costs.
(a) Options
During the year ended December 31, 2023, the Company granted 525,138 options (year ended December 31,
2022 - 449,248 options) to employees of the Company at weighted average exercise price of $18.00 CAD per
share (year ended December 31, 2022 - $17.80 CAD per share) with a term to expiry of five years. These stock
options vest in three equal installments on each annual anniversary date from the date of grant. The total fair
value of these options on the grant date was $3.4 million (year ended December 31, 2022 - $2.8 million), which
is recognized over the vesting period.
A continuity of the issued and outstanding options is as follows:
7 6
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 27
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
Year Ended December 31,
2023
2022
Number of
Stock
Options
Weighted
Average
Exercise
Price (CAD)
Number of
Stock
Options
Weighted
Average
Exercise
Price (CAD)
Outstanding stock options, beginning of year
2,781,074 $
15.49
4,202,389 $
Issued
Exercised
Forfeited
525,138
18.00
449,248
(1,333,199)
11.28
(1,812,558)
(86,688)
18.59
(58,005)
Outstanding stock options, end of year
1,886,325 $
19.56
2,781,074 $
11.36
17.80
6.35
19.59
15.49
The weighted average share price on the date of exercise for options exercised during the year ended December
31, 2023 was $12.94 (year ended December 31, 2022 - $12.44).
As at December 31, 2023, the following stock options were outstanding:
Weighted Average Exercise Prices
$10.01 to $20.00 CAD
$20.01 to $24.45 CAD
$19.56 CAD ($14.79 USD)
Number of
Stock Options
Vested and
Exercisable
Number of
Stock Options
Weighted
Average
Remaining Life
in Years
1,406,222
480,103
645,669
461,490
1,886,325
1,107,159
3.77
1.10
3.09
The fair value of options was determined using the Black-Scholes option pricing model. The weighted average
inputs used in the measurement of fair values at grant date of the options are the following:
Year Ended December 31,
2023
2022
Expected term (years)
Forfeiture rate
Volatility
Dividend yield
Risk-free interest rate
3.2
— %
54 %
— %
3.99 %
Weighted-average fair value per option
$
6.38
$
3.0
— %
60 %
— %
3.86 %
6.16
7 7
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 28
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
(b)
Performance Share Unit Plan
The Company has a performance share unit ("PSU") plan pursuant to which the Compensation Committee may
grant PSUs to Eligible Persons of the Company or its subsidiaries. Each PSU entitles the holder thereof to
receive one common share, its equivalent cash value, or a combination of both, on the redemption date at the
discretion of the Compensation Committee.
The continuity of PSUs issued and outstanding is as follows:
Outstanding balance, beginning of year
Issued
Settled
Forfeited
Outstanding balance, end of year
Year Ended December 31,
2023
2022
881,788
437,204
793,043
344,549
(238,881)
(212,765)
(112,190)
967,921
(43,039)
881,788
These PSUs will vest three years from the date of grant by the Compensation Committee and the number of
PSUs that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain
market and non-market performance conditions. Each vested PSU entitles the holder thereof to receive on or
about the applicable date of vesting of such share unit (i) one common share; (ii) a cash amount equal to the fair
market value of one common share as at the applicable date of vesting; or (iii) a combination of (i) and (ii), as
determined by the Compensation Committee in its sole discretion. The Company has elected to settle its PSUs
using a combination of cash and common shares in the past. As such, based on its history of past settlements,
PSUs are classified as liabilities.
For PSUs with non-market performance conditions, the fair value of the share units granted was initially
recognized at the fair value using the share price at the date of grant, and subsequently remeasured at fair value
on each balance sheet date. For PSUs with market performance conditions, the fair value was determined using
a Geometric Brownian Motion model. As at December 31, 2023, the fair value of the PSU liability was $6.5
million (December 31, 2022 - $5.9 million) of which $3.9 million was recognized in accounts payable and
accrued liabilities and the remainder in other non-current liabilities.
(c) Deferred Share Unit Plan
The Deferred Share Unit ("DSU") plan was established by the Board as a component of compensation for the
Company's independent directors. Pursuant to the DSU Plan, DSUs may only be settled by way of cash
payment. A participant is not entitled to payment in respect of the DSUs until his or her death, retirement or
removal from the Board. The settlement amount of each DSU is based on the fair market value of a common
share on the DSU redemption date multiplied by the number of DSUs being redeemed.
7 8
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 29
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
The continuity of DSUs issued and outstanding is as follows:
Outstanding balance, beginning of year
Issued
Outstanding balance, end of year
Year ended December 31,
2023
2022
219,961
87,351
307,312
131,085
88,876
219,961
At December 31, 2023, DSU liabilities had a fair value of $4.9 million (December 31, 2022 - $3.0 million) which
has been recognized in accounts payable and accrued liabilities.
(d) Restricted Share Unit Plan
The Company has a restricted share unit ("RSU") plan pursuant to which the Compensation Committee may
grant share units to Eligible Persons of the Company or its subsidiaries. The fair value of these restricted share
units is determined on the date of grant using the market price of the Company’s shares. Each RSU entitles the
holder thereof to receive one common share, its equivalent cash value, or a combination of both, on the
redemption date at the discretion of the Compensation Committee.
During the year ended December 31, 2023, the Company granted 203,537 RSUs (year ended December 31,
2022 - 160,320) to employees of the Company at weighted average fair value of $15.59 per share (year ended
December 31, 2022 - $13.86). The total fair value of these RSUs on the grant date was $3.2 million (year ended
December 31, 2022 - $2.2 million).
The continuity of RSUs issued and outstanding is as follows:
Outstanding balance, beginning of year
Issued
Settled
Forfeited
Outstanding balance, end of year
Year ended December 31,
2023
2022
263,202
203,537
(95,456)
(30,713)
340,570
171,106
160,320
(59,795)
(8,429)
263,202
7 9
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 30
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
(e)
Share-based compensation
Stock options
Performance share unit plan
Deferred share unit plan
Restricted share unit plan
Share-based compensation(1)
Year ended December 31,
2023
2022
$
1,574 $
4,093
1,756
1,795
$
9,218 $
2,091
3,158
1,087
1,595
7,931
(1) For the year ended December 31, 2023, the Company recorded $3.4 million (year ended December 31, 2022 - $3.7 million) of share-
based compensation in contributed surplus, and the remaining share-based compensation was recorded in liabilities.
(f) Net Income per Share
Year ended December 31,
2023
2022
Weighted average number of common shares outstanding
94,111,548
90,789,925
Dilutive effects of:
Stock options
Share units
444,216
340,570
1,117,529
263,202
Weighted average number of diluted common shares outstanding(1)
94,896,334
92,170,656
Net income attributable to owners of the Company
Basic net income per share
Diluted net income per share
$
$
$
92,804 $
101,831
0.99 $
0.98 $
1.12
1.10
(1) Weighted average number of diluted common shares outstanding for the year ended December 31, 2023 excluded 646,932 (year ended
December 31, 2022 - 1,647,969) stock options that were anti-dilutive.
8 0
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 31
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
16. Revenue
Year ended December 31,
2023
2022
Copper
Sales within Brazil
Export sales
Adjustments on provisional sales(1)
Gold
Sales
Amortization of deferred revenue(2)
$
24,303 $
300,383
(4,083)
320,603
89,795
17,082
106,877 $
52,841
313,629
(15,066)
351,404
60,207
14,781
74,988
$
$
427,480 $
426,392
(1) Adjustments on provisional sales include both pricing and quantity adjustments. Under the terms of the Company’s contract with its
Brazilian domestic customer, sales are provisionally priced on the date of sale based on the previous month’s average copper price and
subsequently settled based on the average copper price in the month of shipment. Provisionally priced sales to the Company's
international customers are settled with a final sales price between zero to four months after shipment takes place and, therefore, are
exposed to commodity price changes.
(2) During the year ended December 31, 2023, the Company delivered 14,005 ounces of gold (year ended December 31, 2022 - 10,082
ounces of gold) under a precious metals purchase agreement with Royal Gold (note 12) for average cash consideration of $386 per
ounce (year ended December 31, 2022 - $359 per ounces) and recognized $17.1 million in amortization of deferred revenue (year
ended December 31, 2022 - $14.8 million).
8 1
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 32
Ero Copper Corp.
Notes to Consolidated Financial Statements
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
17. Cost of Sales
19. Finance Expense
Materials
Salaries and benefits
Contracted services
Maintenance costs
Utilities
Other costs
Change in inventory (excluding depreciation and depletion)(1)
Cost of production
Sales expense
Depreciation and depletion
Year ended December 31,
2023
2022
$
44,361 $
60,609
32,911
31,025
13,574
1,185
(5,269)
178,396
10,718
86,065
42,359
50,168
32,576
26,381
13,092
1,163
5,321
171,060
9,501
59,475
Change in inventory (depreciation and depletion)
(4,544)
(819)
$
270,635 $
239,217
20. Foreign Exchange Gain
(1) Change in inventory in the year ended December 31, 2022 included $6.1 million of copper concentrates acquired from one of the
Company's customers to settle accounts receivables in arrears. This concentrate was subsequently sold to a different customer for
$6.0 million included in revenues.
functional currency.
18. General and Administrative Expenses
Accounting and legal
Amortization and depreciation
Office and administration
Salaries and consulting fees
Incentive payments
Other
Year ended December 31,
2023
2022
$
2,049 $
1,503
8,970
29,281
6,887
3,739
2,397
313
9,293
24,343
8,213
4,900
$
52,429 $
49,459
Interest on loans and borrowings(1)
Accretion of deferred revenue
Accretion of provision for rehabilitation and closure costs
Interest on lease liabilities
Other finance expenses(2)
Year ended December 31,
2023
2022
$
11,299 $
20,420
3,032
2,703
1,477
7,311
3,407
2,191
706
6,499
$
25,822 $
33,223
(1) During the year ended December 31, 2023, the Company capitalized $17.0 million (2022 - $6.2 million) of borrowing costs to projects
(2) Other finance expenses during the year ended December 31, 2023 included $4.1 million (2022 - $3.3 million) credit loss provision on
in progress.
certain accounts receivable (see Note 23).
The following foreign exchange gains (losses) arise as a result of balances and transactions in the Company’s
Brazilian subsidiaries that are denominated in currencies other than the Brazilian Reals (BRL$), which is their
Year ended December 31,
2023
2022
Foreign exchange gain on USD denominated debt in Brazil
$
18,695 $
Realized foreign exchange gain (loss) on derivative contracts (note 23)
Unrealized foreign exchange gain on derivative contracts (note 23)
Foreign exchange loss on other financial assets and liabilities
11,417
7,582
(3,082)
$
34,612 $
3,890
(12,498)
33,092
(4,574)
19,910
8 2
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 33
Notes to Financial Statements | Page 34
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
19. Finance Expense
Interest on loans and borrowings(1)
Accretion of deferred revenue
Accretion of provision for rehabilitation and closure costs
Interest on lease liabilities
Other finance expenses(2)
Year ended December 31,
2023
2022
$
11,299 $
20,420
3,032
2,703
1,477
7,311
3,407
2,191
706
6,499
$
25,822 $
33,223
(1) During the year ended December 31, 2023, the Company capitalized $17.0 million (2022 - $6.2 million) of borrowing costs to projects
in progress.
(2) Other finance expenses during the year ended December 31, 2023 included $4.1 million (2022 - $3.3 million) credit loss provision on
certain accounts receivable (see Note 23).
20. Foreign Exchange Gain
The following foreign exchange gains (losses) arise as a result of balances and transactions in the Company’s
Brazilian subsidiaries that are denominated in currencies other than the Brazilian Reals (BRL$), which is their
functional currency.
Year ended December 31,
2023
2022
Foreign exchange gain on USD denominated debt in Brazil
$
18,695 $
Realized foreign exchange gain (loss) on derivative contracts (note 23)
Unrealized foreign exchange gain on derivative contracts (note 23)
Foreign exchange loss on other financial assets and liabilities
11,417
7,582
(3,082)
$
34,612 $
3,890
(12,498)
33,092
(4,574)
19,910
8 3
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 34
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
21. Income Taxes
(a) Reconciliation of income taxes
A reconciliation of the income tax expense to the amount calculated using the Company’s combined Canadian
federal and provincial statutory income tax rate of 27% (2022 – 27%) is as follows:
Net income in the year before tax
Tax rate
Income tax expense at statutory rate
Tax effect of:
Difference in tax rate of foreign jurisdictions
Non-taxable items
Change in temporary differences not previously recognized
Withholding taxes and other
Income tax expense
Current income tax:
Relating to current income tax charge
Deferred income tax:
Relating to origination and reversal of temporary differences
Income tax expense recognized in net income
Income tax expense recognized in other comprehensive income
Total income tax expense
Year ended December 31,
2023
2022
$
$
112,351
$
126,383
27 %
27 %
30,335
$
34,123
(11,318)
(10,740)
2,153
7,617
(15,858)
(5,618)
8,762
1,907
$
18,047
$
23,316
Year ended December 31,
2023
2022
$
$
$
15,992 $
15,043
2,055
18,047 $
1,262
19,309 $
8,273
23,316
523
23,839
8 4
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 35
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
(b) Deferred income tax liabilities
The general movement in the deferred income tax liabilities is as follows:
At the beginning of the year
Deferred income tax expense
Income tax expense recognized in OCI
Foreign exchange
At the end of the year
Year ended December 31,
2023
2022
$
(6,229) $
(2,055)
(1,262)
(2)
2,315
(8,273)
(523)
252
$
(9,548) $
(6,229)
Recognized deferred tax and assets and liabilities consist of the following:
Deferred tax assets:
Non-capital losses
Foreign exchange
Other
Mine closure and rehabilitation provision
Lease liabilities
Deferred tax liabilities:
Mineral properties, plant and equipment
Loans and borrowings
Foreign exchange
Loans and borrowings
December 31,
2023
December 31,
2022
$
5,655 $
—
8,563
4,070
2,805
2,546
2,087
4,592
3,381
1,511
21,093
14,117
(15,566)
(10,045)
(3,083)
(1,947)
(30,641)
(9,364)
(9,321)
—
(1,661)
(20,346)
Net deferred income tax liabilities
$
(9,548) $
(6,229)
Presentation on Consolidated Statements of Financial Position
Deferred tax assets
Deferred tax liabilities
1,315
—
$
(10,863) $
(6,229)
8 5
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 36
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
Deferred tax assets of $35.1 million (December 31, 2022 - $30.4 million) have not been recognized for the
following deductible temporary differences as it is not probable that the benefits of these temporary differences
will be realized:
Year ended December 31, 2023
Year ended December 31, 2022
Brazil
Canada
Brazil
Canada
Mineral properties, plant and equipment
39,959
Non-capital losses
Other
—
—
1,150
74,238
33,731
37,077
—
—
$
39,959 $
109,119 $
37,077 $
969
72,535
18,100
91,604
The Company has loss carry forwards in Canada totaling $100.2 million (December 31, 2022 - $82.0 million)
which may be carried forward for 20 years to offset future taxable income, which expire between 2036 and
2043.
22. Related Party Transactions
Key management personnel consist of the Company’s directors and officers. The remuneration of key
management personnel during the year was as follows:
Year ended December 31,
2023
2022
$
$
10,746 $
8,156
18,902 $
11,058
6,478
17,536
Salaries and short-term benefits(1)
Share-based payments(2)
(1)
Includes annual salary and short-term incentives or bonuses earned in the year.
(2)
Includes PSUs, RSUs, DSUs and stock option grants.
23. Financial Instruments
Fair value
Fair values of financial assets and liabilities are determined based on available market information and valuation
methodologies appropriate to each situation. Judgments are required in the interpretation of the market data to
produce the most appropriate fair value estimates. The use of different market information and/or evaluation
methodologies may have a material effect on the fair value amounts.
As at December 31, 2023, derivatives were measured at fair value based on Level 2 inputs.
The carrying values of cash and cash equivalents, short-term investments, accounts receivable, deposits, and
accounts payable and accrued liabilities approximate their fair values due to their short terms to maturity or the
discount rate used approximates to the contractual interest rate. At December 31, 2023, the carrying value of
loans and borrowings, including accrued interest, was $426.2 million while the fair value is approximately
8 6
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 37
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
$376.0 million. At December 31, 2023, the carrying value of notes receivable, including accrued interest, was
$17.4 million which approximates its fair value.
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails
to meet its contractual obligations and arises principally from the Company’s receivables from customers. The
carrying amount of the financial assets below represents the maximum credit risk exposure as at December 31,
2023 and December 31, 2022:
Cash and cash equivalents
Short-term investments
Accounts receivable
Derivatives
Note receivable
Deposits and other assets
December 31,
2023
December 31,
2022
$
111,738 $
—
5,710
11,254
17,413
8,472
177,702
139,700
10,289
3,237
20,630
3,985
$
154,587 $
355,543
The Company invests cash and cash equivalents and short-term investments with financial institutions that are
financially sound based on their credit rating.
The Company’s exposure to credit risk associated with accounts receivable is influenced mainly by the individual
characteristics of each customer.
In November 2022, Paranapanema S/A ("PMA"), one of the Company's customers in Brazil, filed for bankruptcy
protection. According to PMA, the action was attributed to working capital challenges following an operational
halt at one of their facilities. Progress was noted in August 2023 when PMA and its creditors agreed on a
judicial recovery plan, which subsequently received approval from the judicial recovery court in November 2023.
As a preferred supplier to PMA, the Company has entered into a note receivable arrangement with PMA. The
arrangement is excluded from the judicial recovery process and provides the Company with certain judicial
guarantees. According to the note receivable arrangement, repayment is structured over 24 monthly
installments beginning in March 2024, with an annual interest rate equivalent to Brazil's CDI rate of
approximately 11.65%.
At December 31, 2023, the gross amount of accounts and note receivable from PMA was $25.2 million
(December 31, 2022 - $23.9 million). After adjusting for credit loss provision and present value discount of
$7.7 million (December 31, 2022 - $3.3 million), the amortized cost of the note receivable at December 31,
2023 was $17.4 million (December 31, 2022 - $20.6 million), of which $8.3 million (December 31, 2022 -
$10.2 million) was classified as current and $9.1 million (December 31, 2022 - $10.4 million) as non-current.
8 7
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 38
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
Liquidity risk
Liquidity risk is the risk associated with the difficulties that the Company may have meeting the obligations
associated with financial liabilities that are settled with cash payments or with another financial asset. The
Company's approach to liquidity management is to ensure as much as possible that sufficient liquidity exists to
meet their maturity obligations on the expiration dates, under normal and stressful conditions, without causing
unacceptable losses or with risk of undermining the normal operation of the Company.
The table below shows the Company's maturity of non-derivative financial liabilities on December 31, 2023:
Non-derivative financial liabilities
Loans and borrowings (including
Carrying
value
Contractual
cash flows
Up to
12 months
1 - 2
years
3 - 5
years
More than
5 years
interest)
$ 426,233 $
593,991 $
37,743 $
34,468 $
82,781 $ 438,999
Accounts payable and accrued
liabilities
120,704
120,704
120,704
—
—
Other non-current liabilities
8,524
23,436
—
10,166
12,640
Leases
Total
19,603
19,579
10,929
5,521
3,019
$ 575,064 $
757,710 $ 169,376 $
50,155 $
98,440 $ 439,739
—
630
110
The Company also has derivative financial asset for foreign exchange collar contracts and copper derivative
contracts whose notional amounts and maturity information are disclosed below under foreign exchange
currency risk, interest rate risk, and price risk.
Market risk
Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign
exchange rates, and commodity prices. The purpose of market risk management is to manage and control
exposures to market risks, within acceptable parameters, while optimizing return.
The Company may use derivatives, including options, forwards and swap contracts, to manage market risks.
The Company's outstanding derivative instruments as of December 31, 2023 are as follows:
Contract Description
Notional
Amount
Denomination
Weighted
average floor
Weighted
average cap /
forward price
Foreign exchange collar (i)
$316.5 million
USD/BRL
Foreign exchange forward (i)
$60.5 million
USD/BRL
4.99
N/A
5.36
5.15
Copper collar (iii)
6,000 tonnes
$ / lb
$3.60
$4.03
Maturities
January 2024 -
December 2024
January 2024 -
December 2024
January 2024 -
June 2024
8 8
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 39
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
(i) Foreign exchange currency risk
The Company’s subsidiaries in Brazil are exposed to exchange risks primarily related to the US dollar. In order to
minimize currency mismatches, the Company monitors its cash flow projections considering future sales
expectations indexed to US dollar variation in relation to the cash requirement to settle the existing financings.
The Company's exposure to foreign exchange currency risk at December 31, 2023 relates to $17.2 million
(December 31, 2022 – $11.7 million) in loans and borrowings of MCSA denominated in US dollars and Euros. In
addition, the Company is also exposed to foreign exchange currency risk at December 31, 2023 on $342.2
million of intercompany loan balances (December 31, 2022 - $148.2 million) which have contractual repayment
terms. Strengthening (weakening) in the Brazilian Real against the US dollar at December 31, 2023 by 10% and
20%, would have increased (decreased) pre-tax net income by $35.8 million and $71.7 million, respectively.
This analysis is based on the foreign currency exchange variation rate that the Company considered to be
reasonably possible at the end of the year and excluding the impact of the derivatives below. The analysis
assumes that all other variables, especially interest rates, are held constant.
The Company may use certain foreign exchange derivatives, including collars and forward contracts, to manage
its foreign exchange risks. At December 31, 2023, the aggregate fair value of the Company's foreign exchange
derivatives was a net asset of $11.3 million (December 31, 2022 - asset of $3.2 million), and the full $11.3
million is included in other current assets in the statement of financial position. The fair values of foreign
exchange contracts were determined based on option pricing models, forward foreign exchange rates, and
information provided by the counter party.
The change in fair value of foreign exchange collar contracts was an unrealized gain of $7.6 million for the year
ended December 31, 2023 (a gain of $33.1 million for the year ended December 31, 2022) and has been
recognized in foreign exchange gain (loss). In addition, during the year ended December 31, 2023, the Company
recognized a realized gain of $11.4 million (realized loss of $12.5 million for the year ended December 31,
2022) related to the settlement of foreign currency forward collar contracts.
(ii) Interest rate risk
The Company is principally exposed to the variation in interest rates on loans and borrowings with variable rates
of interest. Management reduces interest rate risk exposure by entering into loans and borrowings with fixed
rates of interest or by entering into derivative instruments that fix the ultimate interest rate paid.
The Company is principally exposed to interest rate risk through Brazilian Real denominated bank loans of $2.4
million. Based on the Company’s net exposure at December 31, 2023, a 1% change in the variable rates would
not materially impact its pre-tax annual net income.
(iii) Price risk
The Company may use derivatives, including forward contracts, collars and swap contracts, to manage
commodity price risks.
At December 31, 2023, the Company had provisionally priced sales that are exposed to commodity price
changes (note 16). Based on the Company’s net exposure at December 31, 2023, a 10% change in the price of
copper would have changed pre-tax net income by $2.5 million.
At December 31, 2023, the Company has entered into zero-cost copper derivative contracts on 1,000 tonnes of
copper per month from January 2024 to June 2024, representing approximately 25% of estimated production
volumes over the period. As of December 31, 2023, the fair value of these contracts was a net liability of $0.6
8 9
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 40
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
million (December 31, 2022 - liability of $0.6 million). The fair value of copper collar contracts was determined
based on option pricing models, forward copper price and information provided by the counter party.
During the year ended December 31, 2023, the Company recognized an unrealized loss of $0.1 million ($nil for
the year ended December 31, 2022) and a realized loss of $1.8 million ($nil for the year ended December 31,
2022) in relation to its copper hedge derivatives in other income or loss.
24. Capital Management
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going
concern in order to pursue the development and production of its mine properties and to maintain a flexible
capital structure for its projects for the benefit of its stakeholders.
The Company's capital consists of items included in shareholders’ equity, debt facilities net of cash and cash
equivalents and short-term investments.
Management reviews the capital structure on a regular basis to ensure that the above-noted objectives are met.
The Company manages the capital structure and makes adjustments to it considering changes in the economic
conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the
Company may attempt to issue new loans and borrowings, common shares, or acquire or dispose of assets.
Certain loan agreements contain operating and financial covenants that could restrict the ability of the Company
and its subsidiaries. MCSA, Ero Gold, and NX Gold, to, among other things, incur additional indebtedness
needed to fund its respective operations, pay dividends or make other distributions, make investments, create
liens, sell or transfer assets or enter into transactions with affiliates. There are no other restrictions or externally
imposed capital requirements of the Company.
25. Supplemental Cash Flow Information
Net change in non-cash working capital items:
Accounts receivable
Inventories
Other assets
Accounts payable and accrued liabilities
Non-cash investing and financing activities:
Additions to property, plant and equipment by leases
Non-cash increase in accounts payable in relation to capital
expenditures
Change in mineral properties, plant and equipment from change in
estimates for provision for rehabilitation and closure costs
Year ended December 31,
2023
2022
$
6,918 $
(5,269)
(1,870)
(1,709)
$
$
(11,694)
(13,836)
1,673
(614)
(8,372) $
(18,029)
20,019 $
11,666
28,851
10,311
3,119
1,354
9 0
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 41
Ero Copper Corp.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of US Dollars, except share and per share amounts)
26. Commitment and Contingencies
(a) Capital commitments
As at December 31, 2023, the Company has capital commitments, which is net of advances to suppliers, of
$122.6 million through contracts and purchase orders which are expected to be incurred over a six-year period.
In the normal course of operations, the Company may also enter into long-term contracts which can be
cancelled with certain agreed customary notice periods without material penalties.
(b) Contingencies
Due to the size, complexity and nature of the Company’s operations, it is subject to various investigations,
claims, legal and tax proceedings covering matters that arise in the ordinary course of business. Based on the
opinion of the Company's legal advisers, management considers provisions for its outstanding and pending legal
claims to be adequate.
Each of these matters is subject to various uncertainties and it is possible that some of these matters may
resolve unfavourably to the Company. In the opinion of management, based upon the information currently
available, none of these matters are expected to have a material adverse effect on the results of operations or
financial conditions of the Company. In the event that management’s estimate of the future resolution of these
matters changes, the Company will recognize the effect of these changes in its consolidated financial
statements in the period in which such changes occur. As at December 31, 2023, the Company has recognized a
provision related to certain matters of $1.6 million (December 31, 2022 - $1.6 million).
There are five administrative claims (2022 – five claims) filed by the Nacional Mining Agency regarding alleged
differences in the calculation of certain sales taxes on mining revenue by MCSA. As at December 31, 2023, the
estimated impact of the claims is $4.8 million (December 31, 2022 - $4.4 million). The Company, based on the
opinion of its legal advisors, does not believe such claims will result in a probable cash outflow and as such no
provision is recognized.
9 1
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Notes to Financial Statements | Page 42
NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION
Unless otherwise indicated, scientific and technical information in this Annual Report relating to Ero’s properties (“Technical Information”) is based on
information contained in the following:
The report prepared in accordance with National Instrument 43-101, Standards of Disclosure for Mineral Projects (“NI 43-101”) and entitled “2022 Mineral
Resources and Mineral Reserves of the Caraíba Operations, Curaçá Valley, Bahia, Brazil”, dated December 22, 2022 with an effective date of September
30, 2022, prepared by Porfirio Cabaleiro Rodriguez, FAIG, Bernardo Horta de Cerqueira Viana, FAIG, Fábio Valério Câmara Xavier, MAIG and Ednie Rafael
Moreira de Carvalho Fernandes, MAIG all of GE21 Consultoria Mineral Ltda. (“GE21”), Dr. Beck Nader, FAIG of BNA Mining Solutions (“BNA”) and Alejandro
Sepulveda, Registered Member (#0293) (Chilean Mining Commission) of NCL Ingeniería y Construcción SpA (“NCL”) (the “Caraíba Operations Technical
Report”). Each a “qualified person” and “independent” of the Company within the meanings of NI 43-101.
The report prepared in accordance with NI 43-101 and entitled “Mineral Resource and Mineral Reserve Estimate of the Xavantina Operations, Nova Xavantina”,
dated May 12, 2023 with an effective date of October 31, 2022, prepared by Porfirio Cabaleiro Rodriguez, FAIG, Leonardo de Moraes Soares, MAIG and
Guilherme Gomides Ferreira, MAIG, all of GE21 (the “Xavantina Operations Technical Report”). Each a “qualified person” and “independent” of the Company
within the meanings of NI 43-101.
The report prepared in accordance with NI 43-101 and entitled “Boa Esperança Project NI 43-101 Technical Report on Feasibility Study Update”, dated
November 12, 2021 with an effective date of August 31, 2021, prepared by Kevin Murray, P. Eng., Erin L. Patterson, P.E. and Scott C. Elfen, P.E. all of Ausenco
Engineering Canada Inc. (or its affiliate Ausenco Engineering USA South Inc. in the case of Ms. Patterson), Carlos Guzmán, FAusIMM RM CMC of NCL and
Emerson Ricardo Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the
Company on the date of the report (now of HCM Consultoria Geologica Eireli (“HCM”)) (the “Tucumã Project Technical Report”). Each of Kevin Murray, P. Eng.,
Erin L. Patterson, P.E. and Scott C. Elfen, P.E., Carlos Guzmán, FAusIMM RM CMC and Emerson Ricardo Re, MAusIMM (CP), is a “qualified person” of the
Company within the meanings of NI 43-101. Each of Kevin Murray, P. Eng., Erin L. Patterson, P.E. and Scott C. Elfen, P.E., and Carlos Guzmán, FAusIMM RM
CMC are “independent” of the Company within the meaning of NI 43-101. Emerson Ricardo Re, MAusIMM (CP), as Resource Manager of the Company (on the
date of the report and now of HCM), was not “independent” of the Company on the date of the report, within the meaning of NI 43-101.
Reference should be made to the full text of the Caraíba Operations Technical Report, the Xavantina Operations Technical Report and the Tucumã Project
Technical Report, each of which is available for review on the Company’s website at www.erocopper.com and under the Company’s profile on SEDAR+ at
www.sedarplus.ca, and EDGAR at www.sec.gov.
The disclosure of Technical Information in this Annual Report has been reviewed and approved by Cid Gonçalves Monteiro Filho, SME RM (04317974), MAIG
(No. 8444), FAusIMM (No. 3219148) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report contains “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and
“forward-looking information” within the meaning of applicable Canadian securities legislation (collectively, “forward-looking statements”). Forward-looking
statements include statements that use forward-looking terminology such as “may”, “could”, “would”, “will”, “should”, “intend”, “target”, “plan”, “expect”, “budget”,
“estimate”, “forecast”, “schedule”, “anticipate”, “believe”, “continue”, “potential”, “view” or the negative or grammatical variation thereof or other variations
thereof or comparable terminology. Forward-looking statements may include, but are not limited to, statements with respect to the Company’s production,
operating cost and capital expenditure guidance, mineral reserve and mineral resource estimates; targeting additional mineral resources and expansion
of deposits; capital and operating cost estimates and economic analyses (including cash flow projections), including those from the Caraíba Operations
Technical Report, the Xavantina Operations Technical Report and the Tucumã Project Technical Report; the Company’s expectations, strategies and plans
for the Caraíba Operations, the Xavantina Operations and the Tucumã Project, including the Company’s planned exploration, development, construction
and production activities; the results of future exploration and drilling; estimated completion dates for certain milestones; successfully adding or upgrading
mineral resources and successfully developing new deposits; the costs and timing of future exploration, development and construction including but not
limited to the Deepening Extension Project at the Caraíba Operations and the Tucumã Project; the timing and amount of future production at the Caraíba
Operations, the Xavantina Operations and the Tucumã Project; the Company’s expectations regarding planned capital expenditures for the Tucumã Project,
the Deepening Extension Project and/or the Caraíba Mill expansion project falling within contingency levels; expectations regarding the Company’s ability
to manage risks related to future copper price fluctuations and volatility; future financial or operating performance and condition of the Company and its
business, operations and properties, including expectations regarding liquidity, capital structure, competitive position and payment of dividends; expectations
regarding future currency exchange rates; and any other statement that may predict, forecast, indicate or imply future plans, intentions, levels of activity,
results, performance or achievements.
Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual results, actions,
events, conditions, performance or achievements to materially differ from those expressed or implied by the forward-looking statements, including, without
limitation, risks discussed in this Annual Report and in the AIF under the heading “Risk Factors”. The risks discussed in this Annual Report and in the AIF are
not exhaustive of the factors that may affect any of the Company’s forward-looking statements. Although the Company has attempted to identify important
factors that could cause actual results, actions, events, conditions, performance or achievements to differ materially from those contained in forward-
looking statements, there may be other factors that cause results, actions, events, conditions, performance or achievements to differ from those anticipated,
estimated or intended.
9 2
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Forward-looking statements are not a guarantee of future performance. There can be no assurance that forward-looking statements will prove to be accurate,
as actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements involve statements about
the future and are inherently uncertain, and the Company’s actual results, achievements or other future events or conditions may differ materially from those
reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to herein and
in the AIF under the heading “Risk Factors”.
The Company’s forward-looking statements are based on the assumptions, beliefs, expectations and opinions of management on the date the statements
are made, many of which may be difficult to predict and beyond the Company’s control. In connection with the forward-looking statements contained in this
Annual Report and in the AIF, the Company has made certain assumptions about, among other things: favourable equity and debt capital markets; the ability
to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Company’s properties and
assets; future prices of copper, gold and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any mineral reserve
and mineral resource estimates; the geology of the Caraíba Operations, the Xavantina Operations and the Tucumã Project being as described in the respective
technical report for each property; production costs; the accuracy of budgeted exploration, development and construction costs and expenditures; the price
of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to
operate in a safe, efficient and effective manner; work force continuing to remain healthy in the face of prevailing epidemics, pandemics or other health risks
(including COVID-19), political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favourable
terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour
stability; stability in financial and capital goods markets; availability of equipment; positive relations with local groups and the Company’s ability to meet its
obligations under its agreements with such groups; and satisfying the terms and conditions of the Company’s current loan arrangements. Although the
Company believes that the assumptions inherent in forward-looking statements are reasonable as of the date of this Annual Report, these assumptions
are subject to significant business, social, economic, political, regulatory, competitive and other risks and uncertainties, contingencies and other factors that
could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking
statements. The Company cautions that the foregoing list of assumptions is not exhaustive. Other events or circumstances could cause actual results to differ
materially from those estimated or projected and expressed in, or implied by, the forward-looking statements contained in this Annual Report.
Forward-looking statements contained herein are made as of the date of this Annual Report and the Company disclaims any obligation to update or
revise any forward-looking statement, whether as a result of new information, future events or results or otherwise, except as and to the extent required by
applicable securities laws.
Cautionary Notes Regarding Mineral Resource and Reserve Estimates
Unless otherwise indicated, all reserve and resource estimates included in this Annual Report and the documents incorporated by reference herein have been
prepared in accordance with Canadian NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) — CIM Definition Standards on
Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended (the “CIM Standards”). NI 43-101 is a rule developed by the Canadian
Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral
projects. Canadian standards, including NI 43-101, differ significantly from the requirements of the United States Securities and Exchange Commission (the
“SEC”), and reserve and resource information included herein may not be comparable to similar information disclosed by U.S. companies. In particular, and
without limiting the generality of the foregoing, this Annual Report and the documents incorporated by reference herein use the terms “measured resources,”
“indicated resources” and “inferred resources” as defined in accordance with NI 43-101 and the CIM Standards.
Further to recent amendments, mineral property disclosure requirements in the United States (the “U.S. Rules”) are governed by subpart 1300 of Regulation
S-K of the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”) which differ from the CIM Standards. As a foreign private issuer that is eligible to
file reports with the SEC pursuant to the multi-jurisdictional disclosure system (the “MJDS”), Ero is not required to provide disclosure on its mineral properties
under the U.S. Rules and will continue to provide disclosure under NI 43-101 and the CIM Standards. If Ero ceases to be a foreign private issuer or loses its
eligibility to file its annual report on Form 40-F pursuant to the MJDS, then Ero will be subject to the U.S. Rules, which differ from the requirements of NI 43-
101 and the CIM Standards.
Pursuant to the new U.S. Rules, the SEC recognizes estimates of “measured mineral resources”, “indicated mineral resources” and “inferred mineral
resources.” In addition, the definitions of “proven mineral reserves” and “probable mineral reserves” under the U.S. Rules are now “substantially similar” to the
corresponding standards under NI 43-101. Mineralization described using these terms has a greater amount of uncertainty as to its existence and feasibility
than mineralization that has been characterized as reserves. Accordingly, U.S. investors are cautioned not to assume that any measured mineral resources,
indicated mineral resources, or inferred mineral resources that Ero reports are or will be economically or legally mineable. Further, “inferred mineral resources”
have a greater amount of uncertainty as to their existence and as to whether they can be mined legally or economically. Under Canadian securities laws,
estimates of “inferred mineral resources” may not form the basis of feasibility or pre-feasibility studies, except in rare cases. While the above terms under the
U.S. Rules are “substantially similar” to the standards under NI 43-101 and CIM Standards, there are differences in the definitions under the U.S. Rules and
CIM Standards. Accordingly, there is no assurance any mineral reserves or mineral resources that Ero may report as “proven mineral reserves”, “probable
mineral reserves”, “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources” under NI 43-101 would be the same had Ero
prepared the reserve or resource estimates under the standards adopted under the U.S. Rules.
ADDITIONAL INFORMATION
Additional information about Ero and its business activities, including the AIF, is available under the Company’s profile at www.sedarplus.ca and www.sec.gov.
9 3
E r o C o p p e r A n n u a l R e p o r t 2 0 2 3
Ero Copper Corp
Suite 1050 – 625 Howe St
Vancouver, BC V6C 2T6 Canada
t: +1 604 449 9244
info@erocopper.com
WWW.EROCOPPER.COM
TSX : ERO NYSE: ERO