Ero Copper Sees Net Income Crater 90% In Q3 2023

Ero Copper Corp. (TSX: ERO) reported its Q3 2023 financials, headlined by a quarterly revenue of $105.2 million. This is an increase from both Q2 2023’s $104.9 million and Q3 2022’s $85.9 million.

“2023 continues to be a pivotal year for Ero Copper as our near-term growth projects reach critical milestones and we continue to define and broaden our long-term growth pipeline,” said CEO David Strang.

However, thanks to foreign exchange losses, mainly due to a stronger Brazilian Real relative to the dollar, the company ended up with $2.8 million in net income. This is a dismal decline from last quarter’s $29.9 million and a decrease from last year’s $4.0 million.

Calibrating for said financial items, adjusted net income came in at $17.3 million, which translates to $0.18 earnings per diluted share. Adjusted EBITDA ended at $42.9 million, also a decline from last quarter’s $45.8 million but a gain from last year’s $29.1 million.

During the quarter, the Caraíba Operations processed 806,096 tonnes of ore with a copper grade of 1.46%, resulting in the production of 10,766 tonnes of copper concentrate. This achievement was made possible through metallurgical recoveries of 91.6%. However, it’s worth noting that cash costs increased to $1.82 per pound of copper, up from the previous year’s $1.46 per pound.

Concurrently, the Xavantina Operations processed 31,446 tonnes of ore with a gold grade of 18.72 grams per tonne, leading to the production of 17,579 ounces of gold. The high metallurgical recoveries of 92.9% played a crucial role. Notably, the all-in sustaining costs for gold production decreased to $844 per ounce, down from the previous year’s $1,135 per ounce.

“Despite these important strategic advancements as well as solid operating performance at our Caraíba Operations during the quarter, our financial results were impacted by broader economic conditions that drove weaker metal prices and a stronger BRL against the U.S. dollar,” Strong added. “In response, and in addition to the protection provided by the copper price hedges we established earlier this year, we elected to opportunistically expand our foreign exchange rate hedge program to cover a significant portion of projected operating costs and capital expenditures through the end of 2024.”

Operating cash flow ended at $41.9 million, a decline from both last quarter’s $55.5 million and last year’s $43.0 million. This led the firm to end with a cash, cash equivalents, and short-term investments balance of $87.6 million, down from last quarter’s $180.4 million and last year’s $359.8 million.

Net debt also increased to $331.8 million during the quarter from previous quarter’s $246.5 million and previous year’s $51.5 million.

Regarding the 2023 capital expenditure guidance, the company is accelerating certain workstreams at the Tucumã Project, initially planned for Q1 2024, to Q4 2023, resulting in an estimated increase of approximately $15-$20 million.

Ero Copper last traded at $18.85 on the TSX.

Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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