Ero Copper Corp Aktie

Welcome, everybody. Thank you for joining us this afternoon. I'm very excited to be hosting was our first official Capital Markets Day here in Sao Paulo. We have an exciting week ahead. We're starting here in Sao Paulo with this event, our Capital Markets Day. And then throughout the week, many of you will be joining us. Across our operations to see the transformation that's taking place at ERO Copper.

I think just to start quickly on what I see as the 4 main themes from today's presentation and as we transition the weak at operations, number one, transformation, I have a lot of our leadership team here from around the world to talk about the transformation that's happening in people, culture and our operations and something that we call One ERO.

And we'll talk a little bit about what that means all throughout this week. The second is the performance against our stated objectives back in 2025. I'm incredibly proud of the work that our teams are doing, particularly around deleveraging, and Wayne will speak to that in more detail.

The third thing is the quality of our operating portfolio and some of the technology that we're implementing across all of our assets to improve safety and improve performance, and Jason will speak to that in more detail. And last, but certainly not least, and I don't want to steal too much of Mike's thunder, we'll be talking about the portfolio that we've put together at Ero that includes development asset, producing binds producing mines, development [Audio Gap] assets and a variety of early-stage exploration opportunities that complements what I think is a portfolio that's going to continue to create shareholder value for a long period of time to come.

Just quickly, we're here in Sao Paulo. We had the option as a tank as a company to host this event anywhere in the world, and we chose Sao Paulo for a couple of different reasons. Number one, our Brazilian heritage, clearly. It's convenient for starting an analyst tour here.

But more fundamentally, I think there's a few places in the world today where you have such a strong intersection of public equity markets, venture capital, particularly around technology and also in Brazil, a big push on critical minerals. And all those things are important to Arrow, and we'll explain why that is as we go forward here. Some of these statistics might be more familiar to those in this room but for those of you who are dialing in, a couple of quick interesting facts about Sao Paulo.

Sao Paulo features Latin America's largest exchange over $1 trillion of combined market cap. It's home to more than 12,000 start-up companies that last year raised over $5 billion in venture capital, primarily in forward-facing technologies like artificial intelligence and automation.

And last but not least, talking about critical minerals bran, the National Mining Agency of Brazil, anticipates that over the next 5 years, there'll be $80 billion invested in Brazil in mining projects, $20 billion of which will be critical minerals projects.

So you have all these things happening in Sao Paulo, and that's why you're here today. So again, thank you for joining. Very excited about today and this week. Starting quickly here with disclaimer language. Everyone on the stage will for sure be making forward-looking statements. So please, this is posted on our website, please read those forward-looking statements when you have the opportunity.

The agenda for today and starting with myself to provide some context on today's events. We'll continue with Gelson, who'll walk through some of the operations. We'll talk a little bit about [indiscernible] as well. Jesse will speak to [indiscernible] some of the progress we're making there. Mike will talk about some of the exciting things that are happening in the exploration side of our portfolio, as I said, building out a really strong portfolio of assets all throughout Brazil.

Wayne will talk about our financial performance. And then myself, Eduardo and Courtney. We'll talk a little bit about Brazil and what's happening here, very topical time to be talking about critical minerals and obviously, politics as well. In addition to the speakers, I just want to acknowledge that we have quite a few members of our global leadership team here today.

Their names are listed here. You have the opportunity to meet them. They're in the front row. So please after during the coffee break, introduced. We've been able to attract some incredible talent to organization, really build out what I see as the future building blocks for our company, and you'll have the opportunity to talk to them in more detail.

So getting going here. I think what makes ERO particularly unique in today's environment, we have a history of unlocking value. If you go back to 2016, I was the first employee at ERO Copper in those days, it's just a few of us and we've been able to build out a portfolio of operating mines, development projects, executing on our organic growth strategy. And we also put in place an action plan to really accelerate the growth of our company.

These are conversations that started back in 2020 and 2021, about working with Vale at that time, now Vale-based metals to start on a combined work on a project we call Furnas. And really, when you look at our performance since 2017 in terms of copper growth, we see a very clear pathway today to grow the company to more than 150,000 tons of copper equivalent production.

And so we're very excited about that. I think today's presentation this week is about showcasing the work that we've done and the work that we are doing to realize that value for our shareholders and for our stakeholders.

I think one of the things that's also important to keep in mind, again, one of the things that I'm extremely proud of and that we've worked really hard to do is throughout the execution of that organic growth strategy is really protect our share count and the shares outstanding. And what that's translated to is obviously a lot of production growth, but also revenue growth and resource growth on a relatively stable share count outstanding. So we've really protected our shareholders and created value while doing that.

And obviously, that's reflected in the value that you see in the company today. When I think about culture, and this is something that we will talk a lot about and we talked a little bit about on our Q2 conference call is the round One ERO. So aligning standards, processes, people, operating philosophy across all of our sites, all of our offices.

And this comes down to behaviors, processes and capabilities, fundamentally driven by a focus on a relentless commitment to safety and our relentless commitment to continuous improvement. I'm going to show a video here that we produce internally back in 2025 and when we talked about ONE ERO for the first time, so that all of you can see the work that went into the transformation that you'll see throughout this week.

[Presentation]

More than just a cultural experiment, this philosophy around integrating our operations for safety and performance, has led to some really incredible things that we talked about on our Q2 conference call. But starting out, again, as you saw in the video, an extreme focus on health and safety, Jason will speak to some of the transformation that happened across our organization in the last 18 months, 2 years, culminating in 2025, one of the lowest LTIFRs that we've had at ERO.

More recently, approximately $10 million to $15 million savings -- $10 million to $15 million in savings in an integrated procurement strategy led by our One ERO procurement team and philosophy. As well as more than $20 million in savings through renegotiated concentrate contracts all throughout our operations.

Again, I think the main theme here being focus on leadership, focus on health and safety, focus on procurement as well as technology and innovation and fundamentally underpinned by this culture I spoke to, and you saw the video of One ERO Arrow. Just to touch briefly on -- again, coming back to 2025 in January, I made 3 commitments to all of you and to all of our stakeholders.

That was number one, to achieve commercial production at Tucuman. We did that on July 1. It was to deleverage our balance sheet, which clearly we have done and it was to advance the Furnas copper gold project as the cornerstone of our future growth strategy, and we clearly achieved that with the PE that came out in Q1.

In addition, we also added some few value drivers that have accelerated some of that deleveraging and really resulted in strong financial performance. Obviously, the gold concentrate program at Javanchina, a creative way to add value to our business, and that will benefit us not only this year but also through a good part of next year.

We completed the mine mechanization at Javenchina. For those of you that are coming to Javanchina this week. You will see that in action and the potential that, that provides that operation, as Gelson will speak to. And also the plant debottlenecking that we achieved at Caraiba the last 3 quarters have been all-time record throughput levels at that operation -- again, 3 big value drivers as we think about the future and what our operations are capable of doing.

And just to touch on the deleveraging component, something that I'm very proud of is that $0.90 -- roughly $0.90 of every dollar that was available for deleveraging in our company over the last 18 months has gone to deleveraging, really emphasizing the commitment the performance against that commitment and the focus that we have on positioning the company for future growth.

That future growth is coming in the form of a large project. Obviously, we have organic opportunities around our operations, which Gelson and Mike will speak to. But at Furnas, when I take a big step back and I think about our future, Furnas offers a long duration mine life, significant production potential outstanding geologic opportunities in terms of the exploration programs that we have going there, and we'll talk about that a little bit as well and very, very compelling economics.

You're looking here at the sensitivity that was produced in the PA. Obviously, metal prices have improved a lot since then. And it's part of the reason that we're so focused on this project, again, is the cornerstone of our future growth. Our commitment for no goes beyond the execution of the earning requirements. Today, September 14, very proud of our team. 1,000 days of working on site without a single lost time injury, and I think that's a milestone we're celebrating.

In addition to the fact that in August, we completed our 90,000 meters of drilling that was required under the earned. That happened about 2 years ahead of schedule. And so congratulations to our team there. We have 11 drill rigs that are operating on site now at Furnas, and those are continuing to test resource extensions, confirm mineralization for future studies, including the pre-feasibility study that we expect to be out in 2027.

So what does that mean for ERO? I think fundamentally, as you'll see in this presentation, and as those of you who are joining us on site this week, we'll see is that we have effectively 2 main pillars to our value creation strategy that is set on a foundation of deleveraging and derisking.

So that's coming in 2 places. Number one, focus on balance sheet deleveraging, which clearly, as I indicated, we've done and Wayne will speak to that in a little bit more detail here. But to improve our financial strength and flexibility going forward, that's one of the foundational pillars that we have. Also our continued execution ahead of schedule on for us to accelerate that project as much as possible, enabling Investments in technology and innovation.

Marcelo is here. He's our technology and innovation head here in Brazil, doing some very exciting things across our portfolio. As Gelson will speak to, and you will see this week. And then we also have, as I said, something that I'm very excited about is the exploration portfolio that we've been able to put together in Brazil across every stage of development.

So from near-mine opportunities to new regional opportunities in this environment, we've been working quietly for the last several years. to put this land package together and do some initial work. And I think you'll see today why we're excited about the work that we're doing on that side.

And finally, for us, really creating that bridge to the future state for us. with a target FID in 2029. With that, I'll turn the mic over to Gelson. Thank you very much for being here today.

Thank you, Makko, for your introductory remarks. I thank everyone for being here today. I also want to thank our team from ERO, which have been working very hard for us today. This preparation is fantastic. Thank you very much. Before I move to the slide, I'd like to sort of in the next 25 years, just to explain the common themes that we're going to hear today on this 25 minutes.

Number one is safety. Makko mentioned about this is how we operate also the technical depth, we know these assets very well. And what makes our plans robust. We're also going to be talking about discipline and execution. This is common across all assets and projects. And of course, we got to talk about people. This is our main asset in the company, the people that actually work for ERO.

This is what makes everything possible here. We also extend about the application of technology, innovation in our projects and how we are benefiting from this today. And of course, how we're going to make our assets more efficient and how we're doing this as we speak. Everything on this safety transformation here leads to a very simple point. We want to make our operations safer and we are doing this as we speak. Our track record.

Makko mentioned about 2025, which was our best year so far. Last time [indiscernible] frequency rate, the lowest. We had an uptick also in the same process. We also have the lowest rate in terms of how the [ Angers ] occur. So it's actually half of what happened before. This is a great thing for us. And some of the common themes that we mentioned here is the focus on people the connection with the people on site, the entire leadership.

We've got our directors of operations. Our managers, our supervisors and coordinators they're actually in the front line, and this gets the peer-to-peer connection with our operators and makes a big difference in the group. And also, we get the feedback from our operations to us.

One of the key areas that we focus in the last 18 months with the support with DSS+, and I'll talk about this in a few minutes, is about focus on critical risks. These are the areas that we focus the most because we want to reduce the harm every abstinent direction can cause harm, and that's why we're focusing on the critical areas.

We build controls for this. We increased our audits, internal and external. We also increased communication between our teams. If I look at on the left side of the presentation here, you're going to see several themes, which relates to how we got to One ERO arrow safety management system -- and it goes from something simple like 5S housekeeping programs. This is done across the entire organization, from mining operation exploration and our projects. It's a company-wide. The site is better organized, therefore, it's safer and more productive.

We've seen before in other places and ERO is no different, the safer we are, the more productive we are. We go to projects and aspects like a bright mine, it's a safe mine. And we started this in the underground mines, and we went through other areas within the surface as well where we know the difference between having lead mines across the entire set of underground actually improve safety but also improve productivity. This is all linked together.

On the site leadership renewal, that is clear accountability we've got, as I said, the directors, the managers operating and working side by side with our teams on side that actually makes a difference for us as well. We're sharing best practice, of course, the entire organization that 1 arrow that Makko mentioned here.

It is just not a title. This has been [indiscernible] not only in safety, but in productivity and procurement and technology, everything. And I would just want to open up a little bit about the DSS program that we had. Finished this program after 18 months, but the company to help us in leadership development also processes, governance and management programs across the entire organization, also intensifying our teams on in the ground, all the critical risks.

So there's a big focus on fatality and serious injury prevention. And then finally, after we trained all the managers and directors on site we extended that train, and we called it train the trainer. So DSS helped us to create the environment such that we continue this process on our own -- so the training now is with the supervisors and with the operations, all the operators on site.

This is across the entire organization, and it's been going very well. Makko mentioned about technology, and I want to make a big patents for this. When we talk about technology narrow, there's a big focus on people, right? And I'll talk about the 3 pillars, but big focus on people, reduction of exposure, and we'll see some examples on this when I talk about the sites.

And give the best information for our teams to take decision on site in the moment. And what it means I'll give an example related for Tucuma with the AI-driven mill, is that all the programs that we put in place in technology, they are very focused. We identify the need with the operations. So the discussions they run from the mine directors to the managers, all the people doing the work, we create the programs, the technology application.

And then we have a team on the Marcelo, you see in the room which elaborates the processes, what kind of equipment we're going to use, the timing for the implementation and what benefits we're going to bring plus the training and so forth. So that is going very well.

I'll give an example today when you visit Caraiba this week, we'll see some of the operations now in drilling area, we actually can do the drilling from the surface. This actually reduced not only the exposure of our operators on site, but also removes the induced error while they're doing their work. Some of these work you see is common by laser in the full process in there on the screen.

It's going very well. We also have the same process in [indiscernible] We've got in Tucuma, something that we started there a few months ago. It's running. It's implementing. I can take my phone and show you guys, if you have a time later on, where we have an AI basically implemented with the meal and the crushing sip, which means that it's not a Latin, it's not about talking about if the equipment has got an issue during the operation, but the entire value chain is linked.

So we give information for the operators so they can take a better decision process. So if the system detects that water or a density or even the feed needs to be changed. All of that is done as we progress during the day and the shift.

So they can see that and take the appropriate decision that actually is happening right now, and it's making a big difference for our operations as we speak. Digital train, it's something that we're doing at Tucuma as well. And we look at Furnas in the future.

We'll be talking about it. We want Furnas to start with the right technology from the beginning, not only equipment side, but also how we simulate ones on the study phase of the implementation of the auto construction that's going to be used in there. You see firsthand, the blasting in via that we're doing this remotely from the surface.

It removes people from the line of danger as well and it's controlled with the team. all of these that I mentioned here is running on site, and we'll be able to see it there. Some of you are familiar with Caraiba but if you're not Caraibas in the [ Bayer ] state and has been operating for more than 50 years, is a reference in Brazil in terms of mining operations, not only because of the scale but also everything that actually runs at Caraiba, the history, many professionals in Brazil, mining engineering, geology, or areas that actually have professionals for in Caraiba.

We're very proud of it. Some people that actually work in Caraiba 20 years ago, they worked for us at the moment, and it's -- we are very proud of it. We are running the 4.8 million tonne per annum capacity in the [ mill ] Makki mentioned about the achievements that we've done in terms of changing the mill set up, the investments that actually have been done in the past and also the debottleneck and I'll be able to speak about it shortly.

But the major aspect for Caraiba is the largest investment that we have done there, which is the shaft. And the shot change how we operate in Caraiba, I'll give an example. Today, if you're an operator after you do the shift change to get to the mining phase, which is about 1,000 500 meters deep area, it may take you 1.5 hours driving an ramp. And this is going to change for a few minutes once the shaft is up and running, and that's going to change the productivity and the cost, of course, for Caraiba.

On the plant side, the message here is that every increment that actually have been done on this plant since 2020 with the [indiscernible] installed additional ball mill installed and the large piece of work that actually was done also with the Jameson cells increase in recovery in the plant.

But next -- last year, which was the entire debottlenecking completed by the end of the year, taking us to 4.8%. That's about 1.6 million tonnes per additional capacity that was provided. And you can see on the graph on the right side, the self-explanatory, how we are using that capacity. And I think this is a key message here, not only for Caraiba but what we're going to see soon and also we'll talk about Tucuma and then [indiscernible]

Our Caraiba operation actually is composed by 3 main ore sources. In the past, most of the ore was coming from Pilar, more than 95% of the ore sources coming from Pilar and today, what we see is a combination of Pilar underground mine, we've got Vermelhos, which is also underground mine and Surubim. Surubim is an old mine and it's going to be running all the way to the end of this year with some stockpiles mine in 2027.

And to feed the plant and continue fitting the plant with different ore sources. We've got 8, which is an open pit mine closer to [indiscernible] which will start next year. Work is in progress already feed grade, about 0.9% to 1.1% as we show in the graph there, plus the total capacity in the plant, which we try to maximize and use the total aspect in there.

And that's sort of a projection for us for the next 3 years. As I mentioned before, our single largest investment at Caraiba is the shaft and it opens up many benefits for us. The shaft is in progress. We are about 1,170 meters, give or take. As we speak, we plan to be finishing the excavation of the shaft or the next year and then continues on in the progression of the equipment a shaft and getting the shelf ready in 2018.

The entire capacity of that shaft is going to give us on the [indiscernible] system and people. We're talking about 3 million tonnes additional that open up a different area for us. You can imagine today operating 1,500 meters deep. There are different areas that we want to explore, develop and the shop is going to make that possible and increasing the life of this operation, Pilar for decades to come.

This, of course, will translate to lower operating costs and more efficiency at the mine. This is the current picture of the setup that we have all of these infrastructure, these are permanent infrastructure, where we've got the rock winder, the areas where we have the short frame, this is close to the operations.

There's a massive integration of operation and the project as we speak. And every meter basically that we're seeing today, glad us closer to the highest grades in the development area of Pilar, the deeper areas.

I'd like to make some comments and a presentation here on Tucuman. It's our newest operation. Sorry about this.

Okay. Good. Thank you. Thank you. So Tucuman located in the Carajas area, if you're familiar with the areas on the east side of Carajas has designed a 4 million tonne per annum operation processing with the mine life all the way to 2035. We've reached capacity commercial capacity last year. And now the progress is on basically delivering additional featuring capacity, which we'll talk in a few minutes. Important here is that the whole ore about knowledge now the technical aspects for Tucuman is incredible.

When I joined Arrow, I remember talking to Mark about is that once you turn the mill, the recovery that actually came from out of the concentrator was exact recovery that actually was in the design phase of this project, which illustrates how well the studies were done, but also implementation and also the quality of the ore combined to the processing design.

So it's very positive for us. and we see that on a daily basis. We are adding additional filtration and that your on the tailings side, this additional filtration capacity will take us 4 million tonne per annum processing this is basically the story that I was mentioning here. Sorry, should I put this slide before.

You can see the steps that we're moving on from the day that we started the operation, all the way to [indiscernible] the filters are in the port in [ Bahia ] and the liver site. For those that actually visit the site as well, we'll be able to see the construction ongoing all the saves and materials in there. and it's on plan to deliver what we designed for the remaining of the year, and then we'll be able to see that with me during the week.

Now when I move to [ Shabancina ] [ Shabancina ] is located in the Makko grocery state. It's a high-grade underground operation. And this operation, we've made a huge change recently on that, which I'll talk about it. which is where we see the major growth due to the changes.

So you can picture at the beginning of the operation many years ago, narrow veins, very narrow, the mining method had to adapt to the geology. And of course, as we move and progress deeper, there was the need for us to reevaluate entirely operation, and that actually was done.

So we completed the mechanization. And with the mechanization, we can add mining development and we can increase the mining rates but also remove people from the line of danger. Our plant at Savancina, is capable of processing 300,000 tons a year, and that's where we're moving towards with the implementing production. This is basically a summary of the work related to the mechanization important, when you think about mechanization, we got to remember that we are changing a lot of things around there.

We're changing people, we're changing processes -- we're bringing new equipment and have to be training people. Everything supporting that process needs to be implemented. And then I'm very happy and proud of our team that we achieved that in less than a year since the beginning it's a fantastic work that's actually done there and you see by ourselves.

With that mechanization, we accelerated also bringing technology to the table, and you'll be able to see some of these equipment being guided by laser which reduced viability on the drilling, improving meters that we are able to do on our development. And that's in progress right now, we will be able to see.

So it's scalable, and it's very important for anything that we look at the capability to expand [indiscernible] in the future and to achieve the production rates that we're talking about, the mine is prepared for, and we will continue in that process.

This is the infrastructure support. It's a very simple slide, but I think it makes important that we bring it here. We're always looking at an opportunity to be more efficient, reduce OpEx across the organization. And this was a very important step that we took when we look at the [indiscernible] operation. As we did not have the need for larger capacity in terms of power, we use a 350k volt. And then when we move to mechanization and bringing additional ventilation, additional cooling without the need to work with our partner there, which supplies power for us and increased capacity using a different line is 138k volts.

That's going to help us across the additional power that is required for [indiscernible] but also brings a lot of savings in OpEx for the next few years. Makko mentioned about the opportunities that we take within the company, and this was one of the best opportunities for [indiscernible] in the last while which related for us looking at what we had in stockpile, this material we're seeing there.

We've tested the material, we identified it. We quantified as we reported last year in terms of inferred resources due to the nature of the deposit. We've been operating at since very successfully. We had to bring additional equipment on site to support us, especially in the rainy season and that graph illustrates very well the challenge that we had in there, but you'll be able to see this by yourself and how the entire setup for running concentrate and created concentrate from the stockpiles in progress with the dryer and also the future press we'll be able to see that.

That also, of course, when you look at the cost that is basically the entire operation that you see there is about $700 per ounce and then that brings a significant margin for [indiscernible] I'd like to coffee break, and we continue with 20 minutes. Thank you.

[Break]

Okay. I think we're good to go and we should put the video. Okay. So I think we can start for us. We will see a video about the project. It's a great video. When I look at this it kind of represents everything that is in our minds that represent the -- not just the setting of the project, but the idea behind the project, visually speaking.

And also, we're going to see a couple of slides. Just to finalize, Makko mentioned at the beginning there, some of the highlights of the Furnas project. I won't bring them up, but I will make comments about how the project is progressing. Okay?

[Presentation]

When I first visit the Furnas project I was not only impressed by the setting and the work, which was already done by our teams gathering all the knowledge that actually was acquired with the work done by Vale in our core shed and seeing all the geologists, environmental work and community work in progress.

But when you start putting in the least of what it makes a project successful I saw all the elements in there, not only in terms of the geology and the knowledge that we have acquired for the mineralization, structural controls, great distribution, how the teams located the drilling program, not only to define resources but also to test the boundaries of the mineralization.

I've seen the team testing holds at 800 meters deep, which is way far from what is in that project right now as you speak and testing mineralization and finding the same mineralization, same thickness, high-grade in there, [indiscernible] speaking. So in terms of what it makes a big project, will start with the geology and then move on how can we mine this.

And then the large-scale mining when we compare Furnas with our Caraiba operation, just for a sense of the engineering here, we plan the Furnas during the PEA, we brought not only specialists from outside of the company, but our own team to test and challenge the assumptions that actually were in the PEA. Today, we mined Caraiba from 400 meters from the surface all the way to 1,500 meters.

And even at this scale of fun the entire production on the underground can come from a single level in a year. And even when we get to the end of the 25 years mine life, we will not have reached 500 meters deep. So that is very impressive. We have areas where the ore body crossed 100 meters, large stopes can be applied.

We're looking at base feeling rock feeling the setup with the open pit mine as well, the Geotec in progress. So everything points out for a very robust. In terms of infrastructure, the video points out the area of the infrastructure is beautiful because everything can be concentrated and minimize, minimum impact.

So with that, we're continuing this year with the pre-feasibility study. Some of the accomplishments so far in [indiscernible] '25 and 2026 there. But the most important aspect is that we continue to work on site with additional drilling test work, engineering work as well in progress with the firms working on the project for the PFS level.

But also on the environmental permits with the [indiscernible] already been prepared by our teams collecting our data, a great relationship with the local community. So these are the phases that we see for the Furnas project.

Of course, we plan to deliver this pre-feasibility study next year. We work very close with old some of you asked me how we interact with all its a great interaction. We have quarterly meetings where we share not only what we do in the project, but also we get to understand how they are doing their own projects because everything is the same setting there in the same area there's quite a lot of learning among the 2 companies and then the exchange of information.

And also our target for investment decision, looking at 2029 with the completion of the feasibility study as we progress drilling, the more we learn about the deposit, more we learn about canalization, we adjust the mine plan, we adjust the design and everything continues in the confirmation of the PA so far.

Currently, we have 11 rigs, and we will basically as we progress towards the end of the year, may reduce some of the drilling because we've completed and then it's going to be more specialized really across the site and they focus mostly on the items which make impact on the pre-feasibility study to give a certainty and reduce risk for the project, being aspects related to reserve definition.

Our teams have defined many areas for resource growth actually in progress as well. Very importantly, not only for the open pit areas but also to the underground, there's a very deep understanding on the geotech that what makes us design and make sure that we will perform.

As we say in the design for these mines for slope angles and water inside the areas and how much pumping will be required so these are the processes and work in progress as we speak today at the Furnas. And with that said, I want to finish here and then ask Mike to come in and help us to understand more about the exploration and potential that we see in ERO.

Okay. Thank you, Gelson. Gelson touched on in the video, touched on the exploration as I'm going to talk about the rest of the portfolio. We have a fairly simple and deliberately simple strategy that really hasn't changed. One, we replace reserves and extend the mine life at the mines.

This is where the bulk of our drilling dollars go because it's the highest return on invested capital. It's where we're going to make the cheapest discoveries and those discoveries are going to be near the plant, near our people and with permits.

And then regional and greenfields projects provide us opportunities for organic growth in the future in the medium and long term. And this slide really from left to right shows that progression. So our foundational assets at Caraiba, Tucuma and now Furnas.

I'm going to touch on some of the updates at those mines as well as some of the new regional opportunities. So Caraiba, we have a new copper nickel discovery near the Vermelhos mine. Tucuma. I'm not going to go into great detail, but I will say that we do have an exploration project within 30 kilometers of the mine that we're drilling on right now.

And then we have a new greenfield project, very large, 220,000 hectare project with an emerging copper nickel districts. Starting with Pilar. You can see the reserve growth here from 2017 when the company started through to the discovery of the deepening, so we're really focused on the deeper portion of the mine and the area where we're developing the shaft to.

By 2021, we had 10 million tons indicated, 6 million tonnes inferred by 2025, 3 million tons measured, almost 10 million tonnes indicated and 11 million tonnes inferred. So a big resource growth in that area. And you also noticed the grades are quite high relative to the reserve grade at Caraiba in general.

In the long section on the right, you can see the distribution of the measured and indicated resources in gray and then that sort of mustardy yellow is the inferred resources see in the inset, the shaft, which is 1,500 meters from surface. And then the top -- the bottom of that shaft in the top in the larger image right there, you can see the bottom of that shaft, 1,500 meters below surface.

There hasn't been a lot of drilling here in recent years because of infrastructure requirements and just development needs. But you can see a couple of holes that we've drilled here relatively recently in some of the results. And I think the one that's really worth highlighting is the 2 at the bottom from Hold 217.

So we had 27 meters at 3.2% copper, including a very high-grade interval within that and then 18 meters at 3.4% copper. These holes are hitting at a relatively shallow angle because of the orientation that they're drilled. So those aren't true thicknesses. But the point is that the zone is open and at the bottom of the inferred resources, we're seeing very high-grade mineralization, so it's very encouraging.

At Tucuma, the question here is around the continuity of the geology at depth and what sort of grades we're seeing below the pit. There is an existing underground resource of about 1.35 million tonnes at 2.24% copper. So that's from the 2021 resource updated for depletion. So obviously, it hasn't really changed, but that sits below the pit design.

We had an 8,000-meter program from surface to test for the geological continuity of that high-grade mineralization and to test to see what the grades are below the pit. In the long section -- in the section that we see here of Tucuma, you can see the distribution of blocks above 2% copper and some of the intercepts that we drilled below the pit with some very high grade, so 11 meters at 4.4% copper, 5.9 meters at 4.1% copper.

There's also an intercept at the bottom there of 11.7 meters at 1.8% copper. So very strong sort of underground grades drilled below the pit. We know that it's open. We know it's continuous and there's a very continuous plunge line to that mineralization, which is quite encouraging.

[indiscernible] it's one of the operations where expirations most clearly paid for itself. You can see the change in resources from 2017 before the San Antonio discovery to 2021 where we had about 1 million tons in indicated and 700,000 tonnes inferred to the end of 2025, when we put out the technical report, we had 300,000 tons in measured, 2 million tons indicated and 1.1 million tons inferred.

So very strong resource growth and we have very consistent mineralization and tracking that to the north and drilling those extensions of that mineralization has really added to that resource. In the plan map on the right, you can see there's 3 zones within the lower portion of San Antonio. So this is a plan map. The mineralization is dipping shallowly to the north, northeast.

San Antonio, Maine has been the area that we've mostly focused on. You can see the extension of that mineralization. It remains open. We continue to drill this portion. This is the mineral resource envelope from the end of 2025. And then the black pierce points are drilling from the end of 2025 and through 2026.

And you can see there's been a big focus in this area, which we refer to as Santo Antonio East with some very, very strong grades. So hold 60, 65, 70, you can see intercept 6 meters at 15.5 grams. 1.7 meters at almost 12 grams, 10.3 meters at over 20 grams, very, very strong intercepts.

But I'd also point out that you can see a fair bit of natural variability within this deposit with lower grades that are relatively close to high grade. So 1.9 meters at under 5, 2.3 at 2. So there is variability within the system, which is important when I touch on the next slide. And then it's also worth pointing out this area here over at Santo Antonio West. So the grades and thicknesses are generally lower than what we see at Santo Antonio Main in San Antonio East but this -- what we're encouraged by is that this is within the main mine sequence.

So we see veins, laminated veins hosted by carbonaceous [indiscernible] and the sulfides, galena, sphalerite, and pyrite are very diagnostic of [indiscernible] within the main mine. And so we see all of that here. And we have gold-bearing mineralization within those veins we're going to continue to chase that mineralization in that direction to see if it thickens and gets better grade like we see at Santo Antonio Maine and Santo Antonio East.

So this is quite a different slide. With Santo Antonio, we've consistently drilled and extended the bunge line of that mineralization, and we wanted to see how far that zone went. So we drill the hole to the north of the main mine. So this is the 2025 mineral resource envelope in dark gray.

We drilled SPL03A. It's almost 1,700 meter deep hole from surface which intersected a 3-meter vein interval at about 1,570 meters vertical depth within a larger 11-meter package of carbonaceous [indiscernible] with smaller laminated veins, galena, valerate pyrite, so those diagnostic sulfide minerals that we see within the Santo Antonio mine. So we interpret this as the -- is very similar to the mine sequence, which we see up here, and we effectively believe we've extended the mineralization by about a kilometer from the 2025 mineral resource envelope down to SPL03A.

We have internal lab assays for this, and they are -- we're waiting on the accredited lab assays. But in general, I would say that they're fairly low low-grade anomalous, but very encouraging that we see that mine sequence, very thick and a fairly thick 3-meter package with concentrated veining as you can see here in this core photo.

To follow up on this, we're drilling a number of wedges from the parent hole. So SBL-03B is the first one. It's targeting 1,500 meters as a wedge out of the parent hole and a number of other holes will be drilled to test the lateral continuity, the grade and then the up and down plunge continuity of the mineralization.

Back to Caraiba. This is an emerging nickel copper discovery I think 3 sort of key points to start. It's within 10 kilometers of Vermelhos, so very close to infrastructure and power. We've drilled 4,200 meters on this project, which have defined a strike length of about 400 meters north to south. The mineralization is shallowly plunging, which is quite encouraging for the deposits that we tend to see in the Vermelhos district.

And we've intersected a number of -- we had a number of hits of semi-massive and massive sulfides with [indiscernible] so the nickel and copper bearing minerals. I won't read these out, but you can see some very encouraging intercepts with widths from 7 to 16 meters, some considerably elevated nickel and copper grades with some cobalt.

We consistently explore for this mineralization using borehole EM. So if you're not familiar with that electromagnetic technique, it's a geophysical method. We put a probe down the hole and we look for conductors off hold and usually, those are associated with accumulations of sulfides and nickel copper mineralization.

We have 2 untested plates here at the southern end of the lower plunge of the known mineralization, and those are being drilled now. And we will continue to follow that up with more borehole and drilling. And lastly, this is a new district. At Kariba, we spent 10 years working on it. Obviously, there was a lot of work that happened before we got there. There's been over 400 and 2,000 meters of drilling in the mines and regionally. There's 6 current and past producing mines in that district. We targeted this area at owed in a similar environment in Bahia, it was originally mapped as an area of ophiolites. And ophiolites are a sequence -- basically, it's a slice of oceanic crust, which has been thrusted on to continental crust through tectonic processes and those weren't prospective -- wouldn't be prospective for copper nickel mineralization. But our team had a hypothesis that this was mismatched.

And what we were really looking at was intrusive ultramafic and mafic rocks that had the potential to host magmatic nickel copper sulfides like we see at Caraiba. So we did a fair bit of mapping and soil geochemistry and identified a zone that's about 100 meters wide by 90 or 100 kilometers east west by 90 kilometers north-south.

You can see the soil sample -- or these are stream sediment samples that had identified the zone we did further mapping and soil geochemistry to identify 13 mineral systems. We find nickel copper mineralization hosted by Ultramaphyx at surface, numerous gossans, there's been no work here, no drilling in this entire district. So it's brand new.

With those 6 target advanced target areas, we drill 100 meters from Q2 up until the end of August. I can say that we've hit a number of intervals of disseminated mineralization, similar sulfide minerals that we would see at 30. So Purity, Pentland [indiscernible] disseminate with some zones of net textured mineralization. So the point is not that we've made an economic discovery, but the point is really that we've proven a concept that we have a magmatic nickel copper system here and that we've discovered an emerging district.

So the next steps here are to take that information, understand the distribution of sulfides, understand the geometry of the system, go back and refine our targeting and have a second phase of drilling to understand what the potential is and hopefully make an economic discovery.

So I guess to sum up with Pilar, we have a system that continues to be open at depth with high grades -- we have an emerging copper nickel sulfide discovery in that district near Vermelhos. At Tucuma, we've shown that the mineralization continues at very good grades. Below the pit, and we're going to continue to drill that starting at the end of this year. At Vermelhos the mine continues to add ounces as we drill down the plunge and we've shown that it continues at least a kilometer down with that deep regional hole. And now we have a new emerging nickel copper discovery at Oden. And obviously, I think as Gelson mentioned, we have 11 rigs turning it from -- and with that, I'll turn it over to Wayne.

All right. Good afternoon, everyone, and welcome to the most exciting part of the presentation, finance. And what could be more exciting than risk management. But seriously, when we think about our business, obviously, you've heard a lot from the team around what we do to grow our business, protect our business, a lot of things that we can control.

But there's also a lot of things that we cannot control. And as we think about how we protect our business through the cycle, I just wanted -- we wanted to highlight sort of 5 plaza that really help us protect and grow and continue to deliver value to shareholders. And so what are those?

Obviously, we are a Brazilian-based business, so heavily exposed and reliant on the BRL. Metal prices, that's pretty obvious. When we think about our balance sheet, it is -- we're coming out of a very interesting phase as a company out of a very heavy capital phase. But having a balance sheet that is robust and allows us to do the things we want to do in the future is very important. Commercial terms, obviously, we talk a lot about copper, and when people talk about selling copper concentrate.

It's a little bit more complicated than just putting a loan per vessel and sending it halfway around the world, and I'll touch on that. And then Mike talked about the 1 year program and how that's really helped us on the procurement side. So I will go through each of these in a little bit more detail. So this is a very interesting slide. And I think for those of you who've followed the story and known us for a long time, we've talked a lot about our foreign exchange hedge program. As I said -- mentioned earlier before, we're heavily exposed to the currency. We have all of our assets in Brazil. And as most of you in this room know the real is a very volatile currency, but on the other side is a very liquid currency. So together with the Mexican peso, is probably most -- the most liquid of the Latin American currencies.

And that gives us an opportunity to put in place structures to protect our margins. And how do we think about that? We're not trying to bet on the currency. But what we are trying to do is when we put together a budget for the next 12 to 18 months, we have a very good understanding of what we think the metal price will be.

We have a very good understanding of what input costs will be where we find ourselves exposed is potentially a strong move in the real. And I think we saw that happen obviously very wildly in 2020 when covered hit and we saw the currency move from, well, the low 3s to high 4s, which had a hugely positive impact for us at that point.

But then similarly, when we moved into a heavy capital phase of Tucuma, we saw what that could do to us if it went the other way. And I think this slide really puts it -- summarizes it quite nicely in terms of how the way we think about it.

Obviously, we're not looking to get the exact number. It's about putting in a range. We use costless collars to do that. And I think this demonstrates quite nicely how -- yes, there are swings and roundabouts. The days were and months and quarters where we will lose against the spot rates.

But ultimately, from our perspective, when we think about our budget, we're still very comfortable because we're at a level that we can support. And in the quarters, as you've seen in the last 2 quarters, particularly where that program has delivered quite significant gains to us. And we will continue to try and be opportunistic.

Obviously, you have to be a bit opportunistic. The real has a very interesting relationship with the U.S. dollar because of the interest rate differential. And so the ability to capture that differential when you see opportunistic moves in the currency, whether it be local geopolitical news or whether you see some international turmoil drive currency markets.

We try to use that to the best of our ability, obviously, to capture a range that we feel comfortable with rolling forward into the budget. So Makko touched on the procurement. This is obviously one very happy outcome of the near program that's been in place. I think context is important here.

We obviously had a very decentralized approach to procurement up until a few years ago, and we really solidified a centralized approach last year with the One ERO program. And I think that's given us, as you see stronger governance, standardized contracts, but also given us a much better view of what all 3 assets are consuming where the exposure is in terms of certain supplies or reagents.

And through that and through being able to negotiate now with bigger volumes, of course, bringing Tucuma into that mix has meant that we have a lot more volumes to negotiate against, we're be able to generate fairly significant savings, which is a great testament to the team down here.

Obviously, I think when you look at the balance sheet over the last few quarters, you've seen the inventories grow, but I think that's twofold. That's -- one of that is the point we make about adjusting inventories for disruption. Certainly, the beginning part of this year, we saw significant global turmoil, shall we say, which created significant logistical bottlenecks logistical challenges.

It was something that we very proactively trying to manage, and we did that by building up certain inventories in certain reagents or suppliers that we felt would be difficult to source if we saw a full-blown freeze in the global seaborne freight market.

But obviously, as settles down, we'll work to bring that down. Of course, having a bigger asset base as we do naturally requires us to carry greater inventories.

So I thought this was a slide worth putting on the table because we get a lot of commentary, and I get a lot of -- there's a lot of noise about TC/RCs. And everyone is like, oh, look at the spot TC/RCs. The minus 300 and minus 3. And every week, it's about the TC/RC.

And I think -- what I wanted people to sort of understand is that -- the selling of concentrate the TC and RC and for those of you in the room, I hope there's a treatment charge in a refining charge, treatment charge for a smelter refining charge for a refinery but it is a cost that we pay ultimately because we are delivering -- although we don't deliver a final metal, the historical pricing of the metal is the delivery of a final metal.

And that cost is borne by us as the producer. So when you think about it, there's so much more that goes into TC/RCs because there's the payables introductions, which nobody really focuses on. And a lot of people today sort of say, well, how with these negative TC/RCs running in the market right now, how are smelters still surviving.

Well, they are still surviving because the deductibles and the payables that they've historically had in their contracts are allowing them to have huge wins on gold, silver, other materials they might have. Similarly, when you look at the freight and the freight to different markets, obviously, focus has very much been on China and China freight.

But for us, for example, moving material into Europe versus China is a significant saving. Now that's not -- it's not easy to do that because obviously, there's not amount of smelters in Western Europe or in Europe compared to the smelting capacity that's been built out in Asia.

But if we're able to capture some of that benefit for ourselves, that can have a big -- a very big impact. Right now as well, the mix -- the counterparty mix is proving to be very interesting. So again, for context, when we acquired Caraiba, it was a domestic supplier to put an [indiscernible] And we went about changing that and introducing export sales.

But our volumes are actually quite small when you think about it in the context of the global concentrate market. And so for us, it made sense to deal with traders because they gave us a lot of flexibility around timing. So what do I mean by that? Well, if you supply into a smelter, they have -- they plan out their production and there's inputs, 12 to 18 to 24 months ahead, and they are very particular about their deliveries.

And so if we, for example, put together a lot, 10,000 tonnes is a lot, and we miss a shipment by one -- by a couple of weeks. Let's say a ship, and it's also by the ships moving through the -- around the world. We would potentially up for significant penalties if we did not hit a delivery window into that smelter.

So what are the trade -- obviously, the traders have a very different approach. They have a huge book of material that they buy from lots of producers around the world. They are able to absorb that. Clearly, there's a cost that comes with that. But that cost is built into the TC/RC that they offer you.

And so for the longest time, we were very happy with that relationship, and we continue to be very happy with that relationship, particularly amongst the very large trading houses. But what we're now able to do, which is really exciting is this year is the first year, and in fact, we shipped and delivered our first direct smelter material in late Q2.

And that's really exciting because it allows us to create a bit of a mix between direct smelter business and trading business. We're able to do that because now we have the volumes. So having the 2 assets gives us enough volume to be able to offset any risk of delivery or timing of slips, a slight slip in the shipment schedule. So that again kind of changes the way we think about how we sell the material and the overall value proposition.

So this is a slide that makes me very happy as CFO. It's look, it's self-explanatory. Obviously, tremendous performance over the last 6 quarters from a peak leverage of 2.8x on a gross basis when we right at the end of, I guess, the Tucuma CapEx and the commissioning had just begun.

As Mike said, this was a key part of our strategy over the last few quarters. when we think about what we want to do with this business was to get ourselves below 1x. We're there. And obviously, the numbers on the right really give testament to that.

When you take your adjusted EBITDA from $216 million to $533 million over 2 years, over 18 months. Actually, that's that drives incredible performance in terms of your deleveraging. And I think that then flows into -- the slide, which is how do we think about the balance sheet, how do we think about returns to shareholders?

And certainly, there's a lot of questions and thoughts around what are we doing in respect to returns to shareholders. Well, first thing I would say is in paying down debt, we are actually making returns to shareholders. We're lowering the debt burden, we're lowering the interest charge. And so that, in essence, is a return to shareholders or stakeholders in this business.

But as you can see, we are we're reaching a point where we feel over the next, say, 2 to 3 quarters, we will be in a position to pay down all that remains in our credit facility on our revolver, which is $95 million. Finish up the copper prepay, which we did just 2 years ago. And that really will allow us to be more thoughtful and probably a bit more directed around how we want to begin to make returns to shareholders.

We do that in the context of thinking about Furnas. Furnas is as you just saw an incredibly exciting project for this business. But we want to be really thoughtful about how we fund that. I think when we thought of -- when you look at Tucuma we talk about the debt here. We were very thoughtful about putting in place a high-yield bond when we funded Tucuma.

Obviously, our timing was tremendously advantageous given the current interest rate cycle at that point in time. But today, we have a lot more levers to pull, not least of which is the tremendous cash generation that we have from this business. And so we will continue to think about that. Obviously, Furnas is progressing very quickly. But certainly, I think you are going to see us come to -- back to our shareholders and stakeholders here in the next short while around what we think we're going to do in terms of shareholder returns.

And that is me. Thank you.

Perfect. So we thought we'd do something a little bit different here. Courtney and Eduardo prepared a couple of slides to talk a little bit about the current climate in Brazil. And then I thought what I would do is ask all the controversial questions ahead of our Q&A about Brazilian politics. So over to you, Eduardo and Courtney.

So I'm going to take a step back before we jump into why Brazil is best in to be a partner of choice around critical minerals I want to talk about some of the historical context around why governments today are so focused on critical minerals.

So if you think back to the 1970s, and the oil markets back in the 1970s, OPEC at its height, controlled or supplied, 55% of the world's crude oil production. Today, across critical minerals, the top supplier of refined production supplies an average of 70% of the market.

For copper, it's about 50%. And for rare earth at the opposite at the highest end is about 95%. So back in the days of the oil embargoes and oil crises of the 1970s. OpEx control of the market influenced everything from energy and foreign policy to industrial strategy.

So that's why you're seeing a proliferation of government policies around critical and strategic minerals. The other important point is that it's not as simple as building processing capacity domestically in any country. what's happening now is there's also been a race to secure the feed for those smelters and refiners.

And the pool of concentrate available and the concentrate coming into the market that's uncommitted is shrinking. So last week, Japan announced the transaction with [ Codelco ] where they provided, I think, $666 million of financing. And in exchange, they secured long-term concentrate offtake, and this is happening across the market.

So what Brazil has done and what Brazil recognizes today is that it's in a position of strength around critical minerals. You have a strong policy momentum in Brazil. It's a great jurisdiction, a great mining jurisdiction. In fact, the [ Fraser ] Institute means that the most attractive jurisdiction for investment in the region around mining.

And you have a strong workforce. You have the infrastructure. And so it's really well positioned to take advantage of its place in the world and to become a critical minerals supplier of choice. Last week, Brazil also announced the national policy on critical and strategic minerals.

Eddie will talk more about this. But this is part of a continuum that's been going on for 5 years for Brazil to create some clarity around the regulatory and legal framework and to also provide some support and tax incentives to help build out the critical minerals capabilities in country.

Here, we'll talk a little about why Brazil at this time is have a very unique opportunity when you talk about minerals, mainly about critical minerals. Probably what I'm showing there is not new for anyone. But I think it's important we review again.

The first, the guys used to say that Brazil has in the in our geological deposits, all the periodic table, all the chemical elements. We have a very rich deposit and then with the new technologies that you can see now in the global market for different technologies is a very unique opportunity for Brazil to take a position as a leader of this process.

The other is because most of our territory is not yet totally explored by a geological point of view. We have a lot of areas mainly in the north of the country that you don't have any exploration or any data about our deposits. So we are open to discover large deposits in many areas that is totally open at this moment.

And the -- although as Brazilian guys, we used to talking about some efficiency in our market, in our regulatory jurisdiction. But when you compare with the other countries and other potential producers of different minerals, Brazil has a very good position. We have a labor prepared to do the work that you need, we have agencies that can control the process.

And in some way, we have a stable jurisdiction process, what may create for the investors a stable scenario for making investments to develop the Brazilian industry in the mining sector. And the last one is about the kind of energy that Brazil can support for all the mining producers. Brazil is one of the countries in the world that have the most renewal power generation supply.

We have [indiscernible] supply. We have the solar supply and then all the biofuels that we are using right now and give us in these discussions about green energy, transitions very special position when you compare with the other countries that needs different sources of energy supply the industries that exact in this sector.

And now when you talk about what the Brazil is developing to try to make this position more clear for the investors and for the companies as Courtney mentioned, we just approved a new policy to try to incentivize and the make a regulation for the critical mineral markets.

We expected that the next Wednesday, the President should sign the final regulation that was approved by the Congress by the Senate and then we have here some main points that we can see in the law. If you go for the other -- this focus on trying to develop a better environment for critical minerals is not new.

When you come back in this timeline, you can see that in 2021, the Brazil government creates what they call that timing. [indiscernible] it was a specific agency to try to [indiscernible] process and projects for developed critical minerals. Copper that time was one of these critical minerals. And in the end of 2021, we had just approved it internally the start of Tucuma project.

And then we will apply it for this camera to include our project in this set of minerals, set of projects and was approved. Tucuma project, it was one the projects that was included in the critical minerals camera. But what's happened? We had the change of the government and nothing happened with our projects.

We don't receive any definite incentive to develop our projects some indications about our fast projects to get the permits or some incentives to import equipment. Unfortunately, this project didn't have a continuity and then you follow the normal project and we deliver the projects according to the laws that you had at that time.

Now this discussion come back with this new policy, we have here a timeline that I mentioned. And then we should have the final process next week with the President signing and what you are expecting at this moment from this policy.

I believe all of you are looking at what's happening and know that now you need more time, maybe be months, maybe year to have all the points included the policy regulated because we have a lot of definitions that need to be let's say, defined by the government, by the cons that you create to fully implement this regulation.

But what's the main points. Number one, we should have more facility to get financing. This is really important, mainly for junior companies that are starting developing projects for critical minerals because you have a fund to offer guarantees, we should have specific funds for this kind of project and then this can make easier the development of some projects.

Tax incentives. You know that in Brazil, this is a very controversial points because all the time we have, but it's not applied or you can take time if you can use this, but mainly for projects that is included since the upstream into the downstream of the chain should receive more incentives and then try to match the strategic goals that the government has about control or at least assure the supply of the total -- the full chain of some critical minerals.

And the one point that is really important, and then you believe that this policy can help a lot is about the priority of the permitting. It's not make it easy the process, but the idea is to have a better coordination in the different levels of the government, federal level, state level, municipal level, what can make the permit process easier and then unlock some projects that with the current prices is very attractive in terms of economic results.

And what's important is that we are now creating not just the government policy, but a state policy what for a sector like our sector, where the project is taking 10 years, 20 years, 30 years, we have a policy supported this and heavy better regulatory certainty can help the companies invest and bring more resources to develop this kind of sector that is very clear is economically important for Brazil.

The mining sector has weighed in our trade balance very significant. And strategically, Brazil has very good reserves in strategic minerals. And if you can assure this regulatory certainty for sure, you can be an important player in this new market that you have for the critical minerals.

Perfect. Thank you, Eduardo. So I wrote down 4 questions for both of you. And if you could just give a brief answer before we move into the broader Q&A. And what are this first 1 is for you. Even in the cocktail hour last night, there was a lot of discussion about the presidential election that's happening in October. It's obviously a controversial time in Brazil. But in your opinion, what is that stake for the mining industry in Brazil as it relates to the presidential election?

Makko, we have now very different candidates differently -- but what I think that's important, it's clear that Brazil has a very unique opportunity. And the point is how unlock this potential.

And I believe what you listed from both is that they are committed to try unlock this potential, doing what? They mentioned things like about regulatory stability, I think it's important to have this law that again becomes a state policy instead government policy, number one, and the importance in the trade balance is another point. When you look the fiscal situation of Brazil, continue generating fiscal [indiscernible] really important to at least stabilizing the economic situation.

And the other point is about how we can make it the inflation under control, trying to bring some materials for our producer. I believe that for the mining, both of the candidates should not impact directly. And I believe that by what they have been talking for both mining sector will be very important for all the government that you have.

Okay. Thank you, Eduardo. Courtney, this question is for you. Taking a step back from Brazil for a minute. You've been working closely outside of Brazil. with the Canadian and U.S. governments among others, on broader critical minerals policies outside Brazil. My question for you is what -- and we have this discussion a lot -- what will it take to turn white papers into action?

First of all, I want to say, when I joined the company 5.5 years ago, I never would have believed that I'd be sitting at a table with representatives from governments around the world to talk about critical minerals. So the fact that we're having these conversations is mind blowing. .

The other thing that's important is to recognize is that there's a ton at stake. We are in the midst of a new industrial era that's shaped by electrification, digital infrastructure, AI and what's at stake is technological leadership. So there's a tremendous sense of urgency across governments around the world. The U.S. and Canada in particular are -- have slightly different approaches.

The United States over the last year has announced about 30 billion in funds that are dedicated just to critical minerals. The United States approach is slightly more short-term focused. They're very much looking for deals there I say, huge deals. And the Canadian government is much more policy and partnership focus and also more long-term focus. So they've set aside about CAD 2 billion for a sovereign critical minerals funds.

And their focus has been more around broadly South America with entering into different partnerships with like Chile and Argentina. They are working on something in Brazil I'm not exactly sure when that's going to be announced. The United States, again, much more transaction-focused.

I'm sure a lot of people have heard about the [ Cerro Verde ] transaction. It's an ERO company that was announced, I think, last year, and that provides about $565 million of financing for an expansion of production there. So there's a tremendous sense of urgency -- and there's a recognition that it goes beyond just policy.

Fortunately, there are deep pockets and there are a lot of money behind these commitments that they're making. But ultimately, it's more than just financing. They're also going to have to provide other mechanisms like long-term offtake, price floors, basically guarantees of sales of the product. and they're going to have strong partnerships with the countries that they're working with around ensuring that licensing and permitting is organized and streamlined.

Okay. Thanks, Courtney. Zooming back into the slide that we have here, Eduardo, maybe starting with you and quarter to jump in if there's anything here that you want to touch on from the outside Brazil perspective. But this national policy on critical and strategic minerals that has been signed by Congress and the Senate has received both praise and criticism in equal measure. In your opinion, what do you think the biggest pros and cons are for this policy?

Makko, I believe that you have points. Number one, again, is because I think for the first time we have it for the mining sector, a state policy instead of government policy. What should make it more stable, the rules for the sector, number one.

The second, I believe that one of the points of the policy is to try to have a better coordination among the other levels that your mining company needs to act to get permits. -- federal level, state level, city level because this is a real problem that you have today.

Sometimes you receive the priority for one level, but the other -- to many other reasons is not fully aligned with this, what makes the pros moving slowly to get the permits. So I think this coordination will be very important. And number three, that for Brazil is a point that all the time you discuss is what you have here.

That's the regulatory certainty. We have yet some points. Everybody here knows the situation that you are facing parastate with the [ TIF PM, ] some changes, impacts and other points that sometimes change their rooms, change the assumptions that you use in your feasibility study and then have this in a better way. I think you'll be another positive point for the policy.

By now, we needed to wait the full regular mutation. But what I think is that can be a negative point is because one of the points of the policies are creating of a [indiscernible] to have the definitions about many different aspects of the policy.

And the depends on the size -- the red tape patients that you can have for the -- working of this consult,the projects can suffer in some way. It's not fully clear yet -- but the situation that you have right now, most of the federation is suffer a lack of resources, human resources, technology resources -- and then with this power in this new agents, in this new console, if you don't have enough resources, this can make it more difficult although good indications in a positive way, I believe that this concentration in this concept can be a concern, in my opinion, for the project.

What I would add is, I mean, generally speaking, when a government announces new policies and regulations, it's generally not met with excitement. And I can understand, I can absolutely understand why there would be skepticism and concerns around edit bureaucracy.

However, I very strongly believe that the country of Brazil has a tremendous opportunity before it. And they absolutely understand this. This is a bipartisan opportunity. And the intent behind this new policy is to accelerate the expansion and capabilities around critical minerals. So on one hand, while if they get too prescriptive that certainly a risk.

The intent behind it is to streamline and accelerate and expand. And so I'm actually quite hopeful that again, the devil will be in the details, but I'm quite hopeful that this is going to be a positive for the mining industry.

Perfect. Maybe just one last question for you, Eduardo, before we get to the broader Q&A, something that's been a topic for a few years here, and I know it's near and dear to your heart because I ask you every week about it. Labor productivity in Brazil, particularly for underground mining compared to the rest of the global mining market is low. -- you've been working at the federal and state levels as well as the broader mining industry here in Brazil.

Do you think -- what are you hearing around labor productivity and underground mining -- and do you think that 2027 is the year that we might see a change in underground work hours for mining in Brazil?

Yes. Well, in Brazil, Makko, as you know, the labor is a Adient's from the 40s and that timing for the mining sector, the way that you use to mining that timing when you look at what you have right now is totally different.

And the risk is the safety is a totally different scenario. [ Ibre ] did a study and the among the 10 major economy. Brazil is the only that you don't have a 12-hour shift underground. Fortunately now, with the new technologies, smart mining, remote operations, the shaft that you can do in a very deep areas.

This allows to continue producing. The change in the shift is you'll be very welcome -- but it's a totally different scenario than if you look for 10 years, 20 years ago, that you don't have this kind of technology.

Most of the posts that you have, not just in Brazil but in the world, become deep because the ease depos the underground with the high grades, it's disappearing around the world.

So every time you need it to go deeper to get better grades. And the -- in Brazil, we already started this process. [ Ibre ] has been supporting this discussion. We have in our congress in Brazil, [indiscernible] that presented 2 bills to candid the regulation. One is about the woman working in underground mining, about the maximum age to work on the ground.

And another one is about to increase the timing in the work of the underground, 12-hour shift. This was filed in the Congress, but now stopped probably the come back with these discussions after the election.

We saw it's a very positive way. You'll be very welcome for all the mining sector, all the sector that you operate in underground is asking for this change. In our operations, we changed the surface work. We started using the 12-hour shift, as you know.

And the result is very positive, both in productivity and both in the approval from the employees. They can have more free time, they not spend to timing going come back 6 days in a week. Ibre tried to put this change in the discussions about the scale 61 that you have now in Brazil that should come back after the -- maybe between the first and the second shift in the elections we probably you have a discussion [indiscernible] to approve this.

But unfortunately, the 12-hour shift you what not includes. I believe that after you have a new Congress, maybe the same or a new President, this matter, you'll come back to discussing and you have a very robust arguments to these new technologies, improving safe to approve a change in the regulations is my opinion.

Okay. Perfect. Thank you, Eduardo. So we're going to take just a quick minute break. So don't go too far. We're going to put chairs up here, I'll ask all the speakers to come up. We're going to do a monitored Q&A session, both here in the room and with participants live. [Operator Instructions] So a quick 5-minute break and we'll be back in just 5 minutes. Thank you.

[Break]

Okay. Perfect. Thank you, everyone. Again, thanks, everyone, for sticking around with us this afternoon is walk through our business and some of the things that we're very excited about. Hopefully, you found it exciting as well. [Operator Instructions]

So with that, we will open the floor and the line for questions. Faruk will help and Bruna will help us moderate the questions from the online Q&A. Thank you.

Ricardo Monegaglia from Safra. I have a couple of questions. I'll try to be brief. The first one is on Furnas. We receive a lot of questions on how you could advance the project, you have Vale as a partner. The company, as you probably saw recently is advancing the copper projects.

So where we see the drilling phase is already concluded, and we understand there is a time line that has to be respected till you reach the FID. But I wonder if in any sort, we could take valid example to believe that you guys could anticipate Furnas? And what are the required conditions for you guys to do that? So that's my first question.

My second question, to me, at least, it was the first time I saw [indiscernible] district. And as you discussed, it has pretty similar characteristics as Caraiba. So I wonder if you could give us some color on exploration, how much you plan to spend on exploration at that district. And when do you think we could see some initial results on drilling and eventually the project becoming more feasible or any other detail that you

Thank you. Perfect. Thank you. I'll address the first question with Gelson, then we'll pass the microphone to Mike. In fact, if I could just have one now, we'll pass it to Mike to answer the outing question.

So from my perspective and Furnas, and Gelson, please support me if you see it differently. I think as you saw, we're 2 years ahead on drilling. That's something 2 years ahead of the original schedule that we envisioned under the earn-in agreement.

I would say that from an engineering perspective, we've been moving things very, very rapidly in parallel, right? So when you think about the stage gate from PEA to PFS and FS. We see that much as a continuum in our organization rather than defined stage gates. So there are certain areas that we're well advanced on other areas that we just simply need the hours and the personnel to do the detailed engineering to get us to that feasibility stage.

But it's something that we're working very aggressively. So I would say that on the things that are directly in our control, so drilling obviously, we're well out of schedule. Engineering, we're putting maximum effort and resources allocated to doing that as fast as possible.

And then there's the things that we need to do in partnership with the environmental agencies, with our local stakeholders. Those are the things that are going to take time. And so when we look at that 2029 FID decision, that's taking into account the external factors that we see in front of us.

Certainly, in many conversations, and we have this incredible partnership and relationship with Vale, Obviously, we're all incentivized to move things forward. But we have quite a bit of engineering and man hours to do, and then we also have all the work to do on the environmental and permitting side as well.

So I don't know if Gelson, you've got anything to add there, but that's the way that I see it.

Makko explained most of the topics, and I agree with you, Makko. As we discussed previously here, we had ERO, we do work in parallel. So there are many aspects for this project that it's in parallel work on the engineering test were confirmation of the processing routes has been very different, what I'm saying different in terms of what we have added in the last few months, the amount of tests were completed and confirmation in what we discussed.

So this is very positive, which feeds into the PFS. So I would say there are some elements of the project today, which are already in the PFS level and some areas that we will expedite such that when we get to the end of the I would say, a portion of the work will be in the feasibility study.

So that's the parallel work that we're talking about, especially for derisking, right, collecting data in terms of geotech and hydro, that influences the engineering aspect and mine plan and design, but also looking at the infrastructure decision points related to location drilling for combination, where the plant is going to be located, where the tidis facility to be located.

So all of that, we can expedite, right, in terms of power as well with studies, logistics, we've been in contact with all in various aspects in there. But as Makko said, there are a few areas which are beyond our direct control, and we keep working with recorders and licenses one of them.

We have a very good relationship with [indiscernible] not only for Furnas but everything that actually happened before at Tucuma we've taken that relationship to Furnas as well. So I think the target continues the same, 29, and we have to stay tuned on the advancements that we do as we progress this year and next year.

And then Mike, over to you on Oden.

Yes. On Oden, I think the things that are really encouraging there are the rocks are basically the same. So the [ Ultramapix ] are very, very similar to what we see at Caraiba and what we see at Caribe, the ultramafic are the same. The ages are the same.

So we're very confident that we're looking at the same kind of mineral system and the wall rocks are very similar. There's a lot of research that's been done on how discoveries progress and often, you'll hear numbers about a decade. So you'll see a decade that it takes to go from discovery or working in a district to making a significant discovery because you need to have people that understand those districts.

You need to put in enough work to really make something to make a -- to understand those rocks and understand those systems to make a discovery. The fortunate thing here is because this system is so similar to Caraiba, we have 10 years of experience and a lot of drilling and a lot personnel experience within the group to understand what makes an anomaly that's worth drilling and what makes an anomaly that's not worth drilling.

I think it's very hard to predict the pace of a discovery, but I do think that we've learned a lot about those systems. And I think the first phase of the drilling to me, what was very encouraging was we were drilling ultramafic rocks with sulfides, with nickel, with copper, probably with PGEs, maybe Cobalt.

So that's a very early sign to be drilling sulfides in your first few holes of a program. we're 3,100 meters in. We have about 7,400 meters budgeted to go to the balance of this year. We're going to be reassessing the targeting. So understanding the geometry of those zones is really, really important. And then the next phase of drilling is how do we take what we've learned so far and then apply that knowledge to the next phase.

Good afternoon you all. I'm [indiscernible] from the BTG Pactual. My first question goes towards the encouraging the leveraging the company has delivered over the last quarters. And of course, it will continue towards the year-end, right? Apart from Furnas, developments, and possibly repaying these senior notes. Ero's team today has told us about the shareholder remuneration, possibly this program, right?

So I'd like to ask you to give us a little bit of more details on this possible remuneration. So when you plan to announce it, what magnitude can we think about this program, which you could view in a very positive note.

And if I may, a second question, right? First share have many brownfield many nice brownfield initiatives [indiscernible] current operations. And you have fullness providing this long-term growth to the company. But as of now, we see Tucuma and [indiscernible] with shorter life of mines. And so how is the appetite for M&A Ero's Agos company for the next coming years? How is this appetite? You have some preference for some commodity in specific terms and some preferences for the lock of this possible transaction.

Yes. Both great questions. I'll let Wayne handle the shareholder returns. I think -- and then I'll come back on the M&A question. But I think one of the things that Wayne said that is really important to keep in mind is that, number one, we made a commitment to delever the balance sheet.

I think we're delivering on that. Number two, paying down principal is a form of return to equity. I think that's also important to keep in mind. Then before Wayne jumps in, I just want to say that one experience that we have this year, and I'm sure all of you will appreciate this is that volatility is the new norm, right?

So it's very difficult to predict an exact date, but maybe let Wayne talk to the thinking there.

Well, you kind of saw my thunder day. I was going to -- I'll pick up the point that Makko made. We are certainly on the journey to achieve the 3 pillars of what we set out to do, which was get the leverage ratio below one, repay what I would call the variable senior debt, which is the revolver and then think about shareholder returns.

So one of that one's gone to is probably likely here in the next quarter or -- but that is very much dependent on the metal price environment. And I was talking to somebody that before we started today, last week, we're at $6.60 and now we're at $6.20, a copper price per pound. It's an incredibly volatile environment driven by a single tweet or a single comment coming out.

So we bear that in mind -- no, having said that, the business is in a very strong cash flow generation phase regardless of what the metal price might do around a certain point. And so that point is going to come. Is it by the end of the year, perhaps is it early -- is it in 2027?

Most likely. And I think you will probably hear from us once we're through the third quarter, and we have a little bit more visibility on when and how we plan to return that capital.

Yes. Perfect. And then just circling back on the M&A piece. I would say that I think one of the things that we -- I think that you saw today and we hope to get across is the breadth of the portfolio that we have. So for sure, we look at opportunities to continue to grow our business. We've been very active in looking at opportunities.

We take those reviews very seriously. But we also do that in the context of our own portfolio. And when you just take a big step back and you look at what we've built over the last several years, we have 3 operating mines. We have a very advanced development project in Furnas of all the way through to a new greenfield area that we've been working on for the last several years to put together.

Obviously, it's the first time that we've talked about it. So when we think about looking outside of our business at new opportunities, as I said, we do look at that -- but we are doing that through the lens of the quality of our own portfolio.

On your point on [ Javengin ] and Tucuma, I would say that I always take that comment and stride. If you just take a step back to [indiscernible] and know when we started in 2017, there was no reserves and resources. So today, combined total aggregate resource, 600,000 tonnes, 600,000 ounces in reserves, 400,000 ounces more or less an inferred resource, million ounces of potential when you go drill that.

As Mike showed today, a kilometer step out, still hitting the same mineralization. So -- and similarly, at Tucuma, right, hitting very high-grade mineralization at depth, working areas that are within our portfolio today within 30 kilometers to try and extend that operating footprint that we have in Tucuma.

So I'd say, for sure, we think about it, for sure, we take those reviews very seriously. Fundamentally, we're a copper-gold business. If you look at Furnas, it's copper, gold, all of our assets are copper, gold. And we do look very seriously in the Americas. But as I said, we do that through the lens of the breadth of the portfolio that we've been able to build and hopefully showcase today with some of the exploration success that we're having across the group.

All right. Question from Matt Murphy at BMO. Question on Caraiba. So the range on throughput is 4.5 million to 4.7 million tonnes grade, 0.9% to 1.1%. How do you get to 50,000 tonnes? Because I think if you take the upper estimate of each of those, you don't get there. And I'm wondering, what you see as the upside for that operation once you're -- you have the shaft at full capability and you've got Surubim transitioning into N8 at Vermelhos, which I think should be higher grade? So can you possibly paint a bit of a picture where this goes maybe beyond the 3-year outlook as well?

Yes. Maybe I'll start, and then Gelson can jump in here. Look, I mean, those are long-term averages. Obviously, if you look at the results that Mike put out in the deepening, we do have very high-grade zones within that ore body. So we're talking about large averages.

I think that where I see the greatest opportunity at Caraiba, and we do see modest growth in terms of production output over the next 3 years, but really around what the shaft is going to unlock for us is greater productivity.

Obviously, a little bit better grades and the deepening, but really driving margin out of that business when you think about, "Okay, what does a 30% incremental improvement in productivity do in terms of cost?" We expect that to be a pretty significant savings over the outlook period when that shaft is operational.

And then looking at the portfolio of options that we have, right, so I always like to say that when you take a big step back and you think about the mix of grades in our portfolio, right, from open pit, lower grade, but also lower costs, right? So grade tells one set of the story. Our open pit mining cost is roughly 10% of our underground mining costs, more or less, 10%, 15%. So you don't need very high grades from open pit to generate equal or better margins from underground.

And when I take -- when I look at the overall portfolio, we have -- we're going to continue to have open pit contributions from our mines as well as lower-cost production once the deepening is online.

So look, I think if you look at the deepening project today, as I said in our Q3 conference call -- sorry, Q2 conference call a few months ago, the last shaft that was built at Caraiba was built in 1986. And so we see that investment as being able to support the stability of the complex in Pilar for the next several decades. And I think our operating plan, certainly that's out in the market and our [ technical report ] shows that. It will vary year-to-year depending on the mix of grades.

No, I think you covered well there, Makko. I just want to add that when you look at the deepening area, the development will open new areas for exploration, and that actually can accelerate some of the areas for mining. That's a work in progress as we speak. That's why Mike was showing up some of the results in there.

There are other areas around the surface or close to the surface within Pilar as well, which are in exploration. We don't mention here, but it's part of everything that we do, what we call the brownfields and near-mine exploration. There's a lot of potential there.

And just to finalize, it's not just about the grade, but also the capacity to deliver that tonnage and a very competitive price and the cost, right? So I think that's what it brings up to the Pilar in terms of advantage.

But then looking ahead, what we call the district of Vermelhos, that's why we're calling now, especially with N8; it starts as an open-pit operation. That's a lot of potential for underground. So there's a lot of growth capacity in there, which is part of our plan.

So I think that continuity in the drilling and the modeling and also looking at the opportunities to basically take every advantage that we've got on that processing plant of 4.8 million tonnes, I think that's what's going to drive the growth that I think you were referring to.

Marcio from Goldman Sachs. Thanks for the time for being here with us today. A couple of questions on my side. The first one on Tucuma. Some great numbers you have shown in the last couple of quarters. You mentioned the debottlenecking that was concluded, I think, in midyear. So I think the question is how have the mill performed over the last few months, considering what the work you have been done?

And as you go into next year, you [ install ] the filters at the end of the year, what is the sort of ramp-up we should expect going into 2027? When you should achieve close to 100 throughput capacity at the mill in Tucuma?

And then the second question on Xavantina. You haven't -- obviously, the grades on the concentrate are definitely remarkable. We've only seen mostly 1 quarter of it because of the rainy season, but just trying to understand the level of confidence that you have for the remaining of the concentrate in terms of grades as well, if it's fair enough to extrapolate what we have seen in the first round, I think, above or close to 30 grams per tonne.

Yes. A few things to unpack there and just keep your microphone in case I call back on you to go through those again. But starting with Tucuma, yes, look, the mill has continued to perform well. We saw that right.

You saw that on the chart, the continued improvement in performance. Gelson spoke to some of the technologies that have driven that performance. And he also mentioned that, that filtration capacity with the filters in Brazil now, we expect to exit 2026 at that full run rate, I would say, and are chasing down opportunities to continue to debottleneck the plant as we did at Caraiba this year.

So stay tuned on that. Things are progressing well. We'll obviously have the opportunity to talk about in greater detail about plant throughput on the back of our Q3 call and how that project is progressing. But I would say the mill continues to perform well, in line with our expectations.

Xavantina concentrates, I might have missed the middle one, but we can come back to that. Xavantina concentrate grades, look, we came out with initial resource, it was based -- it was 29,000 ounces, based on what we were able to sample at that time, which is about 20% of the available volume. And I believe that, that had a grade of about 37 grams per tonne for that initial 20%.

If you look at what we've shipped to date, we've been around 35 grams per tonne. That obviously includes that initial material as well as some residual material. And we'll talk about the total volumes in arrears on our Q3 conference call. But I would say that we've got a lot of confidence in the grades that we're seeing coming out of the concentrates for what we have so far, right?

So to extrapolate that out in the future, we obviously don't have sample data to do that. So we don't know with 100% certainty. But if you look at that original estimate versus what we achieved and you look at what we've shipped to date, those grades reconcile pretty well. And so we're feeling good about the performance.

Particularly on the back of Q2, we saw a nice increase in production volumes, right, that came with the installation of that filter preps and dryer. And I'd say that we're -- I mentioned this on the Q2 conference call, but we're feeling good about how that operation is performing in terms of the gold concentrate operation. And again, all that will be reported in arrears on our Q3 call.

Did I missed one of your questions? There was three.

No. I mean, Tucuma's current run rate and expectations of ramp-up and also Xavantina. That's great.

Maybe we'll take a minute here and take some questions from the webcast as well, and then we'll go back into the room. So this is coming from one of our investors on the webcast, and the question is about technology. The question is that you touched on technology through your presentation. Can you give us some details about some of the benefits that you're already seeing from implementing that technology or the different technologies across the operations? Can you repeat just the last part of the...

The actual benefit that we're seeing across our operations. Just from technology...

Yes. The application of the technology, as I mentioned during the presentation, have been very focused in key aspects across the organization at Caraiba, Tucuma and Xavantina. So these gains that we're getting in terms of productivity or in safety and also reduction in cost, they actually have been built into our plans. So we can see that on a monthly basis and then as we progress further.

Definitely, some of the examples that I used here before, for instance, where you have human error in terms of drilling, especially in the face that actually has been removed, which means that we're drilling more effectively, we're taking less time, the blasting becomes more effective as well with less overbreak or under break.

So that's also part of the gain as we speak and the same as in Tucuma. When we get replies from the models that we've got in AI, which is guiding our teams on site and decision-making as a spot, so that actually has been built, and we're quantifying that as we speak and put into our future plans as well.

Thanks, Gelson. I'll do one more question here from the webcast and then pass it back into the room. This question is regarding Xavantina. And the question is, now that you've converted the mining to mechanized mining, what are the opportunities for growth at Xavantina?

Yes. Maybe I'll touch on this and then Gelson can jump in here. I think the most obvious place to look for growth at Xavantina is in the excess mill capacity we have, right? We showed that we've got 300,000 tonnes of mill capacity over the 3 years average, we don't use that. And so we see the largest opportunity of being able to better match the mine output with our mill capacity.

That obviously takes additional development, additional infill drilling, which we are doing now. It also takes the things that we've already done, which is putting equipment, getting the workforce trained, putting in ventilation and cooling to be able to access larger volumes from that operation.

And I think the results that Mike showed today kind of give a clear indication of why we're heading down that path, right? We see an ore body that is continuing to remain open in almost every direction. And so we have a lot of excitement about what we're doing there in terms of being able to get higher mine volumes.

I think some of those intercepts also showed that particularly as we get deeper in Santo Antonio, we do see increased ore thickness. And so that will also have a net result on driving volume eventually when we get development and access to those levels. I don't know if you've got anything to add there.

Makko, I would just add that on top of what you said in terms of the mineralization thickness, it opens up a new area for us in terms of how fast we develop, of course, with the mechanization. We've got support being done by the machine today, and that expedites everything, right? And expedites development rate, it opens up new areas for mining, and that's what we're targeting.

So similarly to what we've done in Caraiba, when you've got the mill capacity there, we want to fill that mill and then opening up new areas for the development and increasing mining rates. I think that's the biggest opportunity within Xavantina today.

[indiscernible] from Bank of America. Over...

Impossible to tell. Maybe just raise your hand so we can tell. We can look at you when you're asking a question.

So I have two questions. My first one is on Tucuma. I think there was some very exciting news on mine [ life ] and potential underground resources. So if you could comment a bit on that and what you guys have done in terms of exploration? It's been a while since you declared reserves on Tucuma, if there's any potential extension there? And what are you guys seeing more medium term? Is there a possibility to extend life of mine, maybe move to underground?

And then my second question is more open-ended, Makko. How do you see Ero's equity story up until 2029 when we would be 100% full and then delivering on that? But now we have a phase in which there's -- Tucuma is ramped up, almost there and your deleveraged, so how are you guys seeing the equity story and strategy up until 2029 from here on?

Yes. Those are good questions, particularly the longer-dated one. I think when you look at what we're doing at Tucuma, I think Mike touched on this a little bit, obviously, we're ramping up capacity there. Everyone knows that. And so we're excited about that potential. As I said in our Q2 conference call, we are coming out with an updated resource and reserve on Tucuma this year before year-end. And we do see opportunities for sure to increase the resources and reserves.

That drill program, the 8,000 meters that Mike spoke to, right, it's an inferred resource, so that won't be reflected clearly in the reserves. But as Mike spoke to, we'll start drilling that here at the end of this year into early next year to really prove out.

And you might ask, "Well, with those kind of grades, why didn't you guys drill there? Like it's copper price of [ 6.50 ], what are you guys thinking?" Which is a fair question, but I would just comment that it's really about you're drilling underneath the pit bottom in a pretty confined space of operation.

So we -- this year, we had quite a big pushback to do to get ready for the later phases of mine life as we just physically did not have the space in the pit to be able to drill those to access the angles that we needed to drill that. And so that's something that we're looking at in Q4 of this year into early next year to restart that program, maybe take some of that inferred and upgrade it into higher categories so that for 2027 and beyond, we can start looking at underground opportunities.

And then I would just say, although Mike didn't get into it, we do have an exploration project -- advanced-stage exploration project that we're drilling now that's in 30 kilometers of Tucuma. And stay tuned on that, I would say. That's something that we still need to do a lot more work on, but it's an area that we're encouraged because of its proximity and because of the apparent mineralization, at least on surface, but we need to do more work.

Fast forward to 2029, what does the company look like at those -- that stage? I think I mentioned this on stage earlier as the first employee of Ero, I think one of the things that we've been able to do consistently over time is put options in place that have crystallized into real shareholder value over time, right?

One of those being Furnas, right? That was a 4 years of effectively discussion until we started drilling there and thinking about how to do that with our partners in Vale Base Metals. And when I look at the portfolio that we have today, and particularly around [ Oden ] and some of the regional work that we're doing around Caraiba, I think that we've got enough in place in our portfolio to continue to create a lot of shareholder value organically.

What that exactly looks like over the next 5 years, 3 to 4 years? Very difficult to say exactly, but Mike and the team are putting the effort and the work in place to be able to position the company for future growth. As I said, we continue to look externally for options as well.

It was -- I'm reminded of the discussion we had back in 2021 when we updated the feasibility study of Tucuma and we sat as a leadership team and we looked at each other and we said, "Okay, what's going to be next after Tucuma?" And obviously, Furnas came out and you see the value that, that brings to the -- to all of our stakeholders today, including our partners at Vale Base Metals.

I would say those same discussions are happening today, right? Okay, what's after Furnas? And I think the work that we've been doing over the last few years to build that pipeline of project across all stages is really reflective of that question, right, which is what are you going to do after Furnas?

And we -- today, we're working pretty hard at developing enough organically in our portfolio to make sure that we can continue to deliver growth for our shareholders and deliver value for our shareholders with what we have today.

Rafael Barcellos from Bradesco BBI. So on the capital allocation, so I think when -- if I'm not wrong, you mentioned that depending on market conditions and considering that the company will head into a net cash position by year-end, you could analyze a shareholder remuneration policy, right, in the next like 2 quarters or so.

But that said, and then I want to bring Makko to this discussion, maybe if you could elaborate a bit further on how do you see M&A as also another strategy here in the long term, which sort of initiatives you could analyze jurisdictions and also type of assets, exploration assets or more developed assets? So it could be interesting to hear as the company heads into this net cash phase.

And as a second question, question for [indiscernible]. Of the 11 drill rigs that you mentioned, I mean, how many are currently resource growth and how many are reserve definition? And if the geotech comes back worse than expectations, would you slow the resource growth? Or would you delay the PFS? Just wondering how do you balance those two things?

Yes. A few things to unpack there. Just the one thing I want to -- I don't think Wayne said net cash by year-end. I don't think you said that, just so we're 100% clear.

I said net senior cash. I mean, obviously, we still have the bond. So it would be net senior debt cash, right, if we pay off the revolver. But we understand the point. I mean the senior bond is a longer-dated part of the capital structure. So we would be in a very advantageous position once we have the revolver -- the senior debt revolver paid off.

Yes. And I think as Wayne and I mentioned, when it comes to shareholder returns, obviously, volatility is the new normal. And so let's see how the next several quarters progress and go from there.

On the M&A side, as I said -- you asked a couple of specific questions, and I typically give the same response to shareholders. But as I mentioned, we do take reviews very seriously. We're pretty disciplined on a couple of different things.

Number one is time zone. So Vancouver time zone to Sao Paulo time zone is -- that's 100% hard limit in anything that we look at. I think all of us have worked for enough businesses with joint offices in Australia and know that we -- that's just a different regime, and we don't want to do that.

Obviously, copper gold. And when it comes to specific stages of opportunities, we do that again through the lens of our own portfolio, right? We've got, as I said, these incredible advanced projects. We've got incredible option value that we're building in Caraibas.

So -- and I think if you take a step back, and you look at the first slide of our presentation, Ero fundamentally, we're a deep value company, right? And so in this market, finding deep value is pretty hard. I think it's much more opportunistic than to say a blanket statement at what stage.

But as I said, we have a corporate development team. They have a job to do, and they do look at opportunities, and we take those reviews very seriously. But we're very happy with our portfolio. I think we have an incredible story in terms of for us and the options that we're putting on the table, again, which I think are going to deliver shareholder value for many, many years to come.

I think there's a question about the Furnas as well.

Yes, why don't you go on that one?

Yes. So I'll have to get back to you specifically on where the drill rigs are exactly in terms of which ones are reserve definition and so forth. But what I can share with you that you made a specific question about geotech, right? So everything so far since we published the PEA, not only in the geotech, but also in metallurgy and the processing side, all the test work that we have done so far for the pre-feasibility study; have confirmed everything that we've discussed before.

So there is nothing out there that in terms of knowledge from the geotech side, which shows a more challenging environment actually is actually confirming everything that we said for the underground, the geotech aspect also for the open pit and the underground. So there's no major change in there.

Similarly to metallurgy, as a matter of fact, we're actually closing in the circuit that additional test work we've completed, including for the [ frigo ] there for the concentration. So everything so far has been confirmed. I need just to get back to you on the exact numbers and where the drill rigs are located.

And I would say maybe just on the question of drill allocation, maybe just a strategy point here is that we decided as a leadership team with Gelson, Mike and Rafael and our brought our technical team on site that the real objective in resource growth was not to add years '25 and beyond, right? Like clearly, we have a robust project with good economics, good cash costs.

What we really sought to do with our resource growth program was target specific areas around planned infrastructure where we could augment the mine plan in that drop-off that you see in the PEA, which is, I think, years '16 through '24, right? And so that was the objective, right?

So I think to maybe answer it from a strategy perspective, well, that was our objective, still is our objective. We'll discuss the Phase 3 results when we get all those assays back. Obviously, for the PFS, our idea is to stabilize that production profile for as long as possible. And I would say stay tuned for when that comes out, but that was the objective.

So to the extent that drill rigs, we start slowing down the drill rigs to focus on definition drilling and some of the more detailed technical aspects to really derisk the project for the first few years, the drills that are going away, it's not as if we're leaving -- we don't believe the extension of mineralization.

It's just that 20, 24 years of stable mine life. It doesn't really make that much sense to continue beyond that from a pure economic perspective in the same way that we did last year.

Stefan Ioannou from ATB Cormark. Just during the panel discussion, you mentioned one of the government initiatives was to streamline permitting. And just wondering if that's something that may actually benefit Furnas going forward or if it's something that's a longer-dated sort of thing?

Yes. I'll maybe turn it to Eduardo. I'd just put that -- yes, I would just maybe comment that Tucuma was one of the 5 projects back in Q4 '21 that was announced as a strategic minerals project. I would say it's certainly, maybe not expectation, but hope that Furnas would get similar treatment under this regime. It is a critical mass project. I'll maybe let Eduardo talk about the specifics.

Again, lots of details to iron out. I would say right now, there's -- as we discussed -- as Eduardo and Courtney discussed in the panel, you've got some targets out there without the framework in place. So there's lots of details to come over the months and years. But maybe, Eduardo, if you want to comment?

In general, what you have in the policy should it happen, should help us to speed up the process. The problem is that to become effective, the policy needs a lot of regulation. That's not clear this you make it in months or years. And once in place, what you have in the policy will help us. But when this will be in place is a question that we don't have the answer yet.

And then we need to wait probably what the guys said they wait. The new government can be the same or can be the other to start to make the council that take the decisions and put in place all the regulation. If this make happen in a fast way, maybe we can use it for the Furnas, is our expectation. But in this moment, we can't say with certainty, okay?

Dalton Baretto from Canaccord. I'll try and squeeze in three quick ones here. Two on Furnas and then one in [ Oden ]. So on Furnas, touching on that line of questioning earlier, 24 years of mine life, the drop off sort of midway, it's open in all directions.

As you design the PFS going to the FS, are you contemplating an expansion at some point in time? Are you sizing certain infrastructure? Is that going to change at all in the PEA?

I'll answer this one and Gelson. We talked about a number of value-generative options in the PEA. I think at a PEA stage, it's always really important to have those options because you know things are going to change as you do detailed engineering and your assumptions will change. So I look at those as a really strong way to protect value and protect the investment as we move through advanced stages.

And so I would say fundamentally, the answer, no, we don't see fundamental changes. We see incorporation of some really exciting value drivers that we talked about in the PEA and a few other ones that we're looking at. But again, those are really important to have in the back pocket to protect value to the extent that things change, including metal price and other things.

So I would say stay tuned for some of those value drivers. We're working on those pretty aggressively now. That has the ability to, again, to create some incremental value for the project.

Okay. And then second one on Furnas was that 40% stub that Vale is going to have, it's pretty subscale for them. Is there a prescribed pathway for you to buy that piece? Are those conversations happening at all? It seems to me like that's probably the best M&A you can do.

Yes. Look, I would say that without -- obviously, our partners, Vale Base Metals is not in the room. And we have a great relationship, so we haven't asked that question because we're working in a true partnership, right, to create value.

I think if you look at other partnerships out in the mining sector where you're sharing best practices, sharing knowledge, sharing some risk, I think this meets all those objectives.

What I would say is that from a pure copper growth perspective, I don't think necessarily that Furnas is subscale, right? You look at the objective that Value Base Metals put out in the market for growth, and it's a very significant growth trajectory. And I would say that every tonne goes a long way to meeting those objectives. And so I think Furnas is an important part of that.

Obviously, I can't speak for them. But we're very, very happy with the partnership we have. And as Gelson mentioned earlier, there's a lot of shared learning that happens between all of our teams in developing this project as well as thinking about the region more broadly in terms of opportunities.

So I would say that we value that partnership a lot, and we will continue working alongside Value Base Metals to deliver this project to create value for our stakeholders, their stakeholders and all the regional stakeholders as well.

Great. And then just on [ Oden ], when I think back to the early days of this company and the focus on Caraiba Valley, the airborne geophysics, I think it was IP at the time, was really, really useful. I mean the mines lit up like a Christmas tree. And is there a plan to do the same thing over [ Oden ]?

Yes. So at this point, if capital was unconstrained, you'd probably fly the entire district with DroneMag and EM. And EM was the tool that I think you're referring to. So looking at those conductors, picking out the mines, but also it was very helpful from an exploration standpoint. So as we go into the 2027 budget season, we are considering that.

At this point, we've mostly focused on geochemistry and mapping to highlight those mineral systems. And then once we found them using ground geophysics, so it's very cost effective to use our own teams for ground EM and also ground MAG. And so we've used those to go from initial target to sort of a drill-ready target once we've got that detailed MAG and then EM conductors to target the drilling on. But as we progress the project, that's certainly something that we'll consider is doing more extensive airborne geophysics.

I think -- and it's an important question to ask again, right, because I think it ties back to our strategy, $0.8 $0.90 of every dollar that we made has gone back to paying down debt. So obviously, a big priority. We committed to that, we're achieving those objectives.

And so -- and I also think it's one of capital allocation because to me, when I think about our portfolio and tying this all the way back to kind of where we are in Sao Paulo and some of the venture capital that exists here, there's a part of our portfolio, which is venture capital, right, potential huge returns, lots of value to be created, but very early stage.

And so when we think about allocating capital across all the priorities we have, including paying down debt, advancing our own operations, advancing Furnas; I would say that, that part of our portfolio is really the venture capital piece where you want to keep expenditures low and really focus on the rest of your portfolio.

And I think what Mike and the team have done there on a very, very small budget is pretty incredible. Across our entire portfolio, our regional exploration program is sub-$5 million. And I think if you look at what we've done at [ Oden ] over the last couple of years, it's a tiny, tiny fraction of that total spend. And we have drill rigs operating there now. So obviously, the spending will increase.

But I think the benefit of having many years to work that belt to think about the geology to do the stream sampling, I think, has really put us in a position where we feel that it's -- now is the time to start putting a little bit more capital. But as I said, Mike has done -- Mike and the team have done an incredible job ground truthing that entire area, that entire belt.

Yes. I would just add, Dalton, if you think about the timing of exploration, so when the company came into the Curaca Valley, we already recognized that we had mines, nickel, copper-style mineralization. Really with [ Oden ], the stage we're at is proving that concept. And so that concept is now proven. And then we can step back and think about how do we want to assess the entire district.

So taking sort of steps to go from a very -- a hypothesis to a kind of a concept to prove that concept, and now we assess the next steps from here.

A couple of questions about Xavantina, please. Orest Wowkodaw, Scotiabank. Your slides still show that the gold concentrate sales will continue to H1 '27. Should they not continue well into '28, assuming that the grade is the same? I know you've only sampled 20%, but why the H1 '27 target?

Well, I think it depends on how much we sell between now and year-end is the real direct answer to that. Obviously, you've seen sort of the cadence that we've had. I talked a little bit on the conference call about some of the monthly performance that we've had since we put in the filter in the dryer. And so we expect to have very strong sales in the second half of the year at Xavantina that help sort of inform that thinking on H1 '27.

What I can tell you is that we -- could it extend through the entirety of 2027? For sure, that's a potential. What -- all I can tell you is the volume that remains, not the ounces, right? So the volume that we see in front of us is something that we're trying to sell as much as we can right now.

So it's difficult to put an exact date on that, Orest. I would say that if you think about the average run rate that we've done over the last 3 quarters, I would say, yes. But we're pushing pretty hard right now to sell concentrate volumes in the second half of the year that could probably reduce that timeline, but maybe increase the sales volumes relative to what you're thinking.

Is there any kind of physical constraint to those volumes, say, on a quarterly basis? Or is it pretty much you can ship unlimited from a drying perspective?

Yes, space and weather conditions would be the two prevailing factors, right? So you think about -- we don't have infinite space. So if you put everything in a centimeter layer in infinite space and you had perfect sunny conditions, obviously, you dry that material as fast as possible. And so the physical limitations, which we'll see on site this week are space available to dry and then also just the weather conditions.

And so you can imagine right now, we're in the dry season as we were last quarter, we're pushing very hard to get sales volumes out the door. The reason we installed the filter press and the dryer was to make sure that we continue sales through the rainy season. But for sure, it's not going to be as easy as it is in the dry season, right?

And then just a quick one for Mike on the same asset. Just you -- I mean, you're mining below your installed throughput rates, your capacity at Xavantina. You've got a less than a 10-year mine life. How long do you think you need to really prove up that reserve that to show that maybe you can produce at higher rates for much longer than the current mine life?

I mean I'll comment on it, and I'll pass the microphone to Gelson because he's thought a lot about this question as well.

I mean I would say that the exploration opportunities at Xavantina are not constrained by ideas or by geology, it's more been constrained by capital allocation and infrastructure for placing rigs. So we see opportunities in Santo Antonio. There are opportunities in the upper part of the mine that can be evaluated. There's other ore bodies laterally that we will evaluate.

We've been consistently drilling at about the same pace. So the exploration budget in mine has been fairly consistent year-on-year. There's been an increase in drilling for definition drilling as we've mechanized the mine because it requires more drill definition, more pierce points to understand the resource. And I think having an understanding about the scale of the ore body and then how we allocate capital, that will certainly be a discussion going into 2027.

Just to add what Mike said as well is the development rates because some of the areas to access and do drilling requires additional development, then you're competing that against opening up new areas for mining. So we've got to balance that out. It's actually something that we are progressing very well as we speak. So stay tuned.

We're actually doing further studies on Xavantina, especially now with the results that we're getting, the performance that we're seeing on mechanization across all the mining operations and planning for next year as well. So I think that there's some possibility there, but the study is ongoing.

So in the interest of time, I just want to -- we're going to wrap things up here. I think we're right on target for our Q&A session.

I, first of all, want to express my gratitude to all of you for joining us today, especially locally here in Sao Paulo and those of you dialing in. [Foreign Language] Thank you all so much. Really appreciate it. It's been a wonderful discussion. Hopefully, you learned a lot.

Our team is available here, as always, and virtually. So if you have a follow-up question, please don't hesitate to reach out to our team. We're deeply thankful for the opportunity to talk to you today and looking forward to a really fantastic site visits on the back of our Capital Markets Day. So thank you all very much.

Also, thank you. One person I want to thank specifically, Bruna in the back of the room has done an unbelievable job organizing this event. Thank you, Bruna. Very deeply grateful for the work that you do and all of our partners here. Thank you very much.

Thank you for standing by. This is the conference operator. Welcome to the Ero Copper Second Quarter 2026 Operating and Financial Results Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to Farooq Hamed, VP, Investor Relations. Please go ahead.

Thank you, operator. Good morning, and welcome to Ero Copper's second quarter earnings call. Our operating and financial results were released yesterday afternoon and are available on our website, along with our financial statements and MD&A for the 3 and 6 months ended June 30, 2026. A corresponding earnings presentation can be downloaded directly from the webcast and is also available in the Presentations section of our website. Joining me on the call today are Makko DeFilippo, President and Chief Executive Officer; Wayne Drier, Executive Vice President and Chief Financial Officer; Gelson Batista, Executive Vice President and Chief Operating Officer; and Courtney Lynn, Executive Vice President, External Affairs and Strategy.

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

With that, I'll now turn the call over to Makko DeFilippo.

Thank you, Farooq, and good morning. I appreciate everyone taking the time to join us today. As I reflected on our results this quarter, what stood out most was not any one individual metric, but the breadth of progress we are seeing across the business. Our efforts to reshape Ero are now increasingly visible in both our operating and financial results. A meaningful part of that progress traces back to OneEro, a company-wide initiative we launched at the start of 2025. OneEro is designed to streamline how we operate, improve efficiency and unlock synergies across operations, human resources, procurement and finance, while investing in people, systems and processes to drive frontline excellence in data and analytics.

We have fundamentally changed how we work together, brought leadership changes on site and across the organization. These changes are translating into safer, stronger operational performance, higher cash flows and meaningful balance sheet improvements, allowing us to accelerate longer-term growth within our portfolio. These were the commitments I made to shareholders at the start of 2025, and we are delivering on that.

These changes are coming together at exactly the right time. Paired with commodity price tailwinds, our operational momentum drove another quarter of solid financial performance. Cash flow from operations increased nearly 50% quarter-on-quarter to approximately $138 million, and adjusted EBITDA increased to $144 million.

Stepping back to the first half as a whole, really illustrates how much our business has changed over the past year. Cash flow from operations for the first 6 months of 2026 increased to approximately $231 million from $156 million in the first half of 2025. Adjusted EBITDA increased to $269 million from $146 million over the same period. Stronger cash generation has enabled us to make significant progress on deleveraging our balance sheet, one of our key strategic priorities this year.

Over the past 18 months, we have reduced net debt by approximately $100 million, while improving our net debt leverage ratio to 0.8 from a peak of 2.6 at the start of 2025. As outlined in our news release, we repaid an additional $25 million on our revolving credit facility in July, bringing total payments in 2026 to $60 million. OneEro has been an important contributor to that progress, and we can point to several tangible examples of the value it is creating across the business.

Operationally, investments we continue to make in infrastructure, equipment, people, processes and technology are increasingly being reflected in our results. Our copper operations produced a combined 17,315 tonness of copper during the second quarter at a consolidated C1 cash cost of $2.42 per pound. At Caraiba, we are sustaining the higher throughput rates we achieved at the end of last year following our completion of a substantial debottlenecking effort and remain on track for a new annual throughput record in 2026.

At Tucuma, plant throughput increased 27% quarter-on-quarter. And in June, we completed the first phase of our tailings filtration expansion. During the second half of the year, we are on track to install and commission 3 new modular filters, which are expected to significantly increase filtration capacity and support higher plant throughput into the future. At Xavantina, important investments in ventilation and cooling are supporting improving -- improved mining and development rates, and we saw that reflected during the quarter.

Our focus on bringing forward value from our gold concentrate program coincided with the end of the rainy season, which allowed us to recover more gold from our historic gold concentrates. Together, improved mine performance and increased contributions from historic gold concentrates drove 170% quarter-over-quarter increase in total gold from Xavantina to more than 20,000 ounces. This included 8,693 ounces of mined gold production at a C1 cash cost of $1,586 per ounce and 11,860 ounces recovered from historic concentrates at a C1 cash cost of $633 per ounce. We expect the successful commissioning and ramp-up of our mobile filter press and industrial dryer to be a real benefit to our concentrate operations through the rest of this year.

The collective improvements we have made and are making across our portfolio have positioned us for a strong second half of 2026. Our copper operations remain well positioned against full year guidance with stronger production expected in the second half. We have also maintained consolidated copper C1 cash cost guidance with unit costs expected to decline sequentially through the remainder of the year. At Xavantina, we expect mining rates, throughput and mine gold production to be meaningfully higher in the second half, with unit costs declining as production increases.

The slower start to the year means we now expect mine gold production at the low end of the maintained guidance range. And as a result, we have updated full year C1 cash cost guidance to $1,100 to $1,350 per ounce and our all-in sustaining cost guidance to $2,200 to $2,700 per ounce. We have also increased our consolidated capital expenditure guidance by $10 million to include the approval of a new power line at Xavantina. Once operational, the power line is expected to strengthen site infrastructure, support our ongoing efforts to grow our operational footprint at Xavantina and importantly, reduce power transmission costs, allowing this investment to effectively pay for itself within 2 years.

At Furnas, our June project update showed continued high-grade continuity with mineralization extending both at depth and along strike, an encouraging sign for the life of mine production plan we outlined in the PEA. We are well advanced on the 45,000-meter Phase 3 drill program and remain firmly on track to complete it before year-end. In parallel, we are progressing various work streams in support of a pre-feasibility study that we expect to publish in 2027.

In summary, our strategy is working. We are investing in and strengthening operating performance across the portfolio, realizing measurable benefits from OneEro, converting that progress into cash flow and balance sheet improvement and rapidly advancing Furnas as Ero's next major leg of growth.

Before I turn the call over to Gelson, I also want to remind everyone that we'll be hosting our Capital Markets Day in Sao Paulo on Monday, September 14. For those of you interested in attending, please reach out to our Investor Relations team for more information and to register. We look forward to seeing many of you there.

With that, I will turn the call over to Gelson.

Thank you, Makko, and good morning, everyone. As Makko outlined, we are entering the second half with improving performance across all 3 operations. I will provide some additional detail on the underlying operating drivers and our expectation for the remaining on our key projects.

At Caraiba, copper production totaled 8,351 tonnes during the quarter. Lower planned head grades were partially offset by slightly higher throughput and improved recoveries. Looking ahead, we expect stronger production at Caraiba in the second half. This should be driven by access to higher grade benches at Surubim, as well as higher grades and tonnage from Pilar due to planned stope sequencing. We expect the higher throughput levels, grades and production in the second half of the year. And as a result, C1 cash costs are expected to decline sequentially through the remainder of the year.

At Tucuma, copper production increased approximately 6% quarter-over-quarter to 8,964 tonnes as the 27% increase in plant throughput more than offset the planned decrease in processed grades. Looking to the balance of the year at Tucuma, we expect sustained higher throughput rates to increase overall processed tonnes, while copper grades are expected to moderate in accordance with the mine plan.

As a result, production is expected to be modestly higher in the second half, while C1 cash costs should remain relatively stable, supporting our maintained full year production and cost guidance for Tucuma. As Makko discussed, we completed the expansion of Tucuma 3 existing filter presses in June. We continue to expect the new 3 modular filters to be delivered through the third quarter and commissioned during the fourth quarter. The combined initiatives are expected to increase filtration capacity and support higher plant throughput as we exit 2026.

At Xavantina, completion of the ventilation and cool tie-ins supported higher mining rates, increased throughput and improved access to higher-grade stopes beginning in May. We have these benefits to become increasingly visible through the second half as mining rates continue to improve quarter-on-quarter. During Q2, we also advanced process optimization work at Xavantina processing plant to improve plant recoveries and increase efficiency. This work included a modest change to the overall process to achieved as well as new investments in flotation cells and the new Falcon concentrator.

Our quarter-on-quarter increase in recoveries reflect these improvements and ongoing optimization work. For the remaining of the year, we expect mining rates and throughput to increase significantly. Approximately 65% of full year mine gold production is expected in the second half with unit cost declining as production increases. We are focusing on delivering value from our historical gold concentrate initiative. During the second quarter, we recovered 11,860 ounces of gold with sales volumes increasing significantly from Q1. We expect volumes to continue benefiting from dryer seasonal conditions, as well as from the mobile filter press and industrial dryer we successfully commissioned at the end of the quarter.

I will now turn the call over to Wayne to walk through our financial results.

Thank you, Gelson, and good morning, all. Our second quarter financial results reflected solid copper production, strong metal prices and a 65% quarter-on-quarter increase in gold sales. These factors drove quarterly revenue to $284.3 million, up 8% from the first quarter. As Makko noted, cash flow from operations increased to $138 million, while adjusted EBITDA increased to $144 million. This stronger cash generation has provided us with the financial capacity to accelerate debt reduction.

Net debt declined by $38 million during Q2 to approximately $453 million, while last 12-month adjusted EBITDA increased to $533 million. Together, these factors reduced our net debt leverage ratio to approximately 0.8x. We continued that progress after quarter end, repaying an additional $25 million on our revolving credit facility in July, bringing total repayments in 2026 to $60 million. Our liquidity position also improved during the period, increasing $36 million to $182 million, including $102 million of cash and cash equivalents and $80 million of availability under the revolver.

Turning to foreign exchange. While the stronger BRL continued to impact our reported operating costs and capital expenditures during the quarter, on a cash basis, our hedge program worked as intended, generating $13 million of realized gains, bringing the total gains for the first half of the year to $20 million. The hedge program is designed to protect approximately 70% of our consolidated full year operating and capital costs at an average floor of BRL 5.54 per U.S. dollar as described on Slide 8 of our results presentation.

Assuming an exchange rate of $5.10 through year-end, we expect the hedge book to generate an additional $20 million to $25 million of realized gains, resulting in potential full-year gains of approximately $40 million to $45 million. While these gains substantially mitigate the cash impact of the stronger real, they are not included in C1 cash costs. As a result, reported unit costs remain sensitive to the local currency and to inflationary pressures on inputs such as fuel, consumables, transportation and freight.

If current currency and inflationary conditions persist through year-end, we estimate potential incremental impacts of approximately $0.10 per pound on reported consolidated copper C1 cash costs and approximately $100 per ounce on reported mined gold C1 cash costs at Xavantina. Again, the cash impact associated with the stronger real is expected to be substantially offset by realized gains from the hedge program.

Turning to capital expenditures. We have updated full year consolidated guidance to $285 million to $330 million, an increase of $10 million from our previous range. The increase reflects the approval of a new power line at Xavantina. As Makko discussed, this investment is expected to strengthen site infrastructure, support future growth and reduce ongoing power transmission costs once operational.

If current currency and inflationary conditions persist, we estimate a potential incremental impact of approximately $20 million to $25 million on reported capital expenditures. The cash impact associated with the stronger real is also expected to be substantially offset by the hedge gains I just discussed.

With that, I'll pass the call back to Makko for some closing remarks.

Thank you, Wayne. Before we open it up to questions, a few points I would like to leave everyone with this morning. First, our operations are performing well, and we are positioned to deliver on our full year guidance with stronger performance at both our copper and gold operations expected in the second half of the year. Second, with strong cash flows, we expect to continue to deliver on our commitment of deleveraging our balance sheet. And third, we are rapidly advancing Furnas, where we are on track to complete the Phase 3 drill program well before year-end and deliver a pre-feasibility study in 2027.

With that, we'll open the line for questions.

[Operator Instructions]

Operator, you can open the line for questions.

Yes. Are you not hearing me? [Operator Instructions] Sorry? Are you able to hear me now?

We seem to be having some technical difficulties here. Just stay tuned. We're trying to open the line here for questions. Thank you.

I'm sorry, can you hear me now? This is the operator. Are you able to hear me now? Okay. I'm getting worried that everyone else that others in the call can hear me. So what I'm going to do is ask the presenter line to reconnect. Perhaps the issue is on their end. So, if the presenter -- I'll just ask them now. Please standby, we'll get this resolved. Okay. We have our presenter line reconnected and they are able to hear me. So, let's get the question-and-answer session underway. [Operator Instructions] And our first question is from Matthew Murphy with BMO Capital Markets.

First question would be on the Tucuma tailings expansion. Can you just remind me what expansion was completed? And then what timeline are you currently looking at for adding these filters in the second half?

Yes. Hey, Matt, apologies for the delay there, everyone. So, the expansion that we completed so far was with our existing circuit. So, during the quarter, we added additional filtration plates to our 3 existing filters. That's about a net 8% improvement to tailings filtration capacity, and that was completed successfully during the quarter. Right now, our 3 modular filters are expected to arrive on site this quarter and be installed and operational in the fourth quarter.

Okay. Got it. And then on Xavantina, the addition of a dryer and filter press, what could that do for your Q3 concentrate sales?

Yes. Look, obviously, under the confines that we're at, we were unable to provide forward-looking guidance as we've talked about multiple times. That's related to the technical and scientific information that we have available. But what I can tell you, Matt, is that if you look at June and July, when we had those operational, both those months, we achieved more than 7,000 ounces of gold. And I think that speaks really well for Q3 and through the rest of the year.

The next question is from Guilherme Rosito with Bank of America.

So, my first question is on Xavantina and maybe, Makko, if you could just explore -- you haven't adjusted your production guidance and it sounded pretty confident on the call. So, maybe if you could just give us some color on what you guys are seeing already from July at Xavantina, what gives you -- makes you so confident that you're reaching guidance even after a rough first half of the operation? And maybe just if you could comment on that and what you guys are seeing in terms of grades and because they've been pretty volatile ever since you made the mechanization investments, right? So, maybe if you could just touch on that a bit. And second question is we're at 0.8x net debt to EBITDA, you generated cash this quarter from everything that looks like second half is stronger in production, therefore, in cash generation, so you're probably moving lower there. So, what's next now? What are your priorities in terms of capital allocation? Is this the time to maybe we can discuss shareholder returns or anything else? So, I just wanted to pick your brains there.

Perfect. Yes, we'll go through those in detail. A few things to unpack, but starting with Xavantina. I would say, look, as taking a step back here, as we discussed last quarter, we made very, very important investments at Xavantina in ventilation and cooling. What we've seen since we completed that tie-in is that we've been able to get back on track in terms of development rates. The reason that we're focused on the second half of the year at Xavantina and why we firmly expect to have a better second half is when you look at the stopes that we're developing into, particularly in San Antonio, we're developing into stopes that are higher grade, and they're also much thicker.

What that translates to in operational terms is that every meter of development that we're doing now is releasing more ore to feed to the mill. And so, when you look at where we've been in the last several months, again, sort of May, June, July, all hitting those development rates that we need to achieve and really working towards getting these higher-grade stopes, larger stopes into the mine plan as we expect. Obviously, that we had a slightly slower ramp-up than we anticipated at the end of Q2, both in development in terms of getting to those development rates that we're achieving now and also as a consequence, mining rates -- but again, I think really the main thing to look forward to is how we see that translate into second half production at Xavantina.

And I was just there with Gelson 2 weeks ago and really pleased to see the progress the team is making on site there to improve performance. Again, not just at the mine as we discussed, but as Matt asked, our concentrate -- gold concentrate sales. And as I mentioned, we're seeing really good progress on the -- not only the end of the rainy season, but also the filter and dryer that we put in place and achieving elevated levels for 2 months. Obviously, 2 months don't make a quarter and don't make a year. So, we've got a lot more work to do, but we're feeling good about where the mine is positioned and certainly where the gold concentrate program is positioned. This quarter, we -- I talked a little bit more about the operating costs associated with gold concentrates and as you can see, that's a very, very high-margin material and hence, our focus on delivering that to the bottom line.

Hopefully, that answers your question, Xavantina. Happy to expand on that in a follow-up question. But getting to your second point on leverage and cash generation, absolutely, I'd say the cash inflection of our business, it's clear that it's already happened. We saw that happen in Q2 and in July, where we made another $25 million repayment on our revolver. Our objectives for this year that we set out were threefold. So, number one, to get below 1x leverage. We did that at the end of Q1. Obviously, coming at 0.8, we're progressing below that level. And step 2 is to pay down our revolver. As we mentioned, we paid to date $60 million in that revolver through the end of July. That means we have an additional $95 million to go.

I think from our perspective, as a management team, we want to make sure that, that pace continues to decrease. We're making excellent progress so far. I think it's still too early to talk about shareholder return program. But obviously, it is top of mind, as everyone knows on this call, and we've talked about many times, Ero Copper was built around a philosophy of return on invested capital, and that certainly is one of our objectives. But we want to see us really achieving that second milestone, which is to pay down our revolver, and we've made excellent progress so far this year. We've got a bit more to go.

The next question is from Craig Hutchison with TD Cowen.

I wanted to ask about Tucuma and specifically, I guess, around the reserves. It's been about 5 years since you guys provided an updated reserve report. And over that period of time, obviously, copper prices have nearly doubled here. Just curious whether there's a plan to put up an updated report, whether you guys have done some drilling there and whether there's a potential to see some of the measured indicated resources come into the mine plan over the next couple of years.

Yes. Thanks for the question. For sure, that's something top of mind, and we've been working. We do expect to publish a technical report on Tucuma this year. So, stay tuned for that.

The next question is from Emerson Vieira with Goldman Sachs.

I have 3 questions maybe. First one on Caraiba. I think despite the low production grades and FX impacting costs, I mean, Q1 declined quarter-over-quarter, but it was helped by lower TC/RCs, right, that offset those impacts. You guys mentioned that you were able to achieve a $20 million savings due to renegotiations in TC/RCs. So, I just want to confirm if going forward into second half, TC/RCs will continue to be running at those lower levels that we saw in the second quarter and maybe providing some offset to other cost pressures? That's the first question.

Yes, sure. It's Wayne speaking here. I think it's important to point out, yes, we did get the benefit of renegotiated contracts for our concentrate sales. We sell our concentrate on term contracts, not on spot contracts. And so some of our historical contracts rolled off, and we were able to negotiate obviously much more favorable terms given the current environment. I would say though the $20 million you referred to is the total savings. We didn't obviously benefit, we didn't get the full benefit of the $20 million in Q2. So, that benefit will be spread over the remainder of the year. And we are -- our contracts allow us to basically sell both mines production into each contract. So, that benefit you may see depending on shipping schedule and depending on which contract we're selling into, you could see some of that benefit flow to Tucuma in the second half of the year rather than Caraiba.

Right. So, my second question goes on Tucuma. Can you please comment on what was the exit throughput at the plant? And what could be, I don't know, incremental throughput in the second half, given that you have increased the tailings filtration capacity by 8%.

Yes. I would say we're really encouraged by what we're seeing at Tucuma. If you look at where we got to in Q2 and some of the levels that we're achieving there, I think the most important thing to probably look at is if you take what we achieved in the second half of the quarter into July, we've been able to maintain a rate of between 250,000 and 260,000 tonnes per month. I think what's particularly noteworthy is that in July, we achieved a rate of throughput right around 250,000, but that included 5 days of downtime for a mill liner replacement. And so, I think we're really pleased to see the daily progress that's happening there and increasing production rates. And again, we think that bodes well for the second half of the year as we outlined in our guidance discussion.

Okay. Just last one here. On the capital allocation, just a follow-up actually. The company has $120 million in the revolving debt facility, right? And if we just assume, I mean, the same pace of amortization, does it make sense to believe that the company will be in a better position by 3Q, 4Q of next year to maybe update us on the shareholder distribution policy, please? Does it make sense about the timing?

Yes. Look, I think if you go back to whenever we talk about shareholder returns and the commitments we made, it was a 3-step process. So, number one, get leverage below 1, which we achieved in Q1. Obviously, we're doing great there. The second was to pay down our revolver. Again, coming back to the payment we made in July, that brings year-to-date total payments on our revolver to $60 million, meaning that we have $95 million left to go in that program. I think the pace of that second step obviously depends on commodity prices. We continue to see very strong tailwinds there and also operational performance in the second half of the year. So, I would say stay tuned on both those things, and we'll give more clarity on what that looks like later in the year once we achieve the second step.

The next question is from Fahad Tariq with Jefferies.

On the Xavantina concentrate, can you just remind us where we are on the remaining 80% of the stockpiles that were not sampled and when we should expect the next update?

Yes. Thank you. Look, just going back to Q4 last year for a bit of context, I'm sure everyone on this call is aware, but that was a value initiative that we announced in October of last year. At that time, we had sampled 20% of the known volume to develop a resource estimate. For -- as we've discussed before, under NI 43-101, we can't provide forward-looking guidance on information that's not supported by a 43-101 estimate. So really, unfortunately, unable to provide that information and clarity that you're looking for other than to say we've seen really strong sales in June, July coming out of dry season on the back of our filtration and concentrate program.

We continue to expect this program to last through at least mid-2027 as we put out early in the year, and we see really strong sales in the second half, again, with the effort that we put into the filter press and dryer.

Okay. Great. And then just maybe a high-level question. Given where copper prices are now, is there anything in the portfolio that you're looking at differently, whether it's a brownfield opportunity or additional exploration spend at a particular asset? Just wondering if you're thinking about anything differently given how elevated copper prices are.

Yes. I don't think it's fundamentally changed the way we think about our business. We've continued to invest in exploration across the portfolio. It's been part of our strategy from day 1 when we started the company. Obviously, we've -- if you look at where our exploration dollars are allocated today, obviously, we're putting a big focus in Furnas as we've spoken to, but we've continued to allocate exploration dollars to earlier-stage opportunities throughout our portfolio. The last decade, we've built a really strong knowledge of the regions that we're operating in, and we're seeking to leverage those through some earlier-stage opportunities. But again, that's not a change in strategy that's continued over the last couple of years. Like could we, in the second half, see some of those programs getting a little bit more capital allocation perhaps but it's not going to fundamentally change the way that we think about our business or how we're operating.

The next question is from Stefan Ioannou with Cormark Securities.

Just back on Xavantina, just you mentioned this is kind of the first quarter where we're seeing reported C1 and AISC costs for the concentrate gold production. And just looking at the numbers for the latest quarter, should we sort of interpolate those as sort of a steady state run rate for costs? Or do you think they could come down even further going forward?

Yes. Look, I think they're pretty steady state. Obviously, there's a -- it's mostly variable costs, right? Because if you look at the component that makes up that C1 the overwhelming majority is going to be on transport costs. So, we don't see much of an opportunity even with increased sales to reduce those costs further. We obviously now are operating the filter and the dryer, which has increased that cost relative to where we were last year. But as you can see, $700 all-in sustaining cost at $4,200 gold is a pretty healthy margin by any means.

Definitely, definitely. And just before I got you, sorry, apologies to mine, maybe just one housekeeping question. Just when Wayne was talking about the FX hedge program, sorry, Wayne, did you say that the effect of the hedges are reflected in the C1 cash cost or not?

They are not reflected, Stefan.

Not. Okay, okay, okay.

Yes, they're below the line. But obviously, the way we run the business and we think about the business is around the exchange rate that we guided to at the beginning of the year, which was $5.40, and we structure our hedges to protect that level. So, that's why you see the fairly significant gains year-to-date.

The next question is from Orest Wowkodaw with Scotiabank.

I was wondering if you could give us an update on the shaft sinking project at Caraiba and what the time line is for, I guess, that to go into operation next year.

Yes. Thanks, Orest. Good question, and we'll have the opportunity in a few weeks to be the perfect person to review the progress there. Right now, we're just over 1,100 meters below surface. We've continued to see our sinking rate improve month-on-month since we started connecting that third leg, which is a fairly significant milestone in that project. I think the thing to keep in mind about the shafts, we started engineering on this back in 2020. The last shaft that was built at Polar was in 1986, and we're making this investment for the next several decades, not for one quarter or the next. But as we said last quarter, our objective is to get to shaft bottom by year-end with the progress that we've made so far and increasing. I talk to Gelson about this nearly daily. You look at some of the projects that are happening in the world today. I think that the team needs an extra month or 2 to make sure that we can deliver that project safely. We're going to go ahead and make that call 10 times out of 10.

So, we'll have the opportunity to be on site in a few weeks to read that progress. I would say that, as I said, our sinking rate is improving. We're continuing to make significant improvements month-on-month. We need to see a bit faster pace here through the balance of the year to hit that milestone, but we're going to make sure that we do that safely and deliver that project for the next several decades.

No, that all totally makes sense. And then can you give us what about the budget? Where are you in terms of the capital spend on that? And are you seeing inflationary pressures?

Yes. We're not seeing much inflationary pressures there. We've got a small team that's on site that you'll meet that are coming in from South Africa. It's a third-party contractor that's doing that sinking rate. We'd have the same type of exposure that we do to our operations in terms of diesel prices because the hoist electrical powered. So, we're not seeing much in the way of inflation on the shaft itself. Obviously, if we make the decision to slow that rate down to make sure we deliver that project safely, there will be an incremental cost component, but it's relatively minor. And we think that if you look at where we're at against that budget, as I've said many times, we're very much through peak CapEx in our business. And so irrespective of kind of where we land through year-end, we see that capital coming down significantly into next year with this year being the last big year of CapEx that we have to spend.

Okay. And just to clarify, how much was left in the budget as of June 30 for that project?

Yes. So, if you look at what we said early on in the year, we had about $80 million to $90 million to spend this year with a stub into next year. We're about halfway through the budget on this year's spend. And what will be -- next year, we expect is a stub year of CapEx, right, as we switch that shaft over from its thinking phase into its operational phase.

[Operator Instructions] Our next question is from Rafael Barcellos with Bradesco.

My first question on Caraiba. Can you please provide like an update on the Pilar shaft in terms of the potential for productivity gains going forward and the timing for these gains? And of course, more color on what you're expecting in terms of the ramp-up of this project. And then moving to capital allocation, just a quick follow-up. I mean the company will probably turn into a net cash position by the end of the year. So, I'm just wondering if you could discuss more shareholder remuneration versus the preparation for starting the investment plans for Furnas. How do you expect to balance those things that could be interesting.

Yes. Perfect. Thank you. I think as Orest alluded to the shaft is making good progress. We continue to expect the full first year of full benefit to be 2028. Obviously, next year, '27 will be focused on transitioning that from the sinking phase into the operational phase after we reached shaft bottom. I think the easiest way to talk about the benefit is to give you the current experience in the future state. So, if you go right now to the deeper part of Pilar mine and you drive down the ramp, that can be -- can take up to about 1.5 hours. As you well know, underground mines in Brazil operate on 6-hour shifts. What that means in practical terms is we're starting out with 50% availability of our workforce in the deepest part of the mine. Obviously, we operate at multiple different levels. So, that's not true for the entire operation. But in the deeper higher-grade zones, that's the reality today.

When the shaft is completed, it's been designed to get our entire workforce in and out of the mine in under an hour. So, we expect a very significant improvement in workforce productivity, improved access, improved ventilation. It will be a transformational investment that, again, if you go back to when the last shaft was built 1986, this one happening now, it's going to support the operation for decades to come. And there's no one more excited about finishing that project than me, having been involved with this since 2019, and we're making good progress. As I said to Orest, we're going to make sure that we deliver that project safely and on budget, and that's what we're committed to doing over the next -- the second half of this year and into next year.

On the cash position and shareholder returns, yes, look, we're excited as everybody here. We're making great progress on our objectives that we committed to in 2025. I think the way that I would characterize our priorities in terms of capital allocation, we're still focused on that second step, which is paying down our revolver, right? We have $95 million left to pay down after the payment that we made in July. We're continuing to accelerate Furnas. It's not -- I would say it's not one or the other. If you look at where we're at in Furnas, we're going to finish effectively a 5-year drill program in the better part of 2 years, right? If you look at when we started drilling to this in October 2024 to the end of this year, we're going to complete all the 90,000 meters that were envisioned under that project, where we completed the PEA. We're rapidly advancing the PFS. So, I wouldn't look at it as an either/or. Obviously, if we see opportunity to accelerate Furnas and put more capital to work there, that's a great place to put capital. But we're working flat out on that project already. And so, taking a big step back, again, Furnas, first priority here, well, first priority was to get to below 1x leverage. We did that. Second priority, pay down our revolver. And number three, I think, come back to the market later this year when we've met that second milestone, which is to pay down our revolver.

If I may, like one follow-up, still on this part of the capital allocation topic. How do you see Ero Copper in the middle of these recent M&A trend that we have seen over the past few years in the copper sector. I mean, how do you see the company in this environment?

Look, as I always say, we have a corporate development team. They have a very, very important job in organization. We look at opportunities in the Americas for growth. We do that pretty thoughtfully in the lens of what our existing portfolio looks like. We have, I would say, one of the better, if not the best, from our perspective, development projects in the market, which is Furnas. We have an incredible pipeline of early-stage exploration projects that our exploration team is working on. And so, we look at opportunities outside of our business through that lens. So, we take reviews in the Americas very, very seriously. But I think our focus is really on executing on our own portfolio. We -- as I said, we have a corporate development team. They have an important job to do in our company, but we're really happy with where our portfolio sits today, and that's what we're focused on executing.

This concludes the question-and-answer session. I'd like to turn the call back over to Makko DeFilippo for any closing remarks.

Yes. Thank you, everyone. As always, our team is available. We appreciate your patience as we redial back in here. And just one last reminder on our Capital Markets Day in Sao Paulo. Look forward to seeing many of you there. Thank you very much. Have a great day.

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

Thank you for standing by conference operator. Welcome to the Ero Copper First Quarter 2026 Operating and Financial Results Conference Call. [Operator Instructions] The conference is being recorded.

I would now like to turn the conference over to Farooq Hamed, VP, Investor Relations. Please go ahead.

Thank you, operator. Good morning, and welcome to Ero Copper's first quarter earnings call. Our operating and financial results were released yesterday afternoon and are available on our website, along with our financial statements and MD&A for the 3 months ended March 31, 2026. A corresponding earnings presentation can be downloaded directly from the webcast and is also available in the Presentations section of our website.

Joining me on the call today are Makko DeFilippo, President and Chief Executive Officer; Wayne Drier, Executive Vice President and Chief Financial Officer; Gelson Batista, Executive Vice President and Chief Operating Officer; and Courtney Linn, Executive Vice President, External Affairs and Strategy.

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

With that, I'll now turn the call over to Makko DeFilippo.

Thank you, Farooq, and good morning. These days, it is difficult to know exactly what each morning's news will bring. So let me start by saying I appreciate all of you dialing in for this. Before diving into the quarter, I wanted to share 3 observations on the back of several weeks of travel throughout Brazil, New York, Boston, comparing notes with Wayne from [ Susq ] and a recent trip to Washington, D.C., all of which have implications for our sector and are highly relevant for Ero.

First, we see broad enthusiasm for copper backstopped by tight supply and a serious lack of quality development assets at a time where there is a structural shift occurring across the copper demand landscape. Second, sector-wide cost inflation is not only topical, it is a ground truth reality. While we are better inflated than many of our peers, and I'll come back to that shortly, we're not immune from it. Third and perhaps most relevant for our business is that Brazil is getting a lot of attention. The world has woken up to Brazil's deep capital markets, its economic diversity, resource production capacity and its relative strategic positioning in an increasingly complex world.

Capital inflows into Brazil have unsurprisingly against this backdrop, resulted in a considerable strengthening of the Brazilian real against the U.S. dollar, which has a direct impact on our business. These observations matter because a lot of our work and strategy over the past year has been focused on making sure that Ero is as well positioned as possible to benefit from these copper market tailwinds, advancing our long-term growth strategy while protecting our bottom line from cost and currency pressures.

I see this happening in 3 ways. First, our operating portfolio prominently features the right mix of commodities at the right time in the sector, and we are developing an extremely high-quality long-term asset in for us. Second, our operations do not rely on sulfuric acid. A considerable portion of our production base is from underground, and we operate in Brazil, where power is majority sourced from renewables, there are well-established local supply chains and diesel is subsidized. Third, with Brazil and the global spotlight, initiatives we undertook last year, particularly around foreign exchange rate risk management are serving to offset cost impacts from the rapid strengthening of the BRL we have seen so far this year.

Circling back to Q1, from my perspective, this is the first quarter that shows our portfolio of investments and risk management in action. It shows where those investments are delivering and where there is more progress to come.

Before I turn the call to Jelson and Wayne to cover the details on our Q1 performance, I want to offer some perspective on what a difference a year makes. Looking back on the last 12 months, our consolidated copper production is up nearly 40% and gold sales volumes when including gold concentrates are up 77% year-on-year. Quarterly revenue and adjusted EBITDA over the same period are up 110% and 100%, respectively. Our focus on debt reduction has resulted in year-on-year decreases in net debt of approximately $70 million, while our leverage ratio has reached targeted levels of 1x, down markedly from approximately 2.4x this time last year.

Most importantly, over the past year, we have put considerable focus on transforming safety across our operations. A few weeks ago, while in Brazil, I was with our teams at Tucumã to mark a significant milestone, 4 years without a lost time injury, representing more than 11 million hours worked from the moment we first broke ground. This milestone is rare in our business. I am cognizant it was earned shift by shift, and it belongs to our entire organization, past and present.

Operationally, during the quarter, our mines tracked largely to plan. Across our copper operations, Q1 production and cost performance have us well positioned against full year guidance. At Xavantina, Q1 was the trough quarter we expected due to necessary ventilation and cooling investments as we advance that operation forward. With that work substantially completed by the end of April, we expect to see mining rates and throughput show a step change increase in the second half of the year, supporting full year gold production and cost guidance. Gelson will speak to this in more detail.

As Wayne discussed -- and as Wayne will discuss, our financial results in Q1 were bolstered by strong copper and gold prices, while our foreign exchange risk management program helped to mitigate some of the external cost pressures we are seeing elsewhere across the sector.

With that and to ensure sufficient time for questions, I will turn the call over to Gelson, who will walk you through our operational performance, our production outlook for the remainder of the year and an update on key projects.

Thank you, Michael, and good morning, everyone. As Marco said at the outset, the work we have done across our operations is starting to come through in the numbers. At Caraíba, mill throughput in Q1 exceeded 1 million tonnes. I would highlight this is the only second quarter in the history where we have achieved that level with the first being Q4 of last year following the completion of our debottlenecking program.

Copper production declined from Q4 on lower head grades, reflecting planned stope sequencing at Pilar and reduced our feed from the Surubim open pit, where heavy-than average rainfall in January and February constrained mining rates. Caraíba's Q1 cash cost for the quarter of $2.79 per pound reflected these operational dynamics as well as the impact of a stronger BRL.

Looking ahead at Caraíba, we expect processed tonnes and grade in Q2 to be broadly similar to Q1 with strong production in the second half, driven by a normalization of mining rates and access to deeper and higher grade benches at Surubim as well as higher grades and tonnage from Pilar and Vermelhos due to planned stope sequencing. Q1 cash costs are expected to decline in step with high grades in the third and fourth quarters, supporting our reaffirmed full year cost guidance.

At Tucumã, copper production decreased modestly from Q4 on lower process grades, partially offset by higher throughput. Tucumã's C1 cash cost for the quarter was $1.97 per pound, in line with our expectations as well as full year guidance. Looking to the balance of the year at Tucumã, we expect processed tonnes to increase from Q1 levels with processed copper grades projected to moderate. As a result, production is expected to be slightly weighted towards the second half on higher throughput with C1 cash costs expected to be relatively stable for the year, supporting our reaffirmed full year guidance at Tucumã.

With respect to Tucumã tailings filtration circuit, we have 2 initiatives underway to unlock further capacity and increase overall throughput. First, as you know, we have placed orders for 3 new modular tailings filters. We continue to expect delivery of these units on site during the third quarter and for them to be operational during the fourth quarter. In parallel, we are in the process of adding additional filter plates to each of our 3 existing filter presses, which is the fulfillment of orders placed this time last year.

The expansion of our existing installations will result in an increase in the capacity of each installed filter press by approximately 7%. Taken together, these 2 initiatives are expected to meaningfully increase Tucumã's total tailings filtration capacity and allow us to achieve a significant increase in plant throughput as we exit 2026. To reiterate, while there continues to be potential for these 2 initiatives to deliver throughput benefit in later part of the year, they are not reflected in our 2026 guidance.

At Xavantina, this quarter was transitional as we completed necessary upgrades of our ventilation and cooling infrastructure required to support higher mining rates going forward, particularly as the mine gets deeper. While this investment impacted first quarter gold production and costs, we expected Q1 to be the weakest gold production quarter of the year due to this critical infrastructure work alongside additional ground support investments made to enhance operational performance beginning in the second quarter.

Looking to the remainder of the year, we expect mining rates and throughput to pick up through the end of Q2 and maintain higher rates in Q3 and Q4. As a result, we expect 60% to 65% of Xavantina's production to be in the second half with cost declining significantly from Q1 levels and allowing us to maintain full year operating production and cost guidance at Xavantina. We also sold approximately 4,300 ounces of gold and concentrate in Q1.

Concentrate sales volumes declined from Q4 due to the rainy season, which impacts our ability to drive the material before transporting to port. We expect gold concentrate sales volumes to benefit significantly from the dryer condition we are experiencing now. Currently on site, we have approximately 12,000 tons of concentrate in the drying phase.

As we have outlined on Page 9 in our results presentation, while we are now firmly in the dry season, we are in the process of finalizing the installation of an industrial dryer and a mobile filter press to proactively support continuity of concentrate sales through the next rainy season.

With that, I'll turn the call over to Wayne to walk through our financial results.

Thank you, Gelson, and good morning all. Revenue in the first quarter was $263.2 million, up from $125.1 million in Q1 2025, driven by stronger copper production from both Caraíba and Tucumã, higher realized prices for both copper and gold and the contribution of gold concentrate sales at Xavantina.

Our consolidated copper C1 cash cost for the quarter was $2.39 per pound, up approximately 8% year-over-year. This increase reflects, in part, a stronger Brazilian real against the U.S. dollar, which impacted our reported C1 costs in Q1 by approximately $0.06 per pound relative to our budgeted BRL 5.40 rate. This real impact was fully offset on a cash flow basis by the $7.3 million realized gain from our foreign exchange hedge program during the period.

Page 8 of our results presentation shows the movement of the Brazilian real so far this year against our existing foreign exchange costs, which protects our cash flows below the BRL 5.54 level. If the real remains at current levels, the impacts on reported C1 cash costs would be offset by an estimated realized foreign exchange gain of approximately $45 million to $50 million for the full year. From an absolute cost perspective, we are reasonably well insulated for the reasons Marco mentioned earlier.

As you can see on Page 7 of our results presentation, which lays out our consolidated operating cost structure, the ongoing Middle East conflict has the potential, all else being equal, to add $0.05 to $0.10 per pound to operating costs if key inputs such as diesel, consumables, road transport and ocean freight stay at current levels. That said, we are not seeing any supply-related shortages at this time.

Turning to earnings. Adjusted EBITDA doubled year-over-year to $125.2 million for Q1. Adjusted net income attributable to shareholders was $72.4 million or $0.69 per share on a fully diluted basis. From a balance sheet perspective, we ended the first quarter with $91.2 million of cash and $55 million available under our senior revolving credit facility for a total available liquidity of $146 million. We continue to deleverage our balance sheet with net debt of $491 million at the end of Q1, an $11 million decrease compared to year-end 2025 and a $70 million year-over-year decrease.

Combined with significantly higher 12-month trailing EBITDA, this resulted in a material improvement in our net debt leverage ratio, which decreased to approximately 1x from 2.4x at the end of Q1 2025. Our top capital allocation priority remains the continued deleveraging of our balance sheet. Having reached our target net debt leverage ratio of 1x, the $145 million currently drawn on our revolver is our next focus for debt reduction. Beyond deleveraging, we are funding our internal growth projects and over time, expect to begin returning capital to shareholders. As we advance these objectives, we look forward to providing the market with additional color on our broader capital return framework.

With that, I'll pass the call back to Makko for some closing remarks.

Thank you, Wayne. Before we open up to questions, 2 things I would like to leave everyone with this morning. First, we are focused on executing against our reaffirmed full year operational guidance. The first quarter was aligned with our expectations with our copper business achieving approximately 24% of our consolidated midpoint on the full year, which we still expect to be back half weighted. At Xavantina, we completed a necessary long-term investment in ventilation and cooling and are ramping up concentrate sales volumes now that we are in the dry season.

Second, we've now drilled more than 60,000 meters at Furnas, and it's worth reminding everyone that PEA as strong as it is, only reflects the first 28,000 meters. We are planning a midyear update on our exploration results since then, plus progress on key PFS work streams. So stay tuned for that.

With that, operator, we will open the line up for Q&A.

The first question comes from Fahad Tariq with Jefferies.

You mentioned quite a bit about Brazil and the dynamics there. Can you just talk about what you're seeing in terms of labor inflation?

Yes. Thank you for the question. So I think more broadly speaking, I'll give a bit of nuance about our labor negotiations, which happen annually in the fall. Those are typically set around the standard inflation rate. So going back to last year in the fall, we negotiated on average, a 5% increase on labor year-on-year. If you go back over the last 10 years, this was historically absorbed by the depreciation of the Brazilian real.

Obviously, as Wayne alluded to, and we spoke in the prepared remarks, the real strengthened significantly and hence, the hedge program that we've put in place to help offset some of that inflation. But 5% was the negotiated rate last year in the fall.

Okay. Great. And just staying on the topic of just input costs. The slide is really helpful, so thanks for presenting that. Any issues on supply? So the cost part, I understand, but are there any concerns around any of these input supplies coming into Brazil?

No concerns at this time. We monitor that pretty closely. Our organization lived through both COVID and a trucker strike in the past several years. And so we've been able to dust off those playbooks and proactively build up key consumables as a risk mitigation across all of our assets. That's something that we continue to monitor pretty closely. As I said, deep knowledge across the organization and what to do in these type of environments. And so we proactively increased our reserve of imported consumables into Brazil. But again, we see no issues at this time.

The next question comes from Orest Wowkodaw with Deutsche Bank.

The comment earlier about there's currently, I think, 12,000 tonnes of gold concentrate drying. Is that indicative of what you expect to sell in Q2? And I'm wondering if you could provide any guidance for the year with respect to contained ounces in the gold concentrate.

Yes. Thank you, Orest. Both great questions. We do have 12,000 tonnes drying as we saw in our Q1 performance and looking back in Q4, the rate of drying and transportation is a function of the sunny days during the month. As you can see on the Slide 9 that we prepared showing average rainfall, obviously, May, June, July and August have very low rainfall on average, less than 10 millimeters. And so we're expecting to ramp up sales volume pretty meaningfully here in Q2. But in terms of giving the exact amount, it's going to be predicated by the amount of sunny days during that time period. So hesitant to do that for obvious reasons.

When I look ahead to Q4, as Gelson mentioned and as shown on Slide 9, we did make progress on some installations of equipment we ordered last year to help ensure continuity of deliveries and shipments through next year's rainy season. But again, for reasons that I think everyone on this call is well aware, we're unable to provide forward-looking guidance on concentrate sales. What I can tell you is that we have seen nothing to date in terms of grade that suggests anything different from the resource that we put out on the sample volume.

So we still see right around 1 ounce per tonne or a bit higher as being the benchmark there. And so I haven't seen any evidence that the grades are lower. But again, giving exact delivery schedule and timing still requires additional sampling from the material that we're extracting and then obviously, additional weather, favorable sunny weather to get that support.

As a follow-up, just as your free cash flow starts to accelerate here, I think Wayne talked about the revolver being the first focus in terms of paying that down. What -- can you walk us through your thinking on cadence after that with respect to either debt reduction or capital returns?

Yes. Thanks, Orest. I mean, obviously, we've achieved our net leverage ratio, as I said, of 1x, obviously, bringing the revolver down further will reduce that leverage even further. I think as we start to think about Furnace and the longer medium-term plans for that asset and with that project, we will keep in mind what those potential requirements are. But I would say all things else being equal in this price environment, the free cash flow generation is going to accelerate meaningfully. And hopefully, we'll be in a position here in the not-too-distant future to talk about our plans for returning capital to shareholders.

The next question comes from Stefan Ioannou with ATB Cormark.

Just wondering, is there any updates or color on just how the shaft project is going at Pilar.

Yes, Stefan, I'll jump in and then Gelson can carry on if I missed any details here. Shaft is progressing well. As we discussed last quarter, we've now finalized the completion of the second leg. So we're starting the third and final leg of the shaft, which is a very important connection for us that was completed this year. Still targeting the shaft reaching shaft bottom at the end of this year or early into next year. And that's really the critical path for that project.

When you look at the surface installation, substantively complete, the underground installation of conveyors and crusher chambers or the excavations are complete. We're installing that equipment very soon or in the process now. And so we're pretty happy with the progress. As I said, a critical path for us is reaching shaft bottom at the tail end of this year or early next year so that we can transition from sinking into transitioning that shaft over to the operational phase.

The next question comes from Mateus Moreira with Bradesco BBI.

First question on your sales versus production gap for copper specifically. I noticed that sales for the quarter came above production figures for both Caraíba and Tucumã. I was just wondering how should we think about the gap between sales and production going forward? That's the first question.

Thanks for the question. And look, obviously, sales and production for us do on a quarterly basis, vary slightly. If you look at the volume of concentrate we produce, it's not as significant as some of the larger copper producers. So we sell in 10,000 tonne lots. And so depending on the timing of when we invoice and we close a lot, you can see some inventory buildup. We did have inventory build in the back end of Q4. We sold early in Q1.

So that timing will always vary just depending on how we assemble our lots. I mean, obviously, we try our very best to sell everything we produce. But sometimes it's just the timing just doesn't work.

Okay. That's clear. And then moving to Tucumã. I mean, regarding the tailings filtration capacity at Tucumã, how has that been progressing? You previously shared that the equipment has been ordered and was in manufacturing. Just wondering, is there any updates there?

Yes. Gelson spoke to, equipment is being manufactured. We still expect delivery here in the third quarter. That remains on track. So we're doing work on site now to prepare for those deliveries. And we expect them to be operational in the fourth quarter. I think the most probably salient point for this call is that, that is not reflected in our full year guidance. And I think we've made that abundantly clear, but to stress, it is not included in our full year guidance. But so far remains on track to be operational in the fourth quarter. As I said in our last quarterly call, it's very important that, that equipment is operational for 2027, not included in 2026 guidance.

The next question comes from Dalton Baretto with Canaccord Genuity.

Makko, I thought I heard you say in your comments that your travels took you through Washington, D.C. And I'm wondering if you can add some context around that. So what sort of discussions you're having given that your assets in Brazil? Anything that you can wrap around that?

Yes. Thanks, Dalton. I was in D.C., as you can probably imagine being an operating company, a well-established operating company in Brazil and the focus on diversifying supply chains across the Western world, including Canada and the United States. There is a big focus on investments into strategically aligned countries. You've seen the U.S. government and the Canadian government enact critical minerals programs. We are invited to participate in a discussion around that.

I think at this point, Dalton, there's not much more to say than that. I think the reality is it's an exciting time to be producing copper. It's an exciting time to be producing copper in Brazil and to be building a business in Brazil. We take the relationships with our government partners in Brazil, Canada and the U.S. very seriously. And so we're invited to participate in critical minerals events. We show up in force to do that.

Got it. And then just I wanted to ask about Paranapanema and how they're doing these days and whether given the rise in shipping costs and everything that's going on, whether that's becoming an option to place more concentrate there.

Look, PMA is its own organization. They're working through some of the challenges they have. Obviously, it's a public company. So they disclose what they're doing there. I think the reality in today's market is that the attention on PMA is really one that's more strategic in nature. For our business, the change in global TC/RCs has offset the cost benefit of shipping locally to the local smelter. And so I think when you're looking forward at the future of PMA, and there continues to be a lot of interest in ramping up that operation, I think it's really around the strategic nature of that asset being one of the few smelters in the world and one of the few smelters in the Western world.

So I said we're -- we continue to monitor what happens there. We don't see it as being a huge benefit or impediment to our business in any way. Obviously, it's down the road from us, so we'd like to see continued movement and progress on that. And as I said, there's quite a bit of interest in getting PMA back up and running full steam ahead. We closely monitor the situation there.

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

Yes. So my first one is on the cost. Makko, I know you guys mentioned I was very clear with the sensitivities and hedges, that's really appreciated. But as we look to all the trends that we started the first quarter at a high level, higher than we were expecting for '17, for instance, which I understand is according to plan. BRL 490. We have pressures from potentially chemicals, fuel. I'm just wondering when you look to the distribution of probabilities, does it make more sense for us to expect costs closer to the higher end of your C1 guidance versus the midpoint?

And then my second question is just maybe if you could comment a bit on the discussions around the mine shift in Brazil, what has evolved or not as we approach an election, do you think there's still time for any change to be made until this year? Or is it now a next year story as elections approach and we don't have any climate improve anything?

Yes. Thank you for the questions. Both very good ones. On the cost side, look, I think when it comes to costs being elevated in Q1, particularly Xavantina, but also at Caraíba, I would point to the second half weighting. So we do expect all else being equal for cost to fall back down in line. Xavantina being the biggest outlier, but again, almost pure denominator volume-based when you look at the impact of C1 versus the full year guide.

As Wayne outlined and as we've shown on Slide 7, I believe, of the webcast presentation, the implied impact on diesel consumables that are diesel linked right now at steady state is about $0.05 to $0.10. That's part of the reason that we do provide a cost guidance range is there's uncertainty around those. With respect to the BRL, your guess is as good as mine. In fact, it's probably better than mine at this point. I think what we can say is that we've protected our business against a floor of BRL 5.54, and that's really the most important message for the BRL.

Again, all else being equal and ignoring foreign exchange, given that $0.05 to $0.10 impact that we're seeing and notwithstanding the various gives and take, both on byproduct credits and on FX, I think it's reasonable to assume that we'll be trending at present moment towards the high end of the cash cost guidance range. But again, we have a number of months ahead of us, and it's a very, very volatile time. So I think it's really too early to give a clear steer one way or another, but we do see costs coming down pretty meaningfully as production volumes ramp up in the second half of the year.

On shift change, so for context for the rest of the people on this call, there's a movement happening in Brazil right now and some legislation being proposed in Congress to eliminate the 6x1 shift schedule. And what that means in practical terms is that most of our operators like all industrial operations in Brazil or most industrial operations operate 6 days on, 1 day off and on a 6-hour shift basis.

So the proposal is to, I would say, more closely aligned with conventional shift schedules, meaning that towards 8 hours, that incremental underground time would be a gain for us. I think it would be a gain for our workforce, quite frankly. It's one of those rare opportunities where you have a proposal at the federal level that is good for companies, good for our workforce. And in fact, when you look at what we've done over the last 12 months, all of our surface operations operate on 12-hour shifts. We've made some of those changes within the last 6 months and the feedback from our operators has been fantastic. And so we'd really like to see that legislation get passed through and change.

Obviously, there's a few roadblocks and hurdles to that getting passed. So difficult to say whether it's this year or next year. But given the positive momentum that we're seeing, not only within our own operations, but Brazil more broadly, we're hopeful that, that shift change gets implemented or that legislation gets passed. Again, not included in our guidance. So it's more of a longer-term benefit.

But again, when I look at the continuity of shift change, I look at the feedback from our employees where we have made those changes and moving people to a 4-day on 4-day off rotation has just been such a positive change, not only for operations, but also for quality of life for our workforce. So really love to see it happen. Again, I think it would be a nice boost to productivity, but we're not relying on it for our guidance for this year.

The next question comes from Anita Soni with CIBC.

I think that most of them have been asked and answered, but I just wanted to get a little bit of detail on the grade profile at Xavantina into the back half of the year. I just want to understand how those costs will come down from the level that they were in Q1.

Yes. Thank you, Anita. The main difference we see is really in the 2 halves. So stronger grades second half. I think really, when you look at the first half is really about the change in volume from Q1 to Q2, but we expect grades to be relatively similar with a step-up in the second half. I would say full year, still very closely aligned with reserve grade. So we don't see a major delta in terms of overall reserve grade for this year's production. Obviously, that depends a lot on sequence.

We've got in aggregate, close to 1 million ounces of reserves when you include the resources when you include all categories. So there's a lot of material there relative to our 1-year production. But we see grades this year, full year on a blended basis being fairly well aligned with our reserve grade.

Okay. And then just in terms of the recovery rates, is that kind of the level at around 81%? Or would that also improve into the back half of the year? Just trying to get an understand our recoveries.

Yes. Thank you, Anita. We see that improving for a couple of reasons. First quarter, we did replace some equipment that was aging in our operations. So we put in a new Falcon concentrator gravity concentrator that we expect to increase performance, and we are seeing that. We also are getting a little bit higher throughput volumes, which tends to stabilize the operation and also a little bit higher grade.

So when we look out to the rest of the year, we see recoveries normalizing in the high 80s with this grade profile. While that may be different from prior years, say that obviously depends on the amount of organic carbon that's coming in feed. And so we see the high 80s for this year as being the right number to look at on a normalized basis.

Okay. And then as you go into next year, is that -- would it climb to say the 90%? Or is that the high 80s we should have it?

Yes. Look, we're putting in considerable effort this year to improve operations. I think our target still remains low 90s. That's for sure, still our target. We have a few initiatives ongoing to help achieve that. And I would say stay tuned for that. We hope to be talking around some of those objectives and plans at Xavantina on our Capital Markets Day in the fall.

The next question comes from Emerson Vieira with Goldman Sachs.

So just on China, I just want to understand what is your guys' expectations for good production comparing to the guidance. I mean it's pretty clear that grades should improve as well as throughput because you're getting access to the higher stopes, right? But even so, I mean, the change in production should be quite material to deliver on the low end of the guidance. So just trying to understand here if you guys think that Xavantina production is now more skewed to the low end of the guidance. So this is the first question.

And just a second one on Tucumã. I mean, it's also pretty clear that we should see an improvement in second Q. But just looking at -- I mean, second half, but just looking at second Q specifically, I mean, what are your expectations for throughput in grades given that, I mean, grade should decline materially by the second half. But on the other hand, throughput should also improve. So just specifically on second Q for Tucumã and on Xavantina's good production guidance, please?

Yes. So when we think about Javantina, I think it's important looking at throughput volume and I hear what you're saying on the step-up, I look at Q4, really the second half of last year in terms of throughput volume and what we achieved there as being aligned with our expectation. Obviously, a little bit of a step-up given some of the work we're doing now in development.

When I look at the second half of April into May and the development rates that we're achieving as well as some of the productivity in preparing stopes and having better access to higher grade, we still see ourselves firmly within that guidance range. So I understand the nature of the question. If we felt the guidance was at risk, then obviously, we'd be talking about a different guidance range. So we still feel comfortable with where we're at, particularly looking at the second half of April. and the first few days in May here. So I hope that addresses the question on Xavantina.

At Tucumã in terms of grade, when I think about the full year, I think you used the word material decrease in grade, but we're looking at a fairly elevated grade profile for the whole year. So we were 1.66 in Q1. Full year average, we're still looking around 1.4. So you can look at the rate of decline there. And I would argue that it's still very high grade across the full year.

This concludes the question-and-answer session. I would like to turn the conference back over to Makko DeFilippo for any closing remarks. Please go ahead.

Thank you, everyone, for joining us this morning, and thank you for the questions. As always, we appreciate the thoughtful dialogue. We're available for any follow-up questions. So please feel free to reach out to our Investor Relations team directly, and we will make ourselves available as needed as always. Lastly, just a reminder that we have our Ero Capital Markets Day, September 14, that we are hosting in Sao Paulo and look forward to seeing many of you there. Thank you again. Have a great day, everyone.

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

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

Thank you, operator. Good morning, and welcome to Ero Copper's Fourth Quarter and Full Year 2025 Earnings Call. Our operating and financial results were released yesterday afternoon and are available on our website along with our financial statements and MD&A for the 3 and 12 months ended December 31, 2025. Our corresponding earnings presentation can be downloaded directly from the webcast and is also available in the Presentations section of our website. Joining me on the call today are Makko DeFilippo, President and Chief Executive Officer; Wayne Drier, Executive Vice President and Chief Financial Officer; Gelson Batista, Executive Vice President and Chief Operating Officer; and Courtney Lynn, Executive Vice President, External Affairs and Strategy.

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

With that, I'll now turn the call over to Makko DeFilippo.

Thank you, Farooq, and thank you to everyone joining us this morning. As we pre-released our 2025 production results and 2026 guidance in early February, I'd like to take a step back here and explain why we believe Ero is extremely well positioned in the current market environment. Last week, as many of you would have seen, we released our maiden preliminary economic analysis on the Furnas project. This was an important milestone for the company and one of our key objectives this year. Over the past 18 months, our exploration and engineering work, combined with extensive historical technical programs completed by Vale on the project since the early 2000s, has enabled the design of an integrated open pit and underground mine expected to produce a total of more than 1.2 million tonnes of copper, 2 million ounces of gold and 9 million ounces of silver over an initial 24-year mine life. Highlighting the quality of Furnas and reinforcing why it is a cornerstone asset in our long-term growth strategy.

Over the first 15 years of operation, Furnas is expected to produce approximately 70,000 tonnes of copper, 111,000 ounces of gold and more than 500,000 ounces of silver annually at first quartile C1 cash costs of approximately $0.24 per pound of copper produced. At long-term consensus metal prices, the PEA delivers an after-tax NPV of approximately $2 billion and an IRR of more than 27% on $1.3 billion of initial capital. Taken together, these metrics uniquely position Furnas from a capital intensity perspective relative to comparable projects while delivering strong economic outcomes across a wide range of commodity prices. Said differently, we see an exceptional project that is both financeable and buildable. As strong as it is, the PEA is just a starting point for us, and we are focused on maintaining momentum this year. In 2026, we plan to complete an additional 50,000 meters of exploration drilling, targeting extensions of high-grade mineralization around planned underground infrastructure.

We will also continue pursuing opportunities we see to further strengthen economics, which include the addition of a magnetite recovery circuit to produce a high-grade magnetite concentrate as well as a gravity pre-concentration stage to enhance gold recoveries. Both initiatives offer potential to further increase byproduct revenue, and we are encouraged by the initial results we are seeing. Getting back to what differentiates Ero, we have clearly outlined a great long-term growth project in Furnas, and we are thrilled to be advancing it towards a construction decision over the coming years. Perhaps most importantly, the capital required to advance Furnas to that point is expected to remain relatively modest as we continue to advance technical studies, drilling and permitting work streams. At the same time, capital spending across our existing operations is projected to decline as we transition out of a multiyear investment phase that included the construction of Tucuma and major investments at Caraiba over the past several years.

These investments are either complete or in the case of our new shaft project at Caraiba, are past peak capital spend. As a result, Ero is exiting a major investment cycle with an exceptional long-term growth asset, increasing cash generation capacity, declining consolidated capital requirements and three operating mines with the right mix of metals at exactly the right time in the commodity price cycle. When I look across the broader sector, many companies, including most of our peers, are jumping into major project builds within the next year. We like this dynamic. Switching gears slightly. I do want to touch on our 2025 results and '26 guidance. And I would start by recognizing the resilience and dedication of our teams that work through a number of challenges to deliver meaningful improvements across the business as the year progressed.

These efforts resulted in sequential quarters of improving operational performance, the unlocking of a major new additional value driver for our business at Xavantina. Starting with Caraiba, Q4 represented our strongest operating quarter of the year. Mill throughput reached nearly 1.2 million tonnes, up 18% compared to Q3 and an all-time record for the operation. This drove copper production 15% higher quarter-on-quarter and contributed to C1 cash costs of $2.27 per pound. At Tucuma, copper production increased more than 22% quarter-on-quarter, representing another record for the operation. Higher process grades helped offset an extended period of unplanned downtime in December, driven by a pull forward of Q1 maintenance for an early mill liner replacement.

This pull forward was due to an OEM wear part quality issue that impacted multiple operations in the region, including ours. C1 cash costs in Q4 were $1.75 per pound, which I would note approximately $0.10 of this was attributable to expensing the unamortized portion of the liners. Turning to Xavantina. Production increased 53% quarter-on-quarter, driven by higher grades and improved throughput as we began to see the benefits of our efforts transition the mine to mechanized mining. In addition, our gold concentrate program resulted in an incremental 15,000 ounces of gold in Q4. As a result, total gold from Xavantina, including mine production and concentrate shipments was nearly 20,000 ounces in the quarter and over 50,000 ounces for the full year. Behind these numbers, what makes 2025 one of our best on record, in my opinion, is that our operational teams delivered these results while achieving one of our best years ever in terms of consolidated safety performance.

Whatever might be said about 2025, nothing matters to me more than this metric. As I look ahead to 2026, our guidance assumes the operational performance gains we achieved in the fourth quarter are effectively sustained through the year. While we continue to work on opportunities to further improve performance across the business, especially in the second half of this year at Tucuma, these are not reflected in our guidance. At Tucuma, we are well advanced on adding additional tailings filtration equipment this year to unlock additional throughput capacity for this operation. We have equipment being manufactured right now. And if all goes according to plan, we would expect this to benefit the operation in the fourth quarter. As I mentioned, the potential benefits here as well as the associated capital investment have not been reflected in our 2026 guidance.

This was a deliberate decision for three reasons: First, guiding to steady state was important for us this year. Second, there is a lot of daylight between now and the fourth quarter. And perhaps most important, in the current metal price environment, we expect the payback on this investment to be 1 to 2 quarters. So while it is a very important objective, and we expect to complete it this year, it will not change our strategy or capital allocation decisions in 2026. At Xavantina, we are investing in our ventilation circuit, mine development and equipment to increase mine capacity and output. This is a low-hanging long-term value driver inherent to our business when we look at the available milling capacity we have there. Last but not least, at Caraiba, we are advancing the new shaft project for the Pilar mine and are pursuing several operational improvement initiatives that we hope to discuss later this year.

To touch briefly on cadence for 2026, we are guiding consolidated copper production of between 67,500 to 77,500 tonnes. This reflects year-over-year growth driven primarily by higher sustained plant throughput at Caraiba and Tucuma, partially offset by lower planned grades. Copper production is expected to be weighted towards the second half of the year due to mine sequencing and a modest increase in throughput throughout the year. At Xavantina in 2026, we are guiding mine production of 40,000 to 50,000 ounces. We expect Q1 to be the softest production quarter of the year. This cadence reflects mine sequencing as well as a tie-in of a major ventilation upgrade during the quarter, including the completion of the new [indiscernible] surface. Production is expected to be weighted towards the second half of the year as a result.

Gold concentrate sales are expected to continue throughout the year, but we expect that to be relatively modest in Q1 due to the rainy season. For some additional context there, you'd be hard-pressed to find a more simple operation in our portfolio. There are only three steps. We remove the material from stockpile, we then spread it out in the sun to dry, then transport the material for shipment. As you can likely imagine, step two in that process is far less productive during the rainy season.

With that, I will turn the call over to Wayne, who will walk through our financial results in more detail.

Thank you, Makko. Our fourth quarter financial results were driven by record copper concentrate sales, a 59% increase in gold dore sales, the commencement of gold concentrate sales and stronger copper and gold prices during the period. All of these factors drove quarterly revenue to a record $320 million or $143 million higher compared to the third quarter. Consolidated C1 copper cash cost per pound were approximately 1.5% higher quarter-on-quarter with the increase predominantly coming from Tucuma, where we experienced higher transportation, demurrage and port costs in the quarter related to the COP30 activities in Para State. This had an impact of approximately $0.10 per pound on our Tucuma C1 costs, which were also impacted by the accelerated amortization of the mill liner Makko referenced earlier. Gold C1 cash cost per ounce declined by approximately 29% from the third quarter.

As a result, the company delivered stronger operating margins, with adjusted EBITDA growing to $186.7 million in the fourth quarter and $409.7 million for the full year. Adjusted net income attributable to owners of the company was $108.4 million for the quarter and $220.4 million for the year or $1.04 and $2.12 per share, respectively. Our liquidity position at quarter end stood at $150.4 million, including $105.4 million in cash and cash equivalents and $45 million of undrawn availability under our revolving credit facility. We continue to deleverage our balance sheet with net debt declining to approximately $502 million at year-end from $545 million at the end of the third quarter. Combined with significantly higher 12-month trailing EBITDA, this resulted in a material improvement in our net debt leverage ratio, which decreased to 1.2x at the end of Q4 from 1.9x in Q3 and 2.6x at the end of 2024.

With copper and gold production expected to grow in 2026 as well as the additional cash flow from Xavantina's gold concentrate sales, we intend for debt reduction and return to shareholders to be key elements of our midterm capital allocation strategy. At December 31, we had $155 million drawn on our revolver, which we intend to pay down fully in 2026. We would like to maintain a strong cash position on the balance sheet and target a net debt-to-EBITDA ratio below 1x ahead of commencing a return of capital program.

I'll now pass the call back to Makko for some closing remarks.

Thank you, Wayne. Before we move into the Q&A session, let me recap the 3 key elements of Ero's value proposition. First, over the past decade, Ero has consistently unlocked value that wasn't fully recognized often through work supported by strong partners. Clear examples include our gold concentrate program and our broader partnership with Royal Gold at Xavantina and more recently, the advancement of the Furnas project with our partner, Valley Base Metals.

Second, we've taken a disciplined countercyclical approach to capital allocation, investing in building projects during periods when development activity across the sector was limited. That strategy has positioned Ero favorably relative to our peer group that are now preparing to enter major capital investment phases. Third, Furnas represents a high-quality, long-life asset being advanced with a top-tier partner and we view it as a compelling cornerstone for Ero's long-term growth.

With that, I will now turn the call back to the operator to open the line for questions.

[Operator Instructions] First question comes from Orest Wowkodaw with Scotiabank.

Question around the gold concentrate stockpiles at Xavantina. You haven't issued any guidance for what those volumes could be this year. But with the 15,000 ounces you sold in the fourth quarter, is that a good guide for shipments in periods or quarters where there's no rainy season?

Yes. Thank you for the question, Orest. Obviously, a bit of a tricky situation. Obviously, we came out with initial resource on the 20% of the volume that we were able to sample. So it's difficult for us, as you can imagine, to give exact guidance. But we certainly expect strong volumes and shipment. I would point to what we achieved in Q4. That was at the tail end of the rainy season. So if you -- just for context, the rainy season in Mato Grosso typically starts in November and goes through March, April, depending on the year.

And so part of those sales did occur when the rainy season was started. We're obviously advancing several initiatives on site to increase volumes from there. And as I said on the outset of the call, Q1 is the heart of the rainy season. This has been an exceptionally rainy year in Brazil, as you are probably aware, from some of the news flow and flooding that's happened throughout the country. And therefore, we expect very, very modest sales in Q1 and then ramp up pretty aggressively Q2, Q3.

And in terms of the stockpile itself, have you seen anything that may suggest that the grade for the other 80% of the stockpile would be materially different than what you have sampled?

Difficult to say Orest, but nothing -- obviously, as we go into the future, we don't have samples there, but to date, nothing that suggests otherwise.

The next question comes from Emerson Vieira with Goldman Sachs.

I would like to understand a little bit more on Tucuma Q3 press issue. So can you provide us an update here? Have you guys already ordered the mobile filter that is expected to increase the future availability? And any update on time could be very helpful. Also, how long should be the maintenance in the first quarter in order to advance with the new aligners replacement? And just a third one on Tucuma, can you please reconcile the production guidance for 2026? I mean, what are you guys expecting in terms of grades and throughput ramp-up throughout the year? Those are my questions.

Thank you. Quite a bit to unpack there. So if I missed something, I apologize, just ask it again, but thanks for the questions. So first, on the filter press capacity, yes, that equipment has been ordered. It's being manufactured. As I said in the prepared remarks, that is a very important objective of ours. But given the -- given what we've outlined, it's not included in our guidance, first and foremost, we expect the payback on that investment to be very fast in this environment. And we expect it to be operational in Q4 as both the quantum of the investment there as well as the current prevailing copper price that investment and completion of that project has very little influence on how we think about our business for 2026. As I said, it was not included in our guidance. So that's first and foremost on that point. The second part of your question was related to the maintenance that happened related to the mill lining. So to be clear, there, we expected that maintenance to occur in Q1.

We had to pull that into Q4, so it's already been completed effectively for the year. That was approximately a 10-day period of downtime that happened in Q4 and impacted our Q4 results.

All right. So no more maintenance, downtown... for...

We have planned downtime every month. So that is still part of our team, but we have no extended period of downtime that we're planning in Q1 of this year.

All right. And just the last one on the reconciliation on grade and throughput comparing to the guidance, please?

Yes. Great question. Thank you. So when we obviously came out -- had a strong result last year in terms of grade, we do expect grades to come down. We are currently looking at -- throughout our guidance, just below 3 million tonnes of processed throughput. And I would say somewhere between 1.3% and 1.4% copper for the full year.

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

So I have two. The first is on Tucuma. I wanted to dive a bit deeper into the C1 cash cost guidance. I just wanted to understand how we could explain the cost increase throughout the year versus what we were in 4Q. I appreciate that there is lower grade and not including the feed. So with the feed there could be a change to guidance. But I'm just trying to understand as you have more fixed cost dilution as you increase processing and also the [ CRCs ] are higher than what you guys are currently doing at Caraiba. So I'm just trying to understand all these moving parts and what's driving costs higher this year?

And second on Xavantina, I just wanted to explore a bit if you could talk about the benefits from the mechanization investments you guys did last year. How should we expect that to translate into the results this year? And what do you guys expect in terms of grades throughout the year? How this should fluctuate, what sort of volatility we should see throughout the year? So that's it.

Thank you for the questions. So yes, starting with Tucuma, a really, really good question there. Main drivers for guidance, as you mentioned, is grade. So obviously, we're coming off of a year of significantly higher grades that has a direct influence on our Q1 -- our C1 costs. We also are putting in additional maintenance efforts there to stabilize the operations. Those are, I would refer to those additional costs as nonstructural. On the TC/RC and shipment side, we've been getting some questions about differences from Caraiba to Tucuma. I would point to two major influencing factors there. Number one, the grade of the concentrate is lower. So therefore, there's more costs associated on a per pound copper basis, number one.

Number two, we have quite a bit further to transport that material. And so when you take those two together, we do see higher TC/RCs. We're seeing a market now in the TC/RC across our business that looks favorable relative to where we expected it to be for the budget. That said, those are mostly longer-term contracts that we have in place. So we are not getting the full benefit of the benchmark pricing. And then more fundamentally, as you'll probably appreciate better than most people, we are seeing a very strong BRL headwind across our business. That's true across all of our operations, and that's been reflected in our guidance. So I would say big moving factors there on Tucuma cost drivers would be the grade that we're mining, the additional maintenance costs that we're incurring. Again, we expect -- we do expect to see a benefit in Q4 from those costs. The TC/RCs and shipment related costs in part because the grade of concentrate is lower than Caraiba.

Your second question on the benefits of mechanization really points to two things. As you've heard me talk about on a number of calls here over the year, reducing exposure of our workforce is one of the top benefits of that investment, and it was one of the key driving factors in making that investment. So getting our workforce away from the work phase to the maximum extent possible. So that's number one. Number two, if you just take a step back and I hope you have the opportunity to show you what the team has been doing at Xavantina later this year. But that mill only operates between 15 and 20 days per month, and that's a function of the asset being mine constrained. So as we look ahead to the future and notwithstanding the cadence of production that we just talked about this year, given the tie-in of the ventilation circuit improvements that we're making, we expect over time here to be able to better match mine output with mill capacity, again, not reflected in our long-term guidance, but it's one of the key low-hanging value drivers that we see in our business.

And Gelson and the team here are working diligently, and we hope to be in a position to talk about what that might look like later in the year.

Your next question comes from Fahad Tariq with Jefferies.

There was a comment made earlier on the call about potential capital return once the net debt to EBITDA gets to the targeted levels below 1x. Maybe just any additional color on that, what form that would be in timing, et cetera?

Yes, I'll jump in and Wayne can piggyback if I missed anything or has anything to add. I would say really, there's 3 steps here that we see as being critically important to driving that decision and timing. First and foremost, as Wayne mentioned, we want to see our net debt leverage ratio below 1x. As you can see from our Q4 results, we're -- given where we were in Q3 to Q4, we're rapidly approaching that metric. Obviously, the world is a volatile place. So we'll see what happens over the next few quarters, but we're pretty close to that metric at 1.2x right now.

Secondly, as we mentioned, we want to pay down our revolver. So as at year-end, we had $155 million drawn. That's just a logical place to pay down our debt. And again, we are cognizant that paying down debt, including our revolver is a de facto return to shareholders. So that's an important component of that strategy. And number three, we're having a lot of discussions with our top shareholders about what that might look like and timing. I would say stay tuned. Let's get through steps 1 and 2 before we get too excited about step 3.

Sounds good. And then maybe on Furnas, the idea of you're entering a period where some of your peers are getting into a build cycle and Furnas is, I guess, much longer dated. Any opportunity to -- or any appetite to try to accelerate that? Or is that even possible given like what the stage is at right now and the terms of the earning agreement and what needs to be done?

Yes. We're very excited about Furnas as you probably heard in our prepared remarks and saw in our webcast materials. The reality is it's a few years out. We like that positioning. We need to do work to advance through a prefeasibility study execute on some of those value drivers that we see as low-hanging fruit to increase the value of the project, increased byproduct revenue. And then we still need to do advance several permitting work streams. The reality, I think, is we do have the appetite to advance that project as fast as possible. I would say that we're already doing that. And we still expect modest capital spend over the next the next few years as a result of the acceleration there.

Next question comes from Stefan Ioannou with ATB Cormark.

Just kind of curious, back on the gold concentrate sales. I think originally, it was suggested that you might -- we're anticipating selling down the entire stockpile over, say, 12 to 18 months. Just given our better understanding of the rainy season and whatnot now, is that a sort of a number we should think it was probably going to be stretched out over a bit more time?

Yes. Look, let's see, right that 12 to 18 months we talked about that time later in November. If you put out -- if you look at what we talked about in our guidance came out this year, we said through mid-2027 those time lines are kind of give or take a month, are pretty well aligned from our perspective.

Okay. Okay. So still mid-20 27-ish. Okay. And just maybe switching gears, just on the -- you mentioned an exploration spend of $30 million to $40 million. Is that really the lion's share at Furnas or is there any other sort of notable projects we should be thinking about from an exploration point of view this year?

It is a great question. Yes, the lion's share of that is at Furnas. I would say that we're still advancing some opportunities throughout the portfolio, both at Tucuma and at Tucuma, Xavantina, and Caraiba at various stages of development. Again, I think the best guidance I can give you at this point is that we're excited about what we're doing there. We expect to give an update at our Investor Day later in the year.

The next question comes from Craig Hutchison with TD Cowen.

I was just wondering if the heavy rainfalls, will that have any impacts on concentrate shipments or timing of shipments from Tucuma as well? Or is it just isolated to Xavantina?

Yes, great question. We plan for cadence across our operations for a normal amount of operational disruption. I would say that what we've seen to date at our other operations is in line with what we expected and built into our budget and guidance for the year. So we're not seeing anything out of the ordinary in terms of operational disruption. There is operational disruption across all our operations due to the rating season. That's been reflected in our guidance and how we think about cadence for the full year.

Okay. Great. And then just TC/RCs in terms of your C1 cash costs, are you able to provide what you're assuming for TCRs for the year?

Those are based on long-term contracts that are commercially sensitive, but I would say the -- what we've heard in the market is well below zero. We're not reflecting that at either of our operations. And as I said, they're long-term contracts that are commercially sensitive. Still very low in a historical context. As I mentioned, when I think about what are the big headwinds and tailwinds for our business, at Caraiba, we have a big tailwind from byproduct gold prices. That was probably pretty clear. And if you look at how that byproduct line item has tracked over the last several years, but we're seeing headwinds on seaborne shipping freight given what's happening in the world today. And then also on the BRL, which has been a big -- I think last year, the BRL was in the top -- was one of the top performing currencies against the U.S. dollar. And so that's a bit of a headwind.

So definitely some gives and takes. We feel pretty happy with where our guidance is at this point in time, given some of the gives and takes that we're seeing there. But obviously, we'll keep everyone updated if we see things moving significantly one way or another.

Next question comes from Anita Soni with CIBC World Markets.

I just wanted to follow up a little bit on Furnas. I was wondering in terms of -- I wanted to tie in the exploration drilling that you've done with the PEA. Can you just talk about how much of the drilling that you've done, how much was included in this PEA? And is there still like some that was outlined that didn't get included?

Yes. Perfect. Thank you for asking the question. You're absolutely right. The PEA, we started drilling at the tail end of 2024. The PEA includes 28,000 meters of drilling of the 50,000 meters that we drilled last year and we expect to complete another 50,000 meters this year. So if you're looking for -- there's several stages under the earn-in agreement, we'll have effectively -- we expect to complete all phases of drilling, all drilling requirements by the end of 2026. And as I mentioned, that PEA only includes 28,000 meters of drilling. Our objectives with the drill program that we completed in the second half of last year and the first part of this year are twofold.

Number one, as we move to pre-feasibility study, we need to convert that inferred mineralization that's included in the PEA into measured and indicated resources that we can include it in the mine plan. And then number two, we -- as you can see in the production profile, really years 16 through '24, we see a drop-off, and that's related to the -- really to the extent of drilling we've been able to do. So we've targeted as part of our drill program some key step-outs around some of the planned underground infrastructure that if successful, we expect to improve the production profile later in the mine life. Obviously, we still need to do the drilling and the mine planning to support what I just said there. So -- but we're looking forward to advancing that work stream and getting it included into the pre-feasibility study.

Yes. That was the second question. Just wanting to drill a little bit into the inferred category. How -- what kind of drill density do you have now? And what do you need to get it into for the M&I?

Well, I don't have that right off the top of my head. We can circle back on that one. What I can tell you is that about 60% of the material that we have, including the PEA is inferred. I will follow up with you just after this call on drill spacing. Obviously, that will be outlined in the technical report that will be filed here shortly. I just don't have that information right at my fingertips.

That's fine. If you're going to file the technical report, that was my third question when you're going to file that because I'd like to get into the weeds on that. And then I would also then want to figure out some of the dilution questions as well because I noticed your M&I and inferred does not have any dilution at all [indiscernible]. But that's it for my question.

Yes. Just to clarify there, it's an important point on dilution. You're correct. The resource statement doesn't include dilution. The mine plan has been fully diluted and you'll see that reflected around the assumptions that are outlined in the technical report.

The next question comes from Dalton Baretto with Canaccord Genuity.

I just want to follow up on some of that Furnas drilling there, but from a different perspective. Makko, you talked about all the drilling that was done last year that was not included in a lot of the drilling this year. My understanding was that sort of the high-grade cores of the deposit, they extend down deeper and possibly deeper than Vale had anticipated. And I'm just trying to understand how much of your drilling is chasing that higher-grade material and whether we could see some sort of a grade bump on the next resource update.

Good questions. Look, I think the way that I would think about this is the project as it stands today is -- it stands on its own 2 feet, right? We're working on some additional value drivers to smooth up the production profile to further enhance the economics. But as you see from the numbers, it absolutely stands on its own 2 feet. We -- if you look at the last drill hole that we drilled as part of the PEA, I'm going to quote some numbers here, so take this with a little bit of grain salt, but it was about around 150 meters at 0.8% copper 0.5 gram gold more or less. And that was the last hole that we drilled that was included in the PEA of that 28,000-meter program. That intercept was 600 meters below surface. We clearly see opportunity to extend the deposit, both to depth and laterally along strike.

We expect to include those in future studies. And as I said, we'll be advancing those drill programs here. In terms of grade bump, look, we still need to do the infill drilling that will be included in the pre-feasibility study. So there are several stages of technical studies to go here. I would say the work that not only we did but also the very, very strong technical work that Vale has done over the years to build an incredible foundation that we were able to build on, I think, really speaks to the quality of the project. And we work with our technical team regularly.

We have an excellent relationship, and we're really moving this forward together to create the best value possible. And when I think about what we've done collectively to drive not only production substantially underground, but also the mine calls for about 30% of its tailings -- expected tailings production to go back underground as paste backfill. We've really worked jointly to reduce the environmental footprint and hopefully set ourselves up for an excellent fast-track project.

Makko. And then can you remind me, is there some sort of a mechanism in your agreement with Vale that gives you the option to buy the piece that you currently won't earn into?

No. We're very happy to be pursuing this project in partnership with Vale Base Metals.

This concludes the question-and-answer session. I would like to turn the conference back over to Makko DeFilippo for any closing remarks. Please go ahead.

Yes. Thank you, everyone, for joining us today. Obviously, we're always available for follow-up questions. I appreciate the robust discussion on the Q&A side as usual. I think one last bit of housekeeping here shortly on our website, for those of you who are interested, we will be hosting a Capital Markets Day in mid-September. That will be physically in person in Sao Paulo and obviously, virtually. And as I said, that information will be on our website shortly.

Thank you all very much. Have a great weekend. Thank you. Bye-bye.

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

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

Thank you, operator. Good morning, and welcome to Ero Copper's Third Quarter Earnings Call. Our operating and financial results were released yesterday afternoon and are available on our website, along with our financial statements and MD&A for the 3 and 9 months ended September 30, 2025. A corresponding earnings presentation can be downloaded directly from the webcast and is also available in the Presentations section of our website.

Joining me on the call today are Makko DeFilippo, President and Chief Executive Officer; Wayne Drier, Executive Vice President and Chief Financial Officer; Gelson Batista, Executive Vice President and Chief Operating Officer; and Courtney Lynn, Executive Vice President, External Affairs and Strategy.

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

Thank you, Farooq, and thank you all for taking the time to join us this morning. Speaking for everyone on this side of today's conference call, it is an exciting time over here at Ero. During our last quarterly update and in conversations with many stakeholders since then, we have been speaking to the fundamental transformation that has been underway at Ero this year. This work has continued to drive sequential improvements in quarterly performance and unlock new value drivers across our portfolio.

These efforts are clearly evident in our Q3 results and in our Xavantina release yesterday. I will speak to both on today's call while ensuring we have sufficient time for questions. Yesterday, before market opened, we announced the result of a dedicated behind-the-scenes effort we initiated late last year to create value from within our portfolio, specifically at the Xavantina operations. This work entailed sampling, metallurgical testing, characterization and commercialization of stockpiled gold concentrates that have been produced in small but high-grade quantities since processing operations began over a decade ago.

These efforts have culminated in the announcement of a maiden inferred resource of 24,000 tonnes grading approximately 37 grams per tonne, containing 29,000 ounces of gold. The estimate was based on detailed sampling of approximately 20% of the concentrate stockpile volume. Late last month, just shy of 1 year since we laid out the initial work plan for this initiative with our teams, we commenced shipping gold concentrate, resulting in our first invoice this week, which Wayne will speak to in more detail.

Looking ahead, we expect to sell between 10,000 and 15,000 tonnes of concentrate during Q4 2025 at an operating cost of approximately $300 to $500 per ounce of gold. At approximately 90% to 95% payability after deductions and treatment charges, this means in practical terms that we expect to significantly accelerate the deleveraging of our business, one of our core objectives for 2025.

Sampling campaigns are ongoing to better quantify the remaining gold concentrate in stockpile, and we expect to sell the full volume over the next 12 to 18 months, resulting in what we expect to be a significant boost to gold sales and financial performance. Before I jump back into the quarter itself, I'll just address what is likely the first question many of you have. How did October go? And how does that compare to underlying operational guidance ranges.

While 1 month doesn't make a quarter, and we have a considerable amount of daylight between now and December 31, I am pleased to report that every single operation in our portfolio achieved not just 2025 calendar year monthly records for productivity and production, but they achieved all-time historic monthly records in October, beating some set many years ago. Starting at Caraíba, we built on the momentum of a solid Q3 and during the month of October, achieved all-time record mine tonnages from each of the Pilar, Vermelhos and Surubim mines.

New high watermarks across all of our mines at Caraíba supported all-time record monthly mill throughput of just over 400,000 tonnes, implying an annualized run rate well beyond our installed capacity. We achieved this result on the back of a successful debottlenecking exercise that was initiated early this year and completed during the third quarter at effectively 0 cost. Q4 at Caraíba is off to a good start with over 3,500 tonnes of copper produced in October, on par with our best month so far this year.

At Tucumã, sequential improvement in throughput volumes and grades following another sequential quarter of nearly 20% growth in copper production drove a new monthly record in October of approximately 3,300 tonnes of copper produced. Last but not least, at Xavantina, we produced just shy of 7,000 ounces of gold in October, excluding any benefits from our new concentrate sales operation.

This is a particularly noteworthy result when you consider that our average quarterly production during the first half of the year was also 7,000 ounces. This result reflects the considerable effort we have put into successfully mechanizing Xavantina to make it safe and more productive. I'm very proud of what Rodrigo Fidelis and his team and the whole broader team at Xavantina have been doing to achieve these results.

More broadly speaking, we have spent a lot of time this year changing the way we do things, challenging the status quo, incentivizing improvement and optimization across our organization and focusing on health and safety in order to drive productivity and operational excellence. The build we saw from a challenging first half of the year across the group, the green shoots in July and August, momentum from August into September and breaking all-time records in September and October has been energizing, and we expect many more production records to be broken over the coming months and years.

I'm deeply proud of the work we are doing to achieve these results, proud of our global leadership team for their commitment and thankful to our operational leadership for achieving these results while consistently improving our consolidated safety performance. That was a long detour to our third quarter results, but hopefully, that clears up the question queue.

Getting back to the quarter itself, Q3 was another record for Ero on consolidated copper production due to increased contributions from Tucumã, up nearly 20% for the second consecutive quarter. As we look to Q4 and as evidenced by my commentary on October, we continue to build on our strengths here and are expecting Q4 to be the strongest production quarter of the year across all 3 of our operations.

At Caraíba, plant throughput levels reached a quarterly volume record, supported by sequentially higher mining rates across all 3 mines in the complex, momentum we have carried so far into Q4. Grade declined as expected in the quarter as we switched our center of mass to the upper levels of the Pilar mine and received more ore from the Surubim pit, a strategy shift that was discussed at length last quarter.

We expect to continue to benefit from higher throughput levels going forward, the result of a multi-quarter debottlenecking effort in order to drive higher copper production. We expect strong production in Q4 to allow us to achieve the low end of our annual production guidance, and we expect cash costs to decline from Q3 levels during Q4, supporting our full year C1 cash costs in the lower half of our range.

At Tucumã, production in the third quarter increased 19%, driven by the continued ramp-up of throughput at the mill, up approximately 37% quarter-on-quarter, partially offset by lower planned grades. As we look to Q4, we expect continued progress in increasing throughput levels, along with higher grades in the mine to drive the strongest production of the year. We're off to a good start in October and expect strong production in Q4 to allow us to achieve the low end of our annual production guidance.

We have adjusted our full year C1 cash cost guidance at Tucumã to reflect higher-than-expected maintenance and freight costs incurred during Q3, which will be partially offset by the expected improvements in underlying costs in Q4. At Xavantina, production increased by approximately 17% quarter-on-quarter as the mine began to benefit from our investments in mechanization during the first half of the year. We mined over 50,000 tonnes of ore in Q3, a level we haven't achieved since 2022.

Looking ahead into Q4, as I touched on in my October commentary, we expect higher mine tonnage, higher tonnes processed and higher grade stopes to significantly drive higher gold production in Q4, which will allow us to achieve the lower end of gold production guidance and meet full year cost guidance ranges at Xavantina.

At Furnas, a central part of our growth strategy, physical work streams on site progressed well through the end of October. We have now completed approximately 50,000 meters of drilling, completing the drilling obligations set out in the agreement for both the Phase 1 and Phase 2 programs. The Phase 1 program completed early this year was drilled in support of an updated mineral resource estimate and preliminary economic analysis.

Technical work streams to support the preliminary economic analysis remain ongoing, and we are on track to complete this study during the first half of next year. The drilling completed under Phase 2 of the agreement will be used in time to support the development of a pre-feasibility study. We currently do not anticipate slowing the drill program at Furnas based on the success of these programs and early insights into potential project economics.

We set out this year to turn around and stabilize our operations, achieve commercial production at Tucuma, delever our balance sheet, aggressively advance long-term growth initiatives at Furnas and in due course, initiate returns to shareholders. Transformative work is nonlinear, but seeing the momentum we have carried and the results flow through to an incredible September and October makes me confident we are on the right path.

Every area of our business is doing its part to achieve these goals and create additional value for all of our stakeholders out of what we believe is a truly remarkable asset portfolio. I am thankful as ever for the continued support and belief in our vision for Ero. To ensure we have sufficient time for Q&A, I will leave it there and pass the call to Wayne, who will provide more detail on our financial results.

Thank you, Makko. Our third quarter financial results reflected a 24% increase in copper concentrate sales at Tucuma, which, together with stronger copper and gold prices during the period drove revenue to $177 million or $14 million higher when compared to the second quarter. At the same time, operating costs increased due to expected lower mined and process grades at Caraíba and a change in the accounting treatment at Tucuma following the declaration of commercial production on July 1, 2025.

As a reminder, ramp-up costs are no longer capitalized and depletion, depreciation and amortization began to be recognized at the operation. As a result, adjusted EBITDA totaled $77.1 million in the third quarter and adjusted net income attributable to owners of the company was $27.9 million or $0.27 per share. Our liquidity position at quarter end stood at $111 million, including $66.3 million in cash and cash equivalents and $45 million of undrawn availability under our revolving credit facility.

We continue to deleverage our balance sheet, paying down $9 million on our copper prepayment facility during the quarter. Combined with higher 12-month trailing EBITDA, this resulted in further improvement in our net debt leverage ratio, which decreased to 1.9x at the end of Q3 from 2.1x in Q2 and 2.5x at the end of 2024. With performance expected to be strongest across all 3 of our operations in the fourth quarter and additional cash flow from Xavantina's gold concentrate sales, we expect to materially accelerate deleveraging in the coming months.

Since the beginning of Q4, we've already shipped 3,000 tonnes of gold concentrate at an invoiced value of approximately $10 million, providing early momentum towards that goal. As for our foreign exchange hedge program, our total notional position at quarter end was $290 million, consisting of 0 cost collars with a weighted average floor and ceiling of BRL 5.59 and BRL 6.59 per dollar, respectively. These extend through December 2026. The real trended stronger and below our collar range during the quarter, resulting in a realized gain of $2 million on these hedges. I'll now pass the call back to Makko for some closing remarks.

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

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

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

Yes. Thank you for the question. I think everyone in this call is capable of dividing the 29,000 ounces by 0.2. We're very excited about the opportunity and what it means for our company, but I think it's too early to say exactly what that remaining volume will be. We fundamentally just need to do the work.

As I -- as we outlined in our prepared remarks and in the news release yesterday, we do expect to sell the full volume over the next 12 to 18 months, which should be a very significant boost to our financial performance. But in terms of outlining specific densities and grades for the volumes that have yet to be sampled, very difficult to do.

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

Yes. Look, also a great question. Let's take a step back and look over the last 8 years because I think context is important. What we saw from effectively 2017 until last year is that the rate of inflation in Brazil was outpaced by the depreciation of the currency. So I don't know what commentary or what company that came from. But it's fair to say that in U.S. dollar terms, inflation is still running high in Brazil. We do see that in our labor agreements. We see that in our contractor pricing. And over the last 2 years, we have not benefited as much from a depreciating BRL as we did in prior years, right, from 2017 to 2022.

As Wayne outlined, one of our strategies to help mitigate that is to put in cost of collars on the foreign exchange, which we have put in place for a portion of our spend next year with a floor that's higher than this year or at a weaker level than this year to help offset some of the inflation that we're seeing. But again, I think whenever we talk about inflation cost in Brazil, it's important to overlay what's happening in the currency and our efforts to help mitigate that. We have a number of initiatives that we spoke to in the past that we call our full potential exercise.

It's a combined effort from operations and procurement to continually seek as our business has grown over the past 2 years with integrating Tucuma and now the mechanization of Xavantina to enter into longer-dated contracts across the group. And we have seen cost reductions on a -- at a -- I don't want to say at a significant level, but at least enough to offset the inflation that we're seeing in our business. So we're going to continue that work. Again, it's fundamental to the long-term protection of our operating margins, and we'll continue that work in the future.

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

So my first one is on the value creation strategy in Xavantina. I just want to understand like regarding the timing, why have you guys announced it now and not before? Just given when you look at the cash OpEx of these concentrates, they look super accretive even under lower gold prices. Of course, it is even more now that prices are close to $4,000. So maybe just if you could expand on why doing it now and not before, it was a matter of time and having the capability to take a look at that.

And also, if you guys see potential for doing that to your other operations, which especially Caraíba, which has been running for some time and maybe has something in terms of concentrate stockpile or maybe the waste on the dams. And then finally, on Tucumã, just a quick question. How are you guys seeing the operating rates throughout 2026 between quarters? When are you expecting now to reach nameplate capacity in throughput?

Perfect. Thank you. We'll go through those one by one. Thank you very much. So the value creation opportunity at Xavantina, it's worth stressing this is not an initiative that began in earnest when gold price hit $4,000 an ounce. This is something that we've known about for a few years. I was involved in my prior role in an engineering exercise to recover value from this material.

We did quite a bit of engineering work a few years ago. and we had mixed results during that time. And so we -- as you'll probably appreciate, we're fairly busy over the last few years building Tucumã. And so they sat on the back burner. With the change in leadership that we had this year, both on site and throughout our technical group, there was a few key initiatives that we outlined in late last year that were chased down in earnest. This was one of those initiatives.

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

With respect to other opportunities across our portfolio in terms of creating value, I'd say we have a number of opportunities in terms of creating value from our operations. We're looking at a few things, one of which I'll talk about in a minute, which is at Tucuma. At Caraíba, look, we need to do the work. It's it's hard for me to say what other opportunities we have there. We need to do the work to determine if there's residual value at that operation.

Obviously, we've spent the first half of this year focused on health and safety, operational excellence, detailed planning, health and safety across that -- across all of our assets and some of the value initiatives that we're working on, we're pretty excited about include some activities at Caraíba, but too early to say if that will be something similar. I don't expect the same level of opportunity. But for sure, we're chasing a few other high-value opportunities across the group.

Tucuma 2026, the last question that you asked there. Look, -- we are seeing a continued ramp-up in our production rates and throughput levels at Tucuma. We're really encouraged by the progress coming out of September and October. We have a lot more work to do, as I outlined, until December 31 at midnight. It's fair to say that our -- the improvements that we've been able to make since January, February, March to now are significant. But we see those improvements as reaching terminal velocity on throughput volume because of our filtration system. So we are looking right now at adding additional filtration capacity to help alleviate that bottleneck or at least take the step-up in the rate of improvement. That work is happening right now.

I wouldn't expect there to be a reaching design capacity until the second half of next year at this stage, but we'll talk about that more in January when we come out with our guide for the year. We are working on a lot of initiatives. In fact, last week, we had a mobile filter press arrive on site. And so we're pretty excited about getting that operating to help us break through some of the last challenges.

It's important to note, we're not talking about large dollar investments, number one. Number two, I think silver lining here is that when you look across the rest of the asset, our crushing circuit, our grinding circuit, our flotation circuit is performing exceptionally well. And so with Gelson here and the whole team, we're looking well beyond the 4 million tonnes a year and how we can maximize the installed asset that we have as part of a debottlenecking exercise.

That is an important factor when you think about the longer-term production profile at Tucumã coming off later in the mine life. If we can increase throughput levels with a relatively modest investment, that will obviously go a long ways to stabilizing production volumes over the long term. So stay tuned, more information on that to come. Hopefully, that answers your question on Tucumã.

The next question comes from Emerson Vieira with Goldman Sachs.

I have 2 sets of questions. The first one on the gold concentrate sales. Can you guys please share with us what is the expected time line to sample the remaining 80% of the total stockpile volume, please? And the second one on the gold side, I just want to understand if this concentrate sales is also subject to the same conditions that the company has with Royal Gold. By that, I mean, should we assume that 25% of those 24,000 ounces shall be delivered at 40% of spot prices?

And moving on to Tucumã. Can you guys share with us what has been done? And what are the next steps on the ongoing improvement of the tailings filtration circuit? And also following on Tucumã, looking at the guidance and taking recoveries and grades from [ 3Q ] as a reference, the company's throughput -- I mean, Tucuma's throughput actually should almost double in the 4Q, so you can reach the 30,000 tonnes guidance. But I understand that grade should improve and throughput has been ramping up through the quarter. So can you share with us what was the throughput figure for September maybe or any latest update on throughput figures, please? That's it.

One second, I'm just writing down your last question, so I get them all. I think we're -- yes, thanks for the question, Emerson. So starting to go through your first question, gold concentrate sales, what's the timing on the remaining volumes on sampling. But the practical reality here is that we did a large amount of work on the volume that was available to be sampled. We need to sell that volume before we continue sampling, and that's obviously what we're doing, as Wayne alluded to.

Our objective is to do that as fast as possible. The reality is that we have a planned resource and reserve schedule. We believe at this point that our sales of concentrate volumes will supersede the rate of our resource update timing. And so what that means from a practical perspective is that we'll provide clarity on a quarterly basis in arrears for the concentrate volumes that we've sold next year. And we'll talk about that more next year in our guidance with respect to giving some more directional levels on the quarterly cadence of concentrate sales.

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

Are the -- second question, are concentrate sales subject to the stream? Yes, they are. That's a pretty conventional term across all streaming agreements, so nothing unusual there. But the stream gold from concentrate sales or the gold from concentrate sales will be subject to the streaming agreement. We have a great relationship with Royal Gold. They've been an incredible partner for the growth and vision of Xavantina over the years, all the way from their first investment.

And so we're really pleased that these deliveries will help to accelerate the effectively pay down to the Stage 3, which is an effective 6% stream tail. And if you want more information on that, you can look at the streaming agreements that we have filed on SEDAR. But effectively, it will help accelerate to the next phase, which is a step down from the 25% gold deliveries.

And then Tucumã filtration capacity, what planned -- what is planned, what's been done, what's ongoing and throughput level clarity. So as I mentioned early on, we do see this continued rate of improvement. It is slowing down, as I said, reaching terminal velocity on the rate of change, and that's just a function of requiring -- it looks like we'll require some additional filtration capacity. As I mentioned, a few months ago, we mobilized the mobile filter press on site. So that's being ramped up and operating now, which should help relieve a little bit of additional capacity.

Gelson and the team are doing additional engineering work and looking at alternative sources for incremental tailings capacity to help break through that rate of change and get throughput volumes up. As you mentioned, we're still looking ahead on the back of a solid October, as I mentioned, we see that grades and recoveries are performing well. We expect that to continue into Q4, helping us to achieve the low end of our guidance range at 30,000 tonnes of copper for the year.

On the throughput level itself, as I said, we are seeing continued improvement. We saw improvement in September, October. We expect to have a good month in November and December as well. I think on the last conference call, I mentioned sort of exit velocity around 80% of our design throughput. We might undershoot that by a little bit, but we've been able to continue to have high-grade feed from the mine that will help support production levels in Q4. Gelson, I don't know if there's anything you want to add on the specific work streams for the filtration capacity.

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

The next question comes from Craig Hutchison with TD Cowen.

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

Yes. Thank you, Craig. When it comes to Xavantina, there's a few things to note there. Maybe step back just a minute before I talk about specific rates. One of our objectives for the strategy at Xavantina this year, obviously, unlock value from gold concentrate sales. So check that mark, check that off the list.

The second was to really extend the known limits of mineralization in the mine. And I think that was reflected really well in our resource update, specifically with the very significant increase in measured indicated resources and inferred resources. Our target was to uncover 1 million ounces. That was our objective. And when you look at what we put out yesterday, I think it's fair to say that we achieved that objective of 1 million ounces.

Some of the last drill holes in the underground mine. We're looking at a recent intercept this morning that came out a few weeks ago, 15 meters at 11 to 12 grams per tonne. So we're seeing a significant increase in the potential for Xavantina, and that makes us very excited. So again, coming back to the strategy for the year, mechanize the mine, make it safer, extend the limits of mineralization.

Obviously, over the next few years, we've started this work now. We need to do additional infill drilling to confirm those resources, which are not yet mineral reserves. But we've been really happy with the effort on mechanization and what that means for Xavantina. We talked a little bit about mining rates in Q3. Obviously, you can see that from an ore process perspective, big increase, right? So going up to 50,000 tonnes mined and processed during Q3. That implies a rate just over 15,000 tonnes.

We've been able to at least match that in October, much higher grades, just a function of where we are in the ore body coming in at -- coming in at about 17 grams per tonne in October. So very high grade. When we think about the variability in that deposit still exists, the mechanization has allowed us to increase the mining rate substantially and do it at a lower cost while making it more productive and safer at the same time.

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

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

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

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

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

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

Yes. Thanks. Good question. We look at this in detail. I'd say that we're early days on mechanization. [indiscernible] back to, the original plan was to complete the mechanization of the mine by June of next year. It was such a resounding success. We accelerated that time line. Our last Jack Lake mining crew left site in September, and so we're 100% mechanized.

I think to give a specific cost reduction number is probably a bit immature given that we're still optimizing. But what we've seen so far, again, I wouldn't peg this for the long term, but something in the order of 30% to 35% reduction in mining costs is what we've seen so far in terms of BRL per tonne. Obviously, it's going to impact by FX and a few other variables there, but so far, about a 30% reduction in mining unit cost.

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

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

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

Yes. Obviously, the right, the 23% is average across. I think when you get to specifics, and we can address this offline, too. I think it's probably a better form. But when you look at the planned stopes that we have with sublevel stoping, they're obviously larger than room and pillar.

And so that tends to increase planned dilution when you look at any kind of variability in the ore body in terms of its orientation, dip, any contours, you tend to pull in more planned dilution when you're using larger stopes. And so again, that 23% is the average across the ore body. So we can talk more specifically about the Matinha vein and some of the impacts there in the update offline. But hopefully, that gives you kind of a rough sense of what we're looking at.

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

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

The next question comes from Roald Ross with Clarksons Securities.

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

No, none other than what we outlined in the call. Obviously, we did increase production volumes a lot at Caraíba, which had an impact. But if you normalize that for volume, I think you see that it's pretty comparable quarter-on-quarter. Obviously, we had a higher grade in Q2. So Q3 was a bump up. We expect that to come down in Q4, as I outlined on the call at Caraíba. Xavantina, I think there's some timing differences there on capital.

So I wouldn't read too much into that in terms of increasing cost. I think I commented on one of the earlier questions about inflation in Brazil. That's a reality of all operations, I think not just in Brazil, but globally, quite frankly, and we're working hard to make sure that we offset that -- those inflationary pressures with hedges on the BRL so we can protect our operating margins going into next year.

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

No, that's exactly right. I mean I know we don't get asked a lot about it a lot anymore. But when you look across our portfolio, we still have a number of value-generative projects that are ongoing or in process. Gelson and I were on site at Caraíba over the weekend and reviewing the progress on our shaft project to access a higher-grade zone in the Pilar mine, which we think will transform the productivity and obviously, margins for that asset when that comes online in 2027.

That's a big investment that we've committed to. We've been working that over a number of years. The shaft right now is about 870 meters below surface. And right now, it takes about 5 minutes to get down to that level in the kibble compared to almost an hour driving down the ramp. So that will make a very significant improvement in our company later on in 2027. Xavantina to that part of the portfolio.

Obviously, big value creation exercise, incredibly proud of what we've been able to do there, not just in terms of unlocking value from gold concentrates, but also the mechanization of the mine. If you look at the planning and effort and execution of that -- those investments and that project, it's been a big success this year. And again, very proud of the work that we're doing there.

We do see with keeping that 1 million ounce target in mind, we see opportunities there to eventually increase production. Obviously, that needs additional studies. There's ventilation, there's drilling, there's development involved in that and some infrastructure. And so we're working on studies to help support that for the future.

But clearly, with 1 million-ounce potential and growing. Again, I mentioned some of those deeper drill holes and the very strong mineralization we continue to see in San Antonio. We for sure see opportunity to expand that operation. That's something that we're working on for the next year. And then you hit on the head for us. It looks like a very compelling opportunity. Obviously, we're working hard right now on the preliminary economic analysis and the drilling, which we remains on track for the first half of next year.

So if I take a big step back, I've had the distinct privilege of being the first employee at Ero Copper 9 years ago and to watch what's happened this year and see our teams firing on all cylinders here at the end of Q3 and early into Q4. It's been an incredible year of transformation and pretty exciting to see the results that we've been able to produce. As I said, nothing is a guarantee or a layout for sure. We have a lot of daylight between now and December 31. But when I look at beyond December 31 in this year, I'm incredibly excited about the legwork that we've done and where we're heading.

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

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

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