Ero Copper reports record fourth quarter and full year 2020 financial results
(all amounts in US dollars, unless otherwise noted)
Ero Copper Corp. (TSX:ERO.TO) ("Ero" or the "Company") today is pleased to announce its financial results for the three and twelve-months ended December 31, 2020. Management will host a conference call tomorrow, Wednesday, March 17, 2021, at 11:30 a.m. Eastern to discuss the results. Dial-in details for the call can be found near the end of this press release.
Additionally, subsequent to the year-end, as part of its ongoing corporate strategy, the Company amended its Credit Agreement with The Bank of Nova Scotia ("Scotiabank") and Bank of Montreal ("BMO"), to amend the existing US$75 million senior secured amortizing non-revolving credit facility and US$75 million senior secured revolving credit facility (collectively the "Prior Facilities") with a US$150 million senior secured revolving credit facility payable in a bullet at maturity, approximately four years from closing, on March 31, 2025 (the "Revolving Credit Facility"). The amendment further reduces the Company's cost of borrowing depending on the Company's consolidated leverage ratio, and eliminates principal payments previously due in 2022, 2023 and 2024 under the Prior Facilities. Additional detail is provided later in this press release.
Commenting on the Company's 2020 results, David Strang, CEO, stated, "Our 2020 financial results reflect the strong operational performance and record-low operating costs we achieved during the year. Despite headwinds associated with the COVID-19 pandemic, 2020 was an outstanding year for the Company and we intend on carrying this operational momentum into 2021, aided thus far by a stronger copper price.
On our growth-initiatives, 2021 is poised to be another exciting year for the Company as we advance multiple projects including, among others, our regional exploration program at the MCSA Mining Complex, ongoing studies on the potential optimization of our 'turn-key' Boa Esperanҫa Project and the progression of the first regional exploration program ever conducted at the NX Gold Mine. With the completion of the amendment to our credit agreement and strong balance sheet, we intend on using this year to continue to demonstrate the world-class exploration potential of the Curaca Valley and our executable low capital-intensity development pipeline."
*EBITDA, Adjusted EBITDA, Adjusted net income attributable to owners of the Company, Adjusted net income per share attributable to owners of the Company, C1 Cash Costs per pound of copper produced and All-in Sustaining Costs ("AISC") per ounce of gold produced are non-IFRS measures - see the Notes section of this press release for additional information.
OPERATIONS & EXPLORATION HIGHLIGHTS
OPERATING AND FINANCIAL HIGHLIGHTS
3 months 3 months 12 months 3 months 12 months ended ended ended ended ended Dec. 31, 2020 Sept. 30, 2020 Dec. 31, 2020 Dec. 31, 2019 Dec. 31, 2019 Operating Highlights (MCSA Operations) Ore Processed (tonnes) 483,447 553,148 2,271,625 589,065 2,424,592 Grade (% Cu) 2.26 2.18 2.08 2.16 1.93 Cu Production (tonnes) 10,018 10,961 42,814 11,526 42,318 Cu Production (000 lbs) 22,086 24,164 94,388 25,411 93,296 Cu Sold in Concentrate (tonnes) 10,265 11,530 42,813 11,595 42,759 Cu Sold in Concentrate (000 lbs) 22,629 25,420 94,387 25,562 94,267 C1 Cash Cost of copper produced (per lb) $0.69 $0.63 $0.67 $0.80 $0.93 Gold (NX Gold Operations) Au Production (oz) 10,789 9,436 36,830 6,043 30,434 C1 Cash Cost of gold produced (per ounce) $405 $421 $457 $980 $691 AISC of gold produced (per ounce) $608 $579 $628 $1,253 $889 Financial Highlights ($millions, except per share amounts) Revenues $91.2 $94.3 $324.1 $75.7 $284.8 Gross profit $58.3 $59.6 $188.1 $31.1 $117.1 EBITDA $91.3 $52.1 $116.2 $34.3 $141.4 Adjusted EBITDA $67.2 $62.5 $207.1 $31.2 $134.1 Cash flow from operations $38.6 $44.4 $162.8 $35.9 $127.8 Net income $66.3 $31.4 $52.5 $45.4 $92.5 Net income attributable to owners of the Company $65.8 $31.1 $51.6 $45.2 $91.9 Net income per share attributable to owners of the Company (Basic) $0.75 $0.36 $0.60 $0.53 $1.08 Net income per share attributable to owners of the Company (Diluted) $0.71 $0.34 $0.56 $0.49 $1.01 Adjusted net income attributable to owners of the Company $37.4 $36.7 $117.3 $40.7 $86.3 Adjusted net income per share attributable to owners of the Company (Basic) $0.43 $0.42 $1.36 $0.47 $1.01 Adjusted net income per share attributable to owners of the Company (Diluted) $0.40 $0.40 $1.27 $0.44 $0.94 Cash and Cash Equivalents $62.5 $54.3 $62.5 $21.5 $21.5 Working Capital (Deficit) $35.8 ($9.4 ) $35.8 ($4.9 ) ($4.9 ) Net Debt $105.6 $118.4 $105.6 $136.4 $136.4
ADJUSTED EBITDA & NET INCOME (LOSS) RECONCILIATION
2020 - Q4 Adjusted EBITDA $ 67,181 Adjustments: Unrealized foreign exchange gain on USD denominated debt in MCSA 7,713 Unrealized foreign exchange gain on derivative contracts 27,659 Realized foreign exchange loss on derivative contracts (7,816 ) Share based compensation and other (2,963 ) Incremental costs in response to COVID-19 pandemic (481 ) EBITDA $ 91,293 Adjusted net income attributable to owners of the Company $ 37,417 Adjustments for non-cash items (attributable to owners of the Company): Unrealized foreign exchange gain on USD denominated debt in MCSA 7,682 Unrealized foreign exchange gain on derivative contracts 23,077 Unrealized gain on interest rate derivative 640 Share based compensation (2,549 ) Incremental costs in response to COVID-19 pandemic (481 ) Reported net income attributable to owners of the Company $ 65,786
CREDIT FACILITIES AMENDMENT DETAILS
On March 16, 2021, the Company amended its Credit Agreement with Scotiabank and BMO to replace the Prior Facilities with a US$150 million senior secured revolving credit facility payable in a bullet at maturity, approximately four years from closing, on March 31, 2025. Benefits of the amendment include a reduction of up to 25 basis points in the Company's cost of borrowing, depending on the Company's consolidated leverage ratio.
The Revolving Credit Facility will bear interest on a sliding scale at a rate of LIBOR plus 2.25% to 4.25% based on the Company's consolidated leverage ratio at the time. Commitment fees for any undrawn portion of the Revolving Credit Facility will also be on a sliding scale between 0.56% to 1.06%.
The Revolving Credit Facility includes standard and customary terms and conditions with respect to fees, representations, warranties, and financial covenants that remain unchanged from prior amendments. Scotiabank is Joint Lead Arranger, Sole Bookrunner and Administrative Agent and BMO is Joint Lead Arranger and Syndication Agent.
A copy of the amendment to the Credit Agreement will be filed on SEDAR (www.sedar.com).
2021 PRODUCTION OUTLOOK
Copper production from the MCSA Mining Complex for 2021 is expected to come from ore mined from the Pilar and Vermelhos underground mines as well as the Surubim open pit mine, which is expected to restart operations later in 2021. Production from the Pilar Mine is expected to contribute a total of approximately 1.5 million tonnes grading 1.40% copper, production from the Vermelhos Mine is expected to contribute a total of approximately 0.8 million tonnes grading 2.40% copper and production from the Surubim Mine is expected to contribute a total of 0.2 million tonnes grading 0.60% copper as it is a partial year of operation. The blended mill head grade incorporating these sources is expected to be approximately 1.75% copper for the full year.
MCSA Mining Complex 2020 2020 Result 2021 Guidance Guidance Tonnes Processed 2,150,000 2,271,625 2,700,000 Copper Grade (% Cu) 2.15 % 2.08 % 1.75 % Copper Recovery (%) 91.0 % 90.5 % 93.0 % Cu Production (000 tonnes) 41.0 - 43.0 42.8 42.0 - 45.0
Gold production from NX Gold for 2021 is expected to come from ore mined from the Santo Antonio Vein. Mining operations during the year are expected to total approximately 167,000 tonnes of ore grading 7.20 grams per tonne gold.
NX Gold Mine 2020 Guidance 2020 Result 2021 Guidance Tonnes Processed 165,000 162,642 167,000 Gold Grade (gpt) 7.70 7.72 7.20 Gold Recovery (%) 90.0 % 91.3 % 92.0 % Au Production (000 ounces) 36.0 - 37.0 36.8 34.5 - 37.5 Ag Production (000 ounces) n/a 22.7 n/a
2021 CASH COST GUIDANCE
The Company's guidance for 2021 assumes a USD:BRL foreign exchange rate of 5.00, gold price of $1,750 per ounce and silver price of $20.00 per ounce.
2020 2020 Result 2021 Guidance Guidance MCSA Mining Complex C1 Cash Cost Guidance (US$/lb) $0.70 - $0.85 $ 0.67 $0.75 - $0.85 NX Gold Mine C1 Cash Cost Guidance (US$/oz) $425 - $525 $ 457 $500 - $600 NX Gold Mine All-in Sustaining Cost (AISC) Guidance (US$/oz) n/a $ 628 $875 - $975
2021 CAPITAL EXPENDITURE GUIDANCE
The Company's capital expenditure guidance for 2021 assumes a USD:BRL foreign exchange rate of 5.00 and has been presented below in USD millions.
MCSA Operations 2020 2020 Result 2021 Guidance Guidance Pilar Mine and Caraiba Mill Complex 45.0 - 55.0 54.5 45.0 - 50.0 (excluding Deepening Extension Project) Deepening Extension Project - - 12.5 - 15.0 Vermelhos Mine & District 11.0 - 13.0 14.0 14.0 - 16.0 Surubim Open Pit Mine - - 10.0 - 12.0 Boa Esperanҫa Project 0.2 - 0.2 0.2 1.0 - 1.5 Capital Expenditure Guidance 56.2 - 68.2 68.7 82.5 - 94.5 Curaca Valley Exploration 25.0 - 30.0 31.9 30.0 - 35.0 NX Gold Mine 2020 Revised 2020 Result 2021 Guidance Guidance Capital Expenditure Guidance 9.0 - 11.0 13.0 13.0 - 15.0 Exploration 3.0 - 5.0 4.3 8.0 - 10.0 Total, NX Gold Mine 12.0 - 16.0 17.3 21.0 - 25.0
CONFERENCE CALL DETAILS
The Company will hold a conference call on Wednesday, March 17, 2020 at 11:30 am Eastern time (8:30 am Pacific time) to discuss these results.
Date: Wednesday, March 17, 2021 Time: 11:30 am Eastern time (8:30 am Pacific time) Dial in: North America: 1-800-319-4610, International: +1-604-638-5340 please dial in 5-10 minutes prior and ask to join the call Replay North America: 1-800-319-6413, International: +1-604-638-9010 Replay Passcode: 5910
Financial results of the Company are prepared in accordance with IFRS. The Company utilizes certain non-IFRS measures, including C1 cash cost of copper produced (per lb), C1 cash costs of gold produced (per ounce), AISC of gold produced (per ounce), EBITDA, Adjusted EBITDA, Adjusted net income attributable to owners of the Company, Adjusted net income per share, net debt and working capital, which are not measures recognized under IFRS. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
C1 Cash Cost of copper produced (per lb.)
C1 cash cost of copper produced (per lb) is the sum of production costs, net of capital expenditure development costs and by-product credits, divided by the copper pounds produced. C1 cash costs reported by the Company include treatment, refining charges, offsite costs, and certain tax credits relating to sales invoiced to the Company's Brazilian customer on sales. By-product credits are calculated based on actual precious metal sales (net of treatment costs) during the period divided by the total pounds of copper produced during the period. C1 cash cost of copper produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company's operating mining unit, and is widely reported in the mining industry as benchmarks for performance, but does not have a standardized meaning and is disclosed in addition to IFRS measures.
C1 Cash Cost of gold produced (per ounce)
C1 cash cost of gold produced (per ounce) is the sum of production costs, net of capital expenditure development costs and silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. C1 cash cost of gold produced per ounce is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company's operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.
All-in Sustaining Cost of gold produced (per ounce)
All-in sustaining cost of gold produced (per ounce) is the sum of production costs, site general and administrative costs, accretion of mine closure and rehabilitation provision, sustaining capital expenditures, sustaining leases, and royalties and production taxes, net of silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. All-in sustaining cost of gold produced per ounce is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company's operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.
Earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA
EBITDA represents earnings before interest expense, income taxes, depreciation, and amortization. Adjusted EBITDA includes further adjustments for non-recurring items and items not indicative to the future operating performance of the Company. The Company believes EBITDA and adjusted EBITDA are appropriate supplemental measures of debt service capacity and performance of its operations.
Adjusted EBITDA is calculated by removing the following income statement items:
-- Recovery of valued added taxes
-- Foreign exchange loss (gain)
-- Loss on gold hedge contracts
-- Share based compensation
-- Incremental costs in response to COVID-19 pandemic
-- Loss on debt settlement
Adjusted net income attributable to owners of the Company and Adjusted net income per share attributable to owners of the Company
The Company uses the financial measure "Adjusted net income attributable to owners of the Company" and "Adjusted net income per share attributable to owners of the Company" to supplement information in its consolidated financial statements. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, the Company and certain investors and analysts use this information to evaluate the Company's performance. The Company excludes non-cash and unusual items from net earnings to provide a measure which allows the Company and investors to evaluate the operating results of the underlying core operations.
During the period, the following non-cash or unusual adjustments to calculated adjusted net income (loss):
-- Net recovery of value added taxes
-- Share based compensation
-- Unrealized foreign exchange loss (gain) on USD denominated debt in MCSA
-- Unrealized loss (gain) on foreign exchange derivative contracts, net of tax
-- Incremental costs in response to COVID-19 pandemic
-- Unrealized loss (gain) on interest rate derivative contracts
-- Loss on debt settlement
-- Unrealized loss on gold hedge contracts
Net debt is determined based on cash and cash equivalents, restricted cash and loans and borrowings as reported in the Company's consolidated financial statements. The Company uses net debt as a measure of the Company's ability to pay down its debt.
Working capital is determined based on current assets and current liabilities as reported in the Company's consolidated financial statements. The Company uses working capital as a measure of the Company's short-term financial health and operating efficiency.
ABOUT ERO COPPER CORP
Ero Copper Corp, headquartered in Vancouver, B.C., is focused on copper production growth from the MCSA Mining Complex located in Bahia State, Brazil, with over 40 years of operating history in the region. The Company's primary asset is a 99.6% interest in the Brazilian copper mining company, MCSA, 100% owner of the MCSA Mining Complex, which is comprised of operations located in the Curaca Valley, Bahia State, Brazil, wherein the Company currently mines copper ore from the Pilar and Vermelhos underground mines, and the Boa Esperanca development project, an IOCG-type copper project located in Para, Brazil. The Company also owns 97.6% of the NX Gold Mine, an operating gold and silver mine located in Mato Grosso, Brazil. Additional information on the Company and its operations, including technical reports on the MCSA Mining Complex, Boa Esperanca and NX Gold properties, can be found on the Company's website (www.erocopper.com) and on SEDAR (www.sedar.com).
ERO COPPER CORP. Signed: "David Strang" For further information contact: David Strang, CEO Makko DeFilippo, President (604) 429-9244 email@example.com
CAUTION REGARDING FORWARD LOOKING INFORMATION AND STATEMENTS This press release contains "forward-looking information" within the meaning of applicable Canadian securities laws. Forward-looking information includes statements that use forward-looking terminology such as "may", "could", "would", "will", "should", "intend", "target", "plan", "expect", "budget", "estimate", "forecast", "schedule", "anticipate", "believe", "continue", "potential", "view" or the negative or grammatical variation thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, statements with respect to the Company's production guidance including the expected tonnes, grade and metallurgical recoveries of the Company's operations, planned capital and operating costs, the timing and advancement of ongoing projects including the expected restart of the Surubim open pit mine, the Deepening Extension Project, the Boa Esperanca Project, and the amount and effectiveness of any proposed exploration program.
Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management's experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this Press Release including, without limitation, assumptions about: favourable equity and debt capital markets; the ability to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Company's properties and assets; future prices of copper and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any mineral reserve and mineral resource estimates; the geology of the MCSA Mining Complex, NX Gold Mine and the Boa Esperanca Property being as described in the technical reports for these properties; production costs; the accuracy of budgeted exploration and development costs and expenditures; the price of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to operate in a safe, efficient and effective manner; work force continues to remain healthy in the face of prevailing epidemics, pandemics or other health risks, political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favourable terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour stability; stability in financial and capital goods markets; availability of equipment and critical supplies, spare parts and consumables; positive relations with local groups and the Company's ability to meet its obligations under its agreements with such groups; and satisfying the terms and conditions of the Company's current loan arrangements. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.
Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. Such risks include, without limitation the risk factors listed under the heading "Risk Factors" in the AIF.
Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking information, there may be other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended.
The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained herein. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.
Forward-looking information contained herein is made as of the date of this press release and the Company disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.
Cautionary Notes Regarding Mineral Resource and Reserve Estimates In accordance with applicable Canadian securities regulatory requirements, all mineral reserve and mineral resource estimates of the Company disclosed or incorporated by reference in this press release have been prepared in accordance with NI 43-101 and are classified in accordance with the CIM Standards.
Mineral resources which are not mineral reserves do not have demonstrated economic viability. Pursuant to the CIM Standards, mineral resources have a higher degree of uncertainty than mineral reserves as to their existence as well as their economic and legal feasibility. Inferred mineral resources, when compared with Measured or Indicated mineral resources, have the least certainty as to their existence, and it cannot be assumed that all or any part of an Inferred mineral resource will be upgraded to an Indicated or Measured mineral resource as a result of continued exploration. Pursuant to NI 43-101, Inferred mineral resources may not form the basis of any economic analysis. Accordingly, readers are cautioned not to assume that all or any part of a mineral resource exists, will ever be converted into a mineral reserve, or is or will ever be economically or legally mineable or recovered.