Ero Copper (ERO) Q3 2026 earnings review
Ero cuts debt fast, but its mining costs keep rising
Ero Copper turned high metal prices and stockpiled gold into its fastest debt repayment yet, while its mines got dearer to run. Revenue nearly doubled from a year ago, and most of the $191 million of operating cash went to the bank line. Management kept the copper plan but raised cost ranges and cut the mined gold target.
| Revenue | $348.0M +97% from a year ago |
|---|---|
| Operating cash flow | $191.2M +73% from a year ago |
| Net debt | $353.5M down $99M in the quarter |
| Full-year copper outlook | Unchanged 67,500–77,500 tonnes; mined gold cut 28% at the middle |
⚖️ Verdict: 🟢 Bullish
The story got better because the balance sheet is close to clean: net debt is half a year of earnings and the revolver is nearly repaid. The bad news: the cost tests did not pass. Caraíba's cash cost rose again and the mined gold range fell for a second year, so the second-half promise rests on one quarter.
The question now is whether the fourth quarter delivers the grades that make the raised cost ranges hold. Either new stopes and Surubim ore bring unit costs down, or the cost base has reset and hedges are hiding it. Caraíba's fourth-quarter cash cost will tell.
🐂 Bull Case
Debt Falls by a Third in Nine Months
Ero Copper mines copper at two sites in Brazil and gold at a third. Two years ago it owed 2.6 times its yearly earnings. Chief executive Makko DeFilippo calls paying that down "one of the core commitments we have made to our shareholders".
The miner generated $191 million of operating cash in the quarter and sent $70 million of it back to its bank line. Net debt fell by $99 million in three months, so the company now owes half a year of earnings.
- Net debt: $353 million, from $502 million at the start of the year
- Bank line: $50 million drawn, from $155 million in December
- Cash available for repayment this year: $136 million, 97% of it used
This matters because management has said shareholder returns come only after the bank line is repaid, and that line is now small. But the cash came with copper at $6.21 a pound, 45% above a year ago.
What to watch: the revolver balance and any return programme in the year-end results. A zero balance with a stated dividend or buyback would mean the deleveraging phase is over.
Old Gold Piles Now Earn More Than the Mine
At Xavantina, its gold mine, Ero Copper is drying and shipping concentrate that earlier owners left in stockpiles. Those ounces cost $621 each to recover, against $1,892 for freshly mined ounces, so by our math the piles earned about $57 million of cash margin this quarter.
The company recovered a record 17,414 ounces, up 47% from the quarter before, because the dry season arrived and a new filter press and dryer started in June. The caution is that the piles are finite: the company has sampled about a fifth and gave no update on the rest.
What to watch: fourth-quarter ounces against the roughly 15,000 the company expects, and any new estimate of what remains. A figure well above that would extend the high-margin stream into 2027.
Furnas Drilling Finished Two Years Early
Furnas is a copper and gold deposit in Brazil's Carajás region that Ero Copper can earn 60% of by meeting work conditions set by partner Vale Base Metals. The main condition was an exploration drilling programme, and the company finished its 45,000-metre final phase this quarter, "more than two years ahead of schedule".
This matters because the earn-in is now about studies and permits rather than finding ore, so the path to a build decision is shorter. A March assessment valued the project at $2.0 billion after tax, but it rests on inferred resources.
What to watch: the pre-feasibility study due in 2027 and its capital cost against the $1.3 billion in the March assessment. A higher number would put the project in competition with shareholder returns.
🐻 Bear Case
Caraíba Costs Keep Rising Despite Record Output
Caraíba is Ero Copper's older copper complex in Bahia. The company says its 2026 unit cost is "in line with the Company's original 2026 guidance" once currency hedge gains are counted. The reported numbers say otherwise: Caraíba's cash cost reached $2.89 a pound, up 25% from a year ago.
The company blamed "accelerated waste stripping at Surubim, which delayed access to the high-grade pit bottom", plus dearer diesel and maintenance and a stronger Brazilian real. Mining cost alone rose to $2.25 a pound from $1.69.
- Caraíba full-year cost range: raised to $2.55–2.75 a pound from $2.30–2.50
- Consolidated copper cost range: raised to $2.25–2.45 a pound from $2.15–2.35
- Q4 consolidated cost needed for the new midpoint: about $2.10 a pound, by our math
The hedge argument holds for cash this year, because the $30 million of gains are real money. But the gains pay out only while the real stays strong, so they do not make the mines cheaper to run.
What to watch: Caraíba's fourth-quarter cash cost per pound. A reading near $2.50 would show the Surubim grades arrived; one near $2.90 would mean the cost base has reset higher.
Xavantina's Mined Gold Target Cut by a Quarter
Xavantina's underground mine was meant to produce 40,000 to 50,000 ounces this year, with most of it in the second half. Three months ago the company moved that to the low end. Now it has cut the range to 30,000 to 35,000 ounces, a 28% drop at the middle by our math.
Mined output fell to 7,844 ounces in the quarter because processed grade dropped to 4.90 grams a tonne from 8.15 a year ago. DeFilippo said the mine achieved "record underground development" instead, opening higher-grade stopes for later quarters.
The cost side moved with it, because the mine's costs are largely fixed. The full-year cash cost range went to $1,650–1,800 an ounce from $1,100–1,350, the third rise in three vintages: unchanged, then +$100, then +$500 at the middle. That is the pattern from 2025, when the mine also missed a lowered target.
What to watch: fourth-quarter mined ounces against the 7,968–12,968 the new range implies by our math. Hitting the upper half would show the development work paid off; another quarter near 8,000 would mean the range fails for a second year.
Risks this quarter didn't answer
Four standing concerns received no new figures in the release, the quarterly report or the presentation, so they stand as they were.
- Metal prices: copper sold at $6.21 a pound and gold at $3,876 an ounce did most of the work; the company gave no sensitivity to a price fall.
- Pilar shaft: no depth or timing update; a slip past early 2027 would delay Caraíba's productivity gains.
- Shareholder returns: $50 million of the bank line remains, and no programme was announced.
- Stockpile size: no sampling update on the roughly 80% of concentrate not yet measured.
👓 Other Themes
Currency Hedges Extended Into 2027 at a Lower Floor
Ero Copper pays its costs in Brazilian reais and sells in dollars, so a stronger real raises its reported costs. Its hedges paid $10.4 million in the quarter and $30.3 million this year. It has now placed $390 million of new collars running to December 2027 with a floor of 5.33 reais, below the 5.54 floor on this year's book, so next year's protection starts lower.
💲 Other KPIs
Falling for an eighth straight quarter: 0.5 times trailing adjusted earnings before interest, tax and depreciation, from 1.2 at year-end and 1.9 a year ago. Both sides moved, because net debt dropped 35% in a year while trailing earnings rose to $657 million. Available liquidity reached $264 million.
Down from $90.1 million last quarter, at 24% of revenue. Spending this year totals $236.7 million against a plan of $285–330 million, so by our math the fourth quarter carries $48–93 million. Caraíba's shaft project took $51.3 million of the quarter's total; Xavantina's spend dropped after deposits were reversed.
Lower than the $12.7 million of the second quarter, taking the year's total to $30.3 million. These gains sit in foreign exchange income, not in the unit costs the company reports, so the cash cost of the mines is lower than the cost per pound suggests.
🔮 Guidance
Unchanged. The plan still calls for about 13% more copper than in 2025 at the middle. By our math, that leaves 14,553–24,553 tonnes for the fourth quarter; the midpoint, 19,553 tonnes, is 7% above this quarter and roughly equal to last year's fourth quarter. The company says both mines will have their strongest quarter in Q4.
Raised. The range moved up $0.10 after three vintages at $2.15–2.35. Costs this year average $2.43, so by our math the fourth quarter must come in at about $2.10 to hit the middle, or $2.47 to hit the top. The company says hedge gains would bring the cash figure to $2.10–2.30.
Cut. The middle of the range dropped 28%. With 22,032 ounces mined so far, by our math the fourth quarter needs 7,968–12,968 ounces; the midpoint is a third above this quarter. The company blames downtime for ventilation work in the first half and low grades in the third quarter.
New. The company has put a number on the stockpile programme for the first time: about 45,000 ounces this year, of which 31,386 are done. By our math, that implies about 15,000 ounces in the fourth quarter, 22% below this quarter. Over 6,000 ounces were invoiced in October and 9,000 are drying at site.
Raised. Third vintage, third increase: flat, then +$100, then +$500 at the middle. Costs so far average $1,828, so by our math the fourth quarter must land near $1,508 for the midpoint to hold. That requires the mined ounces to arrive, because the cost base barely moves with volume.
Raised. All-in sustaining cost adds site overhead, sustaining capital and royalties to the cash cost. The middle rose $1,000 an ounce, after a $200 rise last quarter. Costs this year average $3,528, so by our math the fourth quarter needs about $3,286 for the midpoint, below this quarter's $3,607.
Unchanged. Spending through September totals $236.7 million, so by our math $48–93 million remains for the fourth quarter, against $82.3 million this quarter. The Xavantina allocation rose to $50–60 million from $40–50 million within the same total.
❓ Key Questions
What Caraíba cost does the new consolidated range assume for Q4?
By our math the consolidated midpoint needs about $2.10 a pound in Q4, below any quarter this year. Which part comes from Caraíba grade and which from Tucumã?
How much has OneEro saved in dollars so far?
The company says initial savings offset inflation at Tucumã, but gave no figure against the $20 million smelting target and $10–15 million supply target.
Where is the Pilar shaft and when does it reach bottom?
The quarter's materials carry no depth or date. Last quarter management said the team might need extra months beyond year-end.
When will the rest of the gold stockpile be sampled?
About a fifth has an inferred resource. The remaining ounces now matter more than mined gold for Xavantina's cash flow.
What capital-return format follows repayment of the revolver?
Only $50 million remains drawn. Management has sequenced returns after repayment but has not named a form or size.