Ero Copper: Turning Operational Gains into Cash and Optionality
The Shape of the Turnaround
Ero Copper entered 2025 with a clear mandate to restructure and deleverage. The second quarter of 2026 shows the fruits of that effort. As CEO Makko DeFilippo put it, “a meaningful part of that progress traces back to OneEro, a company-wide initiative we launched at the start of 2025... These changes are translating into safer, stronger operational performance, higher cash flows and meaningful balance sheet improvements.” — Makko Defilippo, CEO · 2026-08-06 Indeed, cash flow from operations jumped nearly 50% quarter-on-quarter to $138 million, while adjusted EBITDA reached $144 million. The company has reduced net debt by roughly $100 million over the past 18 months, pushing its leverage ratio to 0.8x, well below its prior 2.6x peak. The copper price backdrop remains supportive, as evidenced by the pound of copper theme in the market. But Ero’s move is not just cyclical; it is operational. At Caraiba, higher throughput, better recoveries, and favorable TC/RC renegotiations are cutting unit costs. At Tucuma, plant throughput rose 27% quarter-on-quarter, and the company is on track to hit design capacity after adding filtration capacity.
Gold Concentrates: A Hidden, High-Margin Option
The most compelling new story is at Xavantina, where the company is recovering gold from historic concentrates. The program, which began in earnest in late 2024, has become a significant contributor. Makko explained on the call, “we've seen really strong sales in June, July coming out of dry season on the back of our filtration and concentrate program.” — Makko Defilippo, CEO · 2026-08-06 The company’s expectations have been consistent with earlier commentary from the prior quarter, when Makko noted that “we certainly expect strong volumes and shipment. I would point to what we achieved in Q4... part of those sales did occur when the rainy season was started.” — Makko Defilippo, CEO · 2026-03-06 Looking further back, the opportunity was well understood by the market, as Makko had said in late 2025: “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.” — Makko Defilippo, CEO · 2025-11-05 In the latest quarter, Xavantina produced 20,000 ounces of gold, with 11,860 ounces from concentrate at a cash cost of $633/oz. That is a high-margin source of revenue in a high gold price environment. The company also added a dryer and filter press that should boost Q3 volumes. The concentrate program is expected to run through at least mid-2027, providing a bridge while the Furnas project is advanced.
Capital Allocation: The Next Milestone
With leverage below 1x, Ero is now prioritizing paying down its revolving credit facility. CFO Wayne Drier highlighted the FX hedge program: “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.” — Wayne Drier, CFO · 2026-08-06 That protection helps the company smooth the impact of a stronger Brazilian real. Makko was clear about the sequence:
The company has already repaid $60 million on the revolver this year, leaving $95 million. Once that is cleared, the company will be in a position to revisit return of capital program. In the meantime, Ero continues to invest in Furnas, where a pre-feasibility study is targeted for 2027.I think it's still too early to talk about shareholder return program. But obviously, it is top of mind... We've got a bit more to go.
Ero’s story is a classic case of “repair then deploy.” The company has taken a portfolio of assets, improved cost structures, and is now positioned to generate substantial free cash flow that can be returned to shareholders once the remaining debt is gone. With cost of production declining at both copper and gold operations, and the macro backdrop supportive, the path forward looks bright.