Ero Copper reports higher mineral reserves for its mines in Brazil

Ero Copper (TSX: ERO, NYSE: ERO) has reported an increase in  mineral reserves and resources at its MCSA Mining Complex and the NX Gold mine in Brazil. 

The company posted a 13% year-on-year increase in its proven and probable mineral reserves at its 97.6% owned MCSA in northeastern Brazil’s Bahia state, including a 56% increase in the Deepening Extension Zone of the complex’s Pilar mine.   

It also reported a 25% year-on-year increase in proven and probable reserves for its 97.6% owned NX gold mine in Mato Grosso state in west-central Brazil, due to expansions to the Santo Antonio vein and the first mineral reserve estimate for the Matinha vein.  

For MCSA, the company reported proven and probable reserves of 59.2 million tonnes grading 1.02% copper for 607,100 tonnes of contained copper, which includes reserves in the Deepening Extension Zone of 11.01 million tonnes grading 1.44% copper for 432,400 tonnes of contained copper.  

The company’s NX gold mine has proven and probable reserves of 1.1 million tonnes grading 8.64 grams gold per tonne for 306,800 oz. of gold.  

“The meaningful growth of our asset base … continues to demonstrate our ability to deliver organic growth and generate shareholder value through exploration,” David Strang, the company’s CEO, said in a press release.  

“Over the last year, the Deepening Extension Zone continued to exceed our own lofty expectations … these results support our decision in 2021 to undertake a larger redesign of the new external shaft,” he added. “The redesign does require a greater upfront investment but will, over time, enhance the project’s value.”  

BMO analyst Jackie Przybylowski said Ero’s update has “increased” BMO’s confidence in the company’s long-term production and profitability. Furthermore, she expects 50% of the inferred resources in the Deepening Zone will be converted to reserves. 

“The Zone is so promising that Ero is now planning an expanded shaft, in a sinking project already underway … we do not assume that this increases production at MCSA as we were previously assuming the complex was mill capacity constrained, but we have modestly increased our expected grade at MCSA in the 2025-2030 period,” Przybylowski wrote in a research note to clients. 

“We are also assuming a US$50 million increase to the project capex,” she added.  

Scotiabank analyst Orest Wowkodaw described Ero’s update as modestly positive.  

“We anticipate the release of [the company’s] updated five-year guidance later in January, and we will formally update our estimates at that time,” he said in a research note. “On a preliminary basis, we estimate that the updated mineral reserves and resources could increase our 8% NAVPS of $19.29 by ~+5%.”  

“Overall, we view the updated reserves/resources as a modest positive for the shares given the expected impact to our valuation. However, we believe some investors may have anticipated a larger increase in mineral reserves/resources given the company’s sizable drilling campaign.” 

At press time in Toronto, Ero’s shares were trading at $18.20 within a 52-week trading range of $29.76 and $17.09.