Ero Copper: In-Line 2Q26, FY26 Capex Guidance Raised, and Gold Cash Cost Guide Increased on Lower Production

Research evidence excerpt

J P M O R G A N

North America Credit Research

06 August 2026

Underweight

Ero Copper

EROCN

In-Line 2Q26, FY26 Capex Guidance Raised, and Gold

Cash Cost Guide Increased on Lower Production

Table 1: EROCN 2Q26 Earnings Review

$ millions

Revenues

Gross Profit

% margin

Adjusted EBITDA

% margin

LTM Adj EBITDA

Cash

Total Debt

Net Debt

Gross Leverage

Net Leverage

2Q26

284.3

121.4

42.7%

144.0

50.7%

533.1

101.7

573.4

471.6

1.1x

0.9x

1Q26

263.2

105.9

40.2%

125.2

47.6%

471.7

91.2

603.4

512.2

1.3x

1.1x

q/q

8.0%

14.6%

250 bp

15.0%

310 bp

2Q25

163.5

67.3

41.2%

82.7

50.5%

267.2

68.3

653.2

584.9

2.4x

2.2x

y/y

73.9%

80.5%

150 bp

74.3%

20 bp

Source: Company Reports

Earnings Review: EROCN reported relatively in-line 2Q26 results. Revenues

and EBITDA improved meaningfully on greater production, and adj EBITDA of

$144m (vs $147m est) was broadly in line with forecast in a supportive copper

market. The company had ~$182m in available liquidity at June 30, including ~

$102m of cash. After the end of the quarter, EROCN repaid $25m under its

revolver, bringing total repayments under the facility year to date to $60m.

Outlook: EROCN reaffirmed its 2026 copper production and cost guidance

and maintained its gold production guidance. It updated gold cost and capex

guidance. Gold cash costs and AISC forecasts were raised for FY26 to $1,100$1,350/oz and $2,200-$2,700/oz, respectively, at Xavantina, reflecting production

volumes at the low end of the maintained guidance range. FY26 capex guidance

was raised to $330m from $285m to reflect the approval of ~$10m for a new power

line at Xavantina to strengthen site infrastructure.

Relative Value: We maintain our Underweight rating on EROCN. 2Q26

results were broadly in line, and guidance was collectively a bit softer due to lower

gold production at Xavantina. We note Brazil risk within the EROCN complex and

tight trading levels in a supportive copper and gold environment as reasons for our

current Underweight view. We would prefer owning FMCN at a similar spread on

a duration adjusted basis. Risks to the rating: commodity price volatility, asset

execution and capital allocation priorities.

Table 2: EROCN Relative Value

Ticker

EROCN

TKOCN

HBMCN

…