Ero Copper Corp. (TSX: ERO, NYSE: ERO) (“Ero” or
the “Company”) is pleased to announce that it has entered into a
definitive Precious Metals Purchase Agreement (the “NX Gold
Stream”) with RGLD Gold AG, a wholly owned subsidiary of Royal Gold
Inc. (collectively, “Royal Gold”), in relation to gold production
from the NX Gold Mine, located in Mato Grosso, Brazil.
TRANSACTION DETAILS
- Upfront cash
consideration of US$100 million for the purchase of 25% of gold
produced until 93,000 ounces of gold have been delivered,
decreasing to 10% of gold produced over the remaining life of
mine;
- Royal Gold will
make ongoing payments equal to 20% of the prevailing spot gold
price for each ounce of gold delivered until 49,000 ounces of gold
have been received, after which it will pay 40% of the prevailing
spot gold price for each ounce of gold delivered;
- An additional
amount of up to US$10 million will be payable to the Company
subject to certain performance conditions related to planned
exploration drilling and increases to the NI 43-101 (as defined
below) compliant Measured and Indicated mineral resources of the NX
Gold Mine.
TRANSACTION HIGHLIGHTS
- Unlocks
considerable value from the NX Gold Mine by validating the
exploration potential of the broader NX Gold land package;
- Forms strategic
partnership with Royal Gold that is highly aligned with
management’s vision to further develop and grow production from the
NX Gold Mine through continued exploration and utilization of
excess mill capacity;
- Proceeds from the
transaction will significantly enhance Ero’s balance sheet strength
and flexibility, offering further support to execute upon the
Company’s growth strategy including advancing the Boa Esperança
Project;
- Post-transaction,
the NX Gold Mine will continue to be a high-margin gold producer,
highlighted by Q1 2021 All-in-Sustaining Costs(*) of US$643 per
ounce of gold produced; and,
- Royal Gold to
commit US$5 per ounce of gold delivered under the NX Gold Stream to
support the Company’s environmental, social and governance (“ESG”)
commitments for the NX Gold Mine and surrounding communities.
Commenting on the NX Gold Stream, David Strang,
CEO, stated, “In just over three years, the NX Gold Mine has
developed within our organization from an asset held for sale with
no mineral reserves or resources to a low-cost producer with a
long-term mine life, featuring significant exploration potential
and excess mill capacity to be utilized with continued exploration
success. Our partnership with Royal Gold on the NX Gold Mine is an
important vote of confidence on the quality of the asset and its
exploration potential. This transaction unlocks considerable
upfront value for Ero’s shareholders while retaining upside as we
continue to grow and develop the mine.
“The proceeds from this transaction, paired with
our US$84 million cash position at the end of the first quarter,
leave us extremely well-positioned to deliver on all of our core
growth objectives, including: (i) increasing high-margin copper
production at the MCSA Mining Complex, (ii) increasing gold
production and extending mine life at the NX Gold Mine and (iii)
advancing the Boa Esperança Project.”
*All-in Sustaining Costs (“AISC”) per ounce of
gold produced is a non-IFRS measure – please refer to the Non-IFRS
Measures section of this press release and the Company’s press
release dated May 4, 2021 for additional information. Post-closing,
the Company intends to reflect the stream as an adjustment to NX
Gold segment revenue.
TRANSACTION TERMS
Upfront cash consideration of US$100 million to
the Company will be paid upon closing of the NX Gold Stream, which
is expected in Q3 2021. The economic effective date of the
transaction is May 1, 2021. Royal Gold will receive 25% of gold
produced from the mine from the effective date until 93,000 ounces
of gold have been delivered, after which Royal Gold will receive
10% of gold production for the remaining life of mine. Royal Gold
will make ongoing payments equal to 20% of the spot gold price at
the time of delivery until 49,000 ounces have been delivered, after
which Royal Gold will make ongoing payments equal to 40% of the
spot gold price at the time of delivery for the remaining life of
mine.
Additional payment obligations of Royal Gold
include:
(i) Up to US$5
million payable, available through the end of 2024, based upon the
number of ounces of gold added to the Measured and Indicated
mineral resource categories as compared to the mineral resources as
of the effective date of the NX Gold Stream at a rate of US$20 per
ounce;
(ii) Up to US$5
million payable, available from 2022 through the end of 2024, based
upon completion of planned meters of drilling within the
exploration concessions of the NX Gold Mine at a rate of US$100 per
meter; and,
(iii) US$5 per
ounce of gold delivered under the NX Gold Stream payable to the
Company as contribution towards ongoing ESG initiatives within the
area of influence of the mine.
Closing of the transaction is subject to the
completion of certain corporate matters and customary
conditions.
ADVISORS AND COUNSEL
GenCap Mining Advisory Ltd. is acting as
financial advisor and Blake, Cassels & Graydon LLP is acting as
legal advisor to the Company.
NON-IFRS MEASURES
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 at the NX Gold Mine. 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.
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 Curaçá Valley, Bahia State, Brazil, wherein the
Company currently mines copper ore from the Pilar and Vermelhos
underground mines, and the Boa Esperança development project, an
IOCG-type copper project located in Pará, 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 Esperança and NX Gold properties, can be found
on the Company's website (www.erocopper.com), on SEDAR
(www.sedar.com) and EDGAR (www.sec.gov).
ERO COPPER CORP. |
|
Signed: “David Strang” |
For further information contact: |
David Strang, CEO |
Courtney Lynn, VP, Corporate Development & Investor
Relations |
|
(604) 335-7504 |
|
info@erocopper.com |
|
|
CAUTION REGARDING FORWARD LOOKING INFORMATION
AND STATEMENTS This press release contains “forward-looking
statements” within the meaning of the United States Private
Securities Litigation Reform Act of 1995 and “forward-looking
information” within the meaning of applicable Canadian securities
legislation (collectively, “forward-looking statements”).
Forward-looking statements include 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 statements include, without
limitation, statements with respect to the successful closing of
the proposed NX Gold Stream with Royal Gold, future amounts payable
under the NX Gold Stream pursuant to performance conditions, the
Company’s expectations, strategies and plans for the MCSA Mining
Complex, the NX Gold Mine and the Boa Esperança Project, including
post-transaction production margins, the Company’s intention to
reflect the stream as an adjustment to NX Gold segment revenue,
planned exploration, development, construction and production
activities as well as the Company’s balance sheet strength and
flexibility, overall financial condition, results of operations,
cash flows and prospects.
Forward-looking statements are not a guarantee
of future performance and are 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, gold 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
Esperança 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 statements. 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 statements
involve 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 statements. Such risks include,
without limitation the risk factors listed under the heading “Risk
Factors” in the Annual Information Form of the Company for the year
ended December 31, 2020, dated March 16, 2021 (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 statements,
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 statements contained herein. There can be no
assurance that forward-looking statements will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking
statements.
Forward-looking statements contained herein are
made as of the date of this press release and the Company disclaims
any obligation to update or revise any forward-looking statements,
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
Mineral Reserve Estimates. In accordance with applicable Canadian
securities regulatory requirements, all mineral reserve and mineral
resource estimates of the Company disclosed in this press release
have been prepared in accordance with Canadian National Instrument
43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”)
and are classified in accordance with the CIM Standards. NI 43-101
is a rule developed by the Canadian Securities Administrators that
establishes standards for all public disclosure an issuer makes of
scientific and technical information concerning mineral projects.
NI 43-101 differs significantly from the disclosure requirements of
the Securities and Exchange Commission (the “SEC”) generally
applicable to U.S. companies. For example, the terms “mineral
reserve”, “proven mineral reserve”, “probable mineral reserve”,
“mineral resource”, “measured mineral resource”, “indicated mineral
resource” and “inferred mineral resource” are defined in NI 43-101.
These definitions differ from the definitions in the disclosure
requirements promulgated by the SEC. Accordingly, information
contained in this press release may not be comparable to similar
information made public by U.S. companies reporting pursuant to SEC
disclosure requirements.
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.
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