Ero Copper study expands Boa Esperanca mine life, doubles production

An updated feasibility study for Ero Copper‘s (TSX: ERO; NYSE: ERO) Boa Esperanca project in Brazil has doubled life-of-mine copper production and increased the mine life to 12 years from nine. The previous study on the IOCG-type copper project was completed in 2017.

The updated feasibility is based on a 93% increase in contained copper in reserves at the project since the initial study. Total life of mine production is now estimated at 326,000 tonnes, up from 163,000 tonnes previously.

The study pegs initial capital costs for the 4 million tonnes-per-year  open pit operation at US$294 million, with sustaining capital of US$196 million.

At an 8% discount rate, the after-tax net present value is US$380 million and the internal rate of return is 41.8%.

The new study improves the after-tax payback period to 1.4 years from 3.6. It also features a lower life-of-mine head grade of 0.83% compared with 0.95%. The study used consensus copper prices of US$3.80 per lb. in 2024, US$3.95 per lb. in 2025 and US$3.40 per lb. after that.

Cash costs per lb. of copper are expected to be US$1.36 per lb. Over the first five years of mine life, when production is expected to be 35,000 tonnes per year (compared with the life of mine average of 27,000 tonnes), cash costs will be only US$1.12 per pound. 

Ero Copper has started detailing engineering for the project, located in southern Para state, and early construction works could start in the first half of 2022, if the board gives its approval.

In a news release, Ero CEO David Strang said he was excited by the results, and that the project was the latest example of the company creating value from its existing portfolio.

“We started the re-evaluation of Boa from the ground up, beginning with a complete review of the mineral resource calculations that identified significant upside opportunities on which to build a new vision for Boa,” he said. “By re-logging core, focusing our efforts on geologic modelling and optimizing the mine sequence, we were able to identify a superior mine plan capable of supporting a much larger operation by pulling forward high-grade mineralization in the production plan.”

Proven and probable reserves at Boa Esperanca total 43 million tonnes grading 0.83% copper for 356,600 tonnes copper.

The company also sees additional exploration potential at the project. In the near-term, it’s targeting the Gap zone, a target area within the pit shell that has seem limited drilling.

“With production from Boa Esperanca expected to commence in 2024, we model ERO copper production to grow from ~45kt in 2021 to ~77kt in 2024, an increase of 69% with peak production of ~96kt in 2025,” Farooq Hamed, a mining analyst who covers the company for Raymond James wrote in a research note to clients. “We note further upside potential from excess mill capacity at MCSA. Importantly, we believe that as ERO reaches towards the 100ktpa production level, that level of critical mass makes the company a more attractive potential acquisition target to mid-tier and larger copper producers.”

In addition to Boa Esperanca, Ero holds the producing MCSA copper complex in Brazil’s northeastern Bahia state, and the NX Gold mining complex in Matto Grosso state.