Ero Copper Corp. (ERO) Earnings Call Transcript & Summary

Welcome, everybody. Thank you for joining us this afternoon. I'm very excited to be hosting was our first official Capital Markets Day here in Sao Paulo. We have an exciting week ahead. We're starting here in Sao Paulo with this event, our Capital Markets Day. And then throughout the week, many of you will be joining us. Across our operations to see the transformation that's taking place at ERO Copper. I think just to start quickly on what I see as the 4 main themes from today's presentation and as we transition the weak at operations, number one, transformation, I have a lot of our leadership team here from around the world to talk about the transformation that's happening in people, culture and our operations and something that we call One ERO. And we'll talk a little bit about what that means all throughout this week. The second is the performance against our stated objectives back in 2025. I'm incredibly proud of the work that our teams are doing, particularly around deleveraging, and Wayne will speak to that in more detail. The third thing is the quality of our operating portfolio and some of the technology that we're implementing across all of our assets to improve safety and improve performance, and Jason will speak to that in more detail. And last, but certainly not least, and I don't want to steal too much of Mike's thunder, we'll be talking about the portfolio that we've put together at Ero that includes development asset, producing binds producing mines, development [Audio Gap] assets and a variety of early-stage exploration opportunities that complements what I think is a portfolio that's going to continue to create shareholder value for a long period of time to come. Just quickly, we're here in Sao Paulo. We had the option as a tank as a company to host this event anywhere in the world, and we chose Sao Paulo for a couple of different reasons. Number one, our Brazilian heritage, clearly. It's convenient for starting an analyst tour here. But more fundamentally, I think there's a few places in the world today where you have such a strong intersection of public equity markets, venture capital, particularly around technology and also in Brazil, a big push on critical minerals. And all those things are important to Arrow, and we'll explain why that is as we go forward here. Some of these statistics might be more familiar to those in this room but for those of you who are dialing in, a couple of quick interesting facts about Sao Paulo. Sao Paulo features Latin America's largest exchange over $1 trillion of combined market cap. It's home to more than 12,000 start-up companies that last year raised over $5 billion in venture capital, primarily in forward-facing technologies like artificial intelligence and automation. And last but not least, talking about critical minerals bran, the National Mining Agency of Brazil, anticipates that over the next 5 years, there'll be $80 billion invested in Brazil in mining projects, $20 billion of which will be critical minerals projects. So you have all these things happening in Sao Paulo, and that's why you're here today. So again, thank you for joining. Very excited about today and this week. Starting quickly here with disclaimer language. Everyone on the stage will for sure be making forward-looking statements. So please, this is posted on our website, please read those forward-looking statements when you have the opportunity. The agenda for today and starting with myself to provide some context on today's events. We'll continue with Gelson, who'll walk through some of the operations. We'll talk a little bit about [indiscernible] as well. Jesse will speak to [indiscernible] some of the progress we're making there. Mike will talk about some of the exciting things that are happening in the exploration side of our portfolio, as I said, building out a really strong portfolio of assets all throughout Brazil. Wayne will talk about our financial performance. And then myself, Eduardo and Courtney. We'll talk a little bit about Brazil and what's happening here, very topical time to be talking about critical minerals and obviously, politics as well. In addition to the speakers, I just want to acknowledge that we have quite a few members of our global leadership team here today. Their names are listed here. You have the opportunity to meet them. They're in the front row. So please after during the coffee break, introduced. We've been able to attract some incredible talent to organization, really build out what I see as the future building blocks for our company, and you'll have the opportunity to talk to them in more detail. So getting going here. I think what makes ERO particularly unique in today's environment, we have a history of unlocking value. If you go back to 2016, I was the first employee at ERO Copper in those days, it's just a few of us and we've been able to build out a portfolio of operating mines, development projects, executing on our organic growth strategy. And we also put in place an action plan to really accelerate the growth of our company. These are conversations that started back in 2020 and 2021, about working with Vale at that time, now Vale-based metals to start on a combined work on a project we call Furnas. And really, when you look at our performance since 2017 in terms of copper growth, we see a very clear pathway today to grow the company to more than 150,000 tons of copper equivalent production. And so we're very excited about that. I think today's presentation this week is about showcasing the work that we've done and the work that we are doing to realize that value for our shareholders and for our stakeholders. I think one of the things that's also important to keep in mind, again, one of the things that I'm extremely proud of and that we've worked really hard to do is throughout the execution of that organic growth strategy is really protect our share count and the shares outstanding. And what that's translated to is obviously a lot of production growth, but also revenue growth and resource growth on a relatively stable share count outstanding. So we've really protected our shareholders and created value while doing that. And obviously, that's reflected in the value that you see in the company today. When I think about culture, and this is something that we will talk a lot about and we talked a little bit about on our Q2 conference call is the round One ERO. So aligning standards, processes, people, operating philosophy across all of our sites, all of our offices. And this comes down to behaviors, processes and capabilities, fundamentally driven by a focus on a relentless commitment to safety and our relentless commitment to continuous improvement. I'm going to show a video here that we produce internally back in 2025 and when we talked about ONE ERO for the first time, so that all of you can see the work that went into the transformation that you'll see throughout this week. [Presentation]

More than just a cultural experiment, this philosophy around integrating our operations for safety and performance, has led to some really incredible things that we talked about on our Q2 conference call. But starting out, again, as you saw in the video, an extreme focus on health and safety, Jason will speak to some of the transformation that happened across our organization in the last 18 months, 2 years, culminating in 2025, one of the lowest LTIFRs that we've had at ERO. More recently, approximately $10 million to $15 million savings -- $10 million to $15 million in savings in an integrated procurement strategy led by our One ERO procurement team and philosophy. As well as more than $20 million in savings through renegotiated concentrate contracts all throughout our operations. Again, I think the main theme here being focus on leadership, focus on health and safety, focus on procurement as well as technology and innovation and fundamentally underpinned by this culture I spoke to, and you saw the video of One ERO Arrow. Just to touch briefly on -- again, coming back to 2025 in January, I made 3 commitments to all of you and to all of our stakeholders. That was number one, to achieve commercial production at Tucuman. We did that on July 1. It was to deleverage our balance sheet, which clearly we have done and it was to advance the Furnas copper gold project as the cornerstone of our future growth strategy, and we clearly achieved that with the PE that came out in Q1. In addition, we also added some few value drivers that have accelerated some of that deleveraging and really resulted in strong financial performance. Obviously, the gold concentrate program at Javanchina, a creative way to add value to our business, and that will benefit us not only this year but also through a good part of next year. We completed the mine mechanization at Javenchina. For those of you that are coming to Javanchina this week. You will see that in action and the potential that, that provides that operation, as Gelson will speak to. And also the plant debottlenecking that we achieved at Caraiba the last 3 quarters have been all-time record throughput levels at that operation -- again, 3 big value drivers as we think about the future and what our operations are capable of doing. And just to touch on the deleveraging component, something that I'm very proud of is that $0.90 -- roughly $0.90 of every dollar that was available for deleveraging in our company over the last 18 months has gone to deleveraging, really emphasizing the commitment the performance against that commitment and the focus that we have on positioning the company for future growth. That future growth is coming in the form of a large project. Obviously, we have organic opportunities around our operations, which Gelson and Mike will speak to. But at Furnas, when I take a big step back and I think about our future, Furnas offers a long duration mine life, significant production potential outstanding geologic opportunities in terms of the exploration programs that we have going there, and we'll talk about that a little bit as well and very, very compelling economics. You're looking here at the sensitivity that was produced in the PA. Obviously, metal prices have improved a lot since then. And it's part of the reason that we're so focused on this project, again, is the cornerstone of our future growth. Our commitment for no goes beyond the execution of the earning requirements. Today, September 14, very proud of our team. 1,000 days of working on site without a single lost time injury, and I think that's a milestone we're celebrating. In addition to the fact that in August, we completed our 90,000 meters of drilling that was required under the earned. That happened about 2 years ahead of schedule. And so congratulations to our team there. We have 11 drill rigs that are operating on site now at Furnas, and those are continuing to test resource extensions, confirm mineralization for future studies, including the pre-feasibility study that we expect to be out in 2027. So what does that mean for ERO? I think fundamentally, as you'll see in this presentation, and as those of you who are joining us on site this week, we'll see is that we have effectively 2 main pillars to our value creation strategy that is set on a foundation of deleveraging and derisking. So that's coming in 2 places. Number one, focus on balance sheet deleveraging, which clearly, as I indicated, we've done and Wayne will speak to that in a little bit more detail here. But to improve our financial strength and flexibility going forward, that's one of the foundational pillars that we have. Also our continued execution ahead of schedule on for us to accelerate that project as much as possible, enabling Investments in technology and innovation. Marcelo is here. He's our technology and innovation head here in Brazil, doing some very exciting things across our portfolio. As Gelson will speak to, and you will see this week. And then we also have, as I said, something that I'm very excited about is the exploration portfolio that we've been able to put together in Brazil across every stage of development. So from near-mine opportunities to new regional opportunities in this environment, we've been working quietly for the last several years. to put this land package together and do some initial work. And I think you'll see today why we're excited about the work that we're doing on that side. And finally, for us, really creating that bridge to the future state for us. with a target FID in 2029. With that, I'll turn the mic over to Gelson. Thank you very much for being here today.

Thank you, Makko, for your introductory remarks. I thank everyone for being here today. I also want to thank our team from ERO, which have been working very hard for us today. This preparation is fantastic. Thank you very much. Before I move to the slide, I'd like to sort of in the next 25 years, just to explain the common themes that we're going to hear today on this 25 minutes. Number one is safety. Makko mentioned about this is how we operate also the technical depth, we know these assets very well. And what makes our plans robust. We're also going to be talking about discipline and execution. This is common across all assets and projects. And of course, we got to talk about people. This is our main asset in the company, the people that actually work for ERO. This is what makes everything possible here. We also extend about the application of technology, innovation in our projects and how we are benefiting from this today. And of course, how we're going to make our assets more efficient and how we're doing this as we speak. Everything on this safety transformation here leads to a very simple point. We want to make our operations safer and we are doing this as we speak. Our track record. Makko mentioned about 2025, which was our best year so far. Last time [indiscernible] frequency rate, the lowest. We had an uptick also in the same process. We also have the lowest rate in terms of how the [ Angers ] occur. So it's actually half of what happened before. This is a great thing for us. And some of the common themes that we mentioned here is the focus on people the connection with the people on site, the entire leadership. We've got our directors of operations. Our managers, our supervisors and coordinators they're actually in the front line, and this gets the peer-to-peer connection with our operators and makes a big difference in the group. And also, we get the feedback from our operations to us. One of the key areas that we focus in the last 18 months with the support with DSS+, and I'll talk about this in a few minutes, is about focus on critical risks. These are the areas that we focus the most because we want to reduce the harm every abstinent direction can cause harm, and that's why we're focusing on the critical areas. We build controls for this. We increased our audits, internal and external. We also increased communication between our teams. If I look at on the left side of the presentation here, you're going to see several themes, which relates to how we got to One ERO arrow safety management system -- and it goes from something simple like 5S housekeeping programs. This is done across the entire organization, from mining operation exploration and our projects. It's a company-wide. The site is better organized, therefore, it's safer and more productive. We've seen before in other places and ERO is no different, the safer we are, the more productive we are. We go to projects and aspects like a bright mine, it's a safe mine. And we started this in the underground mines, and we went through other areas within the surface as well where we know the difference between having lead mines across the entire set of underground actually improve safety but also improve productivity. This is all linked together. On the site leadership renewal, that is clear accountability we've got, as I said, the directors, the managers operating and working side by side with our teams on side that actually makes a difference for us as well. We're sharing best practice, of course, the entire organization that 1 arrow that Makko mentioned here. It is just not a title. This has been [indiscernible] not only in safety, but in productivity and procurement and technology, everything. And I would just want to open up a little bit about the DSS program that we had. Finished this program after 18 months, but the company to help us in leadership development also processes, governance and management programs across the entire organization, also intensifying our teams on in the ground, all the critical risks. So there's a big focus on fatality and serious injury prevention. And then finally, after we trained all the managers and directors on site we extended that train, and we called it train the trainer. So DSS helped us to create the environment such that we continue this process on our own -- so the training now is with the supervisors and with the operations, all the operators on site. This is across the entire organization, and it's been going very well. Makko mentioned about technology, and I want to make a big patents for this. When we talk about technology narrow, there's a big focus on people, right? And I'll talk about the 3 pillars, but big focus on people, reduction of exposure, and we'll see some examples on this when I talk about the sites. And give the best information for our teams to take decision on site in the moment. And what it means I'll give an example related for Tucuma with the AI-driven mill, is that all the programs that we put in place in technology, they are very focused. We identify the need with the operations. So the discussions they run from the mine directors to the managers, all the people doing the work, we create the programs, the technology application. And then we have a team on the Marcelo, you see in the room which elaborates the processes, what kind of equipment we're going to use, the timing for the implementation and what benefits we're going to bring plus the training and so forth. So that is going very well. I'll give an example today when you visit Caraiba this week, we'll see some of the operations now in drilling area, we actually can do the drilling from the surface. This actually reduced not only the exposure of our operators on site, but also removes the induced error while they're doing their work. Some of these work you see is common by laser in the full process in there on the screen. It's going very well. We also have the same process in [indiscernible] We've got in Tucuma, something that we started there a few months ago. It's running. It's implementing. I can take my phone and show you guys, if you have a time later on, where we have an AI basically implemented with the meal and the crushing sip, which means that it's not a Latin, it's not about talking about if the equipment has got an issue during the operation, but the entire value chain is linked. So we give information for the operators so they can take a better decision process. So if the system detects that water or a density or even the feed needs to be changed. All of that is done as we progress during the day and the shift. So they can see that and take the appropriate decision that actually is happening right now, and it's making a big difference for our operations as we speak. Digital train, it's something that we're doing at Tucuma as well. And we look at Furnas in the future. We'll be talking about it. We want Furnas to start with the right technology from the beginning, not only equipment side, but also how we simulate ones on the study phase of the implementation of the auto construction that's going to be used in there. You see firsthand, the blasting in via that we're doing this remotely from the surface. It removes people from the line of danger as well and it's controlled with the team. all of these that I mentioned here is running on site, and we'll be able to see it there. Some of you are familiar with Caraiba but if you're not Caraibas in the [ Bayer ] state and has been operating for more than 50 years, is a reference in Brazil in terms of mining operations, not only because of the scale but also everything that actually runs at Caraiba, the history, many professionals in Brazil, mining engineering, geology, or areas that actually have professionals for in Caraiba. We're very proud of it. Some people that actually work in Caraiba 20 years ago, they worked for us at the moment, and it's -- we are very proud of it. We are running the 4.8 million tonne per annum capacity in the [ mill ] Makki mentioned about the achievements that we've done in terms of changing the mill set up, the investments that actually have been done in the past and also the debottleneck and I'll be able to speak about it shortly. But the major aspect for Caraiba is the largest investment that we have done there, which is the shaft. And the shot change how we operate in Caraiba, I'll give an example. Today, if you're an operator after you do the shift change to get to the mining phase, which is about 1,000 500 meters deep area, it may take you 1.5 hours driving an ramp. And this is going to change for a few minutes once the shaft is up and running, and that's going to change the productivity and the cost, of course, for Caraiba. On the plant side, the message here is that every increment that actually have been done on this plant since 2020 with the [indiscernible] installed additional ball mill installed and the large piece of work that actually was done also with the Jameson cells increase in recovery in the plant. But next -- last year, which was the entire debottlenecking completed by the end of the year, taking us to 4.8%. That's about 1.6 million tonnes per additional capacity that was provided. And you can see on the graph on the right side, the self-explanatory, how we are using that capacity. And I think this is a key message here, not only for Caraiba but what we're going to see soon and also we'll talk about Tucuma and then [indiscernible] Our Caraiba operation actually is composed by 3 main ore sources. In the past, most of the ore was coming from Pilar, more than 95% of the ore sources coming from Pilar and today, what we see is a combination of Pilar underground mine, we've got Vermelhos, which is also underground mine and Surubim. Surubim is an old mine and it's going to be running all the way to the end of this year with some stockpiles mine in 2027. And to feed the plant and continue fitting the plant with different ore sources. We've got 8, which is an open pit mine closer to [indiscernible] which will start next year. Work is in progress already feed grade, about 0.9% to 1.1% as we show in the graph there, plus the total capacity in the plant, which we try to maximize and use the total aspect in there. And that's sort of a projection for us for the next 3 years. As I mentioned before, our single largest investment at Caraiba is the shaft and it opens up many benefits for us. The shaft is in progress. We are about 1,170 meters, give or take. As we speak, we plan to be finishing the excavation of the shaft or the next year and then continues on in the progression of the equipment a shaft and getting the shelf ready in 2018. The entire capacity of that shaft is going to give us on the [indiscernible] system and people. We're talking about 3 million tonnes additional that open up a different area for us. You can imagine today operating 1,500 meters deep. There are different areas that we want to explore, develop and the shop is going to make that possible and increasing the life of this operation, Pilar for decades to come. This, of course, will translate to lower operating costs and more efficiency at the mine. This is the current picture of the setup that we have all of these infrastructure, these are permanent infrastructure, where we've got the rock winder, the areas where we have the short frame, this is close to the operations. There's a massive integration of operation and the project as we speak. And every meter basically that we're seeing today, glad us closer to the highest grades in the development area of Pilar, the deeper areas. I'd like to make some comments and a presentation here on Tucuman. It's our newest operation. Sorry about this. Okay. Good. Thank you. Thank you. So Tucuman located in the Carajas area, if you're familiar with the areas on the east side of Carajas has designed a 4 million tonne per annum operation processing with the mine life all the way to 2035. We've reached capacity commercial capacity last year. And now the progress is on basically delivering additional featuring capacity, which we'll talk in a few minutes. Important here is that the whole ore about knowledge now the technical aspects for Tucuman is incredible. When I joined Arrow, I remember talking to Mark about is that once you turn the mill, the recovery that actually came from out of the concentrator was exact recovery that actually was in the design phase of this project, which illustrates how well the studies were done, but also implementation and also the quality of the ore combined to the processing design. So it's very positive for us. and we see that on a daily basis. We are adding additional filtration and that your on the tailings side, this additional filtration capacity will take us 4 million tonne per annum processing this is basically the story that I was mentioning here. Sorry, should I put this slide before. You can see the steps that we're moving on from the day that we started the operation, all the way to [indiscernible] the filters are in the port in [ Bahia ] and the liver site. For those that actually visit the site as well, we'll be able to see the construction ongoing all the saves and materials in there. and it's on plan to deliver what we designed for the remaining of the year, and then we'll be able to see that with me during the week. Now when I move to [ Shabancina ] [ Shabancina ] is located in the Makko grocery state. It's a high-grade underground operation. And this operation, we've made a huge change recently on that, which I'll talk about it. which is where we see the major growth due to the changes. So you can picture at the beginning of the operation many years ago, narrow veins, very narrow, the mining method had to adapt to the geology. And of course, as we move and progress deeper, there was the need for us to reevaluate entirely operation, and that actually was done. So we completed the mechanization. And with the mechanization, we can add mining development and we can increase the mining rates but also remove people from the line of danger. Our plant at Savancina, is capable of processing 300,000 tons a year, and that's where we're moving towards with the implementing production. This is basically a summary of the work related to the mechanization important, when you think about mechanization, we got to remember that we are changing a lot of things around there. We're changing people, we're changing processes -- we're bringing new equipment and have to be training people. Everything supporting that process needs to be implemented. And then I'm very happy and proud of our team that we achieved that in less than a year since the beginning it's a fantastic work that's actually done there and you see by ourselves. With that mechanization, we accelerated also bringing technology to the table, and you'll be able to see some of these equipment being guided by laser which reduced viability on the drilling, improving meters that we are able to do on our development. And that's in progress right now, we will be able to see. So it's scalable, and it's very important for anything that we look at the capability to expand [indiscernible] in the future and to achieve the production rates that we're talking about, the mine is prepared for, and we will continue in that process. This is the infrastructure support. It's a very simple slide, but I think it makes important that we bring it here. We're always looking at an opportunity to be more efficient, reduce OpEx across the organization. And this was a very important step that we took when we look at the [indiscernible] operation. As we did not have the need for larger capacity in terms of power, we use a 350k volt. And then when we move to mechanization and bringing additional ventilation, additional cooling without the need to work with our partner there, which supplies power for us and increased capacity using a different line is 138k volts. That's going to help us across the additional power that is required for [indiscernible] but also brings a lot of savings in OpEx for the next few years. Makko mentioned about the opportunities that we take within the company, and this was one of the best opportunities for [indiscernible] in the last while which related for us looking at what we had in stockpile, this material we're seeing there. We've tested the material, we identified it. We quantified as we reported last year in terms of inferred resources due to the nature of the deposit. We've been operating at since very successfully. We had to bring additional equipment on site to support us, especially in the rainy season and that graph illustrates very well the challenge that we had in there, but you'll be able to see this by yourself and how the entire setup for running concentrate and created concentrate from the stockpiles in progress with the dryer and also the future press we'll be able to see that. That also, of course, when you look at the cost that is basically the entire operation that you see there is about $700 per ounce and then that brings a significant margin for [indiscernible] I'd like to coffee break, and we continue with 20 minutes. Thank you. [Break]

Okay. I think we're good to go and we should put the video. Okay. So I think we can start for us. We will see a video about the project. It's a great video. When I look at this it kind of represents everything that is in our minds that represent the -- not just the setting of the project, but the idea behind the project, visually speaking. And also, we're going to see a couple of slides. Just to finalize, Makko mentioned at the beginning there, some of the highlights of the Furnas project. I won't bring them up, but I will make comments about how the project is progressing. Okay? [Presentation]

When I first visit the Furnas project I was not only impressed by the setting and the work, which was already done by our teams gathering all the knowledge that actually was acquired with the work done by Vale in our core shed and seeing all the geologists, environmental work and community work in progress. But when you start putting in the least of what it makes a project successful I saw all the elements in there, not only in terms of the geology and the knowledge that we have acquired for the mineralization, structural controls, great distribution, how the teams located the drilling program, not only to define resources but also to test the boundaries of the mineralization. I've seen the team testing holds at 800 meters deep, which is way far from what is in that project right now as you speak and testing mineralization and finding the same mineralization, same thickness, high-grade in there, [indiscernible] speaking. So in terms of what it makes a big project, will start with the geology and then move on how can we mine this. And then the large-scale mining when we compare Furnas with our Caraiba operation, just for a sense of the engineering here, we plan the Furnas during the PEA, we brought not only specialists from outside of the company, but our own team to test and challenge the assumptions that actually were in the PEA. Today, we mined Caraiba from 400 meters from the surface all the way to 1,500 meters. And even at this scale of fun the entire production on the underground can come from a single level in a year. And even when we get to the end of the 25 years mine life, we will not have reached 500 meters deep. So that is very impressive. We have areas where the ore body crossed 100 meters, large stopes can be applied. We're looking at base feeling rock feeling the setup with the open pit mine as well, the Geotec in progress. So everything points out for a very robust. In terms of infrastructure, the video points out the area of the infrastructure is beautiful because everything can be concentrated and minimize, minimum impact. So with that, we're continuing this year with the pre-feasibility study. Some of the accomplishments so far in [indiscernible] '25 and 2026 there. But the most important aspect is that we continue to work on site with additional drilling test work, engineering work as well in progress with the firms working on the project for the PFS level. But also on the environmental permits with the [indiscernible] already been prepared by our teams collecting our data, a great relationship with the local community. So these are the phases that we see for the Furnas project. Of course, we plan to deliver this pre-feasibility study next year. We work very close with old some of you asked me how we interact with all its a great interaction. We have quarterly meetings where we share not only what we do in the project, but also we get to understand how they are doing their own projects because everything is the same setting there in the same area there's quite a lot of learning among the 2 companies and then the exchange of information. And also our target for investment decision, looking at 2029 with the completion of the feasibility study as we progress drilling, the more we learn about the deposit, more we learn about canalization, we adjust the mine plan, we adjust the design and everything continues in the confirmation of the PA so far. Currently, we have 11 rigs, and we will basically as we progress towards the end of the year, may reduce some of the drilling because we've completed and then it's going to be more specialized really across the site and they focus mostly on the items which make impact on the pre-feasibility study to give a certainty and reduce risk for the project, being aspects related to reserve definition. Our teams have defined many areas for resource growth actually in progress as well. Very importantly, not only for the open pit areas but also to the underground, there's a very deep understanding on the geotech that what makes us design and make sure that we will perform. As we say in the design for these mines for slope angles and water inside the areas and how much pumping will be required so these are the processes and work in progress as we speak today at the Furnas. And with that said, I want to finish here and then ask Mike to come in and help us to understand more about the exploration and potential that we see in ERO.

Okay. Thank you, Gelson. Gelson touched on in the video, touched on the exploration as I'm going to talk about the rest of the portfolio. We have a fairly simple and deliberately simple strategy that really hasn't changed. One, we replace reserves and extend the mine life at the mines. This is where the bulk of our drilling dollars go because it's the highest return on invested capital. It's where we're going to make the cheapest discoveries and those discoveries are going to be near the plant, near our people and with permits. And then regional and greenfields projects provide us opportunities for organic growth in the future in the medium and long term. And this slide really from left to right shows that progression. So our foundational assets at Caraiba, Tucuma and now Furnas. I'm going to touch on some of the updates at those mines as well as some of the new regional opportunities. So Caraiba, we have a new copper nickel discovery near the Vermelhos mine. Tucuma. I'm not going to go into great detail, but I will say that we do have an exploration project within 30 kilometers of the mine that we're drilling on right now. And then we have a new greenfield project, very large, 220,000 hectare project with an emerging copper nickel districts. Starting with Pilar. You can see the reserve growth here from 2017 when the company started through to the discovery of the deepening, so we're really focused on the deeper portion of the mine and the area where we're developing the shaft to. By 2021, we had 10 million tons indicated, 6 million tonnes inferred by 2025, 3 million tons measured, almost 10 million tonnes indicated and 11 million tonnes inferred. So a big resource growth in that area. And you also noticed the grades are quite high relative to the reserve grade at Caraiba in general. In the long section on the right, you can see the distribution of the measured and indicated resources in gray and then that sort of mustardy yellow is the inferred resources see in the inset, the shaft, which is 1,500 meters from surface. And then the top -- the bottom of that shaft in the top in the larger image right there, you can see the bottom of that shaft, 1,500 meters below surface. There hasn't been a lot of drilling here in recent years because of infrastructure requirements and just development needs. But you can see a couple of holes that we've drilled here relatively recently in some of the results. And I think the one that's really worth highlighting is the 2 at the bottom from Hold 217. So we had 27 meters at 3.2% copper, including a very high-grade interval within that and then 18 meters at 3.4% copper. These holes are hitting at a relatively shallow angle because of the orientation that they're drilled. So those aren't true thicknesses. But the point is that the zone is open and at the bottom of the inferred resources, we're seeing very high-grade mineralization, so it's very encouraging. At Tucuma, the question here is around the continuity of the geology at depth and what sort of grades we're seeing below the pit. There is an existing underground resource of about 1.35 million tonnes at 2.24% copper. So that's from the 2021 resource updated for depletion. So obviously, it hasn't really changed, but that sits below the pit design. We had an 8,000-meter program from surface to test for the geological continuity of that high-grade mineralization and to test to see what the grades are below the pit. In the long section -- in the section that we see here of Tucuma, you can see the distribution of blocks above 2% copper and some of the intercepts that we drilled below the pit with some very high grade, so 11 meters at 4.4% copper, 5.9 meters at 4.1% copper. There's also an intercept at the bottom there of 11.7 meters at 1.8% copper. So very strong sort of underground grades drilled below the pit. We know that it's open. We know it's continuous and there's a very continuous plunge line to that mineralization, which is quite encouraging. [indiscernible] it's one of the operations where expirations most clearly paid for itself. You can see the change in resources from 2017 before the San Antonio discovery to 2021 where we had about 1 million tons in indicated and 700,000 tonnes inferred to the end of 2025, when we put out the technical report, we had 300,000 tons in measured, 2 million tons indicated and 1.1 million tons inferred. So very strong resource growth and we have very consistent mineralization and tracking that to the north and drilling those extensions of that mineralization has really added to that resource. In the plan map on the right, you can see there's 3 zones within the lower portion of San Antonio. So this is a plan map. The mineralization is dipping shallowly to the north, northeast. San Antonio, Maine has been the area that we've mostly focused on. You can see the extension of that mineralization. It remains open. We continue to drill this portion. This is the mineral resource envelope from the end of 2025. And then the black pierce points are drilling from the end of 2025 and through 2026. And you can see there's been a big focus in this area, which we refer to as Santo Antonio East with some very, very strong grades. So hold 60, 65, 70, you can see intercept 6 meters at 15.5 grams. 1.7 meters at almost 12 grams, 10.3 meters at over 20 grams, very, very strong intercepts. But I'd also point out that you can see a fair bit of natural variability within this deposit with lower grades that are relatively close to high grade. So 1.9 meters at under 5, 2.3 at 2. So there is variability within the system, which is important when I touch on the next slide. And then it's also worth pointing out this area here over at Santo Antonio West. So the grades and thicknesses are generally lower than what we see at Santo Antonio Main in San Antonio East but this -- what we're encouraged by is that this is within the main mine sequence. So we see veins, laminated veins hosted by carbonaceous [indiscernible] and the sulfides, galena, sphalerite, and pyrite are very diagnostic of [indiscernible] within the main mine. And so we see all of that here. And we have gold-bearing mineralization within those veins we're going to continue to chase that mineralization in that direction to see if it thickens and gets better grade like we see at Santo Antonio Maine and Santo Antonio East. So this is quite a different slide. With Santo Antonio, we've consistently drilled and extended the bunge line of that mineralization, and we wanted to see how far that zone went. So we drill the hole to the north of the main mine. So this is the 2025 mineral resource envelope in dark gray. We drilled SPL03A. It's almost 1,700 meter deep hole from surface which intersected a 3-meter vein interval at about 1,570 meters vertical depth within a larger 11-meter package of carbonaceous [indiscernible] with smaller laminated veins, galena, valerate pyrite, so those diagnostic sulfide minerals that we see within the Santo Antonio mine. So we interpret this as the -- is very similar to the mine sequence, which we see up here, and we effectively believe we've extended the mineralization by about a kilometer from the 2025 mineral resource envelope down to SPL03A. We have internal lab assays for this, and they are -- we're waiting on the accredited lab assays. But in general, I would say that they're fairly low low-grade anomalous, but very encouraging that we see that mine sequence, very thick and a fairly thick 3-meter package with concentrated veining as you can see here in this core photo. To follow up on this, we're drilling a number of wedges from the parent hole. So SBL-03B is the first one. It's targeting 1,500 meters as a wedge out of the parent hole and a number of other holes will be drilled to test the lateral continuity, the grade and then the up and down plunge continuity of the mineralization. Back to Caraiba. This is an emerging nickel copper discovery I think 3 sort of key points to start. It's within 10 kilometers of Vermelhos, so very close to infrastructure and power. We've drilled 4,200 meters on this project, which have defined a strike length of about 400 meters north to south. The mineralization is shallowly plunging, which is quite encouraging for the deposits that we tend to see in the Vermelhos district. And we've intersected a number of -- we had a number of hits of semi-massive and massive sulfides with [indiscernible] so the nickel and copper bearing minerals. I won't read these out, but you can see some very encouraging intercepts with widths from 7 to 16 meters, some considerably elevated nickel and copper grades with some cobalt. We consistently explore for this mineralization using borehole EM. So if you're not familiar with that electromagnetic technique, it's a geophysical method. We put a probe down the hole and we look for conductors off hold and usually, those are associated with accumulations of sulfides and nickel copper mineralization. We have 2 untested plates here at the southern end of the lower plunge of the known mineralization, and those are being drilled now. And we will continue to follow that up with more borehole and drilling. And lastly, this is a new district. At Kariba, we spent 10 years working on it. Obviously, there was a lot of work that happened before we got there. There's been over 400 and 2,000 meters of drilling in the mines and regionally. There's 6 current and past producing mines in that district. We targeted this area at owed in a similar environment in Bahia, it was originally mapped as an area of ophiolites. And ophiolites are a sequence -- basically, it's a slice of oceanic crust, which has been thrusted on to continental crust through tectonic processes and those weren't prospective -- wouldn't be prospective for copper nickel mineralization. But our team had a hypothesis that this was mismatched. And what we were really looking at was intrusive ultramafic and mafic rocks that had the potential to host magmatic nickel copper sulfides like we see at Caraiba. So we did a fair bit of mapping and soil geochemistry and identified a zone that's about 100 meters wide by 90 or 100 kilometers east west by 90 kilometers north-south. You can see the soil sample -- or these are stream sediment samples that had identified the zone we did further mapping and soil geochemistry to identify 13 mineral systems. We find nickel copper mineralization hosted by Ultramaphyx at surface, numerous gossans, there's been no work here, no drilling in this entire district. So it's brand new. With those 6 target advanced target areas, we drill 100 meters from Q2 up until the end of August. I can say that we've hit a number of intervals of disseminated mineralization, similar sulfide minerals that we would see at 30. So Purity, Pentland [indiscernible] disseminate with some zones of net textured mineralization. So the point is not that we've made an economic discovery, but the point is really that we've proven a concept that we have a magmatic nickel copper system here and that we've discovered an emerging district. So the next steps here are to take that information, understand the distribution of sulfides, understand the geometry of the system, go back and refine our targeting and have a second phase of drilling to understand what the potential is and hopefully make an economic discovery. So I guess to sum up with Pilar, we have a system that continues to be open at depth with high grades -- we have an emerging copper nickel sulfide discovery in that district near Vermelhos. At Tucuma, we've shown that the mineralization continues at very good grades. Below the pit, and we're going to continue to drill that starting at the end of this year. At Vermelhos the mine continues to add ounces as we drill down the plunge and we've shown that it continues at least a kilometer down with that deep regional hole. And now we have a new emerging nickel copper discovery at Oden. And obviously, I think as Gelson mentioned, we have 11 rigs turning it from -- and with that, I'll turn it over to Wayne.

All right. Good afternoon, everyone, and welcome to the most exciting part of the presentation, finance. And what could be more exciting than risk management. But seriously, when we think about our business, obviously, you've heard a lot from the team around what we do to grow our business, protect our business, a lot of things that we can control. But there's also a lot of things that we cannot control. And as we think about how we protect our business through the cycle, I just wanted -- we wanted to highlight sort of 5 plaza that really help us protect and grow and continue to deliver value to shareholders. And so what are those? Obviously, we are a Brazilian-based business, so heavily exposed and reliant on the BRL. Metal prices, that's pretty obvious. When we think about our balance sheet, it is -- we're coming out of a very interesting phase as a company out of a very heavy capital phase. But having a balance sheet that is robust and allows us to do the things we want to do in the future is very important. Commercial terms, obviously, we talk a lot about copper, and when people talk about selling copper concentrate. It's a little bit more complicated than just putting a loan per vessel and sending it halfway around the world, and I'll touch on that. And then Mike talked about the 1 year program and how that's really helped us on the procurement side. So I will go through each of these in a little bit more detail. So this is a very interesting slide. And I think for those of you who've followed the story and known us for a long time, we've talked a lot about our foreign exchange hedge program. As I said -- mentioned earlier before, we're heavily exposed to the currency. We have all of our assets in Brazil. And as most of you in this room know the real is a very volatile currency, but on the other side is a very liquid currency. So together with the Mexican peso, is probably most -- the most liquid of the Latin American currencies. And that gives us an opportunity to put in place structures to protect our margins. And how do we think about that? We're not trying to bet on the currency. But what we are trying to do is when we put together a budget for the next 12 to 18 months, we have a very good understanding of what we think the metal price will be. We have a very good understanding of what input costs will be where we find ourselves exposed is potentially a strong move in the real. And I think we saw that happen obviously very wildly in 2020 when covered hit and we saw the currency move from, well, the low 3s to high 4s, which had a hugely positive impact for us at that point. But then similarly, when we moved into a heavy capital phase of Tucuma, we saw what that could do to us if it went the other way. And I think this slide really puts it -- summarizes it quite nicely in terms of how the way we think about it. Obviously, we're not looking to get the exact number. It's about putting in a range. We use costless collars to do that. And I think this demonstrates quite nicely how -- yes, there are swings and roundabouts. The days were and months and quarters where we will lose against the spot rates. But ultimately, from our perspective, when we think about our budget, we're still very comfortable because we're at a level that we can support. And in the quarters, as you've seen in the last 2 quarters, particularly where that program has delivered quite significant gains to us. And we will continue to try and be opportunistic. Obviously, you have to be a bit opportunistic. The real has a very interesting relationship with the U.S. dollar because of the interest rate differential. And so the ability to capture that differential when you see opportunistic moves in the currency, whether it be local geopolitical news or whether you see some international turmoil drive currency markets. We try to use that to the best of our ability, obviously, to capture a range that we feel comfortable with rolling forward into the budget. So Makko touched on the procurement. This is obviously one very happy outcome of the near program that's been in place. I think context is important here. We obviously had a very decentralized approach to procurement up until a few years ago, and we really solidified a centralized approach last year with the One ERO program. And I think that's given us, as you see stronger governance, standardized contracts, but also given us a much better view of what all 3 assets are consuming where the exposure is in terms of certain supplies or reagents. And through that and through being able to negotiate now with bigger volumes, of course, bringing Tucuma into that mix has meant that we have a lot more volumes to negotiate against, we're be able to generate fairly significant savings, which is a great testament to the team down here. Obviously, I think when you look at the balance sheet over the last few quarters, you've seen the inventories grow, but I think that's twofold. That's -- one of that is the point we make about adjusting inventories for disruption. Certainly, the beginning part of this year, we saw significant global turmoil, shall we say, which created significant logistical bottlenecks logistical challenges. It was something that we very proactively trying to manage, and we did that by building up certain inventories in certain reagents or suppliers that we felt would be difficult to source if we saw a full-blown freeze in the global seaborne freight market. But obviously, as settles down, we'll work to bring that down. Of course, having a bigger asset base as we do naturally requires us to carry greater inventories. So I thought this was a slide worth putting on the table because we get a lot of commentary, and I get a lot of -- there's a lot of noise about TC/RCs. And everyone is like, oh, look at the spot TC/RCs. The minus 300 and minus 3. And every week, it's about the TC/RC. And I think -- what I wanted people to sort of understand is that -- the selling of concentrate the TC and RC and for those of you in the room, I hope there's a treatment charge in a refining charge, treatment charge for a smelter refining charge for a refinery but it is a cost that we pay ultimately because we are delivering -- although we don't deliver a final metal, the historical pricing of the metal is the delivery of a final metal. And that cost is borne by us as the producer. So when you think about it, there's so much more that goes into TC/RCs because there's the payables introductions, which nobody really focuses on. And a lot of people today sort of say, well, how with these negative TC/RCs running in the market right now, how are smelters still surviving. Well, they are still surviving because the deductibles and the payables that they've historically had in their contracts are allowing them to have huge wins on gold, silver, other materials they might have. Similarly, when you look at the freight and the freight to different markets, obviously, focus has very much been on China and China freight. But for us, for example, moving material into Europe versus China is a significant saving. Now that's not -- it's not easy to do that because obviously, there's not amount of smelters in Western Europe or in Europe compared to the smelting capacity that's been built out in Asia. But if we're able to capture some of that benefit for ourselves, that can have a big -- a very big impact. Right now as well, the mix -- the counterparty mix is proving to be very interesting. So again, for context, when we acquired Caraiba, it was a domestic supplier to put an [indiscernible] And we went about changing that and introducing export sales. But our volumes are actually quite small when you think about it in the context of the global concentrate market. And so for us, it made sense to deal with traders because they gave us a lot of flexibility around timing. So what do I mean by that? Well, if you supply into a smelter, they have -- they plan out their production and there's inputs, 12 to 18 to 24 months ahead, and they are very particular about their deliveries. And so if we, for example, put together a lot, 10,000 tonnes is a lot, and we miss a shipment by one -- by a couple of weeks. Let's say a ship, and it's also by the ships moving through the -- around the world. We would potentially up for significant penalties if we did not hit a delivery window into that smelter. So what are the trade -- obviously, the traders have a very different approach. They have a huge book of material that they buy from lots of producers around the world. They are able to absorb that. Clearly, there's a cost that comes with that. But that cost is built into the TC/RC that they offer you. And so for the longest time, we were very happy with that relationship, and we continue to be very happy with that relationship, particularly amongst the very large trading houses. But what we're now able to do, which is really exciting is this year is the first year, and in fact, we shipped and delivered our first direct smelter material in late Q2. And that's really exciting because it allows us to create a bit of a mix between direct smelter business and trading business. We're able to do that because now we have the volumes. So having the 2 assets gives us enough volume to be able to offset any risk of delivery or timing of slips, a slight slip in the shipment schedule. So that again kind of changes the way we think about how we sell the material and the overall value proposition. So this is a slide that makes me very happy as CFO. It's look, it's self-explanatory. Obviously, tremendous performance over the last 6 quarters from a peak leverage of 2.8x on a gross basis when we right at the end of, I guess, the Tucuma CapEx and the commissioning had just begun. As Mike said, this was a key part of our strategy over the last few quarters. when we think about what we want to do with this business was to get ourselves below 1x. We're there. And obviously, the numbers on the right really give testament to that. When you take your adjusted EBITDA from $216 million to $533 million over 2 years, over 18 months. Actually, that's that drives incredible performance in terms of your deleveraging. And I think that then flows into -- the slide, which is how do we think about the balance sheet, how do we think about returns to shareholders? And certainly, there's a lot of questions and thoughts around what are we doing in respect to returns to shareholders. Well, first thing I would say is in paying down debt, we are actually making returns to shareholders. We're lowering the debt burden, we're lowering the interest charge. And so that, in essence, is a return to shareholders or stakeholders in this business. But as you can see, we are we're reaching a point where we feel over the next, say, 2 to 3 quarters, we will be in a position to pay down all that remains in our credit facility on our revolver, which is $95 million. Finish up the copper prepay, which we did just 2 years ago. And that really will allow us to be more thoughtful and probably a bit more directed around how we want to begin to make returns to shareholders. We do that in the context of thinking about Furnas. Furnas is as you just saw an incredibly exciting project for this business. But we want to be really thoughtful about how we fund that. I think when we thought of -- when you look at Tucuma we talk about the debt here. We were very thoughtful about putting in place a high-yield bond when we funded Tucuma. Obviously, our timing was tremendously advantageous given the current interest rate cycle at that point in time. But today, we have a lot more levers to pull, not least of which is the tremendous cash generation that we have from this business. And so we will continue to think about that. Obviously, Furnas is progressing very quickly. But certainly, I think you are going to see us come to -- back to our shareholders and stakeholders here in the next short while around what we think we're going to do in terms of shareholder returns. And that is me. Thank you.

Perfect. So we thought we'd do something a little bit different here. Courtney and Eduardo prepared a couple of slides to talk a little bit about the current climate in Brazil. And then I thought what I would do is ask all the controversial questions ahead of our Q&A about Brazilian politics. So over to you, Eduardo and Courtney.

So I'm going to take a step back before we jump into why Brazil is best in to be a partner of choice around critical minerals I want to talk about some of the historical context around why governments today are so focused on critical minerals. So if you think back to the 1970s, and the oil markets back in the 1970s, OPEC at its height, controlled or supplied, 55% of the world's crude oil production. Today, across critical minerals, the top supplier of refined production supplies an average of 70% of the market. For copper, it's about 50%. And for rare earth at the opposite at the highest end is about 95%. So back in the days of the oil embargoes and oil crises of the 1970s. OpEx control of the market influenced everything from energy and foreign policy to industrial strategy. So that's why you're seeing a proliferation of government policies around critical and strategic minerals. The other important point is that it's not as simple as building processing capacity domestically in any country. what's happening now is there's also been a race to secure the feed for those smelters and refiners. And the pool of concentrate available and the concentrate coming into the market that's uncommitted is shrinking. So last week, Japan announced the transaction with [ Codelco ] where they provided, I think, $666 million of financing. And in exchange, they secured long-term concentrate offtake, and this is happening across the market. So what Brazil has done and what Brazil recognizes today is that it's in a position of strength around critical minerals. You have a strong policy momentum in Brazil. It's a great jurisdiction, a great mining jurisdiction. In fact, the [ Fraser ] Institute means that the most attractive jurisdiction for investment in the region around mining. And you have a strong workforce. You have the infrastructure. And so it's really well positioned to take advantage of its place in the world and to become a critical minerals supplier of choice. Last week, Brazil also announced the national policy on critical and strategic minerals. Eddie will talk more about this. But this is part of a continuum that's been going on for 5 years for Brazil to create some clarity around the regulatory and legal framework and to also provide some support and tax incentives to help build out the critical minerals capabilities in country.

Here, we'll talk a little about why Brazil at this time is have a very unique opportunity when you talk about minerals, mainly about critical minerals. Probably what I'm showing there is not new for anyone. But I think it's important we review again. The first, the guys used to say that Brazil has in the in our geological deposits, all the periodic table, all the chemical elements. We have a very rich deposit and then with the new technologies that you can see now in the global market for different technologies is a very unique opportunity for Brazil to take a position as a leader of this process. The other is because most of our territory is not yet totally explored by a geological point of view. We have a lot of areas mainly in the north of the country that you don't have any exploration or any data about our deposits. So we are open to discover large deposits in many areas that is totally open at this moment. And the -- although as Brazilian guys, we used to talking about some efficiency in our market, in our regulatory jurisdiction. But when you compare with the other countries and other potential producers of different minerals, Brazil has a very good position. We have a labor prepared to do the work that you need, we have agencies that can control the process. And in some way, we have a stable jurisdiction process, what may create for the investors a stable scenario for making investments to develop the Brazilian industry in the mining sector. And the last one is about the kind of energy that Brazil can support for all the mining producers. Brazil is one of the countries in the world that have the most renewal power generation supply. We have [indiscernible] supply. We have the solar supply and then all the biofuels that we are using right now and give us in these discussions about green energy, transitions very special position when you compare with the other countries that needs different sources of energy supply the industries that exact in this sector. And now when you talk about what the Brazil is developing to try to make this position more clear for the investors and for the companies as Courtney mentioned, we just approved a new policy to try to incentivize and the make a regulation for the critical mineral markets. We expected that the next Wednesday, the President should sign the final regulation that was approved by the Congress by the Senate and then we have here some main points that we can see in the law. If you go for the other -- this focus on trying to develop a better environment for critical minerals is not new. When you come back in this timeline, you can see that in 2021, the Brazil government creates what they call that timing. [indiscernible] it was a specific agency to try to [indiscernible] process and projects for developed critical minerals. Copper that time was one of these critical minerals. And in the end of 2021, we had just approved it internally the start of Tucuma project. And then we will apply it for this camera to include our project in this set of minerals, set of projects and was approved. Tucuma project, it was one the projects that was included in the critical minerals camera. But what's happened? We had the change of the government and nothing happened with our projects. We don't receive any definite incentive to develop our projects some indications about our fast projects to get the permits or some incentives to import equipment. Unfortunately, this project didn't have a continuity and then you follow the normal project and we deliver the projects according to the laws that you had at that time. Now this discussion come back with this new policy, we have here a timeline that I mentioned. And then we should have the final process next week with the President signing and what you are expecting at this moment from this policy. I believe all of you are looking at what's happening and know that now you need more time, maybe be months, maybe year to have all the points included the policy regulated because we have a lot of definitions that need to be let's say, defined by the government, by the cons that you create to fully implement this regulation. But what's the main points. Number one, we should have more facility to get financing. This is really important, mainly for junior companies that are starting developing projects for critical minerals because you have a fund to offer guarantees, we should have specific funds for this kind of project and then this can make easier the development of some projects. Tax incentives. You know that in Brazil, this is a very controversial points because all the time we have, but it's not applied or you can take time if you can use this, but mainly for projects that is included since the upstream into the downstream of the chain should receive more incentives and then try to match the strategic goals that the government has about control or at least assure the supply of the total -- the full chain of some critical minerals. And the one point that is really important, and then you believe that this policy can help a lot is about the priority of the permitting. It's not make it easy the process, but the idea is to have a better coordination in the different levels of the government, federal level, state level, municipal level, what can make the permit process easier and then unlock some projects that with the current prices is very attractive in terms of economic results. And what's important is that we are now creating not just the government policy, but a state policy what for a sector like our sector, where the project is taking 10 years, 20 years, 30 years, we have a policy supported this and heavy better regulatory certainty can help the companies invest and bring more resources to develop this kind of sector that is very clear is economically important for Brazil. The mining sector has weighed in our trade balance very significant. And strategically, Brazil has very good reserves in strategic minerals. And if you can assure this regulatory certainty for sure, you can be an important player in this new market that you have for the critical minerals.

Perfect. Thank you, Eduardo. So I wrote down 4 questions for both of you. And if you could just give a brief answer before we move into the broader Q&A. And what are this first 1 is for you. Even in the cocktail hour last night, there was a lot of discussion about the presidential election that's happening in October. It's obviously a controversial time in Brazil. But in your opinion, what is that stake for the mining industry in Brazil as it relates to the presidential election?

Makko, we have now very different candidates differently -- but what I think that's important, it's clear that Brazil has a very unique opportunity. And the point is how unlock this potential. And I believe what you listed from both is that they are committed to try unlock this potential, doing what? They mentioned things like about regulatory stability, I think it's important to have this law that again becomes a state policy instead government policy, number one, and the importance in the trade balance is another point. When you look the fiscal situation of Brazil, continue generating fiscal [indiscernible] really important to at least stabilizing the economic situation. And the other point is about how we can make it the inflation under control, trying to bring some materials for our producer. I believe that for the mining, both of the candidates should not impact directly. And I believe that by what they have been talking for both mining sector will be very important for all the government that you have.

Okay. Thank you, Eduardo. Courtney, this question is for you. Taking a step back from Brazil for a minute. You've been working closely outside of Brazil. with the Canadian and U.S. governments among others, on broader critical minerals policies outside Brazil. My question for you is what -- and we have this discussion a lot -- what will it take to turn white papers into action?

First of all, I want to say, when I joined the company 5.5 years ago, I never would have believed that I'd be sitting at a table with representatives from governments around the world to talk about critical minerals. So the fact that we're having these conversations is mind blowing. . The other thing that's important is to recognize is that there's a ton at stake. We are in the midst of a new industrial era that's shaped by electrification, digital infrastructure, AI and what's at stake is technological leadership. So there's a tremendous sense of urgency across governments around the world. The U.S. and Canada in particular are -- have slightly different approaches. The United States over the last year has announced about 30 billion in funds that are dedicated just to critical minerals. The United States approach is slightly more short-term focused. They're very much looking for deals there I say, huge deals. And the Canadian government is much more policy and partnership focus and also more long-term focus. So they've set aside about CAD 2 billion for a sovereign critical minerals funds. And their focus has been more around broadly South America with entering into different partnerships with like Chile and Argentina. They are working on something in Brazil I'm not exactly sure when that's going to be announced. The United States, again, much more transaction-focused. I'm sure a lot of people have heard about the [ Cerro Verde ] transaction. It's an ERO company that was announced, I think, last year, and that provides about $565 million of financing for an expansion of production there. So there's a tremendous sense of urgency -- and there's a recognition that it goes beyond just policy. Fortunately, there are deep pockets and there are a lot of money behind these commitments that they're making. But ultimately, it's more than just financing. They're also going to have to provide other mechanisms like long-term offtake, price floors, basically guarantees of sales of the product. and they're going to have strong partnerships with the countries that they're working with around ensuring that licensing and permitting is organized and streamlined.

Okay. Thanks, Courtney. Zooming back into the slide that we have here, Eduardo, maybe starting with you and quarter to jump in if there's anything here that you want to touch on from the outside Brazil perspective. But this national policy on critical and strategic minerals that has been signed by Congress and the Senate has received both praise and criticism in equal measure. In your opinion, what do you think the biggest pros and cons are for this policy?

Makko, I believe that you have points. Number one, again, is because I think for the first time we have it for the mining sector, a state policy instead of government policy. What should make it more stable, the rules for the sector, number one. The second, I believe that one of the points of the policy is to try to have a better coordination among the other levels that your mining company needs to act to get permits. -- federal level, state level, city level because this is a real problem that you have today. Sometimes you receive the priority for one level, but the other -- to many other reasons is not fully aligned with this, what makes the pros moving slowly to get the permits. So I think this coordination will be very important. And number three, that for Brazil is a point that all the time you discuss is what you have here. That's the regulatory certainty. We have yet some points. Everybody here knows the situation that you are facing parastate with the [ TIF PM, ] some changes, impacts and other points that sometimes change their rooms, change the assumptions that you use in your feasibility study and then have this in a better way. I think you'll be another positive point for the policy. By now, we needed to wait the full regular mutation. But what I think is that can be a negative point is because one of the points of the policies are creating of a [indiscernible] to have the definitions about many different aspects of the policy. And the depends on the size -- the red tape patients that you can have for the -- working of this consult,the projects can suffer in some way. It's not fully clear yet -- but the situation that you have right now, most of the federation is suffer a lack of resources, human resources, technology resources -- and then with this power in this new agents, in this new console, if you don't have enough resources, this can make it more difficult although good indications in a positive way, I believe that this concentration in this concept can be a concern, in my opinion, for the project.

What I would add is, I mean, generally speaking, when a government announces new policies and regulations, it's generally not met with excitement. And I can understand, I can absolutely understand why there would be skepticism and concerns around edit bureaucracy. However, I very strongly believe that the country of Brazil has a tremendous opportunity before it. And they absolutely understand this. This is a bipartisan opportunity. And the intent behind this new policy is to accelerate the expansion and capabilities around critical minerals. So on one hand, while if they get too prescriptive that certainly a risk. The intent behind it is to streamline and accelerate and expand. And so I'm actually quite hopeful that again, the devil will be in the details, but I'm quite hopeful that this is going to be a positive for the mining industry.

Perfect. Maybe just one last question for you, Eduardo, before we get to the broader Q&A, something that's been a topic for a few years here, and I know it's near and dear to your heart because I ask you every week about it. Labor productivity in Brazil, particularly for underground mining compared to the rest of the global mining market is low. -- you've been working at the federal and state levels as well as the broader mining industry here in Brazil. Do you think -- what are you hearing around labor productivity and underground mining -- and do you think that 2027 is the year that we might see a change in underground work hours for mining in Brazil?

Yes. Well, in Brazil, Makko, as you know, the labor is a Adient's from the 40s and that timing for the mining sector, the way that you use to mining that timing when you look at what you have right now is totally different. And the risk is the safety is a totally different scenario. [ Ibre ] did a study and the among the 10 major economy. Brazil is the only that you don't have a 12-hour shift underground. Fortunately now, with the new technologies, smart mining, remote operations, the shaft that you can do in a very deep areas. This allows to continue producing. The change in the shift is you'll be very welcome -- but it's a totally different scenario than if you look for 10 years, 20 years ago, that you don't have this kind of technology. Most of the posts that you have, not just in Brazil but in the world, become deep because the ease depos the underground with the high grades, it's disappearing around the world. So every time you need it to go deeper to get better grades. And the -- in Brazil, we already started this process. [ Ibre ] has been supporting this discussion. We have in our congress in Brazil, [indiscernible] that presented 2 bills to candid the regulation. One is about the woman working in underground mining, about the maximum age to work on the ground. And another one is about to increase the timing in the work of the underground, 12-hour shift. This was filed in the Congress, but now stopped probably the come back with these discussions after the election. We saw it's a very positive way. You'll be very welcome for all the mining sector, all the sector that you operate in underground is asking for this change. In our operations, we changed the surface work. We started using the 12-hour shift, as you know. And the result is very positive, both in productivity and both in the approval from the employees. They can have more free time, they not spend to timing going come back 6 days in a week. Ibre tried to put this change in the discussions about the scale 61 that you have now in Brazil that should come back after the -- maybe between the first and the second shift in the elections we probably you have a discussion [indiscernible] to approve this. But unfortunately, the 12-hour shift you what not includes. I believe that after you have a new Congress, maybe the same or a new President, this matter, you'll come back to discussing and you have a very robust arguments to these new technologies, improving safe to approve a change in the regulations is my opinion.

Okay. Perfect. Thank you, Eduardo. So we're going to take just a quick minute break. So don't go too far. We're going to put chairs up here, I'll ask all the speakers to come up. We're going to do a monitored Q&A session, both here in the room and with participants live. [Operator Instructions] So a quick 5-minute break and we'll be back in just 5 minutes. Thank you. [Break]

Okay. Perfect. Thank you, everyone. Again, thanks, everyone, for sticking around with us this afternoon is walk through our business and some of the things that we're very excited about. Hopefully, you found it exciting as well. [Operator Instructions] So with that, we will open the floor and the line for questions. Faruk will help and Bruna will help us moderate the questions from the online Q&A. Thank you.

Ricardo Monegaglia from Safra. I have a couple of questions. I'll try to be brief. The first one is on Furnas. We receive a lot of questions on how you could advance the project, you have Vale as a partner. The company, as you probably saw recently is advancing the copper projects. So where we see the drilling phase is already concluded, and we understand there is a time line that has to be respected till you reach the FID. But I wonder if in any sort, we could take valid example to believe that you guys could anticipate Furnas? And what are the required conditions for you guys to do that? So that's my first question. My second question, to me, at least, it was the first time I saw [indiscernible] district. And as you discussed, it has pretty similar characteristics as Caraiba. So I wonder if you could give us some color on exploration, how much you plan to spend on exploration at that district. And when do you think we could see some initial results on drilling and eventually the project becoming more feasible or any other detail that you

Thank you. Perfect. Thank you. I'll address the first question with Gelson, then we'll pass the microphone to Mike. In fact, if I could just have one now, we'll pass it to Mike to answer the outing question. So from my perspective and Furnas, and Gelson, please support me if you see it differently. I think as you saw, we're 2 years ahead on drilling. That's something 2 years ahead of the original schedule that we envisioned under the earn-in agreement. I would say that from an engineering perspective, we've been moving things very, very rapidly in parallel, right? So when you think about the stage gate from PEA to PFS and FS. We see that much as a continuum in our organization rather than defined stage gates. So there are certain areas that we're well advanced on other areas that we just simply need the hours and the personnel to do the detailed engineering to get us to that feasibility stage. But it's something that we're working very aggressively. So I would say that on the things that are directly in our control, so drilling obviously, we're well out of schedule. Engineering, we're putting maximum effort and resources allocated to doing that as fast as possible. And then there's the things that we need to do in partnership with the environmental agencies, with our local stakeholders. Those are the things that are going to take time. And so when we look at that 2029 FID decision, that's taking into account the external factors that we see in front of us. Certainly, in many conversations, and we have this incredible partnership and relationship with Vale, Obviously, we're all incentivized to move things forward. But we have quite a bit of engineering and man hours to do, and then we also have all the work to do on the environmental and permitting side as well. So I don't know if Gelson, you've got anything to add there, but that's the way that I see it.

Makko explained most of the topics, and I agree with you, Makko. As we discussed previously here, we had ERO, we do work in parallel. So there are many aspects for this project that it's in parallel work on the engineering test were confirmation of the processing routes has been very different, what I'm saying different in terms of what we have added in the last few months, the amount of tests were completed and confirmation in what we discussed. So this is very positive, which feeds into the PFS. So I would say there are some elements of the project today, which are already in the PFS level and some areas that we will expedite such that when we get to the end of the I would say, a portion of the work will be in the feasibility study. So that's the parallel work that we're talking about, especially for derisking, right, collecting data in terms of geotech and hydro, that influences the engineering aspect and mine plan and design, but also looking at the infrastructure decision points related to location drilling for combination, where the plant is going to be located, where the tidis facility to be located. So all of that, we can expedite, right, in terms of power as well with studies, logistics, we've been in contact with all in various aspects in there. But as Makko said, there are a few areas which are beyond our direct control, and we keep working with recorders and licenses one of them. We have a very good relationship with [indiscernible] not only for Furnas but everything that actually happened before at Tucuma we've taken that relationship to Furnas as well. So I think the target continues the same, 29, and we have to stay tuned on the advancements that we do as we progress this year and next year.

And then Mike, over to you on Oden.

Yes. On Oden, I think the things that are really encouraging there are the rocks are basically the same. So the [ Ultramapix ] are very, very similar to what we see at Caraiba and what we see at Caribe, the ultramafic are the same. The ages are the same. So we're very confident that we're looking at the same kind of mineral system and the wall rocks are very similar. There's a lot of research that's been done on how discoveries progress and often, you'll hear numbers about a decade. So you'll see a decade that it takes to go from discovery or working in a district to making a significant discovery because you need to have people that understand those districts. You need to put in enough work to really make something to make a -- to understand those rocks and understand those systems to make a discovery. The fortunate thing here is because this system is so similar to Caraiba, we have 10 years of experience and a lot of drilling and a lot personnel experience within the group to understand what makes an anomaly that's worth drilling and what makes an anomaly that's not worth drilling. I think it's very hard to predict the pace of a discovery, but I do think that we've learned a lot about those systems. And I think the first phase of the drilling to me, what was very encouraging was we were drilling ultramafic rocks with sulfides, with nickel, with copper, probably with PGEs, maybe Cobalt. So that's a very early sign to be drilling sulfides in your first few holes of a program. we're 3,100 meters in. We have about 7,400 meters budgeted to go to the balance of this year. We're going to be reassessing the targeting. So understanding the geometry of those zones is really, really important. And then the next phase of drilling is how do we take what we've learned so far and then apply that knowledge to the next phase.

Good afternoon you all. I'm [indiscernible] from the BTG Pactual. My first question goes towards the encouraging the leveraging the company has delivered over the last quarters. And of course, it will continue towards the year-end, right? Apart from Furnas, developments, and possibly repaying these senior notes. Ero's team today has told us about the shareholder remuneration, possibly this program, right? So I'd like to ask you to give us a little bit of more details on this possible remuneration. So when you plan to announce it, what magnitude can we think about this program, which you could view in a very positive note. And if I may, a second question, right? First share have many brownfield many nice brownfield initiatives [indiscernible] current operations. And you have fullness providing this long-term growth to the company. But as of now, we see Tucuma and [indiscernible] with shorter life of mines. And so how is the appetite for M&A Ero's Agos company for the next coming years? How is this appetite? You have some preference for some commodity in specific terms and some preferences for the lock of this possible transaction.

Yes. Both great questions. I'll let Wayne handle the shareholder returns. I think -- and then I'll come back on the M&A question. But I think one of the things that Wayne said that is really important to keep in mind is that, number one, we made a commitment to delever the balance sheet. I think we're delivering on that. Number two, paying down principal is a form of return to equity. I think that's also important to keep in mind. Then before Wayne jumps in, I just want to say that one experience that we have this year, and I'm sure all of you will appreciate this is that volatility is the new norm, right? So it's very difficult to predict an exact date, but maybe let Wayne talk to the thinking there.

Well, you kind of saw my thunder day. I was going to -- I'll pick up the point that Makko made. We are certainly on the journey to achieve the 3 pillars of what we set out to do, which was get the leverage ratio below one, repay what I would call the variable senior debt, which is the revolver and then think about shareholder returns. So one of that one's gone to is probably likely here in the next quarter or -- but that is very much dependent on the metal price environment. And I was talking to somebody that before we started today, last week, we're at $6.60 and now we're at $6.20, a copper price per pound. It's an incredibly volatile environment driven by a single tweet or a single comment coming out. So we bear that in mind -- no, having said that, the business is in a very strong cash flow generation phase regardless of what the metal price might do around a certain point. And so that point is going to come. Is it by the end of the year, perhaps is it early -- is it in 2027? Most likely. And I think you will probably hear from us once we're through the third quarter, and we have a little bit more visibility on when and how we plan to return that capital.

Yes. Perfect. And then just circling back on the M&A piece. I would say that I think one of the things that we -- I think that you saw today and we hope to get across is the breadth of the portfolio that we have. So for sure, we look at opportunities to continue to grow our business. We've been very active in looking at opportunities. We take those reviews very seriously. But we also do that in the context of our own portfolio. And when you just take a big step back and you look at what we've built over the last several years, we have 3 operating mines. We have a very advanced development project in Furnas of all the way through to a new greenfield area that we've been working on for the last several years to put together. Obviously, it's the first time that we've talked about it. So when we think about looking outside of our business at new opportunities, as I said, we do look at that -- but we are doing that through the lens of the quality of our own portfolio. On your point on [ Javengin ] and Tucuma, I would say that I always take that comment and stride. If you just take a step back to [indiscernible] and know when we started in 2017, there was no reserves and resources. So today, combined total aggregate resource, 600,000 tonnes, 600,000 ounces in reserves, 400,000 ounces more or less an inferred resource, million ounces of potential when you go drill that. As Mike showed today, a kilometer step out, still hitting the same mineralization. So -- and similarly, at Tucuma, right, hitting very high-grade mineralization at depth, working areas that are within our portfolio today within 30 kilometers to try and extend that operating footprint that we have in Tucuma. So I'd say, for sure, we think about it, for sure, we take those reviews very seriously. Fundamentally, we're a copper-gold business. If you look at Furnas, it's copper, gold, all of our assets are copper, gold. And we do look very seriously in the Americas. But as I said, we do that through the lens of the breadth of the portfolio that we've been able to build and hopefully showcase today with some of the exploration success that we're having across the group.

All right. Question from Matt Murphy at BMO. Question on Caraiba. So the range on throughput is 4.5 million to 4.7 million tonnes grade, 0.9% to 1.1%. How do you get to 50,000 tonnes? Because I think if you take the upper estimate of each of those, you don't get there. And I'm wondering, what you see as the upside for that operation once you're -- you have the shaft at full capability and you've got Surubim transitioning into N8 at Vermelhos, which I think should be higher grade? So can you possibly paint a bit of a picture where this goes maybe beyond the 3-year outlook as well?

Yes. Maybe I'll start, and then Gelson can jump in here. Look, I mean, those are long-term averages. Obviously, if you look at the results that Mike put out in the deepening, we do have very high-grade zones within that ore body. So we're talking about large averages. I think that where I see the greatest opportunity at Caraiba, and we do see modest growth in terms of production output over the next 3 years, but really around what the shaft is going to unlock for us is greater productivity. Obviously, a little bit better grades and the deepening, but really driving margin out of that business when you think about, "Okay, what does a 30% incremental improvement in productivity do in terms of cost?" We expect that to be a pretty significant savings over the outlook period when that shaft is operational. And then looking at the portfolio of options that we have, right, so I always like to say that when you take a big step back and you think about the mix of grades in our portfolio, right, from open pit, lower grade, but also lower costs, right? So grade tells one set of the story. Our open pit mining cost is roughly 10% of our underground mining costs, more or less, 10%, 15%. So you don't need very high grades from open pit to generate equal or better margins from underground. And when I take -- when I look at the overall portfolio, we have -- we're going to continue to have open pit contributions from our mines as well as lower-cost production once the deepening is online. So look, I think if you look at the deepening project today, as I said in our Q3 conference call -- sorry, Q2 conference call a few months ago, the last shaft that was built at Caraiba was built in 1986. And so we see that investment as being able to support the stability of the complex in Pilar for the next several decades. And I think our operating plan, certainly that's out in the market and our [ technical report ] shows that. It will vary year-to-year depending on the mix of grades.

No, I think you covered well there, Makko. I just want to add that when you look at the deepening area, the development will open new areas for exploration, and that actually can accelerate some of the areas for mining. That's a work in progress as we speak. That's why Mike was showing up some of the results in there. There are other areas around the surface or close to the surface within Pilar as well, which are in exploration. We don't mention here, but it's part of everything that we do, what we call the brownfields and near-mine exploration. There's a lot of potential there. And just to finalize, it's not just about the grade, but also the capacity to deliver that tonnage and a very competitive price and the cost, right? So I think that's what it brings up to the Pilar in terms of advantage. But then looking ahead, what we call the district of Vermelhos, that's why we're calling now, especially with N8; it starts as an open-pit operation. That's a lot of potential for underground. So there's a lot of growth capacity in there, which is part of our plan. So I think that continuity in the drilling and the modeling and also looking at the opportunities to basically take every advantage that we've got on that processing plant of 4.8 million tonnes, I think that's what's going to drive the growth that I think you were referring to.

Marcio from Goldman Sachs. Thanks for the time for being here with us today. A couple of questions on my side. The first one on Tucuma. Some great numbers you have shown in the last couple of quarters. You mentioned the debottlenecking that was concluded, I think, in midyear. So I think the question is how have the mill performed over the last few months, considering what the work you have been done? And as you go into next year, you [ install ] the filters at the end of the year, what is the sort of ramp-up we should expect going into 2027? When you should achieve close to 100 throughput capacity at the mill in Tucuma? And then the second question on Xavantina. You haven't -- obviously, the grades on the concentrate are definitely remarkable. We've only seen mostly 1 quarter of it because of the rainy season, but just trying to understand the level of confidence that you have for the remaining of the concentrate in terms of grades as well, if it's fair enough to extrapolate what we have seen in the first round, I think, above or close to 30 grams per tonne.

Yes. A few things to unpack there and just keep your microphone in case I call back on you to go through those again. But starting with Tucuma, yes, look, the mill has continued to perform well. We saw that right. You saw that on the chart, the continued improvement in performance. Gelson spoke to some of the technologies that have driven that performance. And he also mentioned that, that filtration capacity with the filters in Brazil now, we expect to exit 2026 at that full run rate, I would say, and are chasing down opportunities to continue to debottleneck the plant as we did at Caraiba this year. So stay tuned on that. Things are progressing well. We'll obviously have the opportunity to talk about in greater detail about plant throughput on the back of our Q3 call and how that project is progressing. But I would say the mill continues to perform well, in line with our expectations. Xavantina concentrates, I might have missed the middle one, but we can come back to that. Xavantina concentrate grades, look, we came out with initial resource, it was based -- it was 29,000 ounces, based on what we were able to sample at that time, which is about 20% of the available volume. And I believe that, that had a grade of about 37 grams per tonne for that initial 20%. If you look at what we've shipped to date, we've been around 35 grams per tonne. That obviously includes that initial material as well as some residual material. And we'll talk about the total volumes in arrears on our Q3 conference call. But I would say that we've got a lot of confidence in the grades that we're seeing coming out of the concentrates for what we have so far, right? So to extrapolate that out in the future, we obviously don't have sample data to do that. So we don't know with 100% certainty. But if you look at that original estimate versus what we achieved and you look at what we've shipped to date, those grades reconcile pretty well. And so we're feeling good about the performance. Particularly on the back of Q2, we saw a nice increase in production volumes, right, that came with the installation of that filter preps and dryer. And I'd say that we're -- I mentioned this on the Q2 conference call, but we're feeling good about how that operation is performing in terms of the gold concentrate operation. And again, all that will be reported in arrears on our Q3 call. Did I missed one of your questions? There was three.

No. I mean, Tucuma's current run rate and expectations of ramp-up and also Xavantina. That's great.

Maybe we'll take a minute here and take some questions from the webcast as well, and then we'll go back into the room. So this is coming from one of our investors on the webcast, and the question is about technology. The question is that you touched on technology through your presentation. Can you give us some details about some of the benefits that you're already seeing from implementing that technology or the different technologies across the operations? Can you repeat just the last part of the...