Hi InvestorLatam! Thank you, im glad you enjoyed my report.
I’ll gladly answer your questions:
1) If you go back to my first report on Ero you will notice a chart with the AISC of different copper producers going all the way to 2026. My valuation was meant to value Ero as of 2025 in which the chart (courtesy of Eight Capital) shows AISC at $2.08/lb. Since there are 2204.62 pounds in a tonne, each tonne would cost $4,585 to produce. I decided that to put $4,400/lb as grade is actually increasing in Ero’s operations, not decreasing, since the deeper ore is of very high grade. Notice its only a 4.205% difference so its not material when it comes to valuations. But you can certainly acuse me of being optimistic. Nevertheless, Ero’s operations are very very low cost.
With regard to gold costs, I now use a $1050/oz cost which is the guidance that management mentioned in the investor call this May.
2) In 2023 the PE ratio of that ETF was 22.1 and in 2024 it’s 16.74. I use 17 being conservative because Ero Copper is an exceptional copper producer given its management, unique infrastructure, increasing production, high exploration potential and low costs.
3) No, I did not consider those because they dont take into account the more subjective elements such as: excellent management, management’s ability in increasing the life of the NX gold mine, good infrastructure, the potential of the Furnas JV and exploration potential.
If you have any further questions please don’t hesitate to ask.
1) The issue with that calc is that depreciation and amortization is included in AIC but not in AISC. I checked the analysts’ estimates and they forecast a similar production in tones and similar sale price, but their operating profit is lower. It seems that the delta is the D&A. They are forecasting $140-170M in D&A for 2025. Please let us know if that would revise your estimates downwards.
2) I’m having a hard time finding the forward PE of COPX. In yahoo finance, it currently shows 13.5x but that’s TTM.
Hey! No problem, I love engaging in quality conversations about almost anything.
1) D&A was $86M in 2023 and $56M for 2022. I think the range you mentioned of $140M-170M is too much. D&A was $23M for Q1 2024 and that was already something exceptional, so I expect another $80-$90M for 2024, perhaps $90-100M in 2025.
Hey, great article Alberto! A few questions:
1) How did you arrive at the $4400 cost per tonne for copper and $1000 for gold?
2) The COPX ETF js currently trading at 13x earnings, is the 17x you used the historical average?
3) It seems that ERO is usually valued on an EV/EBITDA or P/NAV ratios, did you consider those?
Thanks!
Hi InvestorLatam! Thank you, im glad you enjoyed my report.
I’ll gladly answer your questions:
1) If you go back to my first report on Ero you will notice a chart with the AISC of different copper producers going all the way to 2026. My valuation was meant to value Ero as of 2025 in which the chart (courtesy of Eight Capital) shows AISC at $2.08/lb. Since there are 2204.62 pounds in a tonne, each tonne would cost $4,585 to produce. I decided that to put $4,400/lb as grade is actually increasing in Ero’s operations, not decreasing, since the deeper ore is of very high grade. Notice its only a 4.205% difference so its not material when it comes to valuations. But you can certainly acuse me of being optimistic. Nevertheless, Ero’s operations are very very low cost.
With regard to gold costs, I now use a $1050/oz cost which is the guidance that management mentioned in the investor call this May.
2) In 2023 the PE ratio of that ETF was 22.1 and in 2024 it’s 16.74. I use 17 being conservative because Ero Copper is an exceptional copper producer given its management, unique infrastructure, increasing production, high exploration potential and low costs.
3) No, I did not consider those because they dont take into account the more subjective elements such as: excellent management, management’s ability in increasing the life of the NX gold mine, good infrastructure, the potential of the Furnas JV and exploration potential.
If you have any further questions please don’t hesitate to ask.
Hope it helps.
Hey Alberto, thanks much for the quick response!
1) The issue with that calc is that depreciation and amortization is included in AIC but not in AISC. I checked the analysts’ estimates and they forecast a similar production in tones and similar sale price, but their operating profit is lower. It seems that the delta is the D&A. They are forecasting $140-170M in D&A for 2025. Please let us know if that would revise your estimates downwards.
2) I’m having a hard time finding the forward PE of COPX. In yahoo finance, it currently shows 13.5x but that’s TTM.
3) Makes sense, thanks!!
Hey! No problem, I love engaging in quality conversations about almost anything.
1) D&A was $86M in 2023 and $56M for 2022. I think the range you mentioned of $140M-170M is too much. D&A was $23M for Q1 2024 and that was already something exceptional, so I expect another $80-$90M for 2024, perhaps $90-100M in 2025.
2) Here is the link to the website: https://www.globalxetfs.com/funds/copx/
Yahoo finance and google finance have a lot of misprints, i dont blame them considering the amount of data they manage.
Anyway, the average historical pe ratio for Ero is around 20-24 so im pretty sure im being conservative with 17.
Hope it helps, im loving this exchange of ideas.
Thanks man, just started a position in ERO. Looking forward to reading your gold picks soon!
Great investigation, I'm proud of you and excited about what's coming
Very solid write up and super interesting company, congrats!
Phenomenal article! Keep going at it!