Ero Copper Corp.

Thank you for standing by. This is the conference operator. Welcome to the Arrow Copper Second Quarter 2026 Operating and Financial Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may reach an operator by pressing star then zero. I would now like to turn the conference over to Farooq Hamed, VP, Investor Relations. Please go ahead.

Thank you, operator. Good morning, and welcome to Arrow Copper's second quarter earnings call. Our operating and financial results were released yesterday afternoon and are available on our website, along with our financial statements and MD&A for the three and six months end of June 30th, 2026. A corresponding earnings presentation can be downloaded directly from the webcast and is also available in the presentation section of our website. Joining me on the call today are Makko DeFilippo, President and Chief Executive Officer, Wayne Drier, Executive Vice President and Chief Financial Officer, Gelson Batista, Executive Vice President and Chief Operating Officer, and Courtney Lynn, Executive Vice President, External Affairs and Strategy Before we begin, I'd like to remind everyone that today's discussion will include forward-looking statements, which involve risks and uncertainties that may cause actual results to differ materially. For a detailed discussion of these risks and their potential impact on our business, please refer to our most recent annual information form, available on our website as well as on CDAR and EDGAR. Unless otherwise noted, all figures discussed today are in U.S. dollars. With that, I'll now turn the call over to Makko DeFilippo.

Thank you, Farooq, and good morning. I appreciate everyone taking the time to join us today. As I reflected on our results this quarter, what stood out most was not any one individual metric, but the breadth of progress we were seeing across the business. Our efforts to reshape Arrow are now increasingly visible in both our operating and financial results. A meaningful part of that progress traces back to One Arrow, a company-wide initiative we launched at the start of 2025. One Arrow is designed to streamline how we operate, improve efficiency, and unlock synergies across operations, human resources, procurement and finance while investing in people, systems and processes to drive frontline excellence in data and analytics. We have fundamentally changed how we work together, brought leadership changes onsite and across the organization. These changes are translating into safer, stronger operational performance, higher cash flows and meaningful balance sheet improvement. allowing us to accelerate longer-term growth within our portfolio. These were the commitments I made to shareholders at the start of 2025, and we are delivering on that. These changes are coming together at exactly the right time. Paired with commodity price tailwinds, our operational momentum drove another quarter of solid financial performance. Cash flow from operations increased nearly 50% quarter-on-quarter, to approximately $138 million and adjusted EBITDA increased to $144 million. Stepping back to the first half as a whole really illustrates how much our business has changed over the past year. Cash flow from operations for the first six months of 2026 increased to approximately $231 million from $156 million in the first half of 2025. Adjusted EBITDA increased to $269 million from $146 million over the same period. Stronger cash generation has enabled us to make significant progress on deleveraging our balance sheet, one of our key strategic priorities this year. Over the past 18 months, we have reduced net debt by approximately $100 million, while improving our net debt leverage ratio to 0.8 from a peak of 2.6 at the start of 2025. As outlined in our news release, we repaid an additional $25 million in our revolving credit facility in July, bringing total payments in 2026 to $60 million. One arrow has been an important contributor to that progress, and we can point to several tangible examples of the value it is creating across the business. Operationally, investments we continue to make in infrastructure, equipment, people, processes, and technology are increasingly being reflected in our results, Our copper operations produced a combined 17,315 tons of copper during the second quarter at a consolidated seeding cash cost of $2.42 per pound. At Carriva, we are sustaining the higher throughput rates we achieved at the end of last year following our completion of a substantial debottlenecking effort and remain on track for a new annual throughput record in 2026. At Tucumán, plant throughput increased 27% quarter-on-quarter, and in June we completed the first phase of our tailings filtration expansion. During the second half of the year, we are on track to install and commission three new modular filters, which are expected to significantly increase filtration capacity and support higher plant throughputs into the future. At Chabanchina, important investments in ventilation and cooling are supporting improved mining and development rates, and we saw that reflected during the quarter. Our focus on bringing forward value from our gold concentrate program coincided with the end of the rainy season, which allowed us to recover more gold from our historic gold concentrates. Together, improved mine performance and increased contributions from historic gold concentrates drove a 170% quarter over quarter increase in total gold from Javagena to more than 20,000 ounces. This included 8,693 ounces of mined gold production at a C-1 cash cost of $15.86 per ounce and 11,860 ounces recovered from historic concentrates at a C-1 cash cost of $633 per ounce. We expect the successful commissioning and ramp-up of our mobile filter press and industrial dryer to be a real benefit to our concentrate operations through the rest of this year. The collective improvements we have made and are making across our portfolio have positioned us for a strong second half of 2026. Our copper operations remain well positioned against four-year guidance, with stronger production expected in the second half. We have also maintained consolidated copper C1 cash cost guidance, with unit costs expected to decline sequentially through the remainder of the year. At Chattanooga, we expect mining rates, throughput, and mine gold production to be meaningfully higher in the second half, with unit costs declining as production increases. The slower start to the year means we now expect mine gold production at the low end of the maintained guidance range. And as a result, we have updated full-year C1 cash cost guidance to $1,100 to $1,350 per ounce, and our all-in-sustaining cost guidance to $2,200 to $2,700 per ounce. We have also increased our consolidated capital expenditure guidance by $10 million to include the approval of a new power line at Javanchina. Once operational, the power line is expected to strengthen site infrastructure, support our ongoing efforts to grow our operational footprint at Javanchina, and importantly, reduce power transmission costs, allowing this investment to effectively pay for itself within two years. At Furnas, our June project update showed continued high-grade continuity with mineralization extending both at depth and along strike. An encouraging sign for the life of mine production plan we outlined in the PEA. We are well advanced on the 45,000-meter Phase III drill program and remain firmly on track to complete it before year-end. In parallel, we are progressing various work streams in support of a pre-feasibility study that we expect to publish in 2027. In summary, our strategy is working. We are investing in and strengthening operating performance across the portfolio, realizing measurable benefits from One Arrow, converting that progress into cash flow and balance sheet improvement, and rapidly advancing Furnas as Arrow's next major leg of growth. Before I turn the call over to Gelson, I also want to remind everyone that we'll be hosting our Capital Markets Day in Sao Paulo on Monday, September 14th. For those of you interested in attending, please reach out to our investor relations team for more information and to register. We look forward to seeing many of you there. With that, I will turn the call over to Gelson.

Thank you, Makko, and good morning, everyone. As Makko outlined, we are entering the second half with improving performance across all three operations. I will provide some additional detail on the underlying operating drivers and our expectation for the remaining on our key projects. At Cariba, copper production totaled 8,351 tons during the quarter. Lower plane head grades were partially offset by slightly higher throughput and improved recovers. Looking ahead, We expect stronger production at Caraiba in the second half. This should be driven by access to higher grade benches as should be, as well as higher grades and knowledge from Pilar due to planned slope sequencing. We expect higher throughput levels, grades, and production in the second half of the year, and as a result, C1 cash costs are expected to decline sequentially through the remainder of the year. At Tucuman, copper production increased approximately 6% quarter-over-quarter to 8,964 tons. That's a 27% increase in plant throughput, more than offset the plant decrease in process rates. Looking to the balance of the year at Tucuman, we expect sustained higher throughput rates to increase overall process tons. while copper grades are expected to moderate in accordance with the mine plan. As a result, production is expected to be modestly higher in the second half, while C1 cash costs should remain relatively stable, supporting our maintained full-year production and cost guidance for Tucuman. As Makko discussed, we completed the expansion of Tucuman, three existing filters presses in June We continue to expect the new pre-modular pot filters to be delivered through the third quarter and commissioned during the fourth quarter. The combined initiatives are expected to increase filtration capacity and support higher plant throughput as we exit 2026. At Chavantina, completion of the ventilation and cool tie-in supported higher mining rates, increased the fruit and a number of others. as well as investments in flotation cells and a new falcon concentrator. Our quarter-on-quarter increase in recoveries reflects these improvements and ongoing optimization work. For the remaining of the year, we expect mining rates and throughput to increase significantly. Approximately 65% of full-year mine boat production is expected in the second half, with unit cost declining as production increases. We are focusing on delivering value from our historic Gold Concentrate initiative. During the second quarter, we recovered 11,860 ounces of gold, with sales volumes increasing significantly from Q1. We expect volumes to continue benefiting from drier, Thank you, Gelson, and good morning, all. Our second quarter financial results reflected solid copper production, strong metal prices, and a 65% quarter-on-quarter increase in gold sales.

These factors drove quarterly revenue to $284.3 million, up 8% from the first quarter. As Makko noted, cash flow from operations increased to $138 million, while adjusted EBITDA increased to $144 million. This stronger cash generation has provided us with the financial capacity to accelerate debt production. Net death declined by $38 million during Q2 to approximately $453 million, while last 12-month adjusted EBITDA increased to $533 million. Together, these factors reduced our net death leverage ratio to approximately 0.8 times. We continued that progress after quarter end, repaying an additional $25 million on our revolving credit facility in July. bringing total repayments in 2026 to $60 million. Our liquidity position also improved during the period, increasing $36 million to $182 million, including $102 million of cash and cash equivalents and $80 million of availability under the revolver. Turning to foreign exchange, while the stronger BRL continued to impact our reported operating costs and capital expenditures during the quarter, On a cash basis, our hedge program worked as intended, generating $13 million of realized gains, bringing the total gains for the first half of the year to $20 million. The hedge program is designed to protect approximately 70% of our consolidated full-year operating capital costs at an average floor of $5.54 Brazilian reais per US dollar, as described on slide 8 of our results presentation. Assuming an exchange rate of 510 through year end, we expect the hedge book to generate an additional $20 to $25 million of realized gains, resulting in potential full year gains of approximately $40 to $45 million. While these gains substantially mitigate the cash impact of the stronger real, they are not included in C1 cash costs. As a result, reported unit costs remain sensitive to the local currency. and to inflationary pressures on inputs such as fuel, consumables, transportation and freight. If current currency and inflationary conditions persist through year-end, we estimate potential incremental impacts of approximately 10 cents per pound on reported consolidated copper C1 cash costs and approximately $100 per ounce on reported mined gold C1 cash costs at Chimantina. Again, the cash impact associated with the Stronger Real is expected to be substantially offset by realized gains from the hedge program. Turning to capital expenditures, we have updated full-year consolidated guidance to $285 million to $330 million, an increase of $10 million from our previous range. The increase reflects the approval of a new power line at Cervantino. As Makko discussed, this investment is expected to strengthen site infrastructure support future growth and reduce ongoing power transmission costs once operational. If current currency and inflationary conditions persist, we estimate a potential incremental impact of approximately $20 to $25 million on reported capital expenditures. The cash impact associated with the stronger rail is also expected to be substantially offset by the hedge gains I just discussed. With that, I'll pass the call back to Makko for some closing remarks.

Thank you, Wayne. Before we open it up to questions, a few points I would like to leave everyone with this morning. First, our operations are performing well, and we are positioned to deliver on our full-year guidance with stronger performance at both our copper and gold operations expected in the second half of the year. Second, with strong cash flows, we expect to continue to deliver on our commitment of deleveraging our balance sheet. And third, we are rapidly advancing per mass where we are on track to complete the phase three drill program well before year end and deliver a pre-feasibility study in 2027. With that, we'll open the line for questions.

Thank you. We'll now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request. and our first question is from Matthew Murphy with BMO Capital Markets. Please go ahead.

Hello. First question would be on the Tucuma tailings expansion. Can you just remind me what expansion was completed and then what timeline are you currently looking at for adding these filters in the second half? Yeah, hand back. Apologies for the delay there, everyone.

So the expansion that we completed so far was with our existing circuit. So during the quarter, we added additional filtration plates to our three existing filters. That's about a net 8% improvement to tailings filtration capacity, and that was completed successfully during the quarter. Right now, our three modular filters are expected to arrive on-site this quarter and be installed and operational in the fourth quarter. Okay, got it. Thank you.

And then on Javentina, the addition of a dryer and filter press, what could that do for your Q3 concentrate sales?

Yeah, look, obviously, you know, under the confines that we're at, we're unable to provide forward-looking guidance, as we've talked about multiple times. That's related to the technical and scientific information that we have available. But what I can tell you, Matt, is that if you look at June and July when we had those operational. Both those months, we achieved more than 7,000 ounces of gold. And I think that speaks really well for Q3 and for the rest of the year. Okay. That's interesting. Thank you.

The next question is from Guillermo Rosito with Bank of America. Please go ahead.

Hi everyone, thanks for taking my questions here. So my first question is on Cervantino and maybe Makko. Maybe Makko, if you could just explore, you have an adjusted production guidance and it sounds pretty confident on the call, so maybe if you could just give us some color on what you guys are seeing right now from July at Cervantino, what makes you so confident that you're reaching guidance even after a rough first half of the operation? and maybe just if you could comment on that and what you guys are seeing in terms of grades and because they've been pretty volatile ever since you made the mechanization investments, right? So maybe if you could just touch on that a bit. And second question is we're at 0.8 times net debt should be generated cash this quarter from everything that looks like second half is stronger in production, therefore in cash generation. So we're probably moving over there. What's next now? What are your priorities in terms of capital allocation? Is this the time to maybe we can discuss shareholder returns or anything else? So just wanted to pick your brains there.

Thank you. Perfect. Yeah, we'll go through those in detail. A few things to unpack, but starting with Javanchina, I would say, look, you know, as taking a step back here, as we discussed last quarter, you know, we've made very, very important investments at Javanchina in ventilation and coolant. What we've seen since we completed that tie-in is that we've been able to get back on track in terms of development rates. The reason that we're focused on the second half of the year with Giovincina and why we firmly expect to have a better second half is when you look at the stoves that we're developing into, particularly in Santo Antonio, we're developing into stoves that are higher grade and they're also much thicker. What that translates to in operational terms is that every meter of development that we're doing now is releasing more ore to feed to the mill. And so, you know, when you look at where we've been in the last several months, again, sort of May, June, July, all hitting those development rates that we need to achieve and really working towards getting these higher grade stoves, larger stoves into the mine plan as we expect, obviously that is slightly and the rest of the team. So, it's a slower ramp up than we anticipated at the end of Q2, both in development in terms of getting to those development rates that we're achieving now, and also as a consequence, mining rates. But again, I think really the main thing to look forward to is how we see that translate into second half production at Gavanchina. And I was just there with Gelson two weeks ago and really pleased to see the progress the team's making on site there to improve performance again. Not just at the mine, as we discussed, but as Matt asked, you know, how our goal concentrate fails. And as I mentioned, we're seeing really good progress on the – you know, not only at the end of the rainy season, but also the filter and dryer that we put in place. And achieving, you know, elevated levels for two months. Obviously, two months don't make a quarter and don't make a year, so we've got a lot more work to do. But we're feeling good about where the mine's positioned. and certainly where the gold concentrate program is positioned. This quarter we talked a little bit more about the operating costs associated with gold concentrates and as you can see that's very, very high margin material and hence our focus on delivering that to the bottom line. Hopefully that answers your question, Jeven Sheena. I'm happy to expand on that in a follow-up question but getting to your second point on leverage and cash generation. Absolutely, I'd say the cash inflection of our business, it's clear that it's already happened. We saw that happen in Q2, and in July, we made another $25 million payment on our revolver. Our objectives for this year that we set out were threefold. So number one, to get below one times leverage. We did that at the end of Q1. Obviously, coming at 0.8, we're progressing below that level. And step two is to pay down a revolver. As we mentioned, we've paid to date $60 million in that revolver through the end of July. That means we have an additional $95 million to go. I think, you know, from our perspective, as a management team, we want to make sure that that pace continues to decrease. We're making excellent progress so far. I think it's still too early to talk about the shareholder return program but obviously it is top of mind as everyone knows in this cold we've talked about many times you know Eric Copper was built around the philosophy of return on invested capital and that certainly is one of our objectives but you know we want to see us really achieving that second milestone which is to pay down our revolver and we've made excellent progress so far this year we've got a bit more to go.

Super from you Makko. Appreciate it. Thanks.

The next question is from Craig Hutchinson with TD Collins. Please go ahead.

Hi, guys. I wanted to ask about Tacoma, and specifically, I guess, around the reserves. It's been about five years since you guys provided an updated reserve report, and over that period of time, obviously, copper prices have nearly doubled here. Just curious whether there's a plan to put up an updated report, whether you guys have done some drilling there, and whether there's a potential to see some of the measured indicated resources

coming to the mine plant over the next couple of years. Thanks.

Yeah, thanks for the question. For sure, that's something top of mind, and we do expect to publish a technical report on Sukumar this year, so stay tuned for that.

Okay, great. Thanks, guys.

The next question is from Emerson Vieira with Goldman Sachs. Please go ahead.

Hey, everyone. Good morning. I have three questions, maybe. First one on Caraiba. I think despite the low production, grades, and effects, and taxing costs, I mean, if you want to decline a quarter of a quarter, but it was helpful to buy lower TCRCs, right, that offset those impacts. You guys mentioned that you were able to achieve a $20 million savings due to renovations in TCRCs. So I just want to confirm if going forward into the second half, TCRCs will continue to be running at those lower levels that we saw in the second quarter and maybe providing some offset to other cost pressures. That's the first question. Thank you.

Yeah, sure. It's Wayne speaking here. I think it's important to point out, yeah, we did get the benefit of renegotiated and some of our contracts for our concentrate sales. We sell our concentrate on term contracts, not on spot contracts. And so some of our historical contracts rolled off and we were able to negotiate obviously much more favourable terms given the current environment. I would say that the $20 million you referred to as the total savings, we didn't obviously get the full benefit of the $20 million in Q2. So that benefit will be spread over the remainder of the year. and our contracts allow us to basically sell both mines production into each contract. So that benefit you may see depending on the shipping schedule and depending on which contract we're selling into, you could see some of that benefit flow to Tsukuma in the second half of the year rather than Kariba.

Right, thank you. So my second question goes on to Kiman. Can you please comment on what was the exit throughput at the plant and what could be, I don't know, increments of throughput in the second half given that you have increased the tailing filtration capacity by 8%?

Yeah, I would say, you know, we're really encouraged by what we're seeing at Tsukuba. If you look at, you know, where we got to in Q2 and some of the levels that we're achieving there, you know, I think the most important thing to probably look at is if you take what we achieved in the second half of the quarter into July, we've been able to maintain are rated between 250 and 260,000 tons per month. I think what's particularly noteworthy is that in July, we achieved a rate of throughput right around 250,000, but that included five days of downtime for a middle liner replacement. And so I think, you know, we're really pleased to see the daily progress that's happening there and increasing production rates. And again, we think that goes well for the second half of the year as we outline in our guidance discussion.

Okay, thank you. Just last one here. On the capital allocation, just a follow-up actually. The company has 120 million in the removal credit, that facility, right? And if we just assume in the same pace of amortization, does it make sense to believe that the company will be in a better position by third Q, fourth Q of next year to maybe and a number of other people who have been involved in the process.

So, I think it's important for us to make sure that we're doing everything we can to make sure that we're doing everything we can to make sure that we're doing everything we can to make sure that we're doing everything we can. The second was to pay down our revolver. Again, coming back to the payment we made in July, that brings year-to-date total payments on our revolver to $60 million, meaning that we have $95 million left to go in that program. I think the pace of that second step obviously depends on commodity prices. We continue to see very strong tailwinds there. and also operational performance in the second half of the year. So I would say stay tuned on both those things and we'll get more clarity on what that looks like later in the year once we achieve the second step.

All right.

Thank you.

The next question is from Fahad Tariq with Jefferies. Please go ahead.

Hi, thanks for taking my questions. On the Javentina concentrate, can you just remind us where we are on the remaining 80% of the stockpiles that were not sampled and when we should expect the next update? Thanks.

Yeah, thank you. Just going back to Q4 last year for a bit of context, I'm sure everyone on this call is aware, but that was a value initiative that we announced in October of last year. At that time, we had sampled 20% of the volume, of the known volume to develop a resource estimate for, you know, as we discussed before, under NF431, we can't provide forward-looking guidance on information that's not supported by and the rest of the community. So, really, unfortunately, unable to provide that information and clarity that you're looking for. Other than to say we've seen really strong sales June, July, coming of tri-season on the back of our filtration and concentrate program. We continue to expect this program to last through at least mid-2027 as we put out early in the year, and we see really strong sales in the second half, again, with the effort that we put into the filter press. and Dyer.

Okay, great. And then just maybe a high-level question. Given where copper prices are now, is there anything in the portfolio that you're looking at differently, whether it's the brownfield opportunity or additional exploration spend at a particular asset? Just wondering if you're thinking about anything differently given how elevated copper prices are.

I don't think it's fundamentally changed the way we think about our business. We've continued to invest in exploration across the portfolio. It's been part of our strategy from day one when we started the company. Obviously we've If you look at where our expiration dollars are allocated today, obviously we're putting a big focus in for us as we've spoken to, but we've continued to allocate expiration dollars to earlier stage opportunities throughout our portfolio. In the last decade, we've built a really strong knowledge of the regions that we're operating in, and we're seeking to leverage those through some earlier stage opportunities. Again, that's not a change in strategy. That's continued over the last couple of years. Could we in the second half see some of those programs getting a little bit more capital allocation perhaps? But it's not going to fundamentally change the way that we think about our business or how we're operating. Thank you very much.

The next question is from Stefan Ioano with Cormark Securities. Please go ahead.

Thanks very much. Just back on Zaventina, you mentioned this is kind of the first quarter where we're seeing reported C1 and ASIC costs for the concentrate gold production. And just looking at the numbers for the latest quarter, can we sort of interpolate those as sort of a steady state run rate for costs, or do you think they could come down even further going forward?

Yeah, look, I think they're pretty steady state. Obviously, it's mostly... It's mostly variable costs, right? Because if you look at the component that makes up that C1, the overwhelming majority is going to be on transport costs. So, you know, we don't see much of an opportunity even with increased sales to reduce those costs further. We obviously now are operating the filter and the dryer, which is, you know, which has increased that cost relative to where we were last year. But as you can see, $700 all in sustained costs at $4,200 gold is a pretty healthy margin.

Definitely, definitely, yeah. And this is what I got you, sorry, apologies of mine, maybe just one housekeeping question. Just when Wayne was talking about the FX hedge program, sorry, Wayne, did you say that the effect of the hedges are reflected in the C1 cash costs or not?

They are not reflected, Stefan. Not, okay, okay, okay. Yes, they're below the line, but obviously the way we run the business and at the beginning of the year, which was 540, and we structure our hedger to protect that level. So that's why you see the fairly significant gains year-to-date.

Got it. Okay, great. Thanks very much, guys.

The next question is from with Scotiabank. Please go ahead.

Hi, good morning. I'm wondering if you could give us an update on the shaft sinking project at Kariba and what the timeline is for, I guess, that to go into operation next year.

Yeah, thanks for a good question, and we'll have the opportunity in a few weeks with either person to review the progress there. Right now, we're just over 1,100 meters below surface. We continue to see our sinking rate improve month on month since we started connecting that third leg, which is a fairly significant milestone in that project. The thing to keep in mind about the shaft, we started engineering on this back in 2020. The last shaft that was built at Pilar was in 1986, and we're making this investment for the next several decades, not for one quarter or the next. But as we said last quarter, our objective is is to get to shaft bottom, you know, by year end with the progress that we've made so far and increasing, you know, talk to Gelson about this nearly daily. You look at some of the projects that are happening in the world today. I think if the team needs, you know, an extra month or two to make sure that we can deliver that project safely, we're going to go ahead and make that call 10 times out of 10. So, you know, we'll have the opportunity to be on site in a few weeks to review that progress. I would say that, you know, as I said, our sinking rate's improving. We're continuing to make significant improvements once a month. We do see a bit faster pace here after the balance of the year to hit that milestone, but we're going to make sure that we do that safely and deliver that project, you know, for the next several decades.

No, that all totally makes sense. What about the budget? Where are you in terms of the capital spend on that, and are you seeing inflationary pressures?

Yeah, we're not seeing much inflationary pressures there. You know, we've got a small team that's on site that you'll meet that are coming in from South Africa. It's a third-party contractor that's doing that sinking rate. We're not seeing much in the way of inflation on the shaft itself. Obviously, if we make the decision to slow that rate down to make sure we deliver that project safely, there will be an incremental cost component, but it's relatively minor, and we think that If you look at where we're at against that budget, as I've said many times, we're very much through deep CapEx in our business. And so irrespective of kind of where we land through year end, we see that capital coming down significantly in the next year, with this year being the last big year of CapEx that we have to spend.

Okay. Just to clarify, how much was left in the budget as of June 30th for that project?

Yeah, so if you look at what we said early on in the year, we had about 80 to 90 million to spend this year with a stub in the next year. We're about halfway through the budget on this year's spend. And what will be next year we expect is a stub year of CapEx, right, as we switch that shaft over from its sinking phase into its operational phase. Okay. Thank you very much.

Once again, if you have a question, please press star then 1. Our next question is from Rafael Barcelos with Bardesco BBI. Please go ahead.

Hi. Thanks for taking my questions. My first question on Caraiba. Please provide like an update on the Pilar chat in terms of the, you know, potential for productivity gains going forward and the timing for these gains. And of course, more color on what you're expecting in terms of the ramp up. of this project. And then moving to capital allocation, just a quick follow-up. I mean, the company will probably turn into a net cash position by the end of the year. So I'm just wondering, you know, if you could discuss more, you know, shareholder remuneration versus, you know, the preparation for starting the investment plans for foreigners. How do you expect to balance those things? That could be interesting. Thank you.

Eric, perfect. Thank you. I think I would, you know, allude to the shafts making good progress. We continue to expect the full first year of full benefit to be 2028. Obviously, next year, 2027, we'll be focused on transitioning that from the sinking phase into the operational phase after we reach shaft bottom. I think the easiest way to talk about the benefit is to give you the current experience and the future state. So if you go right now to the deeper part of Palau Mine and you drive down the ramp, that can take up to about an hour and a half. As you all know, underground mines in Brazil operate on six-hour shifts. What that means in practical terms is we're starting out with 50% availability of our workforce in the deepest part of the mine. Obviously, we operate at multiple different levels, so that's not true for the entire operation, but in the deeper, higher-grade zones, That's the reality today. When the shaft is completed, it's been designed to get our entire workforce in and out of the mine in under an hour. So we expect a very significant improvement in workforce productivity, improved access, improved ventilation. It'll be a transformational investment that, again, if you go back to when the last shaft was built, 1986, this one happening now, it's going to support the operation for decades to come. and there's no one more excited about finishing that project than me having been involved with it since 2019 and we're making good progress. As I said to Oris, we're going to make sure that we deliver that project safely and on budget and that's what we're committed to doing over the next, the second half of this year and into next year. On the cash position and share all returns, yeah, we're excited as everybody here. We're making great progress on our objectives that we committed to in 2025. I think the way that I would characterize our priorities in terms of cap allocation, we're still focused on that second step, which is paying down our revolver. We have $95 million left to pay down after the payment that we made in July. We're continuing to accelerate Ferdansk. I would say it's not one or the other. If you look at where we're at in Ferdansk, we're going to finish effectively a five-year drill program in the better part of two years. in October 2024. To the end of this year, we're going to complete all the 90,000 meters that were envisioned under that project. We completed the PEA. We're rapidly advancing the PSS. So I wouldn't look at it as an either or. Obviously, if we see opportunity to accelerate for us and put more capital to work there, that's a great place to put capital. But we're working, you know, flat out on that project already. you know taking a big step back again for us first priority here well first priority was to get to below one times leverage we did that second priority pay down our revolver and number three I think come back to the market later this year when we've met that second milestone which is to pay down our revolver.

If I may like one follow-up still in this part of the capital allocation topic How do you see, you know, Iro Copper in the middle of these recent M&A trend that we've seen over the past few years in the copper sector? I mean, how do you see the company in this environment?

Look, as I always say, you know, we have a corporate development team. They have a very, very important job and organization. We look at opportunities, you know, in the Americas for growth. We do that pretty thoughtfully in the lens of what our existing portfolio looks like. You know, we have, I would say, one of the better, if not the best, from our perspective, development projects in the market, which is for us. We have an incredible pipeline of early-stage exploration projects that our exploration team is working on. And so we look at opportunities outside of our business. through that lens. So we take reviews in the Americas very, very seriously. But I think our focus is really on executing on our own portfolio. You know, we, as I said, we have a corporate development team that have an important job to do in our company, but we're really happy with where our portfolio sits today, and that's what we're focused on executing.

Thank you.

This concludes the question and answer session. I'd like to turn the call back over to Makko DeFilippo for any closing remarks.

Yeah, thank you, everyone. As always, our team's available. We appreciate your patience as we revalve back in here. And just one last reminder on our Capital Markets Day in Sao Paulo, look forward to seeing many of you there. Thank you very much. Have a great day.

brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.