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Ero Copper reported record-breaking fourth-quarter 2025 results, characterized by all-time high revenues of $320 million and significant operational milestones. The company has successfully transitioned out of a heavy capital investment phase, with major projects like Tucuma now operational. A key highlight was the Preliminary Economic Analysis for the Furnas project, which projects a 24-year mine life with first-quartile cash costs of $0.24 per pound of copper and a $2 billion NPV. Operationally, Caraiba and Tucuma achieved record throughput and production, while Xavantina benefited from a new gold concentrate program contributing to 50,000 ounces of gold for the full year. Financial health improved markedly, with the net debt leverage ratio falling to 1.2x. Looking toward 2026, management issued copper production guidance of 67,500 to 77,500 tonnes, with production weighted toward the second half of the year. The company plans to prioritize debt reduction, specifically paying down its revolver, before commencing shareholder returns. Despite macro headwinds like the Brazilian Real's volatility and seasonal rains affecting gold concentrate drying, management remains highly optimistic about their counter-cyclical positioning and long-term growth profile via Furnas.

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ERO COPPER CORP.: Leverage-Heavy Miner Drowning in FX Volatility and Working Capital Deficits

Full Earnings Call Transcript — Q4 • 2026-03-06

Operator: Thank you for standing by. This is the conference operator. Welcome to the Ero Copper Fourth Quarter 2025 Operating and Financial Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Farooq Hamed, VP, Investor Relations. Please go ahead.
Farooq Hamed: Thank you, operator. Good morning, and welcome to Ero Copper's Fourth Quarter and Full Year 2025 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 3 and 12 months ended December 31, 2025. Our corresponding earnings presentation can be downloaded directly from the webcast and is also available in the Presentations 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 the potential impact on our business, please refer to our most recent annual information form available on our website as well as on SEDAR 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.
Makko Defilippo: Thank you, Farooq, and thank you to everyone joining us this morning. As we pre-released our 2025 production results and 2026 guidance in early February, I'd like to take a step back here and explain why we believe Ero is extremely well positioned in the current market environment. Last week, as many of you would have seen, we released our maiden preliminary economic analysis on the Furnas project. This was an important milestone for the company and one of our key objectives this year. Over the past 18 months, our exploration and engineering work, combined with extensive historical technical programs completed by Vale on the project since the early 2000s, has enabled the design of an integrated open pit and underground mine expected to produce a total of more than 1.2 million tonnes of copper, 2 million ounces of gold and 9 million ounces of silver over an initial 24-year mine life. Highlighting the quality of Furnas and reinforcing why it is a cornerstone asset in our long-term growth strategy. Over the first 15 years of operation, Furnas is expected to produce approximately 70,000 tonnes of copper, 111,000 ounces of gold and more than 500,000 ounces of silver annually at first quartile C1 cash costs of approximately $0.24 per pound of copper produced. At long-term consensus metal prices, the PEA delivers an after-tax NPV of approximately $2 billion and an IRR of more than 27% on $1.3 billion of initial capital. Taken together, these metrics uniquely position Furnas from a capital intensity perspective relative to comparable projects while delivering strong economic outcomes across a wide range of commodity prices. Said differently, we see an exceptional project that is both financeable and buildable. As strong as it is, the PEA is just a starting point for us, and we are focused on maintaining momentum this year. In 2026, we plan to complete an additional 50,000 meters of exploration drilling, targeting extensions of high-grade mineralization around planned underground infrastructure. We will also continue pursuing opportunities we see to further strengthen economics, which include the addition of a magnetite recovery circuit to produce a high-grade magnetite concentrate as well as a gravity pre-concentration stage to enhance gold recoveries. Both initiatives offer potential to further increase byproduct revenue, and we are encouraged by the initial results we are seeing. Getting back to what differentiates Ero, we have clearly outlined a great long-term growth project in Furnas, and we are thrilled to be advancing it towards a construction decision over the coming years. Perhaps most importantly, the capital required to advance Furnas to that point is expected to remain relatively modest as we continue to advance technical studies, drilling and permitting work streams. At the same time, capital spending across our existing operations is projected to decline as we transition out of a multiyear investment phase that included the construction of Tucuma and major investments at Caraiba over the past several years. These investments are either complete or in the case of our new shaft project at Caraiba, are past peak capital spend. As a result, Ero is exiting a major investment cycle with an exceptional long-term growth asset, increasing cash generation capacity, declining consolidated capital requirements and three operating mines with the right mix of metals at exactly the right time in the commodity price cycle. When I look across the broader sector, many companies, including most of our peers, are jumping into major project builds within the next year. We like this dynamic. Switching gears slightly. I do want to touch on our 2025 results and '26 guidance. And I would start by recognizing the resilience and dedication of our teams that work through a number of challenges to deliver meaningful improvements across the business as the year progressed. These efforts resulted in sequential quarters of improving operational performance, the unlocking of a major new additional value driver for our business at Xavantina. Starting with Caraiba, Q4 represented our strongest operating quarter of the year. Mill throughput reached nearly 1.2 million tonnes, up 18% compared to Q3 and an all-time record for the operation. This drove copper production 15% higher quarter-on-quarter and contributed to C1 cash costs of $2.27 per pound. At Tucuma, copper production increased more than 22% quarter-on-quarter, representing another record for the operation. Higher process grades helped offset an extended period of unplanned downtime in December, driven by a pull forward of Q1 maintenance for an early mill liner replacement. This pull forward was due to an OEM wear part quality issue that impacted multiple operations in the region, including ours. C1 cash costs in Q4 were $1.75 per pound, which I would note approximately $0.10 of this was attributable to expensing the unamortized portion of the liners. Turning to Xavantina. Production increased 53% quarter-on-quarter, driven by higher grades and improved throughput as we began to see the benefits of our efforts transition the mine to mechanized mining. In addition, our gold concentrate program resulted in an incremental 15,000 ounces of gold in Q4. As a result, total gold from Xavantina, including mine production and concentrate shipments was nearly 20,000 ounces in the quarter and over 50,000 ounces for the full year. Behind these numbers, what makes 2025 one of our best on record, in my opinion, is that our operational teams delivered these results while achieving one of our best years ever in terms of consolidated safety performance. Whatever might be said about 2025, nothing matters to me more than this metric. As I look ahead to 2026, our guidance assumes the operational performance gains we achieved in the fourth quarter are effectively sustained through the year. While we continue to work on opportunities to further improve performance across the business, especially in the second half of this year at Tucuma, these are not reflected in our guidance. At Tucuma, we are well advanced on adding additional tailings filtration equipment this year to unlock additional throughput capacity for this operation. We have equipment being manufactured right now. And if all goes according to plan, we would expect this to benefit the operation in the fourth quarter. As I mentioned, the potential benefits here as well as the associated capital investment have not been reflected in our 2026 guidance. This was a deliberate decision for three reasons: First, guiding to steady state was important for us this year. Second, there is a lot of daylight between now and the fourth quarter. And perhaps most important, in the current metal price environment, we expect the payback on this investment to be 1 to 2 quarters. So while it is a very important objective, and we expect to complete it this year, it will not change our strategy or capital allocation decisions in 2026. At Xavantina, we are investing in our ventilation circuit, mine development and equipment to increase mine capacity and output. This is a low-hanging long-term value driver inherent to our business when we look at the available milling capacity we have there. Last but not least, at Caraiba, we are advancing the new shaft project for the Pilar mine and are pursuing several operational improvement initiatives that we hope to discuss later this year. To touch briefly on cadence for 2026, we are guiding consolidated copper production of between 67,500 to 77,500 tonnes. This reflects year-over-year growth driven primarily by higher sustained plant throughput at Caraiba and Tucuma, partially offset by lower planned grades. Copper production is expected to be weighted towards the second half of the year due to mine sequencing and a modest increase in throughput throughout the year. At Xavantina in 2026, we are guiding mine production of 40,000 to 50,000 ounces. We expect Q1 to be the softest production quarter of the year. This cadence reflects mine sequencing as well as a tie-in of a major ventilation upgrade during the quarter, including the completion of the new [indiscernible] surface. Production is expected to be weighted towards the second half of the year as a result. Gold concentrate sales are expected to continue throughout the year, but we expect that to be relatively modest in Q1 due to the rainy season. For some additional context there, you'd be hard-pressed to find a more simple operation in our portfolio. There are only three steps. We remove the material from stockpile, we then spread it out in the sun to dry, then transport the material for shipment. As you can likely imagine, step two in that process is far less productive during the rainy season. With that, I will turn the call over to Wayne, who will walk through our financial results in more detail.
Wayne Drier: Thank you, Makko. Our fourth quarter financial results were driven by record copper concentrate sales, a 59% increase in gold dore sales, the commencement of gold concentrate sales and stronger copper and gold prices during the period. All of these factors drove quarterly revenue to a record $320 million or $143 million higher compared to the third quarter. Consolidated C1 copper cash cost per pound were approximately 1.5% higher quarter-on-quarter with the increase predominantly coming from Tucuma, where we experienced higher transportation, demurrage and port costs in the quarter related to the COP30 activities in Para State. This had an impact of approximately $0.10 per pound on our Tucuma C1 costs, which were also impacted by the accelerated amortization of the mill liner Makko referenced earlier. Gold C1 cash cost per ounce declined by approximately 29% from the third quarter. As a result, the company delivered stronger operating margins, with adjusted EBITDA growing to $186.7 million in the fourth quarter and $409.7 million for the full year. Adjusted net income attributable to owners of the company was $108.4 million for the quarter and $220.4 million for the year or $1.04 and $2.12 per share, respectively. Our liquidity position at quarter end stood at $150.4 million, including $105.4 million in cash and cash equivalents and $45 million of undrawn availability under our revolving credit facility. We continue to deleverage our balance sheet with net debt declining to approximately $502 million at year-end from $545 million at the end of the third quarter. Combined with significantly higher 12-month trailing EBITDA, this resulted in a material improvement in our net debt leverage ratio, which decreased to 1.2x at the end of Q4 from 1.9x in Q3 and 2.6x at the end of 2024. With copper and gold production expected to grow in 2026 as well as the additional cash flow from Xavantina's gold concentrate sales, we intend for debt reduction and return to shareholders to be key elements of our midterm capital allocation strategy. At December 31, we had $155 million drawn on our revolver, which we intend to pay down fully in 2026. We would like to maintain a strong cash position on the balance sheet and target a net debt-to-EBITDA ratio below 1x ahead of commencing a return of capital program. I'll now pass the call back to Makko for some closing remarks.
Makko Defilippo: Thank you, Wayne. Before we move into the Q&A session, let me recap the 3 key elements of Ero's value proposition. First, over the past decade, Ero has consistently unlocked value that wasn't fully recognized often through work supported by strong partners. Clear examples include our gold concentrate program and our broader partnership with Royal Gold at Xavantina and more recently, the advancement of the Furnas project with our partner, Valley Base Metals. Second, we've taken a disciplined countercyclical approach to capital allocation, investing in building projects during periods when development activity across the sector was limited. That strategy has positioned Ero favorably relative to our peer group that are now preparing to enter major capital investment phases. Third, Furnas represents a high-quality, long-life asset being advanced with a top-tier partner and we view it as a compelling cornerstone for Ero's long-term growth. With that, I will now turn the call back to the operator to open the line for questions.
Operator: [Operator Instructions] First question comes from Orest Wowkodaw with Scotiabank.
Orest Wowkodaw: Question around the gold concentrate stockpiles at Xavantina. You haven't issued any guidance for what those volumes could be this year. But with the 15,000 ounces you sold in the fourth quarter, is that a good guide for shipments in periods or quarters where there's no rainy season?
Makko Defilippo: Yes. Thank you for the question, Orest. Obviously, a bit of a tricky situation. Obviously, we came out with initial resource on the 20% of the volume that we were able to sample. So it's difficult for us, as you can imagine, to give exact guidance. But we certainly expect strong volumes and shipment. I would point to what we achieved in Q4. That was at the tail end of the rainy season. So if you -- just for context, the rainy season in Mato Grosso typically starts in November and goes through March, April, depending on the year. And so part of those sales did occur when the rainy season was started. We're obviously advancing several initiatives on site to increase volumes from there. And as I said on the outset of the call, Q1 is the heart of the rainy season. This has been an exceptionally rainy year in Brazil, as you are probably aware, from some of the news flow and flooding that's happened throughout the country. And therefore, we expect very, very modest sales in Q1 and then ramp up pretty aggressively Q2, Q3.
Orest Wowkodaw: And in terms of the stockpile itself, have you seen anything that may suggest that the grade for the other 80% of the stockpile would be materially different than what you have sampled?
Makko Defilippo: Difficult to say Orest, but nothing -- obviously, as we go into the future, we don't have samples there, but to date, nothing that suggests otherwise.
Operator: The next question comes from Emerson Vieira with Goldman Sachs.
Emerson Vieira: I would like to understand a little bit more on Tucuma Q3 press issue. So can you provide us an update here? Have you guys already ordered the mobile filter that is expected to increase the future availability? And any update on time could be very helpful. Also, how long should be the maintenance in the first quarter in order to advance with the new aligners replacement? And just a third one on Tucuma, can you please reconcile the production guidance for 2026? I mean, what are you guys expecting in terms of grades and throughput ramp-up throughout the year? Those are my questions.
Makko Defilippo: Thank you. Quite a bit to unpack there. So if I missed something, I apologize, just ask it again, but thanks for the questions. So first, on the filter press capacity, yes, that equipment has been ordered. It's being manufactured. As I said in the prepared remarks, that is a very important objective of ours. But given the -- given what we've outlined, it's not included in our guidance, first and foremost, we expect the payback on that investment to be very fast in this environment. And we expect it to be operational in Q4 as both the quantum of the investment there as well as the current prevailing copper price that investment and completion of that project has very little influence on how we think about our business for 2026. As I said, it was not included in our guidance. So that's first and foremost on that point. The second part of your question was related to the maintenance that happened related to the mill lining. So to be clear, there, we expected that maintenance to occur in Q1. We had to pull that into Q4, so it's already been completed effectively for the year. That was approximately a 10-day period of downtime that happened in Q4 and impacted our Q4 results.
Emerson Vieira: All right. So no more maintenance, downtown... for...
Makko Defilippo: We have planned downtime every month. So that is still part of our team, but we have no extended period of downtime that we're planning in Q1 of this year.
Emerson Vieira: All right. And just the last one on the reconciliation on grade and throughput comparing to the guidance, please?
Makko Defilippo: Yes. Great question. Thank you. So when we obviously came out -- had a strong result last year in terms of grade, we do expect grades to come down. We are currently looking at -- throughout our guidance, just below 3 million tonnes of processed throughput. And I would say somewhere between 1.3% and 1.4% copper for the full year.
Operator: The next question comes from Guilherme Rosito with Bank of America.
Guilherme Rosito: So I have two. The first is on Tucuma. I wanted to dive a bit deeper into the C1 cash cost guidance. I just wanted to understand how we could explain the cost increase throughout the year versus what we were in 4Q. I appreciate that there is lower grade and not including the feed. So with the feed there could be a change to guidance. But I'm just trying to understand as you have more fixed cost dilution as you increase processing and also the [ CRCs ] are higher than what you guys are currently doing at Caraiba. So I'm just trying to understand all these moving parts and what's driving costs higher this year? And second on Xavantina, I just wanted to explore a bit if you could talk about the benefits from the mechanization investments you guys did last year. How should we expect that to translate into the results this year? And what do you guys expect in terms of grades throughout the year? How this should fluctuate, what sort of volatility we should see throughout the year? So that's it.
Makko Defilippo: Thank you for the questions. So yes, starting with Tucuma, a really, really good question there. Main drivers for guidance, as you mentioned, is grade. So obviously, we're coming off of a year of significantly higher grades that has a direct influence on our Q1 -- our C1 costs. We also are putting in additional maintenance efforts there to stabilize the operations. Those are, I would refer to those additional costs as nonstructural. On the TC/RC and shipment side, we've been getting some questions about differences from Caraiba to Tucuma. I would point to two major influencing factors there. Number one, the grade of the concentrate is lower. So therefore, there's more costs associated on a per pound copper basis, number one. Number two, we have quite a bit further to transport that material. And so when you take those two together, we do see higher TC/RCs. We're seeing a market now in the TC/RC across our business that looks favorable relative to where we expected it to be for the budget. That said, those are mostly longer-term contracts that we have in place. So we are not getting the full benefit of the benchmark pricing. And then more fundamentally, as you'll probably appreciate better than most people, we are seeing a very strong BRL headwind across our business. That's true across all of our operations, and that's been reflected in our guidance. So I would say big moving factors there on Tucuma cost drivers would be the grade that we're mining, the additional maintenance costs that we're incurring. Again, we expect -- we do expect to see a benefit in Q4 from those costs. The TC/RCs and shipment related costs in part because the grade of concentrate is lower than Caraiba. Your second question on the benefits of mechanization really points to two things. As you've heard me talk about on a number of calls here over the year, reducing exposure of our workforce is one of the top benefits of that investment, and it was one of the key driving factors in making that investment. So getting our workforce away from the work phase to the maximum extent possible. So that's number one. Number two, if you just take a step back and I hope you have the opportunity to show you what the team has been doing at Xavantina later this year. But that mill only operates between 15 and 20 days per month, and that's a function of the asset being mine constrained. So as we look ahead to the future and notwithstanding the cadence of production that we just talked about this year, given the tie-in of the ventilation circuit improvements that we're making, we expect over time here to be able to better match mine output with mill capacity, again, not reflected in our long-term guidance, but it's one of the key low-hanging value drivers that we see in our business. And Gelson and the team here are working diligently, and we hope to be in a position to talk about what that might look like later in the year.
Operator: Your next question comes from Fahad Tariq with Jefferies.
Fahad Tariq: There was a comment made earlier on the call about potential capital return once the net debt to EBITDA gets to the targeted levels below 1x. Maybe just any additional color on that, what form that would be in timing, et cetera?
Makko Defilippo: Yes, I'll jump in and Wayne can piggyback if I missed anything or has anything to add. I would say really, there's 3 steps here that we see as being critically important to driving that decision and timing. First and foremost, as Wayne mentioned, we want to see our net debt leverage ratio below 1x. As you can see from our Q4 results, we're -- given where we were in Q3 to Q4, we're rapidly approaching that metric. Obviously, the world is a volatile place. So we'll see what happens over the next few quarters, but we're pretty close to that metric at 1.2x right now. Secondly, as we mentioned, we want to pay down our revolver. So as at year-end, we had $155 million drawn. That's just a logical place to pay down our debt. And again, we are cognizant that paying down debt, including our revolver is a de facto return to shareholders. So that's an important component of that strategy. And number three, we're having a lot of discussions with our top shareholders about what that might look like and timing. I would say stay tuned. Let's get through steps 1 and 2 before we get too excited about step 3.
Fahad Tariq: Sounds good. And then maybe on Furnas, the idea of you're entering a period where some of your peers are getting into a build cycle and Furnas is, I guess, much longer dated. Any opportunity to -- or any appetite to try to accelerate that? Or is that even possible given like what the stage is at right now and the terms of the earning agreement and what needs to be done?
Makko Defilippo: Yes. We're very excited about Furnas as you probably heard in our prepared remarks and saw in our webcast materials. The reality is it's a few years out. We like that positioning. We need to do work to advance through a prefeasibility study execute on some of those value drivers that we see as low-hanging fruit to increase the value of the project, increased byproduct revenue. And then we still need to do advance several permitting work streams. The reality, I think, is we do have the appetite to advance that project as fast as possible. I would say that we're already doing that. And we still expect modest capital spend over the next the next few years as a result of the acceleration there.
Operator: Next question comes from Stefan Ioannou with ATB Cormark.
Stefan Ioannou: Just kind of curious, back on the gold concentrate sales. I think originally, it was suggested that you might -- we're anticipating selling down the entire stockpile over, say, 12 to 18 months. Just given our better understanding of the rainy season and whatnot now, is that a sort of a number we should think it was probably going to be stretched out over a bit more time?
Makko Defilippo: Yes. Look, let's see, right that 12 to 18 months we talked about that time later in November. If you put out -- if you look at what we talked about in our guidance came out this year, we said through mid-2027 those time lines are kind of give or take a month, are pretty well aligned from our perspective.
Stefan Ioannou: Okay. Okay. So still mid-20 27-ish. Okay. And just maybe switching gears, just on the -- you mentioned an exploration spend of $30 million to $40 million. Is that really the lion's share at Furnas or is there any other sort of notable projects we should be thinking about from an exploration point of view this year?
Makko Defilippo: It is a great question. Yes, the lion's share of that is at Furnas. I would say that we're still advancing some opportunities throughout the portfolio, both at Tucuma and at Tucuma, Xavantina, and Caraiba at various stages of development. Again, I think the best guidance I can give you at this point is that we're excited about what we're doing there. We expect to give an update at our Investor Day later in the year.
Operator: The next question comes from Craig Hutchison with TD Cowen.
Craig Hutchison: I was just wondering if the heavy rainfalls, will that have any impacts on concentrate shipments or timing of shipments from Tucuma as well? Or is it just isolated to Xavantina?
Makko Defilippo: Yes, great question. We plan for cadence across our operations for a normal amount of operational disruption. I would say that what we've seen to date at our other operations is in line with what we expected and built into our budget and guidance for the year. So we're not seeing anything out of the ordinary in terms of operational disruption. There is operational disruption across all our operations due to the rating season. That's been reflected in our guidance and how we think about cadence for the full year.
Craig Hutchison: Okay. Great. And then just TC/RCs in terms of your C1 cash costs, are you able to provide what you're assuming for TCRs for the year?
Makko Defilippo: Those are based on long-term contracts that are commercially sensitive, but I would say the -- what we've heard in the market is well below zero. We're not reflecting that at either of our operations. And as I said, they're long-term contracts that are commercially sensitive. Still very low in a historical context. As I mentioned, when I think about what are the big headwinds and tailwinds for our business, at Caraiba, we have a big tailwind from byproduct gold prices. That was probably pretty clear. And if you look at how that byproduct line item has tracked over the last several years, but we're seeing headwinds on seaborne shipping freight given what's happening in the world today. And then also on the BRL, which has been a big -- I think last year, the BRL was in the top -- was one of the top performing currencies against the U.S. dollar. And so that's a bit of a headwind. So definitely some gives and takes. We feel pretty happy with where our guidance is at this point in time, given some of the gives and takes that we're seeing there. But obviously, we'll keep everyone updated if we see things moving significantly one way or another.
Operator: Next question comes from Anita Soni with CIBC World Markets.
Anita Soni: I just wanted to follow up a little bit on Furnas. I was wondering in terms of -- I wanted to tie in the exploration drilling that you've done with the PEA. Can you just talk about how much of the drilling that you've done, how much was included in this PEA? And is there still like some that was outlined that didn't get included?
Makko Defilippo: Yes. Perfect. Thank you for asking the question. You're absolutely right. The PEA, we started drilling at the tail end of 2024. The PEA includes 28,000 meters of drilling of the 50,000 meters that we drilled last year and we expect to complete another 50,000 meters this year. So if you're looking for -- there's several stages under the earn-in agreement, we'll have effectively -- we expect to complete all phases of drilling, all drilling requirements by the end of 2026. And as I mentioned, that PEA only includes 28,000 meters of drilling. Our objectives with the drill program that we completed in the second half of last year and the first part of this year are twofold. Number one, as we move to pre-feasibility study, we need to convert that inferred mineralization that's included in the PEA into measured and indicated resources that we can include it in the mine plan. And then number two, we -- as you can see in the production profile, really years 16 through '24, we see a drop-off, and that's related to the -- really to the extent of drilling we've been able to do. So we've targeted as part of our drill program some key step-outs around some of the planned underground infrastructure that if successful, we expect to improve the production profile later in the mine life. Obviously, we still need to do the drilling and the mine planning to support what I just said there. So -- but we're looking forward to advancing that work stream and getting it included into the pre-feasibility study.
Anita Soni: Yes. That was the second question. Just wanting to drill a little bit into the inferred category. How -- what kind of drill density do you have now? And what do you need to get it into for the M&I?
Makko Defilippo: Well, I don't have that right off the top of my head. We can circle back on that one. What I can tell you is that about 60% of the material that we have, including the PEA is inferred. I will follow up with you just after this call on drill spacing. Obviously, that will be outlined in the technical report that will be filed here shortly. I just don't have that information right at my fingertips.
Anita Soni: That's fine. If you're going to file the technical report, that was my third question when you're going to file that because I'd like to get into the weeds on that. And then I would also then want to figure out some of the dilution questions as well because I noticed your M&I and inferred does not have any dilution at all [indiscernible]. But that's it for my question.
Makko Defilippo: Yes. Just to clarify there, it's an important point on dilution. You're correct. The resource statement doesn't include dilution. The mine plan has been fully diluted and you'll see that reflected around the assumptions that are outlined in the technical report.
Operator: The next question comes from Dalton Baretto with Canaccord Genuity.
Dalton Baretto: I just want to follow up on some of that Furnas drilling there, but from a different perspective. Makko, you talked about all the drilling that was done last year that was not included in a lot of the drilling this year. My understanding was that sort of the high-grade cores of the deposit, they extend down deeper and possibly deeper than Vale had anticipated. And I'm just trying to understand how much of your drilling is chasing that higher-grade material and whether we could see some sort of a grade bump on the next resource update.
Makko Defilippo: Good questions. Look, I think the way that I would think about this is the project as it stands today is -- it stands on its own 2 feet, right? We're working on some additional value drivers to smooth up the production profile to further enhance the economics. But as you see from the numbers, it absolutely stands on its own 2 feet. We -- if you look at the last drill hole that we drilled as part of the PEA, I'm going to quote some numbers here, so take this with a little bit of grain salt, but it was about around 150 meters at 0.8% copper 0.5 gram gold more or less. And that was the last hole that we drilled that was included in the PEA of that 28,000-meter program. That intercept was 600 meters below surface. We clearly see opportunity to extend the deposit, both to depth and laterally along strike. We expect to include those in future studies. And as I said, we'll be advancing those drill programs here. In terms of grade bump, look, we still need to do the infill drilling that will be included in the pre-feasibility study. So there are several stages of technical studies to go here. I would say the work that not only we did but also the very, very strong technical work that Vale has done over the years to build an incredible foundation that we were able to build on, I think, really speaks to the quality of the project. And we work with our technical team regularly. We have an excellent relationship, and we're really moving this forward together to create the best value possible. And when I think about what we've done collectively to drive not only production substantially underground, but also the mine calls for about 30% of its tailings -- expected tailings production to go back underground as paste backfill. We've really worked jointly to reduce the environmental footprint and hopefully set ourselves up for an excellent fast-track project.
Dalton Baretto: Makko. And then can you remind me, is there some sort of a mechanism in your agreement with Vale that gives you the option to buy the piece that you currently won't earn into?
Makko Defilippo: No. We're very happy to be pursuing this project in partnership with Vale Base Metals.
Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Makko DeFilippo for any closing remarks. Please go ahead.
Makko Defilippo: Yes. Thank you, everyone, for joining us today. Obviously, we're always available for follow-up questions. I appreciate the robust discussion on the Q&A side as usual. I think one last bit of housekeeping here shortly on our website, for those of you who are interested, we will be hosting a Capital Markets Day in mid-September. That will be physically in person in Sao Paulo and obviously, virtually. And as I said, that information will be on our website shortly. Thank you all very much. Have a great weekend. Thank you. Bye-bye.
Operator: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.