40FR12B

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

FORM 40-F

x Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934

or

¨ Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended __________

Commission File Number__________

ERO COPPER CORP. 

(Exact name of registrant as specified in its charter)

Canada	1000	N/A
(Province or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code)	(I.R.S. Employer Identification No.)

625 Howe Street, Suite 1050 

Vancouver, British Columbia

V6C 2T6 

(604) 449-9236

(Address and telephone number of registrant’s principal executive offices)

CT Corporation System

28 Liberty Street 

New York, NY 10005

(212) 894-8940

(Name, address (including zip code) and telephone number (including area code) 

of agent for service in the United States)

Securities to be registered pursuant to Section 12(b) of the Act:

Title of Each Class:	Trading Symbol(s):	Name of Each Exchange On Which Registered:
Common Shares, no par value	ERO	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

For annual reports, indicate by check mark the information filed with this form:

¨ Annual Information Form ¨ Audited Annual Financial Statements

Indicate the number of outstanding shares of each of the registrant’s classes of capital or common stock as of the close of the period covered by the annual report: N/A

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.

¨  Yes            x No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

¨  Yes            ¨  No

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.

Emerging growth company x

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.          ¨

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.      ¨

FORWARD LOOKING STATEMENTS

This Registration Statement on Form 40-F, including the exhibits hereto (collectively, the “Registration Statement”), includes certain statements that constitute “forward-looking statements” and “forward-looking information” within the meaning of applicable Canadian securities laws and United States securities laws (collectively, “forward-looking statements”). Forward-looking statements use forward-looking terminology such as “may”, “could”, “would”, “will”, “should”, “intend”, “target”, “plan”, “expect”, “budget”, “estimate”, “forecast”, “schedule”, “anticipate”, “believe”, “continue”, “potential”, “view” or the negative or grammatical variation thereof or other variations thereof or comparable terminology. Such forward-looking statements include, without limitation, statements with respect to mineral reserve and mineral resource estimates as well as life-of-mine plans; targeting additional mineral resources and expansion of deposits; the capital and operating cost estimates and the economic analyses (including cash flow projections) from the technical report on the MCSA Mining Complex (as defined below) dated January 14, 2021, with an effective date of October 1, 2020 (the “MCSA Mining Complex Technical Report”), the technical report on the NX Gold Mine (as defined below) dated January 8, 2021, with an effective date of September 30, 2020 (the “NX Gold Technical Report”) and the technical report on the Boa Esperança Property (as defined below) dated September 7, 2017, with an effective date of June 1, 2017 (the “Boa Esperança Technical Report”); the Registrant’s expectations, strategies and plans for the MCSA mining complex located within the Curaçá Valley, northeastern Bahia State, Brazil (the “MCSA Mining Complex”), the NX Gold property located approximately 18 kilometers west of the town of Nova Xavantina, southeastern Mato Grosso State, Brazil (the “NX Gold Property” or the “NX Gold Mine”) and the Boa Esperança property located within southeastern Pará State, Brazil (the “Boa Esperança Property”), including the Registrant’s planned exploration, development and production activities; the significance and timing of any particular exploration program or result and the Registrant’s expectations for current and future exploration and drilling plans including, but not limited to, planned areas of additional exploration, the significance of any drill results or new discoveries and targets, including without limitation, extensions of defined mineralized zones, possibilities for mine life extensions or continuity of high-grade mineralization, the recoverable value of any metals other than copper, further extensions and expansion of mineralization near the Registrant’s existing operations and throughout the Curaçá Valley or the NX Gold Mine, statements with respect to the importance of any new discoveries including newly identified mineral systems, the significance of re-evaluation of the Registrant’s past producing open pit mines, the costs, timing and advancement of ongoing projects including, but not limited to, the Deepening Extension Project (as defined in the MCSA Mining Complex Technical Report) and the re-start of the Surubim OP Mine (as defined in the MCSA Mining Complex Technical Report), estimated completion dates for certain milestones, successfully adding or upgrading mineral resources and successfully developing new deposits; the significance of any potential optimization initiatives in connection with the Boa Esperança Property and the potential issuance, and timing of, an optimized feasibility study; the timing and amount of future production at the MCSA Mining Complex, the Boa Esperança Property and the NX Gold Property; the impacts of COVID-19 on the Registrant’s business, financial condition, results of operations, cash flows and prospects; the timing, receipt and maintenance of necessary approvals, licenses and permits from applicable governments, regulators or third parties; expectations regarding consumption, demand and future price of copper, gold and other metals; future financial or operating performance and condition of the Registrant and its business, operations and properties, including expectations regarding liquidity, capital structure, competitive position and payment of dividends; the possibility of entering judgments outside of Canada; expectations regarding future currency exchange rates; the Registrant's ability to service its ongoing obligations; and any other statement that may predict, forecast, indicate or imply future plans, intentions, levels of activity, results, performance or achievements.

Forward-looking statements are not a guarantee of future performance and are based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this Registration Statement, including, without limitation, assumptions about: continued effectiveness of the measures taken by the Registrant to mitigate the possible impact of COVID-19 on its workforce and operations; favorable equity and debt capital markets; the ability to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Registrant’s properties and assets; future prices of copper, gold and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any mineral reserve and mineral resource estimates; the geology of the MCSA Mining Complex, the NX Gold Property and the Boa Esperança Property being as described in the MCSA Mining Complex Technical Report, the NX Gold Technical Report and the Boa Esperança Technical Report, respectively; production costs; the accuracy of budgeted exploration and development costs and expenditures; the price of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favorable such that the Registrant is able to operate in a safe, efficient and effective manner; the work force continuing to remain healthy in the face of prevailing epidemics, pandemics or other health risks (including COVID-19), political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favorable terms; obtaining required renewals for existing approvals, licenses and permits on favorable terms; requirements under applicable laws; sustained labor stability; stability in financial and capital goods markets; availability of equipment and critical supplies, spare parts and consumables; positive relations with local groups and the Registrant’s ability to meet its obligations under its agreements with such groups; and satisfying the terms and conditions of the Registrant’s current loan arrangements. While the Registrant considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, global health, competitive and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking statements. Many assumptions are based on factors and events that are not within the control of the Registrant and there is no assurance that they will prove to be correct.

Furthermore, such forward-looking statements involve a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Registrant to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking statements. Such risks include, without limitation: copper and gold prices are volatile and may be lower than expected; mining operations are risky; mining operations require geologic, metallurgic, engineering, title, environmental, economic and financial assessments that may be materially incorrect and thus the Registrant may not produce as expected; geotechnical, hydrological and climatic events could suspend mining operations or increase costs; actual production, capital and operating costs may be different than those anticipated; infectious diseases, such as COVID-19, may affect the Registrant’s business and operations; changes in climate conditions may affect the Registrant’s operations; currency fluctuations can result in unanticipated losses; the successful operation of the MCSA Mining Complex and the NX Gold Property and the successful development and operation of the Boa Esperança Property depend on the skills of the Registrant’s management and teams; operations during mining cycle peaks are more expensive; title to the MCSA Mining Complex, the NX Gold Property and/or the Boa Esperança Property may be disputed; the Registrant may fail to comply with the law or may fail to obtain or renew necessary permits and licenses; compliance with environmental regulations can be costly; social and environmental activism can negatively impact exploration, development and mining activities; the construction and start-up of new mines and projects at existing mines is subject to a number of factors and the Registrant may not be able to successfully complete new construction projects; land reclamation and mine closure requirements may be burdensome and costly; the mining industry is intensely competitive; inadequate infrastructure may constrain mining operations; operating cash flow may be insufficient for future needs; fluctuations in the market prices and availability of commodities and equipment affect the Registrant’s business; a failure to maintain satisfactory labor relations can adversely impact the Registrant; the Registrant’s insurance coverage may be inadequate to cover potential losses; it may be difficult to enforce judgments and effect service of process on directors, officers and experts named herein; the directors and officers may have conflicts of interest with the Registrant; future acquisitions may require significant expenditures and may result in inadequate returns; disclosure and internal control deficiencies may adversely affect the Registrant and failures of information systems or information security threats can be costly; the Registrant may be subject to costly legal proceedings; the Registrant may be subject to shareholder activism; the Boa Esperança Property is located in an underdeveloped rural area; product alternatives may reduce demand for the Registrant’s products; the Registrant is subject to restrictive covenants that limit its ability to operate its business; the Registrant’s Brazilian operations are subject to political and other risks associated with operating in a foreign jurisdiction; the Registrant may be negatively impacted by changes to mining laws and regulations; a failure to maintain relationships with the communities in which the Registrant operates and other stakeholders may adversely affect the Registrant’s business; corruption and fraud in Brazil relating to ownership of real property may adversely affect the Registrant’s business; the Registrant is exposed to the possibility that applicable taxing authorities could take actions that result in increased tax or other costs that might reduce the Registrant’s cash flow; inflation in Brazil, along with Brazilian governmental measures to combat inflation, may have a significant negative effect on the Brazilian economy and also on the Registrant's financial condition and results of operations; exchange rate instability may have a material adverse effect on the Brazilian economy; the Registrant’s operations may be impaired as a result of restrictions to the acquisition or use of rural properties by foreigner investors or Brazilian companies under foreign control; recent disruptions in international and domestic capital markets may lead to reduced liquidity and credit availability for the Registrant; the Registrant may be responsible for corruption and anti-bribery law violations; investors may lose their entire investment; dilution from equity financing could negatively impact holders of the common shares of the Registrant (the “Common Shares”); equity securities are subject to trading and volatility risks; sales by existing shareholders can reduce share prices; the Registrant does not intend to pay dividends; public companies are subject to securities class action litigation risk; if securities or industry analysts do not publish research or publish inaccurate or unfavorable research about the Registrant’s business, the price and trading volume of the Common Shares could decline; and global financial conditions can reduce the price of the Common Shares.

Although the Registrant has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking statements, there may be risks, uncertainties and other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended, including, without limitation, the risk factors listed under the heading “Risk Factors” in the Registrant’s Annual Information Form for the year ended December 31, 2020, attached hereto as Exhibit 99.1, and incorporated herein by reference, and in other filings that the Registrant has made and may make with applicable securities authorities in the future.

The Registrant cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking statements contained herein. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

The forward-looking statements contained in, or incorporated by reference into, this Registration Statement are made as of the date of this Registration Statement and the Registrant disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.

DIFFERENCES IN UNITED STATES AND CANADIAN REPORTING PRACTICES

This Registration Statement has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ in certain material respects from the disclosure requirements promulgated by the Securities and Exchange Commission (the “SEC”).

The Registrant prepares its financial statements, which are filed with this Registration Statement as Exhibit 99.3 and 99.8 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Also, the terms “mineral reserve”, “proven mineral reserve”, “probable mineral reserve”, “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are Canadian mining terms as defined in accordance with Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) - CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended. These definitions differ from the definitions in the disclosure requirements promulgated by the SEC. Accordingly, information contained in this Registration Statement, the documents attached hereto and the documents incorporated by reference herein, may not be comparable to similar information made public by U.S. companies reporting pursuant to SEC disclosure requirements.

DOCUMENTS FILED PURSUANT TO GENERAL INSTRUCTIONS

In accordance with General Instruction B.(l) of Form 40-F, the Registrant hereby incorporates by reference Exhibit 99.1 through Exhibit 99.35, as set forth in the Exhibit Index attached hereto.

DESCRIPTION OF THE SECURITIES

The Registrant is authorized to issue an unlimited number of Common Shares, without par value.  The holders of Common Shares are entitled to: (i) one vote per Common Share at all meetings of shareholders, except for meetings at which only holders of another specified class or series of shares are entitled to vote separately as a class or series; (ii) receive dividends on a pro rata basis as and when declared by the board of directors of the Registrant; and (iii) participate in any distribution of the Registrant’s net assets upon liquidation, dissolution or winding-up on a pro rata basis. There are no pre-emptive, redemption, purchase or conversion rights attached to the Common Shares.

OFF-BALANCE SHEET TRANSACTIONS

The Registrant does not have any off-balance sheet transactions that have or are reasonably likely to have a current or future effect on the Registrant’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

At December 31, 2020, the Registrant had the following contractual obligations outstanding:

	Payments due by period (U.S. dollars in thousands)
Contractual Obligations	Total		Less than 1  year		1-3 years		3-5 years		More than 5 years
Loans and borrowings		169,889		12,223		36,998		119,976		692
Interest on loans and borrowings		15,025		5,859		4,863		4,296		7
Accounts payable and accrued liabilities		37,878		37,878		—		—		—
Value added, payroll and other taxes		16,332		13,361		1,484		1,487		—
Capital (Finance) Lease Obligations		1,748		1,402		346		—		—
Total		240,872		70,723		43,691		125,759		699

UNDERTAKINGS

The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.

CONSENT TO SERVICE OF PROCESS

Concurrently with the filing of this Registration Statement, the Registrant will file with the Commission a written irrevocable consent and power of attorney on Form F-X. Any change to the name or address of the Registrant’s agent for service shall be communicated promptly to the Commission by amendment to the Form F-X referencing the file number of the Registrant.

EXHIBIT INDEX

Exhibit Number	Documents
Annual Information
99.1*	Annual Information Form for the year ended December 31, 2020
99.2*	Management’s Discussion and Analysis for the year ended December 31, 2020
99.3*	Audited Consolidated Financial Statements for the years ended December 31, 2020 and 2019
99.4*	Annual Report dated March 16, 2021
99.5*	Sustainability Report dated April 13, 2021
99.6*	Annual Information Form for the year ended December 31, 2019
99.7*	Management’s Discussion and Analysis for the year ended December 31, 2019
99.8*	Audited Consolidated Financial Statements for the years ended December 31, 2019 and 2018
99.9*	Annual Report dated March 12, 2020
99.10*	Sustainability Report dated March 31, 2020
Quarterly Information
99.11*	Management’s Discussion and Analysis for the three months ended March 31, 2021
99.12*	Unaudited Condensed Consolidated Interim Financial Statements for the three months ended March 31, 2021 and 2020
99.13*	Management’s Discussion and Analysis for the three and nine months ended September 30, 2020
99.14*	Unaudited Condensed Consolidated Interim Financial Statements for the three and nine months ended September 30, 2020 and 2019
99.15*	Management’s Discussion and Analysis for the three and six months ended June 30, 2020
99.16*	Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended June 30, 2020 and 2019
99.17*	Management’s Discussion and Analysis for the three months ended March 31, 2020
99.18*	Unaudited Condensed Consolidated Interim Financial Statements for the three months ended March 31, 2020 and 2019
Shareholder Meeting Materials and Voting Results
99.19*	Report of voting results with respect to the annual general and special meeting of the Registrant’s shareholders held on May 4, 2021
99.20*	Management Information Circular, dated March 16, 2021, with respect to the annual general meeting of the Registrant’s shareholders held on May 4, 2021
99.21*	Management Information Circular, dated March 12, 2020, with respect to the annual general and special meeting of the Registrant’s shareholders held on May 7, 2020
99.22*	Report of voting results with respect to the annual general and special meeting of the Registrant’s shareholders held on May 7, 2020
Material Change Reports
99.23*	Material Change Report, dated December 1, 2020
99.24*	Material Change Report, dated November 24, 2020
Other Material Documents
99.25**	Technical Report on the MCSA Mining Complex dated January 14, 2021, with an effective date of October 1, 2020
99.26**	Technical Report on the NX Gold Mine dated January 8, 2021, with an effective date of September 30, 2020
99.27**	Technical Report on the NX Gold Mine dated February 3, 2020, with an effective date of September 30, 2019
Consents
99.28*	Consent of KPMG LLP
99.29**	Consent of Porfirio Cabaleiro Rodriguez, FAIG
99.30**	Consent of Paulo Roberto Bergmann, FAusIMM
99.31**	Consent of Dr. Augusto Ferreira Mendonça, RM SME
99.32**	Consent of Dr. Beck (Alizeibek) Nader, FAIG
99.33**	Consent of Bernardo Horta de Cerqueira Viana, MAIG
99.34**	Consent of Fábio Valério Câmara Xavier, MAIG
99.35**	Consent of Leonardo de Moraes Soares, MAIG

*	Filed herewith.
**	To be filed with Amendment No. 1 to this Registration Statement on Form 40-F.

SIGNATURES

Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized.

ERO COPPER CORP.
/s/ Deepk Hundal
Name:	Deepk Hundal
Title:	VP, General Counsel and Corporate  Secretary

Date: June 4, 2021

EX-99.1

Exhibit 99.1

ANNUAL INFORMATION FORM

of

ERO COPPER CORP.
Suite 1050 – 625 Howe Street
Vancouver, British Columbia
V6C 2T6

Telephone: (604) 449-9244
Facsimile: (604) 398-3767
Website: www.erocopper.com
E-mail: info@erocopper.com

For the Year Ended December 31, 2020

Dated: March 16, 2021

TABLE OF CONTENTS

PRELIMINARY NOTES	3
LIST OF ABBREVIATIONS	9
CORPORATE STRUCTURE	10
GENERAL DEVELOPMENT AND BUSINESS OF THE COMPANY	10
MCSA MINING COMPLEX	20
NX GOLD PROPERTY	43
BOA ESPERANÇA PROPERTY	56
RISK FACTORS	68
DIVIDENDS AND DISTRIBUTIONS	86
DESCRIPTION OF CAPITAL STRUCTURE	86
MARKET FOR SECURITIES	87
DIRECTORS AND EXECUTIVE OFFICERS	88
AUDIT COMMITTEE	92
LEGAL PROCEEDINGS AND REGULATORY ACTIONS	93
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS	94
AUDITORS, TRANSFER AGENT AND REGISTRAR	94
MATERIAL CONTRACTS	94
INTEREST OF EXPERTS	94
ADDITIONAL INFORMATION	95
APPENDIX “A” ERO COPPER CORP. AUDIT COMMITTEE MANDATE	A-1

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PRELIMINARY NOTES

Date of Information

In this Annual Information Form (“AIF”), Ero Copper Corp., together with its subsidiaries, as the context requires, is referred to as “Ero”, “Ero Copper” or the “Company”. All information contained herein is presented as at December 31, 2020, unless otherwise stated.

Currency

All dollar amounts in this AIF are expressed in Canadian dollars, except as otherwise indicated. References to “$” or “dollars” are to Canadian dollars, references to “US$” and “USD” are to US dollars and references to “R$” and “BRL” are to Brazilian Reais.

Cautionary Note Regarding Forward Looking Information

This AIF contains “forward-looking information” within the meaning of applicable Canadian securities laws. Forward-looking information includes statements that use forward-looking terminology such as “may”, “could”, “would”, “will”, “should”, “intend”, “target”, “plan”, “expect”, “budget”, “estimate”, “forecast”, “schedule”, “anticipate”, “believe”, “continue”, “potential”, “view” or the negative or grammatical variation thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, statements with respect to Mineral Reserve and Mineral Resource (as defined below) estimates; targeting additional Mineral Resources and expansion of deposits; the capital and operating cost estimates and the economic analyses (including cash flow projections) from the MCSA Mining Complex Technical Report (as defined below), the NX Gold Technical Report (as defined below) and the Boa Esperança Technical Report (as defined below); the Company’s expectations, strategies and plans for the MCSA Mining Complex (as defined below), the NX Gold Property (as defined below) and the Boa Esperança Property (as defined below), including the Company’s planned exploration, development and production activities; the results of future exploration and drilling, estimated completion dates for certain milestones; successfully adding or upgrading Mineral Resources and successfully developing new deposits; the costs and timing of future exploration and development including but not limited to the Deepening Extension Project (as defined below) at the MCSA Mining Complex; the significance of any potential optimization initiatives in connection with the Boa Esperança Property and the potential issuance, and timing of, an optimized feasibility study; the timing and amount of future production at the MCSA Mining Complex, the Boa Esperança Property and the NX Gold Property; the impacts of COVID-19 on the Company’s business and operations; the timing, receipt and maintenance of necessary approvals, licenses and permits from applicable governments, regulators or third parties; expectations regarding consumption, demand and future price of copper, gold and other metals; future financial or operating performance and condition of the Company and its business, operations and properties, including expectations regarding liquidity, capital structure, competitive position and payment of dividends; the possibility of entering judgments outside of Canada; expectations regarding future currency exchange rates; and any other statement that may predict, forecast, indicate or imply future plans, intentions, levels of activity, results, performance or achievements.

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this AIF including, without limitation, assumptions about: continued effectiveness of the measures taken by the Company to mitigate the possible impact of COVID-19 on its workforce and operations; favourable equity and debt capital markets; the ability to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Company’s properties and assets; future prices of copper, gold and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any Mineral Reserve and Mineral Resource estimates; the geology of the MCSA Mining Complex, the NX Gold Property and the Boa Esperança Property being as described in the MCSA Mining Complex Technical Report, the NX Gold Technical Report and the Boa Esperança Technical Report, respectively; production costs; the accuracy of budgeted exploration and development costs and expenditures; the price of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to operate in a safe, efficient and effective manner; work force continuing to remain healthy in the face of prevailing epidemics, pandemics or other health risks (including COVID-19), political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favourable terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour stability; stability in financial and capital goods markets; availability of equipment; positive relations with local groups and the Company’s ability to meet its obligations under its agreements with such groups; and satisfying the terms and conditions of the Company’s current loan arrangements. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.

3

Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. Such risks include, without limitation:

· copper and gold prices are volatile and may be lower than expected;

· mining operations are risky;

· mining operations require geologic, metallurgic, engineering, title, environmental, economic and financial assessments that may be materially incorrect and thus the Company may not produce as expected;

· geotechnical, hydrological and climatic events could suspend mining operations or increase costs;

· actual production, capital and operating costs may be different than those anticipated;

· infectious diseases, such as COVID-19, may affect the Company’s business and operations;

· changes in climate conditions may affect the Company’s operations;

· currency fluctuations can result in unanticipated losses;

· the successful operation of the MCSA Mining Complex and the NX Gold Property and the successful development and operation of the Boa Esperança Property depend on the skills of the Company’s management and teams;

· operations during mining cycle peaks are more expensive;

· title to the MCSA Mining Complex, the NX Gold Property and/or the Boa Esperança Property may be disputed;

· the Company may fail to comply with the law or may fail to obtain or renew necessary permits and licenses;

· compliance with environmental regulations can be costly;

· social and environmental activism can negatively impact exploration, development and mining activities;

· the construction and start-up of new mines and projects at existing mines is subject to a number of factors and the Company may not be able to successfully complete new construction projects;

· land reclamation and mine closure requirements may be burdensome and costly;

· the mining industry is intensely competitive;

· inadequate infrastructure may constrain mining operations;

· operating cash flow may be insufficient for future needs;

· fluctuations in the market prices and availability of commodities and equipment affect the Company’s business;

· a failure to maintain satisfactory labour relations can adversely impact the Company;

· the Company’s insurance coverage may be inadequate to cover potential losses;

· it may be difficult to enforce judgments and effect service of process on directors, officers and experts named herein;

· the directors and officers may have conflicts of interest with the Company;

· future acquisitions may require significant expenditures and may result in inadequate returns;

· disclosure and internal control deficiencies may adversely affect the Company and failures of information systems or information security threats can be costly;

· the Company may be subject to costly legal proceedings;

· the Company may be subject to shareholder activism;

· the Boa Esperança Property is located in an underdeveloped rural area;

· product alternatives may reduce demand for the Company’s products;

· the Company is subject to restrictive covenants that limit its ability to operate its business;

· the Company’s Brazilian operations are subject to political and other risks associated with operating in a foreign jurisdiction;

· the Company may be negatively impacted by changes to mining laws and regulations;

· a failure to maintain relationships with the communities in which the Company operates and other stakeholders may adversely affect the Company’s business;

· corruption and fraud in Brazil relating to ownership of real property may adversely affect the Company’s business;

· the Company is exposed to the possibility that applicable taxing authorities could take actions that result in increased tax or other costs that might reduce the Company’s cash flow;

· inflation in Brazil, along with Brazilian governmental measures to combat inflation, may have a significant negative effect on the Brazilian economy and also on the Company's financial condition and results of operations;

· exchange rate instability may have a material adverse effect on the Brazilian economy;

· the Company’s operations may be impaired as a result of restrictions to the acquisition or use of rural properties by foreigner investors or Brazilian companies under foreign control;

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· recent disruptions in international and domestic capital markets may lead to reduced liquidity and credit availability for the Company;

· the Company may be responsible for corruption and anti-bribery law violations;

· investors may lose their entire investment;

· dilution from equity financing could negatively impact holders of the common shares of the Company (the “Common Shares”);

· equity securities are subject to trading and volatility risks;

· sales by existing shareholders can reduce share prices;

· the Company does not intend to pay dividends;

· public companies are subject to securities class action litigation risk;

· if securities or industry analysts do not publish research or publish inaccurate or unfavourable research about the Company’s business, the price and trading volume of the Common Shares could decline; and

· global financial conditions can reduce the price of the Common Shares.

Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking information, there may be risks, uncertainties and other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended, including, without limitation, those referred to in this AIF under the heading “Risk Factors”.

The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained herein. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.

Forward-looking information contained herein is made as of the date of this AIF and the Company disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.

Scientific and Technical Information

Except as set out below, scientific and technical information contained in this AIF relating to the MCSA mining complex, which is located within the Curaçá Valley, northeastern Bahia State, Brazil, and consists of 110 mineral exploration rights, six mining concessions and one mining concessions currently under application covering a total area of 164,377.69 ha (the “MCSA Mining Complex” or the “Vale do Curaçá Property”), is derived from, and in some instances is a direct extract from, and based on the assumptions, qualifications and procedures set out in, the report prepared in accordance with National Instrument 43-101, Standards of Disclosure for Mineral Projects (“NI 43-101”) and entitled “2020 Updated Mineral Resources and Mineral Reserves Statements of Mineração Caraíba’s Vale do Curaçá Mineral Assets, Curaçá Valley”, dated January 14, 2021 with an effective date of October 1, 2020, prepared by Porfirio Cabaleiro Rodrigues, FAIG, Bernardo Horta de Cerqueira Viana, MAIG, Paulo Roberto Bergmann, FAusIMM, Fábio Valério Câmara Xavier, MAIG and Dr. Augusto Ferreira Mendonça, RM SME all of GE21 Consultoria Mineral Ltda. (“GE21”) and Dr. Beck (Alizeibek) Nader, FAIG of BNA Mining Solutions (“BNA”) (the “MCSA Mining Complex Technical Report”). Each of Porfirio Cabaleiro Rodrigues, FAIG, Bernardo Horta de Cerqueira Viana, MAIG, Paulo Roberto Bergmann, FAusIMM, Fábio Valério Câmara Xavier, MAIG, Dr. Augusto Ferreira Mendonça, RM SME and Dr. Beck (Alizeibek) Nader, FAIG, reviewed and approved the scientific and technical information relating to the MCSA Mining Complex contained in this AIF and is a “qualified person” (“QP” or “Qualified Person”) and “independent” of the Company within the meanings of NI 43-101. In addition, information of a scientific or technical nature in respect of the MCSA Mining Complex set out in the AIF under the heading “MCSA Mining Complex – Update Information with respect to the MCSA Mining Complex”, has been reviewed and approved by Ricardo Emerson Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

Scientific and technical information contained in this AIF relating to the NX Gold Property, which is located approximately 18 km west of the town of Nova Xavantina, southeastern Mato Grosso State, Brazil, and consists of a single mining concession covering an area of 620 ha, where all gold mining and processing activities occur and eight exploration licenses covering an area of 31,096.2 ha (the “NX Gold Property” or the “NX Gold Mine”), is derived from, and in some instances is a direct extract from, and based on the assumptions, qualifications and procedures set out in, the report prepared in accordance with NI 43-101 and entitled “Mineral Resource and Mineral Reserve Estimate of the NX Gold Mine, Nova Xavantina”, dated January 8, 2021 with an effective date of September 30, 2020, prepared by Porfirio Cabaleiro Rodrigues, FAIG, Paulo Roberto Bergmann, FAusIMM, Bernardo Horta de Cerqueira Viana, MAIG and Leonardo de Moraes Soares, MAIG, all of GE21 (the “NX Gold Technical Report”). Each of Porfirio Cabaleiro Rodrigues, FAIG, Paulo Roberto Bergmann, FAusIMM, Bernardo Horta de Cerqueira Viana, MAIG and Leonardo de Moraes Soares, MAIG, reviewed and approved the scientific and technical information relating to the NX Gold Property contained in this AIF and is a “qualified person” and “independent” of the Company within the meanings of NI 43--101. In addition, information of a scientific or technical nature in respect of the NX Gold Property set out in the AIF under the heading “NX Gold Property – Update Information with respect to the NX Gold Property”, has been reviewed and approved by Ricardo Emerson Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

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Scientific and technical information contained in this AIF relating to the Boa Esperança property, which is located within southeastern Pará State, Brazil, and consists of a single mineral concession covering an area of approximately 4,034 ha (the “Boa Esperança Property”), is derived from, and in some instances is a direct extract from, and based on the assumptions, qualifications and procedures set out in, the report prepared in accordance with NI 43-101 and entitled “Feasibility Study, Technical Report for the Boa Esperança Copper Project, Pará State Brazil”, dated September 7, 2017 with an effective date of June 1, 2017, prepared by Rubens Mendonça, MAusIMM of SRK Consultores do Brasil Ltda. (“SRK” or “SRK Brazil”) as at the date of the report (now of Planminas – Projectos e Consultoria em Mineração Ltd. (“Planminas”)) and Carlos Barbosa, MAIG and Girogio di Tomi, MAusIMM, both of SRK Brazil (the “Boa Esperança Technical Report”). Each of Rubens Mendonça, MAusIMM, Carlos Barbosa, MAIG, and Girogio di Tomi, MAusIMM, reviewed and approved the scientific and technical information relating to the Boa Esperança Property contained in this AIF and is a “qualified person” and “independent” of the Company within the meanings of NI 43-101.

Reference should be made to the full text of the MCSA Mining Complex Technical Report, the NX Gold Technical Report and the Boa Esperança Technical Report, each of which is available for review on the Company’s website at www.erocopper.com and under the Company’s profile on SEDAR at www.sedar.com.

CIM Definition Standards

The Mineral Reserves and Mineral Resources for the MCSA Mining Complex (including as used in the MCSA Mining Complex Technical Report), the NX Gold Property (including as used in the NX Gold Technical Report) and the Boa Esperança Property (including as used in the Boa Esperança Technical Report) have been estimated in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards for Mineral Resources and Mineral Reserves adopted by the CIM Council on May 19, 2014 (the “CIM Standards” or “CIM Definition Standards”) and the CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines, adopted by CIM Council on November 29, 2019 (the “CIM Guidelines”), which are incorporated by reference in NI 43-101. The following definitions are reproduced from the CIM Definition Standards:

“Feasibility Study” means a comprehensive technical and economic study of the selected development option for a mineral project that includes appropriately detailed assessments of applicable Modifying Factors together with any other relevant operational factors and detailed financial analysis that are necessary to demonstrate, at the time of reporting, that extraction is reasonably justified (economically mineable). The results of the study may reasonably serve as the basis for a final decision by a proponent or financial institution to proceed with, or finance, the development of the project. The confidence level of the study will be higher than that of a Pre-Feasibility Study.

“Indicated Mineral Resource” means that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of Modifying Factors as described below in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing and is sufficient to assume geological and grade or quality continuity between points of observation. An Indicated Mineral Resource has a lower level of confidence than that applying to a Measured Mineral Resource and may only be converted to a Probable Mineral Reserve.

“Inferred Mineral Resource” means that part of a Mineral Resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade or quality continuity. An Inferred Mineral Resource has a lower level of confidence than that applying to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration.

“Measured Mineral Resource” means that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of Modifying Factors to support detailed mine planning and final evaluation of the economic viability of the deposit. Geological evidence is derived from detailed and reliable exploration, sampling and testing and is sufficient to confirm geological and grade or quality continuity between points of observation. A Measured Mineral Resource has a higher level of confidence than that applying to either an Indicated Mineral Resource or an Inferred Mineral Resource. It may be converted to a Proven Mineral Reserve or to a Probable Mineral Reserve.

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“Mineral Reserve” means the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at pre-feasibility or feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified. The reference point at which Mineral Reserves are defined, usually the point where the ore is delivered to the processing plant, must be stated. It is important that, in all situations where the reference point is different, such as for a saleable product, a clarifying statement is included to ensure that the reader is fully informed as to what is being reported. The public disclosure of a Mineral Reserve must be demonstrated by a Pre-Feasibility Study or Feasibility Study.

“Mineral Resource” means a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling.

“Pre-Feasibility Study” means a comprehensive study of a range of options for the technical and economic viability of a mineral project that has advanced to a stage where a preferred mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, is established and an effective method of mineral processing is determined. It includes a financial analysis based on reasonable assumptions on the Modifying Factors and the evaluation of any other relevant factors which are sufficient for a qualified person, acting reasonably, to determine if all or part of the Mineral Resource may be converted to a Mineral Reserve at the time of reporting. A Pre-Feasibility Study is at a lower confidence level than a Feasibility Study.

“Probable Mineral Reserve” means the economically mineable part of an Indicated, and in some circumstances, a Measured Mineral Resource. The confidence in the Modifying Factors applying to a Probable Mineral Reserve is lower than that applying to a Proven Mineral Reserve.

“Proven Mineral Reserve” means the economically mineable part of a Measured Mineral Resource. A Proven Mineral Reserve implies a high degree of confidence in the Modifying Factors.

For the purposes of the CIM Definition Standards, “Modifying Factors” are considerations used to convert Mineral Resources to Mineral Reserves. These include, but are not restricted to, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors.

Non-IFRS Measures

Financial results of the Company are prepared in accordance with the International Financial Reporting Standards (“IFRS”). The Company utilizes certain non-IFRS measures, including C1 cash cost of copper produced (per lb), C1 cash cost of gold produced (per ounce), all-in sustaining cost (“AISC”) of gold produced (per ounce), earnings before interest, taxes, depreciation and amortization (“EBITDA”), Adjusted EBITDA, Adjusted net income attributable to owners of the Company, Adjusted net income per share, net debt, working capital (deficit) and available liquidity, which are not measures recognized under IFRS. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The reader is directed to the Management’s Discussion and Analysis of the Company for the year ended December 31, 2020 (see “Non-IFRS Measures” section) for a reconciliation of these non-IFRS measures to the most directly comparable IFRS measures as contained in the Company’s audited consolidated financial statements for the year ended December 31, 2020 and 2019. Unless otherwise noted, the non-IFRS measures presented herein have been calculated on a consistent basis for the periods presented.

C1 Cash Cost of Copper Produced (per lb)

C1 cash cost of copper produced (per lb) is the sum of production costs, net of capital expenditure development costs and by-product credits, divided by the copper pounds produced. C1 cash costs reported by the Company include treatment, refining charges, offsite costs, and certain tax credits relating to sales invoiced to the Company’s Brazilian customer on sales. By-product credits are calculated based on actual precious metal sales (net of treatment costs) during the period divided by the total pounds of copper produced during the period. C1 cash cost of copper produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance, but does not have a standardized meaning and is disclosed in addition to IFRS measures.

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C1 Cash Cost of Gold produced (per ounce)

C1 cash cost of gold produced (per ounce) is the sum of production costs, net of capital expenditure development costs and silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. C1 cash cost of gold produced per ounce is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance, but does not have a standardized meaning and is disclosed in addition to IFRS measures.

AISC of gold produced (per ounce)

AISC of gold produced (per ounce) is the sum of production costs, site general and administrative costs, accretion of mine closure and rehabilitation provision, sustaining capital expenditures, sustaining leases, and royalties and production taxes, net of silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. All-in sustaining cost of gold produced per ounce is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

EBITDA and Adjusted EBITDA

EBITDA represents earnings before interest expense, income taxes, depreciation, and amortization. Adjusted EBITDA includes further adjustments for non-recurring items and/or items not indicative to the future operating performance of the Company. The Company believes EBITDA and adjusted EBITDA are appropriate supplemental measures of debt service capacity and performance of its operations.

Adjusted EBITDA is calculated by removing the following income statement items:

· Recovery of valued added taxes;

· Foreign exchange loss (gain);

· Loss on gold hedge contracts;

· Share based compensation;

· Incremental costs in response to COVID-19 pandemic; and

· Loss on debt settlement.

Adjusted net income attributable to owners of the Company and Adjusted net income per share attributable to owners of the Company

The Company uses the financial measure “Adjusted net income attributable to owners of the Company” and “Adjusted net income per share attributable to owners of the Company” (“Adjusted EPS”) to supplement information in its consolidated financial statements. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, the Company and certain investor and analysts use this information to evaluate the Company’s performance. The Company excludes the following items from net income to provide a measure which allows the Company and investors to evaluate the operating results of the underlying core operations: (i) net recovery of value added taxes; (ii) share based compensation; (iii) unrealized foreign exchange loss (gain) on USD denominated debt in Mineração Caraíba S.A. (“MCSA” or “Mineração Caraíba”); (iv) unrealized loss (gain) on foreign exchange derivative contracts, net of tax; (v) incremental costs in response to COVID-19 pandemic; (vi) unrealized loss (gain) on interest rate derivative contracts; (vii) loss on debt settlement; and (viii) unrealized loss on gold hedge contracts. The presentation of Adjusted EPS is not meant to substitute the net income (loss) per share attributable to owners of the Company presented in accordance with IFRS, but rather it should be evaluated in conjunction with such IFRS measures.

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Net Debt

Net debt is determined based on cash and cash equivalents, restricted cash and loans and borrowings as reported in the Company’s annual audited consolidated financial statements for the year ended December 31, 2020. The Company uses net debt as a measure of the Company’s ability to pay down its debt.

Working Capital (Deficit) and Available Liquidity

Working capital is determined based on current assets and current liabilities as reported in the Company’s annual audited consolidated financial statements for the year ended December 31, 2020. The Company uses working capital as a measure of the Company’s short-term financial health and operating efficiency. Available liquidity includes the Company’s working capital and undrawn revolving credit facilities in place.

For further details on Non-IFRS measures, please refer to the Company’s annual audited consolidated financial statements for the year ended December 31, 2020 and Management’s Discussion and Analysis relating thereto, a copy of which is available for review under the Company’s profile on SEDAR at www.sedar.com.

LIST OF ABBREVIATIONS

In this AIF, the following abbreviations have the meanings set forth below:

Cu	copper	Mt	megatonne
Ni	nickel	kt	kilotonne
Co	cobalt	t	metric tonne
Ag	silver	kg	kilogram
Au	gold	g	gram
Fe	iron	lb	pound
Mn	manganese	ml	millilitre
Zn	zinc	MW	megawatt
Cr	chromium	kW	kilowatt
Al	aluminium	MVA	megavolt amperes
Ca	calcium	kV	kilovolt
Mo	molybdenum	kWh	kilowatt hour
W	tungsten	Hz	hertz
Bi	bismuth	d	day
S	sulfur	h	hour
F	fluorine	s	second
Cl	chlorine	Ga	billion years
U	uranium	Ma	million years
As	arsenic	masl	metres above mean sea level
P	phosphorus	m3	cubic metre
Pb	lead	Mm3	cubic megametre
km	kilometre	mmWC	millimeter of water column
m	metre	Pa	pascal
cm	centimetre	mbar	atmospheric air pressure (bar)
mm	millimetre	°	degree
ft	foot	C	Celcius
ha	hectare	µm	micrometre
m3	cubic metre	oz	troy ounce
gpt or g/t	grams per tonne	tph	Tonnes per hour

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CORPORATE STRUCTURE

Ero Copper was incorporated under the Business Corporations Act (British Columbia) (“BCABC”) on May 16, 2016. Ero Copper’s head office is located at Suite 1050, 625 Howe Street, Vancouver, British Columbia, Canada, V6C 2T6 and its registered office is located at Suite 2600, 595 Burrard Street, Vancouver, British Columbia, Canada, V7X 1L3.

The Company directly holds approximately 99.6% of the voting shares of Mineração Caraíba and indirectly holds approximately 97.6% of the voting shares of NX Gold S.A. (“NX” or “NX Gold”) through its wholly-owned subsidiary, Ero Gold Corp. (“Ero Gold”), incorporated under the BCABC. MCSA and NX Gold were formed under the laws of Brazil. The remaining voting shares of MCSA are held by a minority group of shareholders, including former employees of MCSA. The remaining voting shares of NX Gold are held by a minority group of shareholders, including former employees of NX Gold. The Company’s current organization chart is as follows:

 

GENERAL DEVELOPMENT AND BUSINESS OF THE COMPANY

General

Ero is a Vancouver-based mining company listed on the Toronto Stock Exchange (the “TSX”) under the ticker, “ERO” and is focused on the production, exploration and development of mining projects in Brazil.

Ero’s principal asset is its approximately 99.6% ownership interest in MCSA. MCSA’s predominant activity is the production and sale of copper concentrate from the MCSA Mining Complex, located within the Curaçá Valley, northeastern Bahia State, Brazil, with gold and silver produced and sold as by-products. For further details concerning the MCSA Mining Complex, see below under the heading “MCSA Mining Complex”. In addition, MCSA holds a 100% interest in the Boa Esperança Property, a development project located within southeastern Pará State, Brazil. For further details concerning the Boa Esperança Property, see below under the heading “Boa Esperança Property”.

Ero also currently owns, indirectly through Ero Gold, an approximately 97.6% ownership interest in NX Gold. NX Gold’s predominant activity is the production and sale of gold from the NX Gold Property, located in Mato Grosso State, Brazil, with silver produced as a by-product. For further details concerning the NX Gold Property, see below under the heading “NX Gold Property”.

The MCSA Mining Complex, NX Gold Property and the Boa Esperança Property are the mineral projects material to Ero for the purposes of NI 43-101.

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Three Year History

COVID-19 Developments

· The Company continues to have no material disruption to operations, supply chains or sales channels as a result of the COVID-19 pandemic. Since the onset of COVID-19 in early 2020, the Company has continued to take extraordinary measures to mitigate the possible impact of COVID-19 on its workforce and operations. Some of these measures include: (i) eliminating all non-essential travel to and from the Company’s mining operations; (ii) routine engagement with all suppliers and active stockpiling of key consumables to protect against any supply chain disruptions; (iii) reducing physical interaction throughout the organization as much as possible by closing administrative offices and moving to a work-from-home format, increasing social distancing by limiting the number of employees travelling on provided buses between the Company’s mining communities and mines, limiting the number of employees in the cafeteria at any given time, cancelling all group meetings, implementing social-distancing for essential line-out meetings and encouraging work-from-home and video/telephone conferencing where feasible; (iv) establishing COVID-19 committees with senior leadership and local health administrators for the regions in which the Company operates; (v) purchasing thousands of COVID-19 testing kits for the Company’s operations, with the donation of a portion of these test kits, as well as other personal protective equipment, to each of the Company’s local municipalities to facilitate rapid testing throughout each community; and, (vi) implementing wellness education, health screenings, and self-isolation protocols along with enhanced sanitization throughout the Company’s operations. The Company continues to closely monitor the COVID-19 pandemic and is engaged in active operational and financial contingency planning to prudently manage the potential impact of the pandemic on its operations.

General Debenture

· In January 2018, each holder of the General Debentures¹ exercised their option to convert the outstanding principal and accrued and unpaid interest on their General Debentures into General Debenture Units¹ and concurrently exercised their underlying General Warrants¹, such that an aggregate of 5,074,311 Common Shares were issued by the Company to the foregoing holders of General Debentures, of which, an aggregate of 1,014,861 Common Shares were issued upon exercise of the underlying General Warrants.

Credit Facility

· On December 17, 2018, the Company replaced a US$50 million senior secured non-revolving credit facility entered into with The Bank of Nova Scotia (“Scotiabank”) on December 21, 2017 and approximately US$69 million in senior secured notes of MCSA held by Santander Bank, Banco ABC Brasil, Banco Fibra S.A. and Banco Pine S.A. with a new US$130 million debt financing with Scotiabank and Bank of Montreal, pursuant to an amended and restated credit agreement dated as of December 13, 2018 among the Company, as borrower, Scotia, as administrative agent, joint lead arranger and sole bookrunner, Bank of Montreal as joint lead arranger and syndication agent, and Scotia and Bank of Montreal, as lenders (the “Credit Agreement”) and comprised of a US$80 million senior secured amortizing non-revolving credit facility (the “Term Facility”) and a US$50 million senior secured revolving term credit facility (the “Revolving Credit Facility”) (collectively the “Credit Facilities).

· The Credit Agreement was subsequently amended on January 21, 2019, March 12, 2019 and June 26, 2019, with the third amendment serving to increase the Revolving Credit Facility from US$50 million to US$70 million.

· On March 31, 2020, the Company further amended the Credit Agreement to reduce its cost of borrowing by 25 to 50 basis points, depending on the consolidated leverage ratio, and to defer the scheduled principal payments for two years, commencing March 2022. The Term Facility (reduced to US$75 million) featured a 4-year term with principal payments beginning two years after closing (March 31, 2022) and with equal quarterly installments thereafter, while the Revolving Credit Facility (increased to US$75 million) was payable in a lump sum at maturity, four years from closing (March 31, 2024). The Credit Facilities bore interest on a sliding scale at a rate of LIBOR plus 2.50% to 4.25% depending on the Company’s consolidated leverage ratio at the time. Commitment fees for any undrawn portion of the Revolving Credit Facility were on a sliding scale between 0.63% to 1.06%.

¹ On January 18, 2017, the Company completed a private placement offering of an aggregate principal amount of US$2,750,000 unsecured convertible debentures bearing simple interest at an annual rate of 10%, payable on the maturity date of January 18, 2019 (the “General Debentures”). Pursuant to the subscription agreements between the Company and each subscriber of the General Debentures, the outstanding principal and accrued and unpaid interest on the General Debentures could be converted, subject to certain limitations and conditions, at the option of the holders thereof and until the maturity date of the General Debentures into units of the Company (the “General Debenture Units”) at a price of US$0.75 per General Debenture Unit (subject to adjustment pursuant to the terms of the certificates representing the General Debentures). Each General Debenture Unit was comprised of one Common Share and one-quarter of a Common Share purchase warrant (the “General Warrant”), with each one General Warrant entitling the holder thereof to acquire one Common Share at a price of US$1.20 until December 12, 2021, subject to certain acceleration rights of the Company and in accordance with the terms thereof and the terms of the Amended and Restated Warrant Indenture between the Company and Computershare Trust Company of Canada, as warrant agent, originally entered into on September 2, 2016 and amended and restated on December 12, 2016 and on September 12, 2017 (the “Warrant Indenture”).

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· The Credit Agreement was further amended on May 29, 2020 and March 16, 2021, with the sixth amendment serving to amend the Credit Facilities with a US$150 million senior secured revolving credit facility (the “2021 Revolving Credit Facility”) payable in a lump sum at maturity on March 31, 2025. The 2021 Revolving Credit Facility bears interest on a sliding scale at a rate of LIBOR plus 2.25% to 4.25% depending on the Company’s consolidated leverage ratio at the time. Commitment fees for any undrawn portion of the 2021 Revolving Credit Facility will also be on a sliding scale between 0.56% to 1.06%.

MCSA Mining Complex

· On May 17, 2018, the Company announced the discovery of the “West Limb” zone extending parallel to the existing underground workings of the Pilar Mine.

· On September 25, 2018, the Company announced the discovery of the “Vermelhos East” zone, located east and approximately 140 meters below all previously defined Mineral Resources, Mineral Reserves and planned infrastructure at the Vermelhos Mine.

· On October 11, 2018, the Company announced the issuance of the operating license for the newly constructed Vermelhos Mine, which allowed the Company to commence full production at the Vermelhos Mine.

· On June 20, 2019, the Company announced the discovery of the “Baraúna” zone at the Pilar Mine, immediately below the southern portion of the historic pit.

· On July 30, 2019, the Company announced the first regional discovery named “Siriema”, located approximately 1.5 kilometers south of the Vermelhos Mine.

· On December 3, 2019, the Company announced a new high grade mineralized chamber, or “Superpod”, below the known extent of mineralization in the Pilar Mine and within the “Deepening Extension Zone”; two new regional copper discoveries named “N1 South” and “Vermelhos North”, located within the 10 kilometer Vermelhos System trend; and, the identification of a brecciated massive sulphide zone within the Siriema deposit containing copper, nickel and cobalt as well as platinum, palladium, rhodium and gold.

· On November 30, 2020, the Company announced significant year-on-year increases in contained copper within the Proven and Probable Mineral Reserves, Measured and Indicated, and Inferred Mineral Resource categories at the MCSA Mining Complex, with each increasing by 23%, 29% and 62% respectively, inclusive of the newly defined Deepening Extension Zone at the same long-term copper price assumption of US$2.75 per pound, with an updated life-of-mine copper production totalling approximately 480,800 tonnes of copper at average C1 cash costs of US$0.97 per pound of copper produced, at a US dollar to Brazilian Real foreign exchange rate of 5. (see above under the heading “Non-IFRS Measures”).

NX Gold Mine

· On April 18, 2019, the Company announced the discovery of the Santo Antonio vein, located between and on-trend of the Bras and Buracão veins.

· On November 24, 2020, the Company announced a 78% increase in contained gold within the Probable Mineral Reserve category at the NX Gold Mine, totalling 862,134 tonnes grading 8.83 grams per tonne containing 244,650 ounces of gold, with an updated life-of-mine gold production totalling approximately 227,000 ounces of gold produced over a six-year mine life, at an average annual production rate of approximately 36,000 ounces of gold (approximately 41,400 ounces over the first four years) at life-of-mine average C1 cash costs of US$505 per ounce of gold produced and life-of-mine average AISC of US$720 per ounce (see above under the heading “Non-IFRS Measures”).

Boa Esperança Property

· As a result of an ongoing internal technical review, the Company announced on September 22, 2020 that several potential opportunities were identified to optimize and further realize the potential of the Boa Esperança Property, including, but not limited to:

· separating high-grade and low-grade copper domains within the Mineral Resource estimate to better optimize mining sequence, Mineral Reserve conversion and improve overall project economics;

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· increasing the overall size of the open pit, targeting an increase in in-pit Mineral Reserves, extension of mine life and an increase in life-of-mine copper production;

· implementing bulk ore-sorting with the goal of enhancing mine selectivity; and,

· re-designing processing plant reflecting optimization initiatives around selective mining and the implementation of ore-sorting.

The Company advised that its technical team continues to actively review these opportunities and is making headway in advancing them into actionable deliverables. Should this work continue to yield favorable results, the Company will commission an optimized feasibility study, incorporating these initiatives. The Company expects to provide additional guidance on these developments during mid-year 2021.

Corporate Promotions

· On January 4, 2021, the Company announced the promotion of Anthea Bath from Vice President, Technical Services to Chief Operating Officer and Makko DeFilippo from Vice President, Corporate Development to President. Mrs. Bath joined the Company in 2018 and has been instrumental in oversight and delivery of all of the Company’s recent technical and operational developments including, among others, the design and integration of the Deepening Extension Project (as defined below), implementation of ore-sorting and the installation of the Company’s new high intensity grinding mill (HIG Mill). Mr. DeFilippo joined the Company immediately following the acquisition of MCSA and NX Gold and has been responsible for all corporate development and investor relations initiatives since 2017, including having supported the Company through its initial public offering in late 2017.

Business of the Company

Principal Products and Operations

The Company’s principal product is copper produced and sold from the MCSA Mining Complex, with gold and silver produced and sold as by-products from the MCSA Mining Complex. Gold and, as a by-product, silver is also produced and sold from the NX Gold Property. During the financial year ended December 31, 2020, the operations of the MCSA Mining Complex processed 2,271,625 tonnes of material, producing 42,814 tonnes of copper and the operations of the NX Gold Property processed 162,642 tonnes of material, producing 36,830 ounces of gold. The following tables summarize the Company’s production for the financial years ended December 31, 2020 and 2019 from the MCSA Mining Complex and the NX Gold Property:

	Year Ended December 31, 2020			Year Ended December 31, 2019
Operating Information
Copper (MCSA Mining Complex)
Ore Processed (tonnes)		2,271,625			2,424,592
Grade (% Cu)		2.08	%		1.93	%
Cu Production (tonnes)		42,814			42,318
Cu Production (lbs)		94,387,605			93,295,598
Concentrate Grade (% Cu)		33.7	%		34.8	%
Recovery (%)		90.5	%		90.5	%
Concentrate Sales (tonnes)		127,007			122,966
Cu Sold in Concentrate (tonnes)		42,813			42,759

	Year Ended December 31, 2020			Year Ended December 31, 2019
Operating Information
Gold (NX Gold Property)
Ore milled (tonnes)		162,642			158,275
Head grade (grams per tonne Au)		7.72			6.98
Recovery (%)		91.3	%		85.7	%
Gold ounces produced (oz)		36,830			30,434
Gold Sales (oz)		35,855			29,755

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During the year ended December 31, 2020, the Company generated net operating revenue of US$324.1 million (based on the average annual exchange rate for Brazilian Real into US dollars of R$1.00 = US$0.1940). The following table summarizes the net revenue of the Company for the financial years ended December 31, 2020 and 2019. Tabular amounts are in thousands of US dollars:

	Year Ended December 31, 2020(1)  (US$000s)		Year Ended  December 31, 2019(2)  (US$000s)
Copper concentrate		260,888		246,197
Gold		63,188		38,646
Net Operating Revenues:		324,076		284,843

Notes:

⁽¹⁾ Based on the average annual exchange rate for Brazilian Real to US dollars for 2020 of R$1.00 = US$0.1940.

⁽²⁾ Based on the average annual exchange rate for Brazilian Real to US dollars for 2019 of R$1.00 = US$0.2535.

There are global copper and gold markets into which the Company can sell its copper concentrate and gold and, as a result, the Company is not dependent on a particular purchaser with regard to the sale of the copper concentrate and gold that it produces.

MCSA currently sells all of its final copper concentrate to the Paranapanema Company and various multi-national trading companies. The Paranapanema Company smelts this copper concentrate for sale at its smelter located in Dias D’Ávila, Bahia State, Brazil. Multi-national trading companies ship the final copper concentrate purchased from MCSA for sale to international markets via the Barra dos Coqueiros port located in Barra dos Coqueiros, Sergipé State, Brazil. All concentrate is transported to buyers by road using standard highway trucks, which are weighed and sampled for final assay prior to shipping.

NX Gold currently sells all of its doré bars containing gold and silver to COIMPA Industrial Ltda. The doré bars are transported to COIMPA’s facility in Manaus, State of Amazonas, Brazil by airplane via a gravel airstrip located on the NX Gold Property.

Competitive Conditions

The Company’s primary business is to produce and sell copper. The Company also produces and sells gold. Prices are determined by world markets over which the Company has no influence or control. Ero’s competitive position is primarily determined by its costs compared to other producers throughout the world and its ability to maintain its financial integrity through metal price cycles. Costs are governed to a large extent by the grade, nature and location of the Company’s Mineral Reserves and Mineral Resources as well as by input costs and the level of operating and management skill employed in the production process.

The mining industry is competitive, particularly in the acquisition of additional Mineral Reserves and Mineral Resources in all phases of operation, and the Company competes with many companies possessing similar or greater financial and technical resources. The Company also competes with other mining companies and other third parties over sourcing raw materials, equipment and supplies in connection with its production, development and exploration operations, as well as for skilled and experienced personnel and transportation capacity.

Specialized Skills and Knowledge

The nature of the Company’s business requires specialized skills, knowledge and technical expertise in the areas of geology, engineering, mine planning, mine operations, metallurgical processing, and environmental compliance. In addition to the specialized skills listed above, the Company also relies on staff members, contractors and consultants with specialized knowledge of logistics and operations in Brazil and local community relations. In order to attract and retain personnel with the specialized skills and knowledge required for the Company’s operations, the Company maintains competitive remuneration and compensation packages. To date, the Company has been able to meet its staffing requirements.

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Business Cycles

The mining business is subject to global economic cycles which affect the marketability of products derived from mining.

Employees

As at December 31, 2020, Ero and its subsidiaries employed a total of 2,457 employees (consisting of 15 employees of Ero, 4 employees of Ero Copper (US) Ltd., 2,035 employees of MCSA, 400 employees of NX Gold, and 3 employees of Mineração Boa Esperança S/A) and 1,324 contractors (consisting of 7 contractor of Ero, 1,075 contractors of MCSA and 242 contractors of NX Gold).

Foreign Operations

Ero’s material properties are the MCSA Mining Complex, the NX Gold Property and the Boa Esperança Property, each located in Brazil. Foreign operations accounted for approximately 100% of the Company’s revenue and represented approximately 97.1% of its assets as at December 31, 2020. Accordingly, the Company is entirely dependent on its foreign operations for the exploration and development of its properties and for production of copper and gold. Any changes in regulations or shifts in political attitudes in any of these jurisdictions, or other jurisdictions in which Ero has projects from time to time, are beyond the control of the Company and may adversely affect its business. Future development and operations may be affected in varying degrees by such factors as government regulations (or changes thereto) with respect to the restrictions on production, export controls, income taxes, expropriation of property, repatriation of profits, environmental legislation, land use, water use, land claims of local people, mine safety, work force health and safety in the face of prevailing epidemics, pandemics or other health risks, and receipt of necessary permits. The effect of these factors cannot be accurately predicted. See below under the heading “Risks Factors”.

The risks of the corporate structure of the Company and its subsidiaries are risks that are typical and inherent for companies that have material assets and property interests held indirectly through foreign subsidiaries and located in foreign jurisdictions. The Company’s business and operations in Brazil are exposed to various levels of political, economic and other risks and uncertainties associated with operating in a foreign jurisdiction such as a difference in laws, business cultures and practices, banking systems and internal control over financial reporting. See below under the heading “Risk Factors”.

The Company has implemented a system of corporate governance, internal controls over financial reporting and disclosure controls and procedures that apply at all levels of the Company and its subsidiaries. These systems are overseen by the board of directors of the Company (the “Board”) and implemented by the Company’s senior management. The relevant features of these systems are set out below.

Control over and Communication with Foreign Subsidiaries

The Company controls its foreign subsidiaries by virtue of corporate oversight and by its ownership interest in such entities (see above under the heading “Corporate Structure”). The Company’s management has the (i) power to appoint and dismiss, at any time, any and all of the foreign subsidiaries’ officers and directors, (ii) power to instruct the foreign subsidiaries’ officers to pursue business activities in accordance with the Company’s wishes, and (iii) legal right, as a shareholder, to require the officers of each such foreign subsidiary to comply with their fiduciary obligations. As a result, management of the Company can effectively align its business objectives with those of the foreign subsidiaries and implement such objectives at the subsidiary level.

The Company maintains open communication with each of its operations in Brazil through several senior officers who are proficient in Brazilian Portuguese. In addition, all management team members in Brazil are fluent in Brazilian Portuguese and fluent (or proficient) in English. The primary language used in management and Board meetings is English and material documents relating to the Company and its operations that are provided to the Board are in English. If necessary, management of the Company and the Board have access to independent translators to overcome any language differences. The Company does not currently have a formal communication plan or policy in place and has not to date, experienced any communication-related issues.

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Board and Management Expertise

Each of the Company’s directors and senior officers have experience in Brazil, being the jurisdiction in which the Company operates. In addition, the Board, through its corporate governance practices, receives monthly management and technical updates and progress reports in connection with the foreign subsidiaries, and at each quarterly Board meeting, the directors meet with management on topics including short, medium and long-term corporate objectives, strategic risk and mitigation strategies and strategic planning, and in so doing, maintains effective oversight of the Company’s business and operations. Moreover, Board members and senior officers have access to corporate director education programs which offer courses on topics such as strategic direction and risks, financial essentials, audit committee effectiveness, risks and disclosure, human resource and compensation committee performance and enterprise risk oversight.

Prior to the onset of COVID-19 in early 2020, senior officers and Board members visited the Company’s operations in Brazil on a regular basis to ensure effective control and management of the Company’s foreign operations. Certain senior officers of Ero visited the Company’s operations quarterly, or more frequently if circumstances require, on a rotating basis. Each of the Company’s directors, other than Dr. Sally Eyre and Ms. Chantal Gosselin who were appointed to the Board on August 12, 2019, visited the MCSA Mining Complex at least one time in 2018 and 2019. Such directors also visited the NX Gold Property at least one time in 2019. Since their appointment to the Board, Dr. Eyre visited the MCSA Mining Complex and the NX Gold Property one time in 2019 and Ms. Gosselin visited the MCSA Mining Complex one time in 2019. During these visits they met local employees, businesspersons and, in the case of senior officers, government official, such interactions enhancing the visiting directors’ and officers’ knowledge of local culture and business practices.

Given the COVID-19 travel restrictions in Canada, the United States of American and Brazil, as well as the extensive measures taken by the Company to mitigate the possible impact of COVID-19 on its workforce and operations, no director, other than Messrs. Dunn and Strang, visited the Company’s operations in 2020. In addition to Messrs. Dunn and Strang, several senior officers of Ero visited the Company’s operations at least one time in 2020, or more frequently if circumstances required. To ensure effective control and management of the Company’s foreign operations during the pandemic, all directors are provided with monthly reports regarding the Company’s business and operations, and virtual meetings are held amongst the Board and management quarterly, or more frequently if circumstances require, and held amongst management and the operations team in Brazil weekly, or more frequently if circumstances require.

Subject to prevailing COVID-19 conditions and travel restrictions, each of the Company’s directors and senior officers intend to visit the MCSA Mining Complex and the NX Gold Property during 2021.

Internal Control Over Financial Reporting and Funds

The Company maintains internal control over financial reporting with respect to its operations in Brazil by taking various measures. Several of the Company’s senior officers have the relevant language proficiency (Brazilian Portuguese) and each senior officer has local cultural understanding and relevant work experience in Brazil which facilitates better understanding and oversight of the Company’s operations in the context of internal controls over financial reporting.

Pursuant to the requirements of National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings, the Company assesses the design of its internal controls over financial reporting on an annual basis. Furthermore, key controls for the accounts in scope are tested across the Company on an annual basis and the working papers of these tests performed at all the locations are reviewed at the head office level. Please refer to the Company’s audited consolidated financial statements for the year ended December 31, 2020, a copy of which is available for review under the Company’s profile on SEDAR at www.sedar.com.

Differences in banking systems and controls between Canada and Brazil are addressed by having stringent controls over cash; especially over access to cash, cash disbursements, appropriate authorization levels, performing and reviewing bank reconciliations and the segregation of duties.

The Company ensures the flow of funds between Canada and Brazil functions as intended by:

· appointing common officers of the Company and MCSA/NX Gold;

· involving the Company’s Chief Financial Officer, located in Vancouver, in hiring key finance personnel in Brazil; and

· closely monitoring the finance departments in Brazil by regular personal visits by the Chief Financial Officer, the Vice President, Finance and other key executives to Brazil.

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Records

All of the minute books and corporate records and documents of the foreign subsidiaries are filed at the relevant entity’s headquarters, and with the relevant governmental or regulatory body in Brazil. The custodians of such documents report directly to the Company’s head office and senior management team to ensure continued oversight.

Environmental Protection

The Company’s exploration, development and mining activities are subject to various levels of federal, state and local laws and regulations relating to the protection of the environment, including requirements for closure and reclamation of mining properties. Specific statutory and regulatory requirements and standards must be met throughout the exploration, development and mining stage of a property regarding air quality, water quality, fisheries, wildlife and forestry management and protection, tailing facility management, solid and hazardous waste management and disposal, noise, land use and reclamation. Details and qualification of the Company’s mine closure and restoration obligations are set out in Note 11 of the Company’s audited consolidated financial statements for the year ended December 31, 2020, a copy of which is available for review under the Company’s profile on SEDAR at www.sedar.com.

The financial and operating effect of environmental protection requirements on the capital expenditures and earnings of each mineral property are not significantly different than those of similar sized mines and therefore do not and will not impact the Company’s competitive position in the current or future financial years.

Social and Environmental Policies

The Company places great emphasis on providing a safe and secure working environment for all its employees, suppliers, contractors and consultants, and recognizes the importance of operating in a sustainable manner. The Board has adopted a Code of Business Conduct and Ethics of the Company, which sets out the standards which guide the conduct of the Company’s business and the behavior of its directors, officers, employees and consultants. All new employees must read, and acknowledge that they will abide by, the code when hired. The code, among other things, sets out standards in areas relating to the Company’s commitment to health and safety in its business operations and the identification, elimination or control of workplace hazards; promotion and provision of a work environment in which individuals are treated with respect, provided with equal opportunity and is free of all forms of discrimination and abusive and harassing conduct; and ethical business conduct and legal compliance. The Board has also adopted a Supplier Code of Conduct, which sets out the core values that each supplier of the Company is expected to respect and abide by at all times, including among other things: (i) adhering to all applicable laws and regulations of the countries and regions where they conduct business, including laws protective of human rights, worker health and safety, and the environment; (ii) conducting their business ethically and not engaging, directly or indirectly, in unethical or illegal practices; (iii) adhering to the Company’s Anti-Corruption Policy (discussed below), and with all applicable anti-corruption laws, including the Corruption of Foreign Public Officials Act (Canada); (iv) adhering to the Company’s Global Human Rights Policy and Corporate Social Responsibility Policy (discussed below) in all of their dealings with workers, community members and others affected by their activities while providing services to the Company; and (v) adhering to the Company’s Environmental Policy (discussed below), Health and Safety Policy (discussed below) and all other site-specific environmental, health and safety practices and procedures that apply to their activities.

In addition, the Board has adopted a Global Human Rights Policy, as the Company is committed to fostering a positive human rights culture within the organization and striving to prevent or mitigate any adverse impact of the Company’s activities on its employees, communities and external stakeholders. The policy applies to each director, officer, employee, and third party, such as contractor, consultant, supplier, vendor, security provider and business partner of Ero Copper and its subsidiaries. The policy, among other things, outlines the following commitments of Ero Copper: (i) adhering to all applicable human rights laws and regulations of the countries and regions where the Company conducts its business; (ii) providing a safe and healthy workplace that is free from violence, harassment, intimidation, and discrimination on the basis of race, colour, creed, age, gender (including gender identity and expression), language, national or social origin, family or marital status, sexual orientation, disability, religious, political or other opinion, union affiliation or other basis prohibited by law; (iii) respecting workers’ rights, including freedom of peaceful assembly and association, and engagement in collective bargaining consistent with the relevant conventions on that subject; (iv) seeking to avoid or minimize causing or contributing to adverse human rights impacts through its activities, addressing such impacts if they occur, and engaging in processes to mitigate those impacts; (v) maintaining operational-level grievance mechanisms to report and address any actual or potential adverse impacts or risks on human rights; (vi) engaging in meaningful dialogue, promoting participation and fostering inclusion with potentially affected groups and other stakeholders, including women, children and minority groups; (vii) obtaining land access rights and conducting land acquisitions in an appropriate and timely manner to ensure that physical and economic displacement impacts on affected people, if any, are avoided or minimized where possible, and appropriately mitigated when they occur in a manner that fosters trust and mutual respect; (viii) acting with transparency and avoiding knowingly being complicit in activities that cause, or are likely to cause, adverse impacts or risks to human rights; (ix) not engaging in the use of forced, compulsory or child labour; and (x) respecting and not interfering with anyone who acts to promote or protect human rights through peaceful and lawful means.

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The Board has also adopted a Whistleblowing Policy for individuals to report complaints and concerns regarding, among other things, accounting, internal accounting controls and auditing matters. As well, the Company has an Anti-Corruption Policy which requires that directors, officers, employees and consultants of the Company conduct business in a manner that does not contravene local and international anti-bribery and anti-corruption laws that apply to the Company, including the Criminal Code (Canada) and Corruption of Foreign Public Officials Act (Canada). The Lead Director and the Audit Committee of the Company, or a designated member thereof, are responsible for monitoring compliance with these policies and investigating any reported violations, although employees may approach the Company’s external legal counsel if preferred for concerns under the Anti-Corruption Policy.

The Board has also established an Environmental, Health, Safety and Sustainability Committee to assist it in fulfilling its oversight responsibilities in respect of development, implementation and monitoring of the Company’s health, safety, environment and sustainability policies. In particular, the Environmental, Health, Safety and Sustainability Committee is responsible for, among other things: (i) providing oversight with respect to management’s periodic review, evaluation and development, where necessary, of policies, practices and standards of performance that meet or exceed legal and regulatory requirements and industry standards in the areas of health, safety, sustainability and environmental stewardship; (ii) periodically reviewing, with management, the risks and opportunities associated with health and safety; environmental matters including water, waste, biodiversity and air quality management as well as emissions and climate change; corporate social responsibility matters including engagement with host communities; and related matters, and reviewing management’s recommendations regarding the adoption of appropriate programs and procedures to address such risk and opportunities or, if required, make such recommendations; (iii) periodically reviewing, with management, the Company’s loss prevention policies, tailings facility management, and emergency response plans and recovery programs; (iv) periodically reviewing, with management, the Company’s strategies with respect to health, safety, sustainability and the environment; (v) periodically reviewing and monitoring the Company’s policies and, if necessary, procedures and practices relating to the reporting of health, safety and environmental incidents with respect to the Company’s employees, suppliers, contractors, consultants, facilities and operations, in compliance with regulatory laws; (vi) reviewing with management and legal counsel, the Company’s current or pending legal actions by or against the Company, related to environmental, health and safety issues; (vii) receiving and reviewing reports regarding significant health, safety and environmental incidents, emerging issues, summaries of inspections or audits, and corrective actions taken in response to deficiencies; (viii) monitoring as well as reviewing reports prepared by the Company with respect to health, safety, sustainability and the environment, including emerging potential physical and market-related risks to the Company’s business associated with climate change, and review the Company’s public disclosure documents with respect to such matters; (ix) periodically reviewing steps taken by management to ensure that employees receive the training necessary to meet health, safety, sustainability and environmental standards set by law and policies set by the Company; (x) directing management to regularly monitor and report on the Company’s health, safety, environmental and sustainability performance; (xi) facilitating information sharing with other Board committees to address matters of mutual interest or concern regarding health, safety, environmental and sustainability issues; and (xii) reporting regularly to the Board on its activities. The Environmental, Health, Safety and Sustainability Committee also assists the Board in its oversight of the Company’s Corporate Social Responsibility Policy, Health and Safety Policy and Environmental Policy, which apply to each director, officer, employee and any third party, such as a contractor, consultant and supplier, representing or providing services for or on behalf of Ero Copper or any of its subsidiaries.

The Corporate Social Responsibility Policy outlines the Company’s commitment to fostering sustainable development by operating all of its mines and developing new projects in a manner that is respectful of local communities. The policy, among other things, outlines the following commitments of Ero Copper: (i) identifying and engaging its communities of interest in timely, inclusive, ethical, transparent and culturally respectful dialogue prior to undertaking significant activities and throughout the life of an operation or project; (ii) continuing to maintain formal grievance mechanisms as part of its overall community engagement process; (iii) monitoring, continuously improving, and reporting on the performance and effectiveness of its activities related to corporate social responsibility; (iv) implementing meaningful and effective strategies for community engagement; (v) promoting a safe environment for local communities; (vi) respecting the social, economic and cultural rights of local people; (vii) assisting local and regional development in areas where its operations and projects are located through training and employment; and (viii) adhering to all applicable laws and regulations of the countries and regions where Ero Copper conducts its business.

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The Health and Safety Policy outlines the Company’s commitment to protecting the health and safety of its employees and third parties, such as contractors, consultants, and suppliers, at its mining operations and development projects. The policy, among other things, outlines the following commitments of Ero Copper: (i) promoting health and safety on and off the job; (ii) providing employees with the training and tools to work safely and expecting third parties, such as contractors, consultants and suppliers, to do the same; (iii) educating its employees to the potential hazards of their job and expecting third parties, such as contractors, consultants and suppliers, to do the same; (iv) requiring that employees perform their duties in the safest manner possible and expecting third parties, such as contractors, consultants and suppliers, to do the same; (v) adhering to all applicable health and safety laws and regulations of the countries and regions where Ero Copper conducts its business; (vi) striving for continuous improvement in all aspects of health and safety; (vii) providing a safe work environment by minimizing or, where possible, eliminating hazards, adhering to proven health and safety practices, implementing accident prevention programs, and ensuring that first aid and emergency response plans are in place at each operation; (viii) ensuring accident reporting is completed in a diligent manner and where necessary taking immediate steps to mitigate the potential for reoccurrence; (ix) developing and operating health and safety management programs at its operations that meet or exceed those in use by its peer companies; (x) promoting employee participation in the development of health and safety standards and management programs such that its employees take ownership of their health and safety responsibilities; (xi) conducting regular reviews of health and safety management programs and report findings to management and the Board; and (xii) conducting annual audits of all health and safety management programs and, with its capabilities, remediating all identified health and safety findings promptly.

The Environmental Policy outlines the Company’s commitment to wise environmental stewardship, including operating its mines and developing new projects in an environmentally sustainable and responsible manner. The policy, among other things, outlines the following commitments of Ero Copper: (i) adhering to all applicable environmental laws, regulations and other environmental obligations in the countries and regions in which it operates, and to follow additional environmental standards and practices that are voluntarily adopted by the Company; (ii) protecting the environment by applying proven management practices to minimize releases of greenhouse gas emissions and other pollutants to the air, land or water, facilitate the appropriate treatment and disposal of waste and mitigate environmental impacts; (iii) mitigating impacts to biodiversity through research, partnerships and land management processes; (iv) promoting the efficient use of energy, water and other natural resources through recovery, recycling and reuse; (v) striving to ensure the safe and responsible management and storage of tailings in accordance with applicable laws and regulations during the life of each operation and after the closure thereof; (vi) performing progressive reclamation activities during the life of each operation, and regularly updating closure plans to take into consideration the interests of host communities; (vii) communicating this commitment to excellence in environmental performance and climate protection with its subsidiaries, employees, suppliers, contractors, and other agents and the communities in which it operates; (viii) allocating the necessary resources to meet its reclamation and environmental obligations; (ix) educating employees regarding environmental matters, including climate change, water conservation and energy efficiency and awareness, and promoting employee participation in minimizing environmental impacts; (x) striving to ensure all environmental incidents are reported, investigated and remediated; (xi) seeking opportunities to improve its environmental performance through adherence to these principles; (xii) regularly reviewing its environmental management system to ensure that it remains appropriate and that its environmental objectives and targets are being addressed; and (xiii) communicating openly and transparently with internal and external interested parties to develop a mutual understanding of environmental issues, needs and expectations, including regularly report its water use, energy use and greenhouse gas emissions as well as climate-related risks and opportunities to stakeholders.

A copy of the above-mentioned codes and polices can be found on the Company’s website at www.erocopper.com.

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MCSA MINING COMPLEX

The scientific and technical information in this section relating to the MCSA Mining Complex, other than the scientific and technical information under the heading “MCSA Mining Complex – Updated Information with respect to the MCSA Mining Complex”, is a direct extract of the Executive Summary section contained in the MCSA Mining Complex Technical Report dated January 14, 2021 with an effective date of October 1, 2020, which has been conformed to be consistent with the formatting and other defined terms within this AIF. The entire MCSA Mining Complex Technical Report, a copy of which is available for review under the Company’s profile on SEDAR at www.sedar.com, is incorporated by reference into this AIF and should be consulted for details beyond those incorporated herein.

The scientific or technical information set out in this AIF under the heading “MCSA Mining Complex - Updated Information with respect to the MCSA Mining Complex”, has been reviewed and approved by Ricardo Emerson Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

Executive Summary

Ero Copper is a Vancouver-based publicly listed copper mining company that trades on the Toronto Stock Exchange under the ticker “ERO” and exists under the BCABC. Ero Copper’s principal asset is a 99.6% interest in MCSA, a Brazilian mining company operating in the Curaçá Valley, northeastern Bahia State, Brazil. The regional MCSA operations include fully integrated processing operations and, currently, two active producing mining locations within the Curaçá Valley. The active operations include the Caraíba Complex (comprised of the underground Pilar Mine (“Pilar UG Mine”), integrated Caraíba Mill and the inactive solvent extraction electrowinning plant (“SX/EW Plant”)), and the underground Vermelhos Mine (“Vermelhos UG Mine”). The past producing operations include the open pit mines of R22 (“R22 Mine”), Surubim (“Surubim OP Mine”) as well as the historic mines of Angicos (“Angicos Mine”) and Suçuarana (“Suçuarana Mine”). Collectively the active and past-producing mines comprise the “MCSA Mining Complex”. Additionally, future operations are forecast to occur later in the production plan within the northern part of the Curaçá Valley including: the adjacent Vermelhos West (N8) and Vermelhos East (N9) open pits (collectively the “N8/N9 OP Mine”), the Siriema open pit mine (“Siriema OP Mine”), collectively with the active Vermelhos UG Mine comprise the Mineral Reserves within the “Vermelhos District”. In the central part of the Curaçá Valley, future operations include: the adjacent Surubim and C-12 underground mines (the “Surubim UG Mine” and “C-12 UG Mine”) and the C-12 open pit (“C-12 OP Mine”), collectively with the Surubim OP Mine, which is expected to re-start operations during 2021, comprise the stated Mineral Reserves of the “Surubim District”. In the southern part of the Curaçá Valley, the past producing Suçuarana open pit (“Suçuarana OP Mine”) and the R22W open pit (“R22W OP Mine”), collectively with the active Pilar UG Mine comprise the stated Mineral Reserves of the “Pilar District”. The Pilar District is located approximately 385km north-northwest of Salvador and 90km southeast of Petrolina, in the State of Bahia, Brazil. The center of the Surubim District is located approximately 33km north of the Caraíba Mine at the Surubim OP Mine, while the center of the Vermelhos District and the Vermelhos UG Mine is located another 31km north-northwest of the Surubim OP Mine. In aggregate, mining and development activities occur over approximately 100km in strike length across the Curaçá Valley.

Within the MCSA Mining Complex life-of-mine (“LOM”) production plan, the Company has included production, capital and operating cost projections based upon the Mineral Reserves derived from the Measured and Indicated Mineral Resources from within the Deepening Extension Zone of the Pilar Mine (the “Deepening Extension Project”).

In addition, the Company has included an independent preliminary economic assessment based upon the Inferred Mineral Resources within the Deepening Extension Zone of the Pilar Mine (the “Deepening Inferred Project”), that shows the expected synergies associated with utilizing the infrastructure that will be built in support of the Deepening Extension Project, to illustrate the potential of the Deepening Extension Zone. Additional information on the Deepening Inferred Project can be found in Chapter 24 of the MCSA Mining Complex Technical Report. The Deepening Inferred Project is preliminary in nature and based on the Inferred Mineral Resources of the Deepening Extension Zone which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that the Deepening Inferred Project will be realized. Mineral Resources that are not Mineral Reserves do not have a demonstrated economic viability. The Company has commenced a program to continue infill drilling of the Inferred resource to further upgrade this material; however, until this work is completed and the Inferred resources have been upgraded to reserves, there is no certainty this material will be converted into Mineral Reserves.

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The MCSA Mining Complex has an extensive operating history in the region. Open pit and processing operations started in 1979, while underground mining operations commenced in 1986. MCSA owns a 100% interest in the MCSA Mining Complex including the abovementioned mines, integrated processing facilities and all supporting infrastructure. The Pilar UG Mine currently produces a nominal 4,000 tonnes per day (“t/d”), or approximately 1.4 million tonnes per annum from underground operations that, combined with the nominal 3,000 to 5,000 t/d, or approximately 1.0 million tonnes per annum currently mined from satellite mining operations within the MCSA Mining Complex, including the Vermelhos UG Mine, serves as feed for the Caraíba Mill. The Caraíba Mill is currently producing high quality, low impurity copper concentrate grading approximately 35% copper. The concentrate typically contains minor amounts of precious metals. Historical average grades of precious metals in concentrate are approximately 2 gpt gold and 43 gpt silver in concentrate.

The purpose of the MCSA Mining Complex Technical Report is to set out and to provide background and supporting information on the Mineral Resources and Mineral Reserves for the MCSA Mining Complex. The MCSA Mining Complex Technical Report was prepared by GE21 and BNA on behalf of Ero Copper. The MCSA Mining Complex Technical Report and estimates herein have been prepared following the guidelines of NI 43-101 and Form 43-101F1 – Technical Report.

The effective date of the MCSA Mining Complex Technical Report is October 1, 2020 (in this section of the AIF, the “Effective Date”). The issue date of the MCSA Mining Complex Technical Report is January 14, 2021.

1.1       Property Description and Ownership

The MCSA Mining Complex is located in northeastern Bahia State, Brazil, about 385 km north-northwest of the capital city of Salvador. The center of the MCSA Mining Complex is located at 9º 52’ South, 39º 52’ West. As of the Effective Date, MCSA holds, has applications in process, or has negotiated agreements with third-parties for a north-trending set of 110 mineral exploration rights, six mining concessions and one additional mining concession is currently under application. The property, including mining and permits under application covers a total area of 164,377.69 ha. The exploration rights held or with applications in process cover an area of 160,118.81 ha and consist of areas up for renewal as well as negotiated with third-parties under normal course of business. MCSA holds 100% legal and beneficial ownership of exploration rights for a period varying up to three years with three-year extensions provided annual reporting requirements are performed on the property. Within the exploration rights, MCSA’s interests include the right to access the property, to engage in exploration, development, processing, and construction activities in support of mineral exploration and development. Where applicable, compensation is provided to the holder of surface rights for occupation or loss caused by the work.

Mining and development activities are contained within six mining concessions covering 3,299.61 ha. In addition, MCSA has one application for mining covering 966.27 ha. Within the mining concessions, MCSA holds 100% legal and beneficial ownership. There are no time constraints provisioned with the mining concessions; however, operating permits and licenses are extended and renewed in normal course of business according to the nature of each permit and requirements therein.

Infrastructure maps of the MCSA Mining Complex and the broader Curaçá Valley are shown in Appendix D to the MCSA Mining Complex Technical Report.

1.2        Geology and Mineralization

The Curaçá Valley’s mafic-ultramafic complex is located within the Curaçá high-grade metamorphic gneissic terrain - part of the Salvador-Curaçá orogen, a northern extension of the Atlantic Coast Granulite Belt in the São Francisco Craton. The mining and development projects located within the MCSA Mining Complex lie within a Trans-Amazonian age belt bordered on the west by volcano-sedimentary rocks of the Jacobina Group and on the east by the Itiúba intrusive syenite rocks.

Known copper deposits are hosted within the Rio Curaçá and Tanque Novo sequences, differentiated by metamorphic facies. The two sequences are located across the base of the MCSA Mining Complex and include the mafic-ultramafic rocks as well as granite, granodiorite and syenite. Pyroxenite has been described within the mafic-ultramafic lenses at the Caraíba Mine, R22W Mine, Angicos Mine, Suçuarana Mine, Surubim OP Mine and the Vermelhos UG Mine.

The Cu-rich deposits are hosted by irregular-shaped intrusive bodies of pyroxenite (hypersthenite) and minor gabbro-norite that have been intruded into granulite facies gneiss and migmatite at the northern margin of the São Francisco Craton. The intrusions have been interpreted as either deformed sill-like bodies or irregular shaped intrusions into an anastomosing ductile shear zone. Mineralized textures include interstitial, net-textured, stringer and sulphide-rich matrix breccias. There is additional evidence throughout the Curaçá Valley of sulphide zonation, characterized as pyrrhotite +/- pentlandite zoning to pyrrhotite +/- pentlandite plus chalcopyrite and finally to chalcopyrite plus bornite. High-grade mineralization is often closely associated with phlogopite enrichment. Additional work is underway to evaluate recent observed occurrences of nickel and platinum group elements throughout the Curaçá Valley.

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1.3       Exploration Status

Once open pit operations began in 1979, limited exploration work was performed regionally outside of the main Caraíba Mine area. Where it did occur, such exploration work focused primarily on exploration permit renewal requirements. The Caraíba Mine was privatized in 1994 and further exploration work was limited until the formation of the Codelco Joint Venture in 2004 (the “Codelco JV”) which existed until 2008. Under the Codelco JV, work was conducted on several prospects outside of the Caraíba Mine area including an airborne Versatile Time Domain Electromagnetic survey over the Vermelhos District. Ground Moving-loop Electromagnetic and Bore-hole Electromagnetic (“BHEM”) test surveys were also conducted.

Near-surface copper mineralization in the Curaçá Valley has historically been well-defined by geochemical sampling methods. Mineralized mafic-ultramafic intrusions show anomalous copper, nickel, cobalt, gold and silver. Several soil geochemical surveys have been conducted regionally throughout the Curaçá Valley. Leveling efforts undertaken by Ero Copper in 2018 to normalize multiple surveys into a central database have been successful and the dataset, supplemented with ongoing soil geochemistry campaigns, continues to be used to define areas of exploration potential.

Historic regional exploration activities also included geophysical surveys performed locally on specific targets. These include ground magnetic, gravity and induced polarization (“IP”) surveys. Regional airborne geophysical surveys consist of a historic magnetic and radiometric survey flown by the Brazil National Department of Mineral Production (“DNPM” which was replaced in 2018 by the new federal mining agency of Brazil, the Agência Nacional de Mineração (“ANM”)). Based on known deposits, mineralized mafic-ultramafic intrusions respond well to gravity, IP and electromagnetic (“EM”) surveys including the use of BHEM.

Since the acquisition of MCSA in late 2016, Ero Copper has worked with MCSA to compile, organize, validate, analyze and interpret the various historical data sets. A list of prioritized exploration targets using district-wide dataset compilation and validation has been created for the first time for the MCSA exploration permits throughout the Curaçá Valley. Priority targets occur in three main areas or “Districts”: the Pilar District, the Vermelhos District and the Surubim District.

In 2018, Ero Copper advanced its exploration efforts and completed approximately 158,000m of drilling with the objective of upgrading and increasing Mineral Resources and reserves as well as commenced testing new regional targets in the Curaçá Valley. Simultaneously, Ero Copper continued development and production from the Pilar UG Mine, Surubim OP Mine (expected to re-start operations in 2021) and commenced production from the Vermelhos UG Mine. In support of its regional exploration efforts, Ero Copper commissioned and completed a ~24,000 line-km airborne electromagnetic and gravity geophysical survey focused on high-grade discoveries throughout the Curaçá Valley. In 2019, Ero Copper significantly increased drilling activities and completed approximately 235,000m of drilling, continuing to focus on upgrading and increasing Mineral Resources and reserves as well as testing of new regional targets in the Curaçá Valley.

Ero Copper significantly increased drilling activities through 2020, whereas at the date of the MCSA Mining Complex Technical Report, a total of 27 drill rigs are on the property. Over 220,000m of drilling is planned for 2020 throughout the Curaçá Valley. Drilling continues to focus on in-mine extensions, near-mine discoveries, including further exploration of the Deepening Extension Zone, new near-mine discoveries and new regional discoveries within the three main mineralized Districts of the Curaçá Valley.

1.4       Development and Operations

Mining operations within the Curaçá Valley are currently comprised of two core operations: the Pilar UG Mine and the Vermelhos UG Mine. Production from these two mines currently serves as feed for the Caraíba Mill. Ongoing development and exploration activities include: the continued advancement of the primary ramp and associated infrastructure of the Pilar and Vermelhos underground mines in support of mine life extensions, including the delivery of the Deepening Extension Project, as well as associated plant and site refurbishments undertaken in support of the LOM plan and during the normal course of business.

In support of the current Mineral Resource and Mineral Reserve estimate, a total of 857,589m of diamond core drilling was incorporated into the geological model.

1.5       Data Verification and QA/QC

GE21 has visited MCSA’s operations on a regular basis since 2017 to assess MCSA’s exploration data, including overall procedures for drilling, logging, sample handling, control, storage, quality-assurance quality-control (“QA/QC”), database preparation and density measures.

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Sample Preparation, Analyses and Security

MCSA’s sampling procedures are well-defined, in line with the industry best practices. Physical preparation and chemical analysis of core samples are performed by MCSA’s on-site laboratory, following well-defined procedures. GE21 evaluated the sample collection, analysis and security methods, as well as the procedures used by MCSA’s internal laboratory.

Quality Assurance and Quality Control

Standard QA/QC procedures implemented by MCSA were found to be complete and aligned with industry best practices. A selection of historic information (collected before the current QA/QC procedures were implemented in 2007) was verified by the authors of the MCSA Mining Complex Technical Report via a post-mortem validation process. Data from historic drill holes that could not be validated were omitted from the Mineral Resource estimate.

The QA/QC process implemented includes the analysis of blanks, standards, pulverized duplicates, coarse tailings duplicates, field duplicates and a second third-party laboratory check-assay. Check-assay analysis of copper grades by a second third-party laboratory was implemented as part of MCSA’s QA/QC program in 2020. As part of the validation process, GE21 verified 377 holes totaling 96,417m of drilling. Density information has been obtained for over 40 years, and measurement processes are aligned with standard industry practice. Based upon the validation process, GE21 concluded that MCSA’s exploration data is adequate for the current Mineral Resource and Mineral Reserve estimate.

1.6       Mineral Resource and Mineral Reserve Estimates

Mineral Resource and Mineral Reserve estimates for the MCSA Mining Complex were classified and prepared in accordance with CIM Standards and CIM Guidelines by Sr. Porfirio Cabaleiro Rodriguez, MAIG, with contributions from others at GE21. All are independent Qualified Persons as such term is defined under NI 43-101.

The authors of the MCSA Mining Complex Technical Report validated the current Mineral Resource estimate that was prepared by MCSA under the supervision of GE21, by preparing a separate 3D model using Leapfrog Geo software, to define and interpolate geological domains. The variograms prepared by MCSA under the supervision of GE21 were reproduced and applied through an independent grade estimate, using Leapfrog Edge software. Resource classification was determined based upon the number of “passes” and results were used to compare the tonnage, grade and contained copper content within each geological domain. Differences of less than 5% of the contained copper content was considered acceptable within each domain. The validation performed did not indicate any material differences between the two estimates.

Mineral Reserves were classified according to the CIM Standards and the CIM Guidelines by Dr. Beck (Alizeibek) Nader, FAIG, of BNA, an independent Qualified Person as such term is defined under NI 43-101.

1.6.1       Mineral Resources

Cut-off grades of 0.51% copper as well as a marginal cut-off grade of 0.32% copper, were used for underground Mineral Resources and 0.21% copper for open pit Mineral Resources. Mineral Resources were estimated using ordinary kriging within 5m by 5m by 5m block sizes. Mineral Resources are shown inclusive of Mineral Reserves. Underground Mineral Resource effective date varies by deposit, with an effective date of August 8, 2020 except for P1P2 (July 24, 2020), R75 (July 9, 2019) and Suçuarana (July 3, 2020) within the Pilar District; Vermelhos Mine (July 29, 2020), Siriema and N8 (July 4, 2020), N9 (July 9, 2019) within the Vermelhos District; and Surubim District effective date of July 9, 2019 except for Terra do Sal (July 3, 2020). Open pit Mineral Resource effective date varies by deposit, with an effective date of August 8, 2020, except for Suçuarana (July 3, 2020), R22W and R75 (July 9, 2019) within the Pilar District; Siriema and N8 (July 4, 2020), N9 and Vermelhos North (July 9, 2019) within the Vermelhos District; and an effective date of July 9, 2019 for the Surubim District except Terra do Sal (July 3, 2020).

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Table 1-1: Underground Mineral Resources

		Tonnage		Grade		Cu Contained
Underground Mine / Deposit	Classification	(000 tonnes)		(Cu %)		(000 tonnes)
	Measured		-		-		-
Deepening Extension Zone, Pilar Mine	Indicated		7,527		1.86		140.0
(Pilar Mine below Level -965)	Measured & Indicated		7,527		1.86		140.0
	Inferred		4,476		2.12		94.8
	Measured		26,829		1.50		401.3
	Indicated		13,991		1.11		154.8
Pilar Mine Ex-Deepening Extension Zone (Pilar Mine above Level -965)	Measured & Indicated		40,820		1.36		556.0
	Inferred		12,790		0.87		111.6
	Measured		816		0.72		5.9
	Indicated		1,045		0.89		9.3
Pilar District, Other Underground (R75, Sucuarana)	Measured & Indicated		1,861		0.82		15.2
	Inferred		742		0.60		4.5
	Measured		27,645		1.47		407.2
	Indicated		22,563		1.35		304.2
Pilar District Underground Total	Measured & Indicated		50,208		1.42		711.3
	Inferred		18,008		1.17		210.9
	Measured		3,389		2.80		94.9
	Indicated		4,514		1.19		53.7
Vermelhos Mine	Measured & Indicated		7,903		1.88		148.6
	Inferred		4,128		0.86		35.5
	Measured		1,465		0.79		11.6
	Indicated		4,153		0.80		33.4
Vermelhos District, Other Underground	Measured & Indicated		6,676		0.91		61.1
(Siriema, N8/N9)	Inferred		7,689		0.88		67.9
	Measured		4,402		2.33		102.4
	Indicated		8,667		1.00		87.1
Vermelhos District Underground Total	Measured & Indicated		13,069		1.45		189.5
	Inferred		13,781		0.93		127.6
	Measured		1,841		0.96		17.7
	Indicated		3,062		0.96		29.3
Surubim District, Other Underground	Measured & Indicated		4,904		0.96		47.0
(Surubim, C12, Cercado Velho, Lagoa da Mina, Terra do Sal)	Inferred		4,482		0.92		41.3
	Measured		1,841		0.96		17.7
	Indicated		3,062		0.96		29.3
Surubim District Underground Total	Measured & Indicated		4,904		0.96		47.0
	Inferred		4,482		0.92		41.3
	Measured		33,888		1.56		527.3
	Indicated		34,292		1.23		420.6
Total, Underground	Measured & Indicated		68,180		1.39		947.9
	Inferred		36,271		1.05		379.8

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Underground Mineral Resource Notes:

1. Mineral Resource effective date varies by deposit, with an effective date of August 8, 2020 except for P1P2 (July 24, 2020), R75 (July 9, 2019) and Suçuarana (July 3, 2020) within the Pilar District; Vermelhos Mine (July 29, 2020), Siriema and N8 (July 4, 2020), N9 (July 9, 2019) within the Vermelhos District; and Surubim District effective date of July 9, 2019 except for Terra do Sal (July 3, 2020).

2. Presented Mineral Resources inclusive of Mineral Reserves. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

3. Mineral Resources have been constrained within newly developed 3D lithology models applying a 0.45% and 0.20% copper grade envelope for high and marginal grade, respectively. Within these envelopes, Mineral Resources for underground deposits were constrained using varying stope dimensions of up to 20m by 10m by 35m applying a 0.51% copper cut-off grade, as well as a 0.32% copper marginal cut-off grade. Mineral Resources have been estimated using ordinary kriging inside 5m by 5m by 5m block sizes. The Mineral Resource estimates were prepared in accordance with the CIM Standards, and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate to the deposit.

Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.

Table 1-2: Open Pit Mineral Resources

		Tonnage		Grade		Cu Contained
Open Pit Mine / Deposit	Classification	(000 tonnes)		(Cu %)		(000 tonnes)
	Measured		3,172		0.49		15.4
	Indicated		365		0.45		1.6
Pilar District, Open Pit (R22W, Suçuarana, R75)	Measured & Indicated		3,537		0.48		17.0
	Inferred		351		0.47		1.6
	Measured		3,172		0.49		15.4
	Indicated		365		0.45		1.6
Pilar District Open Pit Total	Measured & Indicated		3,537		0.48		17.0
	Inferred		351		0.47		1.6
	Measured		-		-		-
	Indicated		2,956		0.92		27.1
Siriema Deposit	Measured & Indicated		2,956		0.92		27.1
	Inferred		187		0.99		1.9
	Measured		7,420		0.55		41.1
	Indicated		13,562		0.48		64.9
N8/N9 Deposits	Measured & Indicated		20,982		0.51		106.0
	Inferred		858		0.40		3.4
	Measured		-		-		-
	Indicated		-		-		-
Vermelhos North	Measured & Indicated		-		-		-
	Inferred		121		0.88		1.1
	Measured		7,420		0.55		41.1
	Indicated		16,518		0.56		92.0
Vermelhos District Open Pit Total	Measured & Indicated		23,938		0.56		133.1
	Inferred		1,166		0.55		6.4
	Measured		2,340		0.93		21.7
	Indicated		73		0.84		0.6
Surubim Mine	Measured & Indicated		2,413		0.92		22.3
	Inferred		3		0.80		0.0
	Measured		1,272		0.94		11.9
	Indicated		942		0.70		6.6
C12 Deposit	Measured & Indicated		2,214		0.84		18.6
	Inferred		154		0.56		0.9
	Measured		1,067		0.61		6.5
	Indicated		1,436		0.67		9.6
Surubim District, Other Open Pit (Cercado Velho, Lagoa da Mina, Terra do Sal)	Measured & Indicated		2,503		0.64		16.1
	Inferred		1,255		0.15		1.9
	Measured		4,678		0.86		40.1
	Indicated		2,452		0.69		16.8
Surubim District Open Pit Total	Measured & Indicated		7,130		0.80		56.9
	Inferred		1,413		0.20		2.8
	Measured		15,270		0.63		96.6
	Indicated		19,335		0.57		110.5
Total, Open Pit	Measured & Indicated		34,605		0.60		207.0
	Inferred		2,930		0.37		10.8

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Open Pit Mineral Resource Notes:

1. Mineral Resource effective date varies by deposit, with an effective date of August 8, 2020, except for Suçuarana (July 3, 2020), R22W and R75 (July 9, 2019) within the Pilar District; Siriema and N8 (July 4, 2020), N9 and Vermelhos North (July 9, 2019) within the Vermelhos District; and an effective date of July 9, 2019 for the Surubim District except Terra do Sal (July 3, 2020).

2. Presented Mineral Resources inclusive of Mineral Reserves. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

3. Mineral Resources have been constrained within newly developed 3D lithology models using a 0.21% copper cut-off grade for open pit deposits. Mineral Resources have been estimated using ordinary kriging inside 5m by 5m by 5m block sizes. The Mineral Resource estimates were prepared in accordance with the CIM Standards, and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate to the deposit.

Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.

1.6.2       Mineral Reserves

The Mineral Reserves for the Pilar UG Mine, Vermelhos UG Mine, N8/N9 OP Mine, Siriema OP Mine, C12 UG Mine, C12 OP Mine and the Surubim OP Mine are derived from the Measured and Indicated Mineral Resources as defined within the resource block models following the application of economic and other modifying factors further described below. Inferred Mineral Resources, where unavoidably included within a defined mining shape, have been assigned zero grade.

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Table 1-3: Mineral Reserves

			Tonnage		Grade		Cu Contained
	Classification		(000 tonnes)		(Cu %)		(000 tonnes)
Reserves, Underground
Deepening Extension Zone, Pilar UG Mine		Proven		-		-		-
(Pilar Mine below Level -965)		Probable		7,432		1.68		125
Pilar UG Mine Ex-Deepening Extension Zone		Proven		5,835		1.41		82
(Pilar Mine above Level -965)		Probable		7,725		1.09		84
Vermelhos UG Mine		Proven		3,359		2.09		70
		Probable		1,844		1.23		23
Surubim District, Underground		Proven		513		1.09		6
(C12 Underground)		Probable		515		0.83		4
Total Proven, Underground				9,707		1.63		158
Total Probable, Underground				17,516		1.34		236
Total Proven & Probable, Underground				27,224		1.45		394
Reserves, Open Pit
N8/N9 OP Mine		Proven		7,355		0.55		40
(Vermelhos District)		Probable		8,012		0.54		44
Siriema OP Mine		Proven		-		-		-
(Vermelhos District)		Probable		3,011		0.88		26
Surubim District, Open Pit		Proven		2,778		0.82		23
(Surubim & C12)		Probable		123		0.55		1
Suçuarana South OP Mine		Proven		1,623		0.42		7
(Pilar District)		Probable		328		0.46		2
Total Proven, Open Pit				11,757		0.60		70
Total Probable, Open Pit				11,474		0.63		72
Total Proven & Probable, Open Pit				23,230		0.61		142

Mineral Reserve Notes:

1. Mineral Reserve effective date of October 1, 2020.

2. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

3. Mineral Reserve estimates were prepared in accordance with the CIM Standards, and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate for the deposit. Mineral Reserves are based on a long-term copper price of US$2.75 per lb, and a USD:BRL foreign exchange rate of 4.27, except for the C12 (Surubim District) and Suçuarana (Pilar District) open pit mines, whose design was not changed since 2019, and continued to assume a 3.70 USD:BRL foreign exchange rate. Mineral Reserves are the economic portion of the Measured and Indicated Mineral Resources. Mining dilution and recovery factors vary for specific Mineral Reserve sources and are influenced by factors such as deposit type, deposit shape, stope orientation and selected mining method. Inferred resource blocks, where unavoidably mined, were assigned zero grade. Dilution occurring from Measured & Indicated resource blocks was assigned grade based upon the Mineral Resource grade of the blocks included in the dilution envelope. Please see “Technical and Scientific Information” in the MCSA Mining Complex Technical Report for additional information on the stated Mineral Reserves.

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A summary of the Mineral Reserve estimate parameters is provided below:

Table 1-4: Mineral Reserve Estimate Parameters

Mining Costs (US$/tonne ore mined)
Pilar UG Mine	$	23.52
Vermelhos UG Mine	$	21.95
C12 UG Mine	$	18.66
Surubim OP Mine	$	2.65
Suçuarana & C12 OP Mine	$	3.06
N8/N9 & Siriema OP Mines	$	2.17
Transportation Costs (US$/tonne to mill)
Pilar Mine		(none	)
Vermelhos Mine	$	10.96
Surubim OP Mine	$	5.48
C12 OP/UG Mine	$	5.98
Suçuarana mine	$	3.54
Processing Costs (US$/tonne milled)
Pilar & Vermelhos Mines	$	7.41
Suçuarana & C12 OP/UG Mine	$	7.90
Surubim, Siriema & N8/N9 OP Mines	$	4.12
Metallurgical Recovery (average)
Pilar UG Mine		90.39	%
Vermelhos UG Mine		91.49	%
N8/N9, Siriema, Suçuarana & C12 OP/UG Mines		89.0	%
Surubim OP Mine		85.0	%
LME Copper Price (US$/lb)	$	2.75
Net Smelter Return		94.53	%
Transport & Sales Costs (US$/tonne copper)	$	82.15
CFEM Royalty (after tax)		1.58	%
Foreign Exchange Rate (USD:BRL)		4.27

Reserve Parameters Note

All road-maintenance costs associated with the Curaçá Valley haul road have been allocated to Vermelhos. Calculated differences between open pit mining and processing costs are a result of additional incurred costs related to contract mining vs. employee operated and allocation of mining and processing administrative / fixed costs between mines. Metallurgical recoveries vary by area as outlined. G&A costs of US$4.16 per tonne were applied to the current operating underground mining operations of Pilar and Vermelhos. USD:BRL foreign exchange rate of 4.27 applied to all mines, except Suçuarana and C12 OP/UG mines, as the mine designs did not change from 2019, thus remain based on a USD:BRL foreign exchange rate of 3.70.

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Other modifying factors considered in the determination of the Mineral Reserve estimate include:

• 10% dilution has been applied to all mines, with the exception of the Pilar UG Mine which varies with stope height. For planned stopes within the Pilar UG Mine with a height above 35 meters, dilution of 15% has been applied, while for planned stopes with a height of 26 meters, dilution of 7% has been applied.

• Maximum bench height of 15 meters for open pit mines. Maximum underground stope dimensions based on geotechnical assessments from previous studies and past operating experience within each mining area, combined with evaluation of induced stresses and the Rock Mass Rating.

• The Vertical Retreat Mining method with cemented paste fill was selected for the Pilar UG Mine, where the method is currently in use. For the Vermelhos UG Mine, Sublevel with cemented rockfill is the mining method currently in use on consideration of the dip, plunge and thickness of the ore-bodies, the rock quality designation and overall competence of the host rock.

• Mining recovery of 100% has been applied for open pit mines. The Pilar UG Mine and Vermelhos UG Mine assume 96% and 95% mine recovery, respectively.

• Within designed stopes, all contained material was assumed to be mined with no selectivity. Inferred Mineral Resources, where unavoidably included within a defined mining shape, have been included in the Mineral Reserves estimate at zero grade. Mining dilution resulting from Measured and Indicated blocks was assigned the grade of those blocks captured in the dilution envelope using the estimated grade within the blocks of the dilution and development model.

Additionally, GE21 and BNA presents the following accompanying comments to the Mineral Resource and Mineral Reserve estimate:

• MCSA holds the surface rights required to support the mine operations considered in the Mineral Reserve estimate. Future development beyond the stated Mineral Reserves of these areas may require additional acquisition of surface rights.

• As of the date of the MCSA Mining Complex Technical Report, MCSA possesses the requisite permits to allow for current mining and processing operations from its core assets of the Pilar UG Mine and Vermelhos UG Mine and is in the process of obtaining mining permits for future production areas commensurate with the envisioned production timelines of those areas as outlined in the LOM plan. Based upon the long operating history of MCSA, the well-established timelines and procedures to obtain such permits, it is the opinion of the QPs that permitting of future production areas within the envisioned timelines does not pose a material risk for the development of the stated Mineral Reserves.

• Overall, GE21 considers that the components of the Mineral Reserve estimate (including but not limited to geology, mining, processing, infrastructure, logistics, market, environmental and social considerations) have been conducted at a feasibility level of study and in accordance with NI 43-101.

It is the opinion of the QPs that there are no known mining, metallurgical, infrastructure, permitting, legal, political, environmental, title, taxation, socio-economic, marketing or other relevant factors that could materially affect the potential development of the stated Mineral Reserves.

1.7 Recovery Methods

The Caraíba Mill has been producing copper concentrate since commissioning in 1979 and has benefited from improvement projects over the years, including most recently those undertaken by Ero Copper. The mill has been designed to process ore from both the Pilar UG Mine, via a production shaft supported by two primary underground jaw crushers as well as ore from throughout the Curaçá Valley (including within the Vermelhos and Surubim Districts) via a primary cone crusher located on surface. The concentrator is operated 24 hours per day, 7 days per week with monthly scheduled downtime for routine maintenance. In its current configuration, the plant is capable of processing a nominal 3.2 million tonnes of copper ore per annum assuming 91% availability. Pursuant to the current LOM plan, the milling capacity of the Caraíba Mill will be increased to 4.2 million tonnes per annum (“Mtpa”) through integration of the Company’s high intensity grinding mill (“HIG Mill”) that was successfully installed during the third quarter of 2020, and a to-be-installed high pressure grinding roll. In support of the LOM production plan, the Company will integrate ore sorting technology into the future open pit operations of the Vermelhos District.

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Through the end of 2019, the Caraíba Mill has produced over 3.0 million tonnes of concentrate containing over 1.0 million tonnes of copper. The Caraíba Mill operating results from 2011 to 2019, and from January to September 30^th of 2020 are provided below in Table 1-5 and Table 1-6, respectively.

Table 1-5: Caraíba Mill Processing Results, 2011 to 2019

	Caraíba Mill Feed				Copper Production
Year	Tonnes		Grade (% Cu)		Tonnes		Recovery (%)
2011		2,749,812		1.09		25,096		83.7
2012		2,717,980		1.07		24,827		85.4
2013		2,940,566		0.91		22,494		84.3
2014		3,014,269		1.01		25,717		84.7
2015		2,836,528		1.11		27,046		86.0
2016		826,759		0.71		4,895		83.5
2017		1,771,209		1.31		20,133		86.8
2018		2,257,917		1.56		30,426		86.3
2019		2,424,592		1.93		42,318		90.5

Table 1-6: January 2020 to September 30, 2020 Processing Results

	Caraíba Mill Feed				Copper Production
Year	Tonnes		Grade (%Cu)		Tonnes		Recovery (%)
2020 (Jan-Sep)		1,788,178		2.03		32,796		90.2

The table below shows the production plan for the Caraíba Mill as outlined for the current Mineral Reserve estimate and LOM production plan. Production has been adjusted from mined totals, where appropriate, for forecast stockpiles and in-process inventories, as well as the integration of ore-sorting. Metallurgical recoveries, including the impacts of ore sorting on the open pit mines of the Vermelhos District are discussed in greater detail in Chapter 13 – Mineral Processing and Metallurgical Testing and Chapter 17 – Recovery Methods of the MCSA Mining Complex Technical Report.

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Table 1-7: LOM production plan

	Q4 2020*			2021			2022			2023			2024			2025			2026			2027			2028			2029			2030			2031			2032			2033
Underground Operations
Pilar UG Mine, Ex-Deepening
Tonnes Mined (000s)		233			945			1,146			1,232			1,010			644			749			1,100			778			851			875			-			-			-
Grade Mined (% Cu)		1.24	%		1.09	%		1.12	%		1.26	%		1.14	%		1.06	%		1.09	%		0.94	%		1.05	%		0.97	%		0.98	%		-			-			-
Pilar UG Mine, Deepening (below -965)
Tonnes Mined (000s)		-			-			6			184			650			979			1,007			939			946			555			244			397			664			757
Grade Mined (% Cu)		-			-			0.61	%		0.98	%		1.46	%		1.29	%		1.54	%		1.47	%		1.75	%		2.11	%		1.48	%		1.85	%		1.98	%		2.42	%
Pilar UG Mine, Deepening (above -965)
Tonnes Mined (000s)		131			556			540			680			564			693			575			9			194			55			-			-			-			-
Grade Mined (% Cu)		2.17	%		2.03	%		2.17	%		1.27	%		1.75	%		1.53	%		1.07	%		0.93	%		0.83	%		0.74	%		-			-			-			-
Vermelhos UG Mine
Tonnes Mined (000s)		184			839			851			882			813			876			700			-			-			-			-			-			-			-
Grade Mined (% Cu)		2.42	%		2.48	%		2.17	%		1.88	%		1.38	%		1.35	%		1.03	%		-			-			-			-			-			-			-
Surubim UG Mine
Tonnes Mined (000s)		-			-			-			-			-			-			-			8			184			206			630			-			-			-
Grade Mined (% Cu)		-			-			-			-			-			-			-			0.83	%		0.98	%		0.99	%		0.95	%		-			-			-
Open Pit Operations
Vermelhos District, Open Pit (ex-Ore Sorting)
Tonnes Mined (000s)		-			-			390			-			-			-			-			-			-			-			-			-			-			-
Grade Mined (% Cu)		-			-			0.54	%		-			-			-			-			-			-			-			-			-			-			-
Surubim District, Open Pit
Tonnes Mined (000s)		-			240			353			522			627			428			418			314			-			-			-			-			-			-
Grade Mined (% Cu)		-			0.63	%		0.64	%		0.65	%		0.75	%		0.89	%		1.19	%		0.89	%		-			-			-			-			-			-
Ore Sorting Operations
Vermelhos District, Open Pit
Tonnes Crushed & Sorted (000s)		-			-			-			635			840			1,140			1,755			2,681			4,046			3,777			1,920			3,175			-			-
Grade Crushed & Sorted (% Cu)		-			-			-			0.62	%		0.74	%		0.55	%		0.66	%		0.74	%		0.59	%		0.52	%		0.52	%		0.36	%		-			-
Sort Product, Vermelhos District
Sorted Tonnes to Mill (000s)		-			-			-			302			399			542			834			1,273			1,922			1,794			912			914			-			-
Sorted Grade to Mill (% Cu)		-			-			-			1.23	%		1.47	%		1.09	%		1.31	%		1.47	%		1.17	%		1.02	%		1.03	%		1.03	%		-			-
Production Plan
Tonnes Mined & Processed (000s)		482			2,722			3,196			3,686			4,162			4,129			4,007			3,940			3,959			3,555			2,808			1,311			664			757
Grade Mined & Processed (% Cu)		2.07	%		1.70	%		1.46	%		1.34	%		1.29	%		1.23	%		1.26	%		1.22	%		1.27	%		1.17	%		1.04	%		1.28	%		1.98	%		2.42	%
Recoveries (%)		92.5	%		92.8	%		92.0	%		91.5	%		91.3	%		91.1	%		91.2	%		91.0	%		91.2	%		90.8	%		90.2	%		91.3	%		93.5	%		94.5	%
Copper in Concentrate (000 tonnes)		9.2			43.0			42.9			45.1			48.9			46.3			46.2			43.9			46.0			37.8			26.3			15.3			12.3			17.3

*Q4 2020 outlines the Mineral Reserve schedule for the three months from the Effective Date to December 31, 2020. All figures have been rounded to reflect the accuracy of the estimates. Summed amounts may not add due to rounding. LOM plan totals are based on Mineral Reserves and does not include the Deepening Inferred Project, which is addressed separately in Chapter 24 of the MCSA Mining Complex Technical Report. The Deepening Inferred Project is preliminary in nature and based on the Inferred Mineral Resources of the Deepening Extension Zone which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that the Deepening Inferred Project will be realized. Mineral Resources that are not Mineral Reserves do not have a demonstrated economic viability.

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1.8 Infrastructure

The MCSA Mining Complex infrastructure includes fully integrated mining and processing operations located within the Curaçá Valley. All supporting infrastructure required for mining operations are currently in place. The current mining operations include the Pilar UG Mine and Vermelhos UG Mine. Primary components of installed infrastructure comprising the MCSA Mining Complex, outside of the individual mining operations, include:

• Caraíba Mill processing plant with current installed capacity of approximately 9,600 t/d;

• access to water via an MCSA owned, operated and maintained 86km permanent steel pipeline, 80cm in diameter, from the São Francisco River;

• water treatment plant;

• metallurgical laboratory;

• main substation and transformers, each configured with 60 MVA / 230 kV / 13.8 kV;

• power lines supplied by Companhia Hidroelétrica do São Francisco (CHESF), a Brazilian State-owned power company;

• ancillary surface buildings including maintenance, security and administration; and

• inactive SX/EW Plant.

1.9 Environment

The current permitting status for the active operations of the MCSA Mining Complex can be summarized in the following table:

Table 1-8: Summary of Primary Operational Permits

				Permit Period
Mine/Project	License Scope	Project Phase	License Phase	Start	Expiry	Status
Caraíba Mine	Mining Operations	Operational	Renewal	April 6, 2017	April 6, 2020	Valid (1)
Caraíba Mine	Chemical Products	Operational	Renewal	October 23, 2020	October 22, 2021	Valid
Caraíba Mine	Fuel Station	Operational	Renewal	May 6, 2020	May 6, 2023	Valid
Surubim OP Mine	Mining Operations	Operational	New	September 6, 2017	September 6, 2019	Valid (1)
Surubim OP Mine	Fuel Station	Operational	Renewal	May 18, 2018	May 18, 2021	Valid
Vermelhos UG Mine	Mining Operations	Operational	New	October 10, 2018	October 10, 2020	Valid (1)
Vermelhos UG Mine	Fuel Station	Operational	New	May 14, 2018	May 14, 2021	Valid

⁽¹⁾ The Operation Licenses for the Pilar, Surubim, and Vermelhos Mines are valid and in compliance with the applicable legislation, specifically the State Decree 15,682/2014 that regulates environmental permitting in the Bahia State.

MCSA maintains an excellent relationship with the communities throughout the Curaçá Valley, having held regular meetings and consultation sessions with local stakeholders routinely for over 40 years. In support of this relationship, MCSA undertakes several key initiatives annually focused on sustainable community development ensuring the social license to operate.

1.10 Capital and Operating Costs

Capital and operating costs are shown for the period from October 2020 to December 2033. It is expected that a combination of resource conversion and delineation of new mineralization within the Curaçá Valley will continue to augment the production profile, subject to satisfactory exploration results, technical, economic, legal and environmental conditions.

Total capital costs are estimated at R$2,767 million and are summarized in the table below. All costs are shown in BRL, unless otherwise noted.

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Table 1-9: MCSA Mining Complex – Total Capital Expenditures

	Q4 2020 (1)		2021		2022		2023		2024		2025		2026		2027		2028		2029		2030		2031		2032		2033
Capital Costs (R$ 000s)
Deepening below -965		2,314		108,418		171,209		204,433		206,038		78,018		89,588		49,945		25,767		15,786		53		-		-		-
Pilar District (ex-Deepening below -965)		96,974		229,703		166,004		161,739		104,204		79,010		59,365		44,903		15,003		14,171		16,418		6,647		-		-
Vermelhos Underground		9,185		44,315		50,288		39,876		40,720		14,038		395		595		495		495		495		395		-		-
Vermelhos Open Pit		2,650		29,819		69,234		33,241		57,029		22,945		64,748		66,348		356		-		7,504		-		-		-
Surubim Underground		-		-				-		-		-		-		8,180		13,180		12,120		3,290		-		-		-
Surubim Open Pit		3,306		52,215		54,201		52,322		46,072		4,876		10,916		4,194		331		338		345		353		-		-
Total Capital Costs (R$ 000s)		114,429		464,470		510,935		491,611		454,062		198,886		225,012		174,166		55,132		42,910		28,105		7,395		-		-

(1) 2020 based on the 3 months from the Effective Date to December 31, 2020

An operating cost forecast model was generated utilizing MCSA’s extensive historical cost data and consumption coefficients. Mine and plant activities are subdivided and adjusted selectively, reflecting the impact of producing from different areas and changes in the infrastructure going forward. A fixed and variable component was included in all estimations, allowing the costs to reflect the production rate of each year. Operating costs are summarized in the table below.

Table 1-10: MCSA Mining Complex - Operating Costs

	Q4 2020 (1)		2021		2022		2023		2024		2025		2026		2027		2028		2029		2030		2031		2032		2033
Operating Cost Summary (R$/tonne)
Pilar UG*		100.12		102.56		105.32		100.68		95.44		91.79		90.34		94.65		93.34		96.99		101.76		175.16		129.96		118.60
Vermelhos Underground*		162.39		151.59		145.58		146.94		152.70		148.69		147.75		-		-		-		-		-		-		-
Vermelhos Open Pit*		-		-		12.32		11.69		12.80		9.87		11.84		12.37		13.72		15.95		13.96		32.84		-		-
Surubim Underground*		-		-		-		-		-		-		-		284.58		113.67		108.40		70.27		-		-		-
Surubim Open Pit*		-		18.26		14.86		14.95		16.01		27.95		35.22		11.17		-		-		-		-		-		-
Plant**		46.85		35.92		33.65		32.02		30.57		31.05		31.09		31.32		30.85		32.39		34.86		47.01		83.52		85.19
Operational Support**		32.11		24.65		19.84		17.45		15.78		15.75		16.15		15.04		13.99		13.73		14.44		24.89		44.51		39.49
G&A**		50.78		34.02		28.98		25.12		22.25		22.43		23.11		23.50		23.39		26.05		32.98		47.09		69.74		65.49

* R$/tonne mined (ore + opex waste)
** R$/tonne processed

⁽¹⁾2020 based on the 3 months from the Effective Date to December 31, 2020

Table 1-11: MCSA Mining Complex – C1 Cash Costs

	Q4 2020 (1)			2021			2022			2023			2024			2025			2026			2027			2028			2029			2030			2031			2032			2033
Operating Costs (R$000s)
Mining Costs (incl. transport and sorting)		67,830			299,064			369,784			413,498			448,932			543,247			493,964			404,625			415,249			330,385			254,303			158,982			86,495			89,983
Processing		22,558			97,774			107,541			117,623			127,424			126,737			124,240			122,857			123,246			114,924			99,558			68,765			55,454			57,370
Operational Support		15,459			67,107			63,409			64,238			65,731			64,728			64,672			59,096			55,699			48,760			40,896			33,565			29,505			28,952
less: Precious Metal Credits		(18,531	)		(70,776	)		(72,701	)		(76,323	)		(82,851	)		(78,467	)		(78,223	)		(74,297	)		(77,850	)		(64,079	)		(44,609	)		(25,982	)		(20,498	)		(28,944	)
plus: TC/RCs, Net of Tax		(6,223	)		(6,834	)		(41,893	)		(48,268	)		(50,641	)		(48,164	)		(48,992	)		(44,973	)		(49,791	)		(39,351	)		(28,557	)		(18,049	)		(13,511	)		(17,723	)
C1 Cash Costs Basis (R$ 000s)		81,093			386,336			426,141			470,767			508,594			608,082			555,662			467,308			466,553			390,639			321,592			217,282			137,444			129,638
C1 Cash Costs (US$/lb)	$	0.80		$	0.81		$	0.90		$	0.95		$	0.94		$	1.19		$	1.09		$	0.97		$	0.92		$	0.94		$	1.11		$	1.28		$	1.02		$	0.68

⁽¹⁾2020 based on the 3 months from the Effective Date to December 31, 2020

1.11       Economic Analysis

An economic analysis was prepared considering production, capital and operating expenditures for all of the assets comprising the current Mineral Reserves of the Curaçá Valley, including both core and non-core assets. For additional detail regarding core and non-core assets as well as associated production, capital and operating expenditures by asset, please refer to Chapter 21 of the MCSA Mining Complex Technical Report. The economic analysis used the following primary assumptions:

· The economic analysis considers commencing on the month of the Effective Date and does not include actual performance achieved through September 31, 2020.

· The economic analysis of MCSA’s Vale do Curaçá mineral assets is based solely on Mineral Reserves and does not include Measured and Indicated Mineral Resources, which are not part of the Mineral Reserve estimate.

· Total ore processed of 39.4 million tonnes at an average feed grade of 1.33% copper.

· Total sales of 480,802 tonnes of contained copper in concentrate.

· Metal prices of US$3.00 per lb. copper from 2020 through 2033.

· USD:BRL exchange rate of 5.00 in years 2020 through 2033.

The Vale do Curaçá mineral assets comprising the MCSA Mining Complex produce an undiscounted after-tax cash flow of R$5.2 billion, or US$1.0 billion.

The after-tax Net Present Value (“NPV”) at an 8% discount rate is US$663.7 million. Average C1 cash costs over the production forecast period are estimated to be US$0.97 per lb of copper produced. C1 cash costs per lb of copper produced is a non-IFRS measure. Please refer to Chapter 22.6 of the MCSA Mining Complex Technical Report for additional detail regarding non-IFRS measures.

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After-tax sensitivity analyses were prepared considering changes in copper price, foreign exchange, capital costs and operating costs. The analysis shows that the MCSA Mining Complex is most sensitive to copper price and exchange rates.

Table 1-12: After-tax Cash Flow Summary, MCSA Mining Complex

Assumptions		2020 1			2021			2022			2023			2024			2025			2026			2027			2028			2029			2030			2031			2032			2033
Exchange Rate	R$/US$		5.00			5.00			5.00			5.00			5.00			5.00			5.00			5.00			5.00			5.00			5.00			5.00			5.00			5.00
Copper Price	US$/tonne		6,614			6,614			6,614			6,614			6,614			6,614			6,614			6,614			6,614			6,614			6,614			6,614			6,614			6,614
Copper Price	US$/lb		3.00			3.00			3.00			3.00			3.00			3.00			3.00			3.00			3.00			3.00			3.00			3.00			3.00			3.00
Production
Ore Processed	tonnes		481,500			2,722,259			3,195,865			3,685,914			4,162,318			4,128,927			4,007,498			3,940,287			3,959,190			3,554,640			2,807,691			1,310,943			663,931			757,090
Copper Grade Processed	%		2.07			1.70			1.46			1.34			1.29			1.23			1.26			1.22			1.27			1.17			1.04			1.28			1.98			2.42
Metallurgical Recovery	%		92.5			92.8			92.0			91.5			91.3			91.1			91.2			91.0			91.2			90.8			90.2			91.3			93.5			94.5
Copper Contained	tonnes		9,234			43,032			42,940			45,080			48,936			46,346			46,202			43,883			45,982			37,848			26,348			15,346			12,283			17,343
Copper Contained	lbs		20,358,107			94,868,533			94,667,248			99,383,625			107,884,558			102,175,902			101,857,551			96,745,835			101,372,188			83,439,963			58,087,148			33,832,134			27,078,774			38,235,472
Capex
Total Capex	000 R$		114,429			464,470			510,935			491,611			454,062			198,886			225,012			174,166			55,132			42,910			28,105			7,395			-			-
Operating Costs
Mining Costs (incl. transport and sorting)	000 R$		67,830			299,064			369,784			413,498			448,932			543,247			493,964			404,625			415,249			330,385			254,303			158,982			86,495			89,983
General & Administrative	000 R$		24,451			92,606			92,606			92,606			92,606			92,606			92,606			92,606			92,606			92,606			92,606			61,737			46,303			46,303
Operational Support	000 R$		15,459			67,107			63,409			64,238			65,731			64,728			64,672			59,096			55,699			48,760			40,896			33,565			29,505			28,952
Processing	000 R$		22,558			97,774			107,541			117,623			127,424			126,737			124,240			122,857			123,246			114,924			99,558			68,765			55,454			57,370
Sub Total	000 R$		130,298			556,551			633,340			687,964			734,693			827,318			775,482			679,184			686,800			586,674			487,363			323,049			217,757			222,608
Depreciation/Exhaustion	000 R$		20,312			103,289			135,100			174,210			211,009			202,139			227,548			173,398			166,473			157,345			163,732			132,001			99,577			64,594
Total Costs	000 R$		150,610			659,840			768,440			862,174			945,702			1,029,457			1,003,030			852,582			853,273			744,020			651,095			455,050			317,334			287,203
Revenue
Copper Sales	tonnes		9,234			43,032			42,940			45,080			48,936			46,346			46,202			43,883			45,982			37,848			26,348			15,346			12,283			17,343
Gross Metal Revenue	000 R$		305,378			1,423,035			1,420,016			1,490,762			1,618,277			1,532,647			1,527,871			1,451,195			1,520,591			1,251,606			871,312			507,485			406,184			573,535
Total Net Metal Revenue	000 R$		317,825			1,393,131			1,405,441			1,479,757			1,604,549			1,519,813			1,516,204			1,440,293			1,508,256			1,243,658			868,006			506,617			402,016			568,294
Other Revenue 2	000 R$		981			3,924			3,444			3,444			3,444			3,444			3,444			3,444			3,444			3,444			3,444			3,444			3,444			3,444
Total Net Revenue	000 R$		318,806			1,397,055			1,408,885			1,483,201			1,607,993			1,523,257			1,519,648			1,443,737			1,511,700			1,247,102			871,450			510,061			405,460			571,738
Revenue Invoiced with Taxes Added Back	000 R$		352,974			1,520,801			1,587,114			1,666,185			1,808,704			1,712,998			1,707,661			1,621,962			1,699,523			1,398,886			973,842			567,202			454,123			641,225
Cash Flow
Revenue Invoiced with Taxes Added Back	000 R$		352,974			1,520,801			1,587,114			1,666,185			1,808,704			1,712,998			1,707,661			1,621,962			1,699,523			1,398,886			973,842			567,202			454,123			641,225
Opex (ex-Depreciation & Exhaustion)	000 R$		(130,298	)		(556,551	)		(633,340	)		(687,964	)		(734,693	)		(827,318	)		(775,482	)		(679,184	)		(686,800	)		(586,674	)		(487,363	)		(323,049	)		(217,757	)		(222,608	)
Less Capitalized Development 3	000 R$		-			-			-			-			-			-			-			-			-			-			-			-			-			-
Income & Social Contribution Taxes	000 R$		(30,933	)		(145,288	)		(146,982	)		(157,834	)		(173,416	)		(153,818	)		(161,588	)		(163,141	)		(186,304	)		(157,278	)		(101,334	)		(55,120	)		(39,547	)		(74,284	)
Other Taxes & Credits	000 R$		19,976			47,229			(6,932	)		(5,644	)		(1,883	)		-			-			-			-			-			-			-			-			-
Employee Profit Sharing & Bonuses	000 R$		-			(23,927	)		(35,820	)		(35,820	)		(35,820	)		(35,820	)		(35,820	)		(35,820	)		(35,820	)		(35,820	)		(35,820	)		(35,820	)		(35,820	)		(35,820	)
Operating Cash Flow	000 R$		211,720			842,264			764,040			778,923			862,893			696,042			734,770			743,817			790,600			619,114			349,325			153,213			160,999			308,513
CAPEX	000 R$		(114,429	)		(464,470	)		(510,935	)		(491,611	)		(454,062	)		(198,886	)		(225,012	)		(174,166	)		(55,132	)		(42,910	)		(28,105	)		(7,395	)		-			-
Free Cash Flow	000 R$		97,291			377,795			253,105			287,312			408,830			497,156			509,758			569,651			735,468			576,204			321,220			145,818			160,999			308,513
Accumulated Free Cash Flow	000 R$		97,291			475,086			728,190			1,015,502			1,424,333			1,921,488			2,431,246			3,000,898			3,736,366			4,312,570			4,633,790			4,779,607			4,940,606			5,249,119
Free Cash Flow	000 US$		19,458			75,559			50,621			57,462			81,766			99,431			101,952			113,930			147,094			115,241			64,244			29,164			32,200			61,703
Accumulated Free Cash Flow	000 US$		19,458			95,017			145,638			203,100			284,867			384,298			486,249			600,180			747,273			862,514			926,758			955,921			988,121			1,049,824
EBITDA	000 R$		188,508			840,504			775,544			795,237			873,300			695,939			744,166			764,554			824,901			660,428			384,087			187,012			187,702			349,129
EBITDA	000 US$		37,702			168,101			155,109			159,047			174,660			139,188			148,833			152,911			164,980			132,086			76,817			37,402			37,540			69,826
Discount Rate	%pa		8	%
Results
After-Tax NPV8	000 US$		663,663
IRR	%pa		n/a
Simple Payback	years		n/a

⁽¹⁾2020 based on the 3 months from the Effective Date to December 31, 2020

⁽²⁾Other Revenue includes recovery of water pipeline operating costs and scrap sales

EBITDA is a non-IFRS measure. Please see Chapter 22.6 of the MCSA Mining Complex Technical Report for additional detail regarding non-IFRS measures used by the Company.

1.12       Deepening Inferred Project, Preliminary Economic Analysis

The Deepening Inferred Project is based upon an ongoing exploration campaign in the Pilar UG Mine below level -965 which, as at the Effective Date, had identified a significant portion of Inferred Mineral Resources within the Deepening Extension Zone. Given the intrinsic synergies associated with the Deepening Extension Project, MCSA commissioned NCL Ingeniería y Construcción SpA. (“NCL”) to undertake engineering and trade-off studies for the development of the Deepening Inferred Project.

The Deepening Inferred Project is preliminary in nature and based on the Inferred Mineral Resources of the Deepening Extension Zone which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that the Deepening Inferred Project will be realized. Mineral Resources that are not Mineral Reserves do not have a demonstrated economic viability. The Company has commenced a program to continue infill drilling of the Inferred resource to further upgrade this material; however, until this work is completed and the Inferred resources have been upgraded to reserves, there is no certainty this material will be converted into Mineral Reserves.

The primary objective of the Deepening Inferred Project is to evaluate the potential to utilize the planned infrastructure to mine and process the Inferred Mineral Resources within the in the Pilar UG Mine’s Deepening Extension Zone, as well as evaluate the potential for the integration of required development in support of the Deepening Inferred Project. Inferred Mineral Resources of the Pilar UG Mine, Deepening Extension Zone are detailed below. Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.

33

The Deepening Inferred Project envisions application of the same mining and recovery methods as the Deepening Extension Project as more fully described in Chapters 13, 15 and 16 of the MCSA Mining Complex Technical Report. Accordingly, the same mining, recovery and dilution modifying factors have been applied to the Deepening Inferred Project. Specifically, these modifying factors include: mining recovery of 96% and dilution that varies with stope height. For planned stopes with a height above 35m, dilution of 15% has been applied, while for planned stopes with a height of 26m, dilution of 7% has been applied.

The assumed available material and contained copper based on these parameters, after application of stated mining factors, is shown in Table 1-13. Modified Inferred Mineral Resources are not Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have a demonstrated economic viability.

Table 1-13: Modified Inferred Mineral Resources in the Pilar UG Mine Below Level -965

	Deepening Extension Zone, Inferred Resources		Deepening Inferred Project,  Captured Inferred Resource
Tonnes (000s)		4,476		4,203
Grade (% Cu)		2.12		2.01
Contained Cu (000 tonnes)		94.8		84.5

    Deepening Inferred Project Notes:

1. Mineral Resource effective date of August 8, 2020. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding. Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.

2. The Inferred Mineral Resources (undiluted) outlined in this table are further detailed in Chapter 14 – Mineral Resource Estimates, of the MCSA Mining Complex Technical Report. Mineral Resources of the Pilar Mine are based on copper prices of US$2.90 per pound, net smelter return of 94.53%, average metallurgical recoveries of 90.7%, processing costs of US$5.65 per tonne (run of mine) and mining costs of US$17.30 per tonne.

3. Mineral Resources have been constrained within newly developed 3D lithology models applying a 0.45% and 0.20% copper grade envelope for high and marginal grade, respectively. Within these envelopes, Mineral Resources for underground deposits were constrained using varying stope dimensions of up to 20m by 10m by 35m applying a 0.51% copper cut-off grade, as well as a 0.32% copper marginal cut-off grade. Mineral Resources have been estimated using ordinary kriging inside 5m by 5m by 5m block sizes. The Mineral Resource estimates were prepared in accordance with the CIM Standards, and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate to the deposit. Please refer to Chapter 14 – Mineral Resource Estimates of the MCSA Mining Complex Technical Report for additional details.

Mining operations were assumed to be the same as for the Deepening Inferred Project, using a combination of transverse stoping and longitudinal stoping mining method. Dilution was set to 1.0m, comprised of 0.5m for the hanging wall, 0.5m for the footwall and a maximum waste percentage of 75%.

Extraction of mined material from the Deepening Inferred Project required the addition of two new panels below the -1381 Level, as the production panels and supporting infrastructure to be built from level -1069 to -1381 are shared by the Deepening Extension Project. The primary ramp continues at depth beyond the Deepening Extension Project and is designed to follow the mineralization to the north. The bottom of the new external hoisting shaft that will be built in support of the Deepening Extension Project will be completed to the -1075 Level. Two new panels with 4 production levels each are designed below -1381 Level in support of the Deepening Inferred Project.

The mine ventilation system for the deeper panels of the mine in support of the Deepening Inferred Project will utilize the existing mine ramp and internal ventilation raises connecting the production levels. This infrastructure, including cooling requirements, will be shared with the Deepening Extension Project, as more fully described in Chapter 18 of the MCSA Mining Complex Technical Report.

The same assumptions for development rates and production schedules were incorporated into the mine design for the Deepening Inferred Project as were used for the Mineral Reserves incorporated into the Deepening Extension Project.

The Deepening Inferred Project is expected to utilize the same infrastructure that will be built in support of the Deepening Extension Project, including a new external shaft as described in Chapter 18. Over the Deepening Inferred Project life, approximately 4.2 million tonnes grading 2.01% copper are expected to be mined, producing a total of approximately 78,900 tonnes of copper after average metallurgical recoveries of 93.2%. First development from the Deepening Inferred Project is expected in 2023 and first mined ore is expected after the completion of the new external shaft and associated development in support of the Deepening Extension Project of the Pilar UG Mine.

34

Table 1-14: Deepening Inferred Project Production Schedule

	Q4 2020*		2021		2022		2023			2024			2025			2026			2027			2028			2029			2030			2031			2032			2033			Total
Production Plan
Ore Mined & Processed (kt)		-		-		-		19			40			71			193			260			254			645			956			803			536			426			4,203
Grade Mined & Processed (% Cu)		-		-		-		0.62	%		0.77	%		1.30	%		1.20	%		1.68	%		1.66	%		1.90	%		2.59	%		2.30	%		1.61	%		1.94	%		2.01	%
Recoveries (%)		-		-		-		85.6	%		87.8	%		91.3	%		90.9	%		92.4	%		92.4	%		92.9	%		93.8	%		93.9	%		92.3	%		93.3	%		93.2	%
Copper in Concentrate (kt)		0.0		0.0		0.0		0.1			0.3			0.8			2.1			4.0			3.9			11.4			23.2			17.4			8.0			7.7			78.9

The production detailed in the production schedule for the Deepening Inferred Project contains only Inferred Mineral Resources. Inferred Mineral Resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that value from such Inferred Mineral Resources will be realized either in whole or in part. Mining of the Inferred Mineral Resource within the Pilar UG Mine’s Deepening Extension Zone, as envisioned, reflects a continuation of mining of the Deepening Extension Project.

1.12.1        Operating and Capital Costs, Deepening Inferred Project

As there is no certainty that the Deepening Inferred Project will be realized due to the nature of the preliminary economic assessment, fixed processing costs and the majority of operational support costs, other than variable operational support costs associated with concentrate transport for the Deepening Inferred Project, have been allocated to the LOM production plan.

Mining costs for the Deepening Inferred Project were estimated using first principles and are based on the assumed costs of the Deepening Extension Project, and are shown below.

Table 1-15: Operating Costs, Deepening Inferred Project

	Q4 2020*		2021		2022		2023			2024			2025			2026			2027			2028			2029			2030			2031			2032			2033
Operating Costs (R$ 000s)
Mining Costs		-		-		-		650			3,226			6,709			15,602			24,456			27,593			62,295			66,358			52,316			34,314			25,890
Processing		-		-		-		398			830			1,462			3,960			5,342			5,216			13,275			19,665			16,515			11,027			8,767
Operational Support		-		-		-		40			106			327			811			1,562			1,505			4,420			8,994			6,727			3,080			2,980
less: Precious Metal Credits		-		-		-		(174	)		(464	)		(1,431	)		(3,546	)		(6,828	)		(6,580	)		(19,320	)		(39,315	)		(29,406	)		(13,270	)		(12,838	)
plus: TC/RCs, Net of Tax		-		-		-		(110	)		(284	)		(878	)		(2,221	)		(4,133	)		(4,208	)		(11,864	)		(25,168	)		(20,427	)		(8,747	)		(7,861	)
Cash Costs Basis (R$ 000s)		-		-		-		805			3,414			6,189			14,606			20,399			23,526			48,806			30,534			25,726			26,403			16,937
Cash Costs (US$/lb)		-		-		-	$	0.71		$	1.13		$	0.66		$	0.63		$	0.46		$	0.55		$	0.39		$	0.12		$	0.13		$	0.30		$	0.20

As a result of shared infrastructure and associated synergies with the Deepening Extension Project as reflected in LOM production plan, total capital costs for the Deepening Inferred Project, comprised of only equipment and development, are expected to total R$139.1 million over the production schedule, as detailed below.

Table 1-16: Capital Costs, Deepening Inferred Project

	Q4 2020*		2021		2022		2023		2024		2025		2026		2027		2028		2029		2030		2031		2032		2033		Total
Capital Costs (R$ 000s)
Deepening below -965
Equipment		-		-		-				-		-		-		-18,678		13,392				-20,146		-		-		-		52,216
Ventilation and Cooling		-		-		-				-		-		-		-		-		-		-		-		-		-		-
Development		-		-		-		1,010		5,486		4,571		5,761		14,960		32,820		22,165		105		-		-		-		86,878
Shaft		-		-		-				-		-		-		-		-		-		-		-		-		-		-
Infrastructure		-		-		-				-		-		-		-		-		-		-		-		-		-		-
Total Capital Costs (R$ 000s)		-		-		-		1,010		5,486		4,571		5,761		33,638		46,212		22,165		20,251		-		-		-		139,095

The economic analysis for the Deepening Inferred Project has been prepared by Ero Copper and MCSA with inputs from NCL and under the supervision of BNA and GE21. MCSA provided the mining and processing cost estimates, and NCL provided capital cost estimates. The estimates were reviewed by the authors of the MCSA Mining Complex Technical Report who have found the estimation procedures and outcomes to be in-line with industry best practice and well correlated to the performance of the existing operations.

35

1.12.2 Financial Analysis, Deepening Inferred Project

Table 1-17: After-tax Cash Flow Summary – Deepening Inferred Project

Assumptions		2020 1			2021		2022		2023			2024			2025			2026			2027			2028			2029			2030			2031			2032			2033
Exchange Rate	R$/US$		5.00			5.00		5.00		5.00			5.00			5.00			5.00			5.00			5.00			5.00			5.00			5.00			5.00			5.00
Copper Price	US$/tonne		6,614			6,614		6,614		6,614			6,614			6,614			6,614			6,614			6,614			6,614			6,614			6,614			6,614			6,614
Copper Price	US$/lb		3.00			3.00		3.00		3.00			3.00			3.00			3.00			3.00			3.00			3.00			3.00			3.00			3.00			3.00
Production
Ore Processed	tonnes		-			-		-		19,363			40,351			71,075			192,504			259,715			253,578			645,362			955,989			802,886			536,069			426,184
Copper Grade Processed	%		-			-		-		0.62			0.77			1.30			1.20			1.68			1.66			1.90			2.59			2.30			1.61			1.94
Metallurgical Recovery	%		-			-		-		85.6			87.8			91.3			90.9			92.4			92.4			92.9			93.8			93.9			92.3			93.3
Copper Contained	tonnes		-			-		-		103			274			845			2,095			4,033			3,886			11,411			23,221			17,368			7,952			7,693
Copper Contained	lbs		-			-		-		226,138			604,398			1,863,095			4,617,751			8,891,550			8,567,959			25,156,847			51,194,201			38,290,626			17,530,410			16,959,400
Capex
Total Capex	000 R$		-			-		-		1,010			5,486			4,571			5,761			33,638			46,212			22,165			20,251			-			-			-
Operating Costs
Mining Costs (incl. transport and sorting)	000 R$		-			-		-		650			3,226			6,709			15,602			24,456			27,593			62,295			66,358			52,316			34,314			25,890
Operational Support	000 R$		-			-		-		40			106			327			811			1,562			1,505			4,420			8,994			6,727			3,080			2,980
Processing	000 R$		-			-		-		398			830			1,462			3,960			5,342			5,216			13,275			19,665			16,515			11,027			8,767
Sub Total	000 R$		-			-		-		1,088			4,162			8,499			20,373			31,361			34,315			79,990			95,017			75,559			48,420			37,636
Depreciation/Exhaustion	000 R$		-			-		-		8,757			10,607			10,161			11,438			8,716			8,368			7,909			8,230			6,635			5,005			3,247
Total Costs	000 R$		-			-		-		9,845			14,769			18,659			31,812			40,077			42,683			87,899			103,247			82,194			53,426			40,883
Revenue
Copper Sales	tonnes		-			-		-		103			274			845			2,095			4,033			3,886			11,411			23,221			17,368			7,952			7,693
Gross Metal Revenue	000 R$		-			-		-		3,392			9,066			27,947			69,268			133,376			128,522			377,360			767,928			574,371			262,961			254,396
Total Net Metal Revenue	000 R$		-			-		-		3,367			8,989			27,713			68,739			132,374			127,479			374,964			765,015			573,389			260,263			252,071
Other Revenue 2	000 R$		-			-		-		-			-			-			-			-			-			-			-			-			-			-
Total Net Revenue	000 R$		-			-		-		3,367			8,989			27,713			68,739			132,374			127,479			374,964			765,015			573,389			260,263			252,071
Revenue Invoiced with Taxes Added Back	000 R$		-			-		-		3,791			10,133			31,236			77,419			149,071			143,646			421,765			858,293			641,959			293,997			284,421
Cash Flow
Revenue Invoiced with Taxes Added Back	000 R$		-			-		-		3,791			10,133			31,236			77,419			149,071			143,646			421,765			858,293			641,959			293,997			284,421
Opex (ex-Depreciation & Exhaustion)	000 R$		-			-		-		(1,088	)		(4,162	)		(8,499	)		(20,373	)		(31,361	)		(34,315	)		(79,990	)		(95,017	)		(75,559	)		(48,420	)		(37,636	)
Less Capitalized Development 3	000 R$		-			-		-		-			-			-			-			-			-			-			-			-			-			-
Effective Tax Rate	%		8.8			9.6		9.3		9.5			9.6			9.0			9.5			10.1			11.0			11.2			10.4			9.7			8.7			11.6
Income & Social Contribution Taxes	000 R$		-			-		-		(359	)		(972	)		(2,805	)		(7,326	)		(14,994	)		(15,747	)		(47,419	)		(89,310	)		(62,385	)		(25,602	)		(32,949	)
Other Taxes & Credits	000 R$		-			-		-		-			-			-			-			-			-			-			-			-			-			-
Employee Profit Sharing & Bonuses	000 R$		-			-		-		-			-			-			-			-			-			-			-			-			-			-
Operating Cash Flow	000 R$		-			-		-		2,344			4,999			19,932			49,719			102,716			93,584			294,356			673,966			504,015			219,974			213,835
CAPEX	000 R$		-			-		-		(1,010	)		(5,486	)		(4,571	)		(5,761	)		(33,638	)		(46,212	)		(22,165	)		(20,251	)		-			-			-
Free Cash Flow	000 R$		-			-		-		1,334			(487	)		15,361			43,958			69,078			47,373			272,191			653,715			504,015			219,974			213,835
Accumulated Free Cash Flow	000 R$		-			-		-		1,334			847			16,208			60,166			129,244			176,616			448,808			1,102,522			1,606,537			1,826,511			2,040,346
Free Cash Flow	000 US$		-			-		-		267			(97	)		3,072			8,792			13,816			9,475			54,438			130,743			100,803			43,995			42,767
Accumulated Free Cash Flow	000 US$		-			-		-		267			169			3,242			12,033			25,849			35,323			89,762			220,504			321,307			365,302			408,069
EBITDA	000 R$		-			-		-		2,279			4,827			19,214			48,365			101,013			93,165			294,974			669,998			497,831			211,843			214,435
EBITDA	000 US$		-			-		-		456			965			3,843			9,673			20,203			18,633			58,995			134,000			99,566			42,369			42,887
Discount Rate	%pa		8	%
Results
After-Tax NPV8	000 US$		188,661
IRR	%pa		n/a
Simple Payback	years		n/a

⁽¹⁾ 2020 based on the 3 months from the Effective Date to December 31, 2020

⁽²⁾ Other Revenue includes recovery of water pipeline operating costs and scrap sales

1.13 Conclusions

1.13.1 Mineral Exploration and Geology

The geological descriptions, sampling procedures and density tests that were evaluated were found to be of acceptable quality and in accordance with industry best practices. Data was stored in a standardized database, which was found to be secure and auditable. The complexity of the mineralization controls and the quantity and phases of data in the Curaçá Valley merits the use of visualization and data integration tools that are more advanced than those which MCSA had at its disposal at the time of the MCSA Mining Complex Technical Report.

While GE21 believes that the current QA/QC program can guarantee the quality of the exploration data used in the resource estimates, GE21 suggests that a chain of custody program be implemented for good measure. GE21 supervised the process through which density was determined and concluded that it aligns with industry best practices.

1.13.2 QA/QC

GE21 performed the evaluation of the data generated after the last validation and concluded that the QA/QC procedures are being followed using the same standards. GE21 considered the standard QA/QC procedures to be in accordance with mining industry best practice and appropriate for use in the current Mineral Resource estimation.

It was observed tthroughout the 2020 review period by GE21, that the MCSA laboratory continues to display a tendency to underestimate the copper assay values when using certified reference material (“CRM”) ITAK 825; however, the results of the laboratory when using CRM ITAK 851, which features a similar copper grade range, demonstrate better reproducibility.

1.13.3 Geological Model

The procedure that was adopted to produce the 3D geological model (wireframes), consisting of generating triangulations between interpreted geological cross sections, was executed properly and in accordance with the opinions of GE21. Due to the plunge of the mineralized zone at the Pilar UG Mine towards the north and the east-west geological cross sections, a pattern of sub-vertical discontinuous lenses was created locally within the regions of lower drill hole density.

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GE21 noted that, with respect to the integration and interpretation of geological data, limited lithostructural mapping (mine, surface and subsurface) had been undertaken. GE21 also notes that the field interpretation and 3D interpretation were historically focused on interpreting only copper grade, therefore, few vertical and horizontal lithostructural geological sections have been developed which may provide greater understanding and control of aspects relating to the geology and other potential metals of significance in the Curaçá Valley. In 2020, MCSA started to adopt 3D implicit modelling techniques based upon grouped lithologies and copper grade shells using Leapfrog software. This methodology was used by GE21 to create 3D validation models and GE21 encourages the expansion of this program at MCSA.

1.13.4 Grade Estimation

The variograms that were used in the estimation method are satisfactory and consistent with respect to the grade estimation that was calculated via ordinary kriging, making use of search anisotropy determined in the variographic analysis.

GE21 considers the resource classification model and the analysis of criteria for the classification of those Mineral Resources, to be satisfactory although some processes could be improved. Such recommended improvements did not impose limitations on the classification of Measured and Indicated Mineral Resources.

1.13.5 Mineral Resource Estimate

The authors of the MCSA Mining Complex Technical Report are not aware of any environmental, permitting, legal, title, taxation, socio-economic, marketing, political or other relevant factors which could materially affect the current Mineral Resource estimate. It is the opinion of GE21 that the current drilling information is sufficiently reliable to interpret with confidence the boundaries of higher-grade mineralized domains and that the assay data is sufficiently reliable to support estimation of Mineral Resources. The authors of the MCSA Mining Complex Technical Report that validated the Mineral Resource estimate did not identify overall or local grade biases, as demonstrated by Swath Plot analysis. The authors found that the quality of the data is appropriate for the classification of the Mineral Resource, in accordance with the CIM Standards and CIM Guidelines.

1.13.6 Mineral Reserve Estimate

GE21 and BNA carried out a detailed review of the current Mineral Reserves for Curaçá Valley, aimed at demonstrating its technical and profitable extraction for the production and sale of copper concentrate. The results for this review, demonstrated a good adherence using detailed verification procedures performed by the authors of the MCSA Mining Complex Technical Report. In general, resulting in differences of less than 1% in the total copper metal contained, which BNA considered acceptable.

Several observations related with the current Mineral Reserve are worth noting:

• The metallurgical recovery value is expected to rise after commissioning of the HIG Mill. This potential gain was not applied for this current estimation of reserves, which was a correct measure, according to BNA assessment given the limited operating history of the HIG Mill prior to the Effective Date;

• Within the Vermelhos District ore sorting will be integrated within the open pit operations to reduce transport and processing costs. However, these potential savings have not been considered in current reserve estimation as the Ero Copper and MCSA teams continue to conduct additional project assessments as at the Effective Date of the MCSA Mining Complex Technical Report;

• The operating mines (Pilar UG Mine and Vermelhos UG Mine) currently employ a joint reconciliation process in which it is difficult to accurately differentiate mine-to-mill reconciliation from one mine to another; and,

• As at the date of the MCSA Mining Complex Technical Report, the ventilation and cooling infrastructure for the Pilar UG Mine, is being upgraded according to the plans developed by the Ero Copper and MCSA teams.

The Mineral Reserve estimation has been performed according to industry best practice and conform to the CIM Standards and CIM Guidelines.

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BNA has not identified any mining, metallurgical, infrastructure, permitting, legal, political, environmental, technical, or other relevant factors that could materially affect the potential development of the current Mineral Reserves.

1.13.7 Deepening Inferred Project

NCL has carried out a mine schedule, production plan and capital cost estimates at a preliminary economic analysis level for the Deepening Inferred Project under the supervision of GE21 and BNA. Mining and processing operating costs were prepared by MCSA under the supervision of GE21 and BNA. GE21 reviewed these plans and estimates and agrees with the potential economic value of the inferred Mineral Resource contained within the Deepening Extension Zone. GE21 is satisfied that the technical work adheres to industry best practices and that the favorable results of the potential economic assessment have been demonstrated, thereby warranting further work.

As at the date of the MCSA Mining Complex Technical Report, the Company has commenced an approximate US$7 million drill program to continue infill drilling of the Inferred Mineral Resource to further upgrade this material; however, until this work is completed and the Inferred Mineral Resources have been upgraded to Mineral Reserves, there is no certainty this material will be converted into Mineral Reserves.

1.14 Recommendations

Regarding the Mineral Resources and Mineral Reserves estimation, the authors recommend a work program to include the following, most of which can be completed at little or no cost. Estimated costs of the work program are shown in the table below.

i. Formalize the use of implicit modelling internally throughout MCSA, emphasizing structural geology and variation in lithology for domain definition and exploration target integration.

ii. Implement additional empirical criteria for resource classification, based on the ‘15% Rule’, as commonly attributed to Dr. Harry Parker and since expanded upon in multiple sources of geostatistical literature.

iii. Expand ongoing geometallurgical studies to encompass all deposits and blends therein to study mill feed interaction. Suggest including standardized laboratory tests as normal operating procedure. Additionally, it is recommended that MCSA advance geometallurgical studies for inclusion in Mineral Reserve definition, to classify metallurgical recovery according to the different characteristics associated with each lithological domain rather than by deposit.

iv. Confirm the expected improvement in metallurgical recoveries following the addition of the HIG Mill to validate a recovery improvement in the definition of Mineral Reserves in the future.

v. Validate of the certified grade for CRM ITAK 825 due to the observed inconsistencies in assay values, in contrast with the consistent results obtained when utilizing CRM ITAK 851, which has a similar Cu grade range.

vi. Recommend standardizing QA/QC mass controls during assay sample crushing and grinding to evaluate the quality of the comminution procedures and ensure no sample loss during sample preparation.

vii. Install a sample tower to improve the mine to mill reconciliation process for the current operating mines. Such an installation will allow differentiation of ore source reconciliation within the processing plant.

viii. Improve systems for Mineral Reserve attribute database management to standardize fleet sizing, economic and consumable parameters, swell factors, dilution and mine call factors as well as store historic block model and design attributes including mathematical pit designs and supporting assumptions within a centralized validated database to improve the application of Mineral Reserve modifying factors in future studies.

ix. Advance geotechnical monitoring campaigns and 3D geotechnical lithological models to improve structural understanding of the current and future operations of the Curaçá Valley.

x. Execute the installation of ventilation and cooling within the operations of the Pilar UG Mine, both in the short term and in the long term as currently envisioned to ensure safe delivery of the Deepening Extension Project.

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xi. A drill program for the Deepening Inferred Project be executed so as to promote the resource classification from Inferred to Measured or Indicated Mineral Resources. Additional engineering work should continue alongside the exploration program to promote the confidence of the mine design and costing parameters of the Deepening Inferred Project. The authors note as at the date of the MCSA Mining Complex Technical Report, such programs were underway.

Table 1-18: Proposed Budget for Recommended Work

Program	Budget (US$)
Advance geometallurgical studies	$	200,000
Continued multi-element assays for the Vermelhos District (incl. check assays)	$	50,000
Installation of sampling tower to enhance Mine-to-Mill reconciliation for multiple mining operations	$	500,000
Improvement of reconciliation systems	$	60,000
Advance geotechnical monitoring campaings and geotechnical-lithology model development	$	100,000
Deepening Inferred Project drill program	$	7,000,000
Total	$	7,910,000

Updated Information with respect to the MCSA Mining Complex

The following update has been prepared under the supervision of and approved by Ricardo Emerson Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

Mineral Resource and Mineral Reserve Estimates as at December 31, 2020

The effective date of the underground and open pit Mineral Resource estimates contained in the MCSA Mining Complex Technical Report varied by deposit, as follows:

· the underground Mineral Resource has an effective date of August 8, 2020, except for P1P2 (July 24, 2020), R75 (July 9, 2019) and Suçuarana (July 3, 2020) within the Pilar District; Vermelhos Mine (July 29, 2020), Siriema and N8 (July 4, 2020), N9 (July 9, 2019) within the Vermelhos District; and Surubim District effective date of July 9, 2019 except for Terra do Sal (July 3, 2020); and

· the open pit Mineral Resource has an effective date of August 8, 2020, except for Suçuarana (July 3, 2020), R22W and R75 (July 9, 2019) within the Pilar District; Siriema and N8 (July 4, 2020), N9 and Vermelhos North (July 9, 2019) within the Vermelhos District; and an effective date of July 9, 2019 for the Surubim District except Terra do Sal (July 3, 2020).

The underground and open pit Mineral Reserve estimates contained in the MCSA Mining Complex Technical Report were prepared as at October 1, 2020.

As production at the MCSA Mining Complex has continued since the preparation of these estimates, the Mineral Resources and Mineral Reserves at the MCSA Mining Complex have decreased. Accordingly, set out below is an internal update of the Mineral Resource and Minerals Reserve estimates as at December 31, 2020, based on cut-off grades of 0.51% copper as well as a marginal cut-off grade of 0.32% copper used for underground Mineral Resources and a cut-off grade of 0.21% copper used for open pit Mineral Resources, and accounting for the material mined since the preparation of the Mineral Resource and Mineral Reserve estimates contained in the MCSA Mining Complex Technical Report. Mineral Resources are shown inclusive of Mineral Reserves. Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.

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Table 1-18: Underground Mineral Resources, December 31, 2020

		Tonnage		Grade		Cu Contained
Underground Mine / Deposit	Classification	(000 tonnes)		(Cu %)		(000 tonnes)
	Measured		-		-		-
Deepening Extension Zone, Pilar Mine	Indicated		7,527		1.86		140.0
(Pilar Mine below Level -965)	Measured & Indicated		7,527		1.86		140.0
	Inferred		4,476		2.12		94.8
Pilar Mine Ex-Deepening Extension Zone	Measured		26,829		1.50		401.3
(Pilar Mine above Level -965)	Indicated		13,991		1.11		154.8
	Measured & Indicated		40,820		1.36		556.0
	Inferred		12,790		0.87		111.6
	Measured		816		0.72		5.9
Pilar District, Other Underground	Indicated		1,045		0.89		9.3
(R75, Sucuarana)	Measured & Indicated		1,861		0.82		15.2
	Inferred		742		0.60		4.5
	Measured		27,645		1.47		407.2
Pilar District Underground Total	Indicated		22,563		1.35		304.2
	Measured & Indicated		50,208		1.42		711.3
	Inferred		18,008		1.17		210.9
	Measured		3,240		2.66		86.1
Vermelhos Mine	Indicated		4,511		1.19		53.6
	Measured & Indicated		7,751		1.80		139.8
	Inferred		4,128		0.86		35.5
	Measured		1,465		0.79		11.6
Vermelhos District, Other Underground	Indicated		4,153		0.80		33.4
(Siriema, N8/N9)	Measured & Indicated		6,676		0.91		61.1
	Inferred		7,689		0.88		67.9
	Measured		4,402		2.33		102.4
Vermelhos District Underground Total	Indicated		8,667		1.00		87.1
	Measured & Indicated		13,069		1.45		189.5
	Inferred		13,781		0.93		127.6
	Measured		1,841		0.96		17.7
Surubim District, Other Underground	Indicated		3,062		0.96		29.3
(Surubim, C12, Cercado Velho, Lagoa da Mina, Terra do Sal)	Measured & Indicated		4,904		0.96		47.0
	Inferred		4,482		0.92		41.3
	Measured		1,841		0.96		17.7
Surubim District Underground Total	Indicated		3,062		0.96		29.3
	Measured & Indicated		4,904		0.96		47.0
	Inferred		4,482		0.92		41.3
	Measured		33,888		1.56		527.3
Total, Underground	Indicated		34,292		1.23		420.6
	Measured & Indicated		68,180		1.39		947.9
	Inferred		36,271		1.05		379.8

Underground Mineral Resource Notes:

1. Mineral Resource effective date as at December 31, 2020.

2. Presented Mineral Resources inclusive of Mineral Reserves. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

3. Mineral Resources have been constrained within newly developed 3D lithology models applying a 0.45% and 0.20% copper grade envelope for high and marginal grade, respectively. Within these envelopes, Mineral Resources for underground deposits were constrained using varying stope dimensions of up to 20m by 10m by 35m applying a 0.51% copper cut-off grade, as well as a 0.32% copper marginal cut-off grade. Mineral Resources have been estimated using ordinary kriging inside 5m by 5m by 5m block sizes. The Mineral Resource estimates were prepared in accordance with the CIM Standards, and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate to the deposit.

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Table 1-19: Open Pit Mineral Resources, December 31, 2020

		Tonnage		Grade		Cu Contained
Open Pit Mine / Deposit	Classification	(000 tonnes)		(Cu %)		(000 tonnes)
	Measured		3,172		0.49		15.4
Pilar District, Open Pit	Indicated		365		0.45		1.6
(R22W, Suçuarana, R75)	Measured & Indicated		3,537		0.48		17.0
	Inferred		351		0.47		1.6
	Measured		3,172		0.49		15.4
Pilar District Open Pit Total	Indicated		365		0.45		1.6
	Measured & Indicated		3,537		0.48		17.0
	Inferred		351		0.47		1.6
	Measured		-		-		-
Siriema Deposit	Indicated		2,956		0.92		27.1
	Measured & Indicated		2,956		0.92		27.1
	Inferred		187		0.99		1.9
	Measured		7,420		0.55		41.1
N8/N9 Deposits	Indicated		13,562		0.48		64.9
	Measured & Indicated		20,982		0.51		106.0
	Inferred		858		0.40		3.4
	Measured		-		-		-
Vermelhos North	Indicated		-		-		-
	Measured & Indicated		-		-		-
	Inferred		121		0.88		1.1
	Measured		7,420		0.55		41.1
Vermelhos District Open Pit Total	Indicated		16,518		0.56		92.0
	Measured & Indicated		23,938		0.56		133.1
	Inferred		1,166		0.55		6.4
	Measured		2,340		0.93		21.7
Surubim Mine	Indicated		73		0.84		0.6
	Measured & Indicated		2,413		0.92		22.3
	Inferred		3		0.80		0.0
	Measured		1,272		0.94		11.9
C12 Deposit	Indicated		942		0.70		6.6
	Measured & Indicated		2,214		0.84		18.6
	Inferred		154		0.56		0.9
	Measured		1,067		0.61		6.5
Surubim District, Other Open Pit	Indicated		1,436		0.67		9.6
(Cercado Velho, Lagoa da Mina,	Measured & Indicated		2,503		0.64		16.1
Terra do Sal)	Inferred		1,255		0.15		1.9
	Measured		4,678		0.86		40.1
Surubim District Open Pit Total	Indicated		2,452		0.69		16.8
	Measured & Indicated		7,130		0.80		56.9
	Inferred		1,413		0.20		2.8
	Measured		15,270		0.63		96.6
Total, Open Pit	Indicated		19,335		0.57		110.5
	Measured & Indicated		34,605		0.60		207.0
	Inferred		2,930		0.37		10.8

Open Pit Mineral Resource Notes:

1. Mineral Resource effective date as at December 31, 2020.

2. Presented Mineral Resources inclusive of Mineral Reserves. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

3. Mineral Resources have been constrained within newly developed 3D lithology models using a 0.21% copper cut-off grade for open pit deposits. Mineral Resources have been estimated using ordinary kriging inside 5m by 5m by 5m block sizes. The Mineral Resource estimates were prepared in accordance with the CIM Standards, and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate to the deposit.

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The Mineral Reserves for the Pilar UG Mine, Vermelhos UG Mine, N8/N9 OP Mine, Siriema OP Mine, C12 UG Mine, C12 OP Mine and the Surubim OP Mine are derived from the Measured and Indicated Mineral Resources as defined within the resource block models following the application of the same economic and other modifying factors set out in the MCSA Mining Complex Technical Report. Inferred Mineral Resources, where unavoidably included within a defined mining shape, have been assigned zero grade.

Table 1-20: Mineral Reserves, December 31, 2020

			Tonnage		Grade		Cu Contained
	Classification		(000 tonnes)		(Cu %)		(000 tonnes)
Reserves, Underground
Deepening Extension Zone, Pilar UG Mine		Proven		-		-		-
(Pilar Mine below Level -965)		Probable		7,432		1.68		125
Pilar UG Mine Ex-Deepening Extension Zone		Proven		5,835		1.41		82
(Pilar Mine above Level -965)		Probable		7,725		1.09		84
Vermelhos UG Mine		Proven		3,224		2.04		66
		Probable		1,839		1.25		23
Surubim District, Underground		Proven		513		1.09		6
(C12 Underground)		Probable		515		0.83		4
Total Proven, Underground				9,707		1.63		158
Total Probable, Underground				17,516		1.34		236
Total Proven & Probable, Underground				27,224		1.45		394
Reserves, Open Pit
N8/N9 OP Mine		Proven		7,355		0.55		40
(Vermelhos District)		Probable		8,012		0.54		44
Siriema OP Mine		Proven		-		-		-
(Vermelhos District)		Probable		3,011		0.88		26
Surubim District, Open Pit		Proven		2,778		0.82		23
(Surubim & C12)		Probable		123		0.55		1
Suçuarana South OP Mine		Proven		1,623		0.42		7
(Pilar District)		Probable		328		0.46		2
Total Proven, Open Pit				11,757		0.60		70
Total Probable, Open Pit				11,474		0.63		72
Total Proven & Probable, Open Pit				23,230		0.61		142

Mineral Reserve Notes:

1. Mineral Reserve effective date of December 31, 2020.

2. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

3. Mineral Reserve estimates were prepared in accordance with the CIM Standards, and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate for the deposit. Mineral Reserves are based on a long-term copper price of US$2.75 per lb, and a USD:BRL foreign exchange rate of 4.27, except for the C12 (Surubim District) and Suçuarana (Pilar District) open pit mines, whose design was not changed since 2019, and continued to assume a 3.70 USD:BRL foreign exchange rate. Mineral Reserves are the economic portion of the Measured and Indicated Mineral Resources. Mining dilution and recovery factors vary for specific Mineral Reserve sources and are influenced by factors such as deposit type, deposit shape, stope orientation and selected mining method. Inferred resource blocks, where unavoidably mined, were assigned zero grade. Dilution occurring from Measured & Indicated resource blocks was assigned grade based upon the Mineral Resource grade of the blocks included in the dilution envelope.

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NX GOLD PROPERTY

The scientific and technical information in this section relating to the NX Gold Property, other than the scientific and technical information under the heading “NX Gold Property – Updated Information with respect to the NX Gold Property”, is a direct extract of the Executive Summary section contained in the NX Gold Technical Report dated January 8, 2021 with an effective date of September 30, 2020, which has been conformed to be consistent with the formatting and other defined terms within this AIF. The entire NX Gold Technical Report, a copy of which is available for review under the Company’s profile on SEDAR at www.sedar.com, is incorporated by reference into this AIF and should be consulted for details beyond those incorporated herein.

The scientific or technical information set out in this AIF under the heading “NX Gold Property – Updated Information with respect to the NX Gold Property”, has been reviewed and approved by Ricardo Emerson Re, MSc, MBA, MAusIMM (CP)
(No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

Executive Summary

1.1 Introduction

The purpose of the NX Gold Technical Report is to set out and provide background and supporting information on the current Mineral Resources and Mineral Reserves for the NX Gold Mine, a producing underground gold mining operation located in the State of Mato Grosso Brazil and wholly-owned by NX Gold, a company formed under the laws of Brazil. The effective date of the NX Gold Technical Report is September 30, 2020 (in this section of the AIF, the “Effective Date”) and the issue date of the NX Gold Technical Report is January 8, 2021. The NX Gold Technical Report has been prepared by GE21 on behalf of Ero Copper of Vancouver, Canada and existing under the BCABC.

Ero Copper is a publicly listed company that trades on the Toronto Stock Exchange under the ticker, “ERO”. Ero Copper’s principal asset is its 99.6% ownership interest in MCSA. MCSA’s predominant activity is the production and sale of copper concentrate from the Vale do Curaçá Property, which is located within the Curaçá Valley, northeastern Bahia State, Brazil, with gold and silver produced and sold as by-products. Ero Copper’s wholly owned subsidiary, Ero Gold (existing under the BCABC) currently owns a 97.6% ownership interest in NX Gold.

The NX Gold Mine was constructed and commenced commercial production in 2012, with the first full year of production occurring in 2013. As of the end of September 2020, approximately 241,000 ounces of gold had been produced from the NX Gold Mine. As of the date of the NX Gold Technical Report, there are currently 8 drill rigs operating on the property. Exploration activities are underway on the central Santo Antônio orebody as well as testing for possible extensions of the Brás and Buracão orebodies to depth and along strike. The first regional exploration program on the property commenced in 2020.

Doré bars containing gold and silver, as well as lesser amounts of lead, are shipped from the mine weekly by airplane via a gravel airstrip located on the property. The majority of NX Gold’s Mineral Resources, Mineral Reserves and all of the mine’s current production is from the Santo Antonio vein– an east-west striking, shear-zone hosted, quartz vein, accessed from a single mine portal and decline and from the Buracão vein. During the second half of 2019, the mine successfully transitioned mining activities from the Brás and Buracão veins, into the centrally located Santo Anton vein where all current mining activities take place.

The NX Gold Technical Report and estimates herein have been prepared following the guidelines of the NI 43-101.

The NX Gold Technical Report provides a summary of the work completed by NX Gold and its independent consultants as of the Effective Date. All dollar amounts presented in the NX Gold Technical Report are stated in US dollars unless otherwise specified.

1.2       Property Description and Location

NX Gold owns a 100% interest in the NX Gold Mine, located in the eastern portion of the State of Mato Grosso, Brazil. The mine is located 18km west of the town of Nova Xavantina, with a population of approximately 20,000 people, and approximately 670 km east of Cuiabá, the capital city of Mato Grosso. The total NX Gold Mine property, including exploration licences, measures 31,716.2 ha. The property is comprised of one mining concession, where all current mining and processing activities occur (registration number 866269/1990), that totals 620 ha and eight exploration licenses covering an area of 31,096.2 ha. Within the mining concession, NX Gold holds 100% legal and beneficial ownership, including surface rights. There are no time constraints provisioned with the mining concession; however, operating permits and licenses are extended and renewed in normal course of business according to the nature of each permit and requirements therein. All relevant licenses and operational permits in support of the mine’s operation are in good standing.

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Within the exploration licences, NX Gold’s interests include the right to access the property and to engage in exploration, development, processing, and construction activities in support of mineral exploration and development. Where applicable, compensation is provided to the holder of surface rights for occupation or loss caused by the work. All exploration licenses are currently valid and, for those concessions where expiration dates are approaching, applications have been, or are expected to be submitted for renewal at the time of expiry.

1.3        Geology and Mineralization

Gold and silver mineralization at the NX Gold Mine can be characterized as a shear-zone hosted, sulphide-rich, laminated quartz vein. Economic mineralization on the property, to date, has been hosted within the northeast trending Araés shear zone that cross-cuts the deformed and metamorphosed volcano-sedimentary sequence of the Proterozoic Cuiabá Group and is generally associated with felsic dikes.

Economic gold and silver mineralization at the NX Gold Mine is structurally controlled within the Araés shear zone. Gold and silver are currently mined from a major sulphide-rich, laminated quartz vein dipping approximately 40 degrees to the north-northwest and striking to the west-southwest – the Santo Antonio vein. Prior to the second half of 2019, mining activities occurred in the Brás and Buracão veins, located to the east and west of Santo Antonio, respectively. Vein dimensions are variable throughout the deposit, with an average thickness of 4 meters. Local occurrences of up to 10 meters in vein thickness are common, particularly within the Brás and lower levels of the Santo Antonio veins. Where gold and silver grades are found in economic concentrations, quartz veins typically contain approximately 2 to 15 percent total sulphide represented mostly by pyrite and galena, as well as minor chalcopyrite, bornite, pyrrhotite, and sphalerite. Higher gold and silver grades are generally associated with galena, chalcopyrite, bornite, and sphalerite.

Historic and the current known extent of gold mineralization at the NX Gold Mine are structurally controlled and hosted in four major sulphide-rich quartz veins/bodies, from west to east: Buracão, Santo Antonio, Brás and Matinha. The veins are hosted in strongly deformed metamorphosed sedimentary rock units and diorite that trend generally to the northeast. The veins exhibit a typical laminated pattern parallel with the vein contacts. The laminations are characterized by alternating quartz bands and foliated host rocks indicative of multiple pulses of mineralized fluids during formation.

The Buracão vein is located on the western portion of the mining concession and includes a primary laminated vein measuring 100 meters in length and dipping 45 degrees to the northwest in the upper portion of the mine and 70 meters in length dipping 40 degrees to the northwest in the lower portion of the mine. The Brás vein is located to the east of the Buracão vein and includes a primary laminated vein measuring 220 meters in strike length in the upper part of the mine and 50 meters in strike length in the lower levels of the mine. The Santo Antonio vein is located between the Brás and Buracão veins and currently extends over 300 meters in strike length. The Santo Antonio vein, discovered during the 2018/2019 drill program, further drilled in 2020, and remains open to depth. Continued drill-testing of extensions of the vein are planned for 2020 where high-grade drill intercepts have been shown to occur at depth. To date, the mineralogical characterization of all of the veins containing economic values of gold and silver on the NX Gold property are the same.

1.4       Exploration

The occurrence of gold in the Araés shear zone has been known for over 80 years. Although limited information exists, extensive artisanal mining activity occurred in open pit and in underground operations prior to the formalization of the mine concessions in 1990. Between 1985 and 2004 two companies, Mineração Araés and Mineração Nova Xavantina, conducted geological and metallurgical studies, geological mapping and a total of 2,306 meters of drilling in 8 diamond drill holes. In 2004, MCSA acquired the mineral and surface rights for the property. Between 2006 and 2012, MCSA drilled a total of 43,441 meters in 212 surface diamond drill holes. In 2013, the property was transferred to NX Gold, a subsidiary of MSCA. Between 2013 and 2015, NX Gold drilled a total of 27,822 meters in 104 surface diamond drill holes and a total of 9,427 meters in 107 underground diamond drill holes. In December of 2016, MCSA (and its interest in NX Gold) was acquired by Ero Copper.

Other exploration activities undertaken from 2013 to 2015 included regional geological mapping, soil sampling and a 1,969 line-kilometer airborne magnetic survey completed in 2013.

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Following the acquisition of NX Gold in 2016 by Ero Copper, commencing in 2018, NX Gold conducted the largest drill programs undertaken on the property to date, completing a total of 63,198 meters of drilling in 129 surface diamond drill holes and 1,315 meters in 8 underground drill holes, resulting in the discovery of, and continued delineation of the Santo Antonio vein. In total, the 2018 to 2020 drill programs conducted by the Company represent more than 40% of the total drill meterage drilled on the property. The drilling followed standard industry procedures including measuring core recovery, rock quality design, taking photos of the core boxes, geological logging of the core, sampling, and assaying. NX Gold inserts a series of certified reference material, blanks, and laboratory duplicates in the stream of samples to verify the assay results as part of its quality assurance, QA/QC procedures.

1.5       Drilling, Sample Preparation, Analysis and Security

Several drill programs have been conducted at the NX Gold Mine. Prior to the 2018 to 2020 drill programs, the bulk of prior drilling occurred during the period from 2006 to 2012 when the property was held by MCSA. The global drill hole database at the NX Gold Mine includes 559 drill holes, including 150 underground drill holes, totaling 147,670 meters of drilling, of which, 13,209 meters are from underground drilling.

Drilling and assaying undertaken in support of the current Mineral Resource and Mineral Reserve estimate has been carried out using sampling, security and QA/QC procedures that are in line with industry best practices.

Beginning in 2015, a full QA/QC program meeting generally recognized industry best practices has been in use. Standardized procedures are used in all aspects of the exploration data acquisition and management including surveying, drilling, sampling, sample security, assaying, and database management.

QA/QC measures, as part of the routine core sampling procedures, use blank, standard and duplicate samples to allow verification of the fire assay results produced by the NX Gold laboratory. For the 2014 to 2020 drilling programs, control samples were inserted at the frequency of 1 gold certified reference, 1 blank sample and 1 duplicate pulp sample every 20 samples.

The authors of the NX Gold Technical Report performed an evaluation of the data used in the determination of NX Gold’s Mineral Resource estimate and found the results to be in accordance with industry best practice and appropriate for use in the current Mineral Resource estimate.

1.6       Mineral Resource and Mineral Reserve Estimate

Mineral Resources

The mineral resource estimates were prepared in accordance with the CIM Standards and the CIM Guidelines. Grade-shell models using 1.20 gpt were used to generate a 3D model of the NX Gold Mine, and within this, a gold cut-off grade of 1.90 gpt was considered of Mineral Resources based upon a gold price of US$1,900 per ounce of gold and total underground mining and processing costs of US$115.14 per tonne of ore mined and processed. Mineral Resources have been estimated using ordinary kriging inside block sizes of 2.5 meters (x), by 2.5 meters (y), by 0.5 meters in height (z) and a minimum mining stope dimension of 1.25 meters (x), by 1.25 meters (y), by 1.5 meters in height (z).

The NX Gold Mineral Resource estimate was sub-divided in four mineralized veins: Brás, Buracão, Santo Antônio and Matinha.

Mineral Resource effective date of August 31, 2020.

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Table 1 - Mineral Resource Estimate

Classification	Tonnage (000 tonnes)		Grade (gpt Au)		Au Contained (000 ounces)
Indicated Mineral Resource (inclusive of Reserves)
Santo Antonio Vein		763.3		10.97		269.2
Brás Vein		6.9		3.36		0.7
Buracão Vein		-		-		-
Total Indicated Resource		770.2		10.90		269.9
Inferred Mineral Resource
Santo Antonio Vein		267.8		13.08		112.6
Matinha Vein		149.0		12.15		58.2
Brás Vein		149.3		4.81		23.1
Buracão Vein		7.7		2.77		0.7
Total Inferred Resource		573.8		10.55		194.6

1. Mineral Resource effective date of August 31, 2020

2. Presented Mineral Resources inclusive of Mineral Reserves. Indicated mineral resource totals are undiluted. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

3. Grade-shell 3D models using 1.20 gpt gold were used to generate a 3D mineralization model of the NX Gold Mine. Mineral Resources were estimated using ordinary kriging within 2.5 meter by 2.5 meter by 0.5 meter block size. Mineral Resources were constrained using a minimum stope dimension of 1.25 meters by 1.25 meters by 1.50 meters and a cut-off of 1.90 gpt based on gold price of US$1,900 per ounce of gold and total underground mining and processing costs of US$115.14 per tonne of ore mined and processed. The Mineral Resource estimates were prepared in accordance with the CIM Standards, and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate to the deposit.

Mineral resources which are not mineral reserves do not have demonstrated economic viability.

Mineral Reserves

Mineral Reserve estimates were prepared in accordance with the CIM Standards and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate for the deposit. Mineral Reserves are based on a long-term gold price of US$1,650 per ounce, and a USD:BRL foreign exchange rate of 5.00. Mineral Reserves are the economic portion of the Indicated Mineral Resources. Mineral Reserve estimates include operational dilution of 17.4% plus planned dilution of approximately 8.5% within each stope for room-and-pillar mining areas and operational dilution of 3.2% plus planned dilution of 21.2% for cut-and-fill mining areas. Assumes mining recovery of 92.5% and 94.7% for room-and-pillar and cut-and-fill areas, respectively. Practical mining shapes (wireframes) were designed using geological wireframes / mineral resource block models as a guide. The Mineral Reserve estimates for the NX Gold Mine were prepared in accordance with the CIM Guidelines and the CIM Standards by NX Gold Mine engineering personnel under the direct supervision of Sr. Porfirio Cabaleiro Rodriguez of GE21, an independent qualified person as such term is defined under NI 43-101.

It is the opinion of GE21 that the current Mineral Reserves for the underground operation have been estimated in a manner consistent with industry best practices, CIM Guidelines, and CIM Standards.

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Table 2 - Mineral Reserve Estimate

Classification	Tonnage (000 tonnes)		Grade (gpt Au)		Au Contained (000 ounces)
Probable Mineral Reserve
Santo Antonio Vein		862.1		8.83		244.7
Brás Vein		-		-		-
Buracão Vein		-		-		-
Total Probable Reserve		862.1		8.83		244.7

1. Mineral Reserve effective date of September 30, 2020.

2. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

3. Mineral reserve estimates were prepared in accordance with the CIM Standards and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate for the deposit. Mineral reserves are based on a long-term gold price of US$1,650 per oz of gold, and a USD:BRL foreign exchange rate of 5.00. Mineral reserves are the economic portion of the Indicated Mineral Resources. Mineral Reserve estimates include operational dilution of 17.4% plus planned dilution of approximately 8.5% within each stope for room-and-pillar mining areas and operational dilution of 3.2% plus planned dilution of 21.2% for cut-and-fill mining areas. Assumes mining recovery of 92.5% and 94.7% for room-and-pillar and cut-and-fill areas, respectively. Practical mining shapes (wireframes) were designed using geological wireframes / mineral resource block models as a guide.

The Mineral Reserves for the NX Gold Mine are derived from the Indicated Mineral Resource as defined within the resource block model following the application of economic and other modifying factors further described below. Inferred Mineral Resources, where unavoidably mined within a defined mining shape have been assigned zero grade. Dilution occurring from Indicated Mineral Resource blocks were assigned grade based upon the current Mineral Resource grade of the blocks included in the dilution envelope. Mineral Reserves were classified according to the CIM Standards and the CIM Guidelines by Sr. Porfirio Cabaleiro Rodriguez of GE21, an independent qualified person as such term is defined under NI 43-101.

Mineral Reserve cut-off grades and parameters applied to the Mineral Reserve estimate are summarized below:

· 3.14 gpt applied to mining stopes, in room and pillar mining areas, and 3.22 gpt to stopes in cut and fill mining areas, incorporating mining and development, processing, general and administrative and indirect costs;

· 0.80 gpt applied to gallery development incorporating development and processing costs; and,

· 2.30 gpt applied to mining marginal material adjacent to planned mining stopes incorporating mining, development and processing costs.

Mineral Reserve cost assumptions are based on actual operating cost data during the eight-month period from January 1, 2020 to August 30, 2020, expressed in USD per tonne run-of-mine, converted at a USD:BRL foreign exchange rate of 5.00 corresponding to the average foreign exchange rate during this same period.

A summary of the Mineral Reserve estimate parameters is provided below:

Table 3 - Mineral Reserve Cut-off Parameters

Mining Costs (US$/tonne ROM)	$	76.52
Processing Costs (US$/tonne ROM)	$	38.62
G&A Costs (US$/tonne ROM)	$	18.10
Indirect Costs (US$/tonne ROM)	$	22.07
Metallurgical Recovery (average)		91.0	%
Gold Price (US$/oz)	$	1,650
Foreign Exchange Rate (USD:BRL)		5.00

Other modifying factors considered in the determination of the Mineral Reserve estimate include:

· A cut-off grade of 3.14 gpt was applied to mining stopes within the room and pillar mining areas, and 3.22 gpt to stopes within the cut and fill mining areas, in the determination of planned mining stopes within the Mineral Resource blocks based on actual operating cost data and past operating performance of the mine.

· The mining method employed for the Santo Antônio vein is inclined room and pillar for the thicker lower-panel of the vein, and overhand cut and fill for the thinner upper panel of the vein incorporating paste-fill. A new paste-fill plant was designed, and will be constructed at a cost of approximately US$2 million, with the aim of improving overhand cut and fill operations as well as enhancing pillar recovery throughout the mine.

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· Maximum stope spans in the room and pillar mining area are based on a design stope of 6m by 4m between pillars. For cut and fill mining areas the size of stopes are based on a designed stope measuring 18m along strike with a frontal slice of 3 vertical meters.

· Within designed stopes, all contained material was assumed to be mined with no selectivity. Inferred Mineral Resources, where unavoidably included within a defined mining shape have been included in the Mineral Reserves estimate at zero grade. Mining dilution resulting from Indicated blocks was assigned the grade of those blocks captured in the dilution envelope using the current Mineral Resources estimate.

Mineral Reserve effective date of September 30, 2020.

1.7       Mining Methods

The mining method currently employed for the Santo Antonio vein is inclined room and pillar. Prior to commencing operations within the Santo Antonio vein, the mine employed a combination of inclined room and pillar and overhand cut and fill, with backfill requirements generated from waste development. Mining method selection has been based upon desired selectivity, geometry of the orebodies (both planned and previously mined) as well as the rock mechanic characteristics of the footwall and hanging wall.

For the purposes of the current Mineral Reserve and life-of-mine plan, the Santo Antonio vein has been divided into two main panels on -65 (upper) and -170 (lower) based upon the relative strength characteristics of these zones within the mine. In the upper panel, underhand cut and fill utilizing paste back-fill will be employed, while inclined room in pillar, the current mining method, will be employed in the lower panel. Cemented paste will also be employed in the lower panel to enhance pillar recovery following primary mining. NX Gold undertook extensive geomechanical analysis and 3D modeling as well as knowledge gained through prior mining in Brás and Buracão, and current operating procedures within the Santo Antonio vein, to define these mining methods.

The underhand cut and fill method relies upon removing the ore in horizontal slices, advancing from top to bottom, utilizing cemented paste (7% cement by weight) to provide support to the next series of advances. Each advance within the upper panel of Santo Antonio will be 3.0 meters. The inclined room and pillar method, currently used in practice, is based upon excavating parallel rooms, connected with a cross-section of galleries. Each 6 meter room is supported by pillars measuring approximately 4 meters. During the primary extraction stage, room and pillar mine recovery averages approximately 75%, improving to approximately 92.5% following secondary extraction of pillars from bottom to top.

Based on operating experience, mining rates from inclined room and pillar operations have been assumed to average 500 tonnes per month per room in operation. The main constraint in this mining method is the number of jackleg operators per shift and developed rooms from which to conduct mining operations. Total production from the mine, incorporating upper and lower panel mining averages approximately 11,000 tonnes per month over the life of mine, and approximately 14,000 tonnes per month over the first four years – in-line with current mining rates. Actual operating performance of the mine was determined to calculate modifying factors applied to the life of mine. Operational dilution of 17.4% plus planned dilution of 8.5% was applied to lower panel stopes utilizing room and pillar mining method. Operational dilution of 3.2% plus planned dilution of 21.2% was assumed for stopes within the upper panel utilizing cut and fill mining method.

1.8       Recovery Methods

The metallurgical process currently in place has been engineered and subsequently optimized over the years to leach gold ores containing high contents of preg-robbing units capable of adsorbing gold from cyanide solutions, such as the carbonaceous phyllite unit that exists throughout the NX Gold Mine orebodies, including Santo Antonio.

Metallurgical recoveries at the NX Gold Mine have been sequentially optimized since commissioning to recover gold and silver from the quartz vein orebodies containing this carbonaceous material. This optimization work has resulted in recoveries increasing from approximately 40% in 2012 when the plant was commissioned, to current metallurgical recoveries in excess of 90% (92.0% average was achieved during third quarter 2020). Prior to the Effective Date, average feed grade to the plant was approximately 7.72 gpt gold. 2020 production from the NX Gold Mine to the Effective Date is shown below in Table 4.

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Table 4 - Nova Xavantina Plant Performance to Effective Date

	Jan 1st – Sep 30th, 2020
Mill Feed (000 tonnes)		117,067
Gold Grade (gpt Au)		7.72
Metallurgical Recovery (%)		89.7
Au Production (oz)		26,041
Ag Production (oz)		15,931

Processing takes place at the Nova Xavantina Plant. Unit operations include a conventional 3 stage crush, milling and a combination of gravity concentration with intensive leaching and flotation followed by carbon in leach (“CIL”) and a desorption circuit. In 2019, a gravity concentrate re-grind mill was added to the circuit to improve gold recoveries and reduce required residence time within the intensive leaching circuit. Gold and silver are produced from solution via electrolysis followed by smelting of doré bars containing both gold and silver. The installed crushing and grinding capacity is approximately 80 tph and 44.5 tph, respectively, resulting in an installed annual plant capacity in excess of 300,000 tonnes per annum. The plant is currently forecast to operate at approximately 45% of its installed capacity, on average, over the current life of mine.

In 2018 and 2019, NX Gold conducted gravity concentration tests to assess recovery of the Santo Antonio orebody in advance of mining operations. A composite sample was taken from 9 drill holes and processed in the NX Gold’s laboratory Falcon concentrator. The results obtained exhibited similar characteristics as previously tested samples from within existing and historic operations of the Buracão and Brás veins. Upon achieving full production rates from the Santo Antonio vein in 2020, several initiatives on the processing side were implemented to improve metallurgical recoveries from this material. These efforts contributed to achieving 92.0% metallurgical recovery during the third quarter of 2020 – in-line with current forecast recoveries over the life of mine.

Based on the current Mineral Reserve estimate, the production plan for the Nova Xavantina Plant is set forth below:

Table 5 - NX Gold Production Plan

	Q4 2020*			2021			2022			2023			2024			2025			2026
Ore Mined & Processed (000 tonnes)		46.5			167.0			179.4			170.9			139.4			80.6			78.4
Au Grade (gpt)		7.61			7.21			8.34			9.13			9.61			9.87			11.61
Recovery (%)		92.1	%		92.1	%		92.1	%		92.0	%		92.0	%		92.0	%		92.0	%
Gold Production (oz)		10,458			35,647			44,291			46,121			39,631			23,550			26,901
Silver Production (oz)		5,980			20,370			25,309			26,355			22,646			13,457			15,372

(*) Q4 2020 production outlines the Mineral Reserve schedule for the three months from the effective date of September 30, 2020 to December 31, 2020.

Throughout the life of the mine, the plant has successfully processed ores with different grades and varying carbon content, obtaining key information to improve recovery, under different operational conditions. The metallurgical recoveries of the NX Gold Mine have increased from 40% in 2012 to up to 92% in third-quarter of 2020 (with a 2020 average of approximately 90% prior to the Effective Date), as summarized in the following table.

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Table 6 - Historic Production of the NX Gold Mine

Year	Tonnes (t)		Au (oz)		Recovery
2012		137,980		6,654		40	%
2013		261,726		26,216		67	%
2014		208,259		23,730		83	%
2015		226,608		35,115		87	%
2016		213,776		29,098		84	%
2017		135,013		25,173		88	%
2018		117,857		39,808		91	%
2019		158,275		29,755		86	%
Jan to Sep 30th 2020		117,067		25,755		90	%
Total		1,567,561		241,304		84	%

1.9       Project Infrastructure

The facilities at the NX Gold Mine include the mine portal, the Nova Xavantina Plant, tailings storage facility, mechanical workshop, administrative offices, metallurgical laboratory, security gate and guard facilities, medical clinic, a cafeteria and a gravel airstrip used to fly out doré bars after production.

National electrical service is available on site from the town of Nova Xavantina, located approximately 18 km from the NX Gold Mine. The mine is supplied through a 34.5 kV power transmission line (600 kVA), owned by the state public utility, ENERGISA S/A. Water in sufficient quantities to support mining and processing operations is sourced from surface run-off and a fully permitted water supply system comprised of a water intake from the neighboring Mortes River, with capacity of 150 cubic meters per hour, and a water main connecting the sumps of the underground mine.

Process tailings are disposed into two ponds in a closed loop with water loss only occurring through evaporation and in the residual moisture content of the tailings. The first pond receives inert-tailings from flotation, and the second pond receives non-inert tailings from the CIL circuit. The latter tailings pond is lined with a double layer of HDPE, including leach detection devices, and allows for natural degradation of residual cyanide through exposure to sunlight, complemented by a cyanide detoxification circuit.

1.10        Permitting, Environmental and Social Considerations

The NX Gold Mine is a fully permitted gold mine currently in operation. An environmental action program was developed for NX Gold prior to the mine reaching commercial production. NX Gold follows the guidelines set forth in the program to reduce its impact and recover impacted areas within the vicinity of the mine. NX Gold adheres to a program of frequent environmental monitoring including water quality control, as well as re-vegetation of historic artisanal mining areas that pre-date the commissioning of the mine by NX Gold.

The mine’s closure plan, adapted to the current social and environmental context within the area of the NX Gold Mine, has been designed to maximize the physical, chemical, biological, and socio-economic stability of the area after mining activities have concluded. The current estimated reclamation liabilities are approximately R$24.9 million.

NX Gold maintains an excellent relationship with the neighboring community of Nova Xavantina, as well as smaller neighboring land-owners, providing among others, community outreach, children’s educational programs and sponsorship of local sporting events and teams. NX Gold has provided technical and financial support towards the environmental rehabilitation of areas previously impacted by historic artisanal mining activities and has remained an important economic contributor to the region through both direct and indirect jobs, royalties and tax revenue. The NX Gold Mine has all required environmental licenses to conduct its operations, issued by the Environment Secretary of Mato Grosso (SEMA) in 2007. The authors of the NX Gold Technical Report are not aware of any material environmental or permitting risks to the current operations nor to the envisioned production plan associated with this Mineral Reserves estimate.

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1.11        Capital and Operating Costs

Capital and operating costs are shown for 2020 through 2026 reflecting the period of operation from the day immediately following the Effective Date (commencing October 1, 2020). For the purposes of the NX Gold Technical Report, mine reclamation and closure are assumed to commence on the conclusion of mining of the Mineral Reserves; however, NX Gold is actively undertaking exploration activities to increase the mine’s life. It is anticipated that a combination of Mineral Resource conversion, extension of the Santo Antonio ore body, and delineation of target areas will serve to augment the production profile and increase mine life subject to satisfactory exploration results, as well as technical, economic, legal and environmental conditions.

Total capital costs over the life of mine are estimated at R$189.2 million, of which R$24.9 million is related to mine closure in 2026. Details of these capital expenditures are shown below in Table 7.

Table 7 - Forecast Capital Expenditures

	Q4 2020[1]		2021		2022		2023		2024		2025		2026
Capital Expenditures (R$ 000s)
Development		9,531		36,964		19,822		1,705		418		-		-
Equipment		750		5,415		5,783		788		-		-		-
Ventilation & Safety Equipment		950		514		260		300		250		230		-
Environment		419		650		280		240		350		180		-
Other, Sustaining		552		0		5,964		2,618		2,239		2,074		-
Sustaining Capital, Sub-Total		12,201		43,543		32,109		5,652		3,257		2,484		-
Infrastructure		7,886		5,608		2,470		640		230		68		-
Other, Non-Sustaining (incl. Growth)		3,923		21,121		2,456		4,898		2,915		827		-
Exploration / Drilling		12,000		-		-		-		-		-		-
Reclamation & Closure Costs		-		-		-		-		-		-		24,939
Non-Sustaining Capital, Sub-Total		23,809		26,729		4,926		5,538		3,145		895		24,939
Total Capital Costs (R$ 000s)		36,010		70,272		37,035		11,189		6,402		3,379		24,939

Capital Expenditure Notes:

1. 2020 capital expenditure presented for the three months of the mineral reserve schedule from the day immediately following the Effective Date to December 31, 2020.

2. Amounts shown do not include discretionary greenfield or brownfield exploration in years 2021 through 2026.

3. Capital expenditures presented in BRL, thousands.

An operating cost forecast was prepared using the mine’s operating history and current consumption coefficients. The expected C1 cash cost of the NX Gold Mine averages US$505 per ounce of gold produced. The AISC of the NX Gold Mine, including G&A costs, capitalized development and sustaining capital expenditures, averages US$720 per ounce of gold produced over the life of mine. C1 cash cost and AISC are non-IFRS measures, please refer to Chapter 22.1 of the NX Gold Technical Report for additional information on non-IFRS measures, including C1 cash costs and AISC.

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Table 8 - Operating Cost Summary

	Q4 2020[1]			2021			2022			2023			2024			2025			2026
Tonnes Processed (000s)		46.5			167.0			179.4			170.9			139.4			80.6			78.4
Exchange Rate (USD:BRL)		5.00			5.00			5.00			5.00			5.00			5.00			5.00
Gold Price (US$/oz)		1,750			1,750			1,750			1,750			1,750			1,750			1,750
Silver Price (US$/oz)		18.00			18.00			18.00			18.00			18.00			18.00			18.00
Operating Cost Detail (R$ 000s)
Mining Costs (incl. Development)		20,982			88,365			93,448			65,702			60,909			36,084			39,012
Processing Costs		7,618			35,352			36,064			35,308			32,537			19,255			20,787
Operational Support		5,113			19,640			17,333			17,333			17,333			10,400			11,440
Sub Total (R$ 000s)		33,714			143,357			146,845			118,343			110,778			65,739			71,238
less: Silver Credit		(538	)		(1,833	)		(2,278	)		(2,372	)		(2,038	)		(1,211	)		(1,383	)
less: Capitalized Development		(9,531	)		(36,964	)		(19,822	)		(1,705	)		(418	)		-			-
less: Operator Bonus Provision		(775	)		(6,154	)		(6,154	)		(6,154	)		(6,154	)		(6,154	)		(6,154	)
Total, C1 Basis (R$ 000s)		22,870			98,405			118,591			108,111			102,167			58,373			63,700
C1 Cast Cost (R$ per oz)	$	2,187		$	2,761		$	2,678		$	2,344		$	2,578		$	2,479		$	2,368
C1 Cash Cost (US$ per oz)	$	437		$	552		$	536		$	469		$	516		$	496		$	474
add: G&A (incl. Bonus Provision)		4,398			20,023			20,023			20,023			20,023			14,476			15,308
add: Sustaining Capital (incl. Development)[2]		12,201			43,543			32,109			5,652			3,257			2,484			-
add: CFEM Royalty (1.5%)		1,381			4,706			5,847			6,089			5,232			3,109			3,552
add: Transport & Insurance		20			72			72			72			72			72			72
Total, AISC Basis (R$ 000s)	$	40,870		$	166,750		$	176,643		$	139,947		$	130,752		$	78,514		$	82,632
AISC (R$ per oz)	$	3,908		$	4,678		$	3,988		$	3,034		$	3,299		$	3,334		$	3,072
AISC (US$ per oz)	$	782		$	936		$	798		$	607		$	660		$	667		$	614

C1 Cash Cost / AISC Notes:

1.	2020 operating costs are presented for the three months of the mineral reserve schedule from the day immediately following the Effective Date to December 31, 2020.
2.	Sustaining Capital (including Development) as further detailed in Table 70, “Forecast Capital Expenditures” of the NX Gold Technical Report.
3.	C1 cash costs per ounce of gold produced and AISC are non-IFRS measures, as more particularly discussed under Chapter 22.1.
4.	Operating Costs presented in BRL, thousands.

1.12       Economic Analysis

An economic analysis was prepared for the NX Gold Mine using the following primary assumptions:

· Considers commencing on day immediately following the Effective Date and does not include actual performance achieved prior to October 1, 2020.

· Total ore processed of 862.1 thousand tonnes at an average head grade of 8.88 g/t gold.

· Gold and silver sales are assumed to equal production, with total sales of 226,599 ounces of gold and 129,489 ounces of silver.

· Metal prices of US$1,750 per ounce of gold and US$18.00 per ounce of silver.

· USD:BRL foreign exchange rate of 5.00.

· CFEM royalty based on 1.5% of gross revenue.

The NX Gold Mine produces an undiscounted after-tax cash flow of approximately R$907 million (approximately US$181 million).

The after-tax NPV at a 5% discount rate is US$156.3 million. The results of the economic analysis are shown below in Table 9.

An after-tax sensitivity analysis was performed considering changes in gold price, foreign exchange rates, and capital and operating costs. The analysis shows that the NX Gold Mine is most sensitive to gold prices and foreign exchange rates.

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Table 9 - Economic Analysis of the NX Gold Mine

Assumptions		20201			2021			2022			2023			2024			2025			2026
Exchange Rate	R$/US$		5.00			5.00			5.00			5.00			5.00			5.00			5.00
Gold Price	US$/oz		1,750			1,750			1,750			1,750			1,750			1,750			1,750
Production
Ore Mined	tonnes		46,455			166,989			179,438			170,863			139,415			80,623			78,352
Gold Grade Mined	g/t		7.61			7.21			8.34			9.13			9.61			9.87			11.61
Ore Processed	tonnes		46,455			166,989			179,438			170,863			139,415			80,623			78,352
Gold Grade Processed	g/t		7.61			7.21			8.34			9.13			9.61			9.87			11.61
Global Recovery	%		92.1			92.1			92.1			92.0			92.0			92.0			92.0
Gold Contained	ounces		10,458			35,647			44,291			46,121			39,631			23,550			26,901
Capex
Investments	000 R$		36,010			70,272			37,035			11,189			6,402			3,379			24,939
Total	000 R$		36,010			70,272			37,035			11,189			6,402			3,379			24,939
Operating Costs
General & Administrative	000 R$		3,622			13,869			13,869			13,869			13,869			8,321			9,153
Operational Support	000 R$		5,113			19,640			17,333			17,333			17,333			10,400			11,440
Underground Mining	000 R$		20,982			88,365			93,448			65,702			60,909			36,084			39,012
Processing	000 R$		7,618			35,352			36,064			35,308			32,537			19,255			20,787
Sub Total	000 R$		37,336			157,226			160,714			132,212			124,647			74,060			80,392
Depreciation/Exhaustion	000 R$		10,500			40,486			56,115			57,452			51,885			37,476			38,109
Total Costs	000 R$		47,837			197,712			216,829			189,664			176,531			111,536			118,500
Revenue
Gold Sales	ounces		10,458			35,647			44,291			46,121			39,631			23,550			26,901
Gross Metal Revenue	000 R$		91,507			311,909			387,549			403,556			346,771			206,059			235,387
Total Net Metal Revenue	000 R$		90,664			309,035			383,979			399,839			343,577			204,166			233,219
Total Net Revenue	000 R$		90,664			309,035			383,979			399,839			343,577			204,166			233,219
P&L
Net Revenue	000 R$		90,664			309,035			383,979			399,839			343,577			204,166			233,219
Opex	000 R$		(47,837	)		(197,712	)		(216,829	)		(189,664	)		(176,531	)		(111,536	)		(118,500	)
Less Capitalized Development2	000 R$		9,531			36,964			19,822			1,705			418			-			-
Gross Profit	000 R$		52,358			148,287			186,971			211,881			167,464			92,630			114,719
Effective Tax Rate	%		14.8			15.5			12.9			13.6			13.4			9.7			11.8
Income & Social Contribution Taxes	000 R$		(7,749	)		(23,036	)		(24,138	)		(28,737	)		(22,502	)		(8,947	)		(13,518	)
Net Profit	000 R$		44,609			125,251			162,834			183,144			144,962			83,683			101,201
Cash Flow
Revenue	000 R$		90,664			309,035			383,979			399,839			343,577			204,166			233,219
Opex (ex-Depreciation & Exhaustion)	000 R$		(37,336	)		(157,226	)		(160,714	)		(132,212	)		(124,647	)		(74,060	)		(80,392	)
Less Capitalized Development2	000 R$		9,531			36,964			19,822			1,705			418			-			-
Income & Social Contribution Taxes	000 R$		(7,749	)		(23,036	)		(24,138	)		(28,737	)		(22,502	)		(8,947	)		(13,518	)
Employee Bonuses	000 R$		-			(6,860	)		(6,860	)		(6,860	)		(6,860	)		(6,860	)		(6,860	)
Operating Cash Flow	000 R$		55,110			158,877			212,089			233,736			189,986			114,298			132,449
CAPEX	000 R$		(36,010	)		(70,272	)		(37,035	)		(11,189	)		(6,402	)		(3,379	)		(24,939	)
Free Cash Flow	000 R$		19,099			88,605			175,054			222,547			183,584			110,919			107,510
Accumulated Free Cash Flow	000 R$		19,099			107,704			282,758			505,305			688,889			799,809			907,319
Free Cash Flow	000 US$		3,820			17,721			35,011			44,509			36,717			22,184			21,502
Accumulated Free Cash Flow	000 US$		3,820			21,541			56,552			101,061			137,778			159,962			181,464
Discount Rate	%pa		5	%
Results
After-Tax NPV5	000 US$		156,342
IRR	%pa		n/a
Simple Payback	years		n/a

⁽¹⁾ 2020 based on the 3 months from October 1, 2020 to December 31, 2020

53 

1.13       Conclusions and Recommendations

The authors of the NX Gold Technical Report have carried out a review and assessment of the material technical issues that could influence the future performance of NX Gold and classified the Mineral Resource and Mineral Reserve estimates. The authors found that the procedures and processes adopted by NX Gold personnel to produce the geological models were executed according to proper industry standards. Sampling, QA/QC, security and data control were similarly in line with industry best practices and support the current Mineral Resource and Mineral Reserve estimate. The authors note the following:

a. NX Gold holds the surface rights and permits required to conduct the mining operation as outlined in the Mineral Reserve estimate. Future development beyond the stated Mineral Reserves may require the acquisition of additional surface rights.

b. The authors have carried out the appropriate review to satisfy that the Mineral Reserve can be technically and profitably extracted. Consideration has been given to all technical areas of the operations, the associated capital and operating costs, and relevant factors including marketing, permitting, environmental, land use and social factors. The authors are satisfied that technical and economic feasibility has been demonstrated.

c. The authors have not identified any known mining, metallurgical, infrastructure, permitting, legal, political, environmental or other relevant factors that could materially affect the development or extraction of the stated Mineral Reserves.

Regarding the Mineral Resource and Mineral Reserve estimation process, and to continue to ensure the continuity of mining operations, the authors recommend a work program that includes the following:

· Intensify the exploratory program in the regions classified as exploration potential to further define and classify these zones into incremental Mineral Resources (and Mineral Reserves).

· Undertake additional infill drilling campaigns to upgrade the classification of Indicated Mineral Resources into Measured Mineral Resources and Inferred Mineral Resources into Indicated Mineral Resources.

· It is recommended that NX Gold implement an update to its QA/QC procedures to ensure that there is no possibility of contamination in the preparation and analytical results of the Company’s duplicate check-sample program.

· Undertake a study to improve model to mine reconciliation.

The hanging wall of the deposit, in the opinion of the authors of the NX Gold Technical Report, is competent enough for the current mining method provided mining support is implemented as designed. GE21 recommends the Company undertake a third-party geotechnical study to further evaluate the potential of reducing sill pillar thickness with the aim of increasing mine recovery during the primary mining phase of the operations.

A summary of the proposed work program is detailed below. At the time of the NX Gold Technical Report, 8 drill rigs had been mobilized to the property and were undertaking various exploration programs aimed at increasing the current Mineral Resources and Mineral Reserves of the property.

Table 10 - GE21 Recommended Work Program

Program	Budget (US$)
Exploration drill program in the regions identified as having exploration potential	$	5,000,000
Infill drill campaign to promote the classification of measured Mineral Resources	$	5,000,000
QA/QC Program Update & Validation	$	20,000
Mine to mill reconciliation program	$	50,000
Geomechanics study to improve mine recoveries	$	300,000
Total	$	10,370,000

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Updated Information with respect to the NX Gold Property

The following update has been prepared under the supervision of and approved by Ricardo Emerson Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

Mineral Resource and Mineral Reserve Estimates as at December 31, 2020

The Mineral Resource and Mineral Reserve estimates contained in the NX Gold Technical Report were prepared as at August 31, 2020 and September 30, 2020, respectively. As production at the NX Gold Property has continued since the preparation of these estimates, the Mineral Resources and Mineral Reserves at the NX Gold Property have decreased.

Accordingly, set out below is an internal update of the Mineral Resource and Minerals Reserve estimates as at December 31, 2020, based on a 1.90 g/t cut-off gold grade for Mineral Resources, cut-off grades for Mineral Reserves (3.14 gpt applied to mining stopes in room and pillar mining areas and 3.22 gpt to stopes in cut and fill mining areas, incorporating mining and development, processing, general and administrative and indirect costs; 0.80 gpt applied to gallery development incorporating development and processing costs; and 2.30 gpt applied to mining marginal material adjacent to planned mining stopes incorporating mining, development and processing costs), and accounting for the material mined since the preparation of the Mineral Resource and Mineral Reserve estimates contained in the NX Gold Technical Report. Mineral Resources are shown inclusive of Mineral Reserves. Mineral resources which are not mineral reserves do not have demonstrated economic viability.

Table 11 - Mineral Resource Estimate, December 31, 2020

Classification	Tonnage (000 tonnes)		Grade (gpt Au)		Au Contained (000 ounces)
Indicated Mineral Resource (inclusive of Reserves)
Santo Antonio Vein		728.6		10.98		257.1
Brás Vein		6.9		3.36		0.7
Buracão Vein		-		-		-
Total Indicated Resource		735.5		10.91		257.8
Inferred Mineral Resource
Santo Antonio Vein		267.8		13.08		112.6
Matinha Vein		149.0		12.15		58.2
Brás Vein		149.3		4.81		23.1
Buracão Vein		7.7		2.77		0.7
Total Inferred Resource		573.8		10.55		194.6

1.	Mineral Resource effective date of December 31, 2020
2.	Presented Mineral Resources inclusive of Mineral Reserves. Indicated mineral resource totals are undiluted. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.
3.	Grade-shell 3D models using 1.20 gpt gold were used to generate a 3D mineralization model of the NX Gold Mine. Mineral Resources were estimated using ordinary kriging within 2.5 meter by 2.5 meter by 0.5 meter block size. Mineral Resources were constrained using a minimum stope dimension of 1.25 meters by 1.25 meters by 1.50 meters and a cut-off of 1.90 gpt based on gold price of US$1,900 per ounce of gold and total underground mining and processing costs of US$115.14 per tonne of ore mined and processed. The Mineral Resource estimates were prepared in accordance with the CIM Standards, and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate to the deposit.

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Table 12 - Mineral Reserve Estimate, December 31, 2020

Classification	Tonnage (000 tonnes)		Grade (gpt Au)		Au Contained (000 ounces)
Probable Mineral Reserve
Santo Antonio Vein		816.6		8.89		233.3
Brás Vein		-		-		-
Buracão Vein		-		-		-
Total Probable Reserve		816.6		8.89		233.3

1.	Mineral Reserve effective date of December 31, 2020.
2.	All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.
3.	Mineral reserve estimates were prepared in accordance with the CIM Standards and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate for the deposit. Mineral reserves are based on a long-term gold price of US$1,650 per oz of gold, and a USD:BRL foreign exchange rate of 5.00. Mineral reserves are the economic portion of the Indicated Mineral Resources. Mineral Reserve estimates include operational dilution of 17.4% plus planned dilution of approximately 8.5% within each stope for room-and-pillar mining areas and operational dilution of 3.2% plus planned dilution of 21.2% for cut-and-fill mining areas. Assumes mining recovery of 92.5% and 94.7% for room-and-pillar and cut-and-fill areas, respectively. Practical mining shapes (wireframes) were designed using geological wireframes / Mineral Resource block models as a guide.

As with the Mineral Reserve estimate (as at September 30, 2020) in the NX Gold Technical Report, the Mineral Reserve estimate as at December 31, 2020 is derived from the Indicated Mineral Resource as defined within the resource block model following the application of the same economic and other modifying factors described in the NX Gold Technical Report.

Inferred Mineral Resources, where unavoidably mined within a defined mining shape have been assigned zero grade. Dilution occurring from Indicated Mineral Resource blocks were assigned grade based upon the current Mineral Resource grade of the blocks included in the dilution envelope.

BOA ESPERANÇA PROPERTY

The scientific and technical information in this section relating to the Boa Esperança Property is a direct extract of the Executive Summary section contained in the Boa Esperança Technical Report dated September 7, 2017 with an effective date of June 1, 2017, which has been conformed to be consistent with other defined terms and formatting within this AIF. The entire Boa Esperança Technical Report, a copy of which is available for review under the Company’s profile on SEDAR at www.sedar.com, is incorporated by reference into this AIF and should be consulted for details beyond those incorporated herein.

Executive Summary

SRK was commissioned by Ero to prepare a NI 43-101 compliant Feasibility Study (“FS”) for the Boa Esperança Deposit (“Boa Esperança” or the “Project”) as part of the Boa Esperança Property located in Pará, Brazil. The Project was acquired by MCSA from Corporacion Nacional Del Cobre (Codelco) in 2007 and is now 100% owned by MCSA. In December 2016, Ero acquired approximately 85.0% interest in MCSA. In June 2017, Ero acquired an additional 14.5% by subscribing for shares from treasury for a total interest in MCSA of approximately 99.5%.

The Boa Esperança Technical Report is an update of a prior 2015 report prepared by SRK. The original 2015 report has been updated based on work performed throughout various studies developed for the Project by third-party technical and engineering firms throughout the course of the Project’s ownership under MCSA. SRK has reviewed the contents and, where relevant, has accepted and/or modified the conclusions therein based on the judgment of the authors and the recommendations therein. There has been no new material scientific or technical information about the property since the publication of these reports. It is the opinion of the authors of the Boa Esperança Technical Report that the information contained in such reports has been appropriately reviewed and are current for the purposes of NI 43-101. A full list of references relevant to the Project is listed in Chapter 27 – References.

1.1 Property Description and Location

The Boa Esperança copper deposit is located in the municipality of Tucumã, Pará State, Brazil. The site is located approximately 40 km to the southwest of the town. Tucumã can be accessed by state highway PA-279, which connects the town of Xinguara to the town of São Felix do Xingu, a stretch of road that runs for approximately 160 km. The junction of PA-279 with federal highway BR-155 is in Xinguara. The latter is the main highway leading to the city of Marabá, situated around 220 km north of Xinguara.

56 

1.2 Ownership

MCSA acquired the Boa Esperança copper deposit concession from Corporación Nacional del Cobre (Codelco) in 2007 and became the legal owner of the mineral rights to the Boa Esperança copper deposit. In December 2016, Ero acquired approximately 85.0% interest in MCSA. In June 2017, Ero acquired an additional 14.5% by subscribing for shares from treasury for a total interest in MCSA of approximately 99.5%.

The legal status of MCSA’s mining rights is as follows:

· The Final Exploration Report was presented to the DNPM on April 10, 2008 and was approved by the DNPM on July 30, 2009;

· MCSA filed for the Mining Concession through the presentation of an Economic Exploitation Plan (Plano de Aproveitamento Econômico or PAE), which was filed with the DNPM on May 5, 2010; and

· The Preliminary License was filed with the DNPM on March 22, 2012.

All criteria to obtain the mining rights have been fulfilled and the Ero is awaiting final approval of the change status to a full Mining Concession after issuance of the Installation License, currently under review by the Pará State environmental agency.

The Mineral Resources and Mineral Reserves disclosed in this report are completely contained within the Exploration Licence held by MCSA. MCSA is either the beneficial owner or has the right to the required surface rights for the envisioned operations.

1.3 Geology and Mineralization

The Carajás Mineral Province, where the Boa Esperança copper deposit is located, is on the east side of the Amazon Craton and is considered one of the most important mineral provinces in Brazil. It is a region of high economic importance, as it hosts the world’s largest known high-grade Fe deposits, as well as world-class Cu-Au deposits, such as Salobo, Sossego, 118, Cristalino and Igarapé Bahia-Alemão. Deposits of Mn, Ni, Cr, Al and Zn have also been identified in the province. The existence of high-grade significant deposits elsewhere in the region provides no assurance regarding the size, extent, grade, or value of any deposits or prospective deposits at the Boa Esperanҫa.

The Carajás Mineral Province encompasses two distinct tectonic domains, both of these Archean in age. The South Block, which is the older of the two (3.0 to 2.86 Ga) and is where the Boa Esperança deposit is located, is called the Rio Maria Block and contains a typical granite-greenstone belt terrain. The North Block, which is the younger domain (2.8 to 2.5 Ga), is called Carajás and is composed of volcano-sedimentary rocks and granitoids, which host the large Fe, Cu-Au, Mn, Ni and Zn deposits in the province. These two blocks are considered to be products of the juxtaposition of volcanic island arcs and plutonic-like Andes environments, associated with an intra-continental mantle plume.

The Boa Esperança copper deposit occurs within an isolated hill, which is elongated in a NNE direction and located 38 km SW following a straight line from the town of Tucumã. The topographic high is supported mainly by breccias composed of quartz and magnetite, which cut the Neoarchean biotite-granite (2.78 Ga), the host of the copper mineralization. The Neoarchean biotite granite intrudes into the Mesoarchean Rio Maria granodiorite (2.85 Ga).

Mineralization consists of a series of brecciated zones, which are aligned N60°-70°E and incline in a SE direction (60°-70°SE). However, another alignment of about N40°E was observed in the field and coincides with the elongation of the Boa Esperança hill.

1.4 Exploration Status

Project exploration has consisted of ground geological mapping and sampling, geophysical surveys and exploration drilling. Ground geophysical surveys completed include magnetic and gravity surveys and induced polarization electrical surveys.

The geophysical surveys were completed by Codelco during the period from 2003 to 2006. The exploration work conducted by MCSA includes confirmation drilling conducted during the period from 2008 through 2013, and site-specific studies in support of this and prior feasibility studies.

The Project’s first drillhole campaign began in 2003 under the supervision of Codelco. Codelco completed four drillhole campaigns in 2003-2004, 2005 and 2006. Codelco completed 62 core drillholes, totaling 21,956.12 m on a 200 m x 200 m drilling grid that was infill drilled to 100 m x 100 m.

MCSA completed additional drilling between 2008 and 2013, totaling 36,016.13 m, for a project total of 57,972.25 m in 165 core holes. Infill drilling was completed to approximately 50 and 25 m centers for the core of the deposit.

The deposit has been drilled sufficiently to allow for the definition of Mineral Resources as defined under NI 43-101.

57 

1.5Mineral Resource Estimate

The Mineral Resource estimate was prepared by SRK Senior Geologist Rafael Russo Sposito and supervised by SRK Principal Resource Geologist Carlos César Barbosa; Mr. Barbosa is a Qualified Person and is independent of MCSA as defined by NI 43-101.

The Mineral Resource estimate was prepared using a three-dimensional percentage block model of 10 m x 10 m x 5 m. In addition, oxidation state and resource classification codes were assigned to each block. The resource estimation was conducted using Geovia GEMS™ (v6.6) software. Other graphs were created using GSLIB software.

The Mineral Resources are constrained to a pit optimization shell run with the following parameters:

· Copper price: US$4.00 per pound;

· Mining cost: US$2.25/t moved;

· Processing cost + G&A: US$8.21/t processed;

· TC/RC: US$0.32/lb copper; and

· Recovery: 91%.

The internal copper CoG (excluding mining costs) is 0.20 %.

The Measured, Indicated and Inferred Mineral Resources within the pit optimization shell are given in Table 1. The copper grades are undiluted grades within the grade shell wireframes.

Table 1: Mineral Resource statement, Boa Esperança Copper Project, Pará State,
Brazil, SRK Consultores do Brasil LTDA., June 1, 2017

Domain	Category	Quantity (Mt)		Cu %		Contained Cu (tonnes)
	Measured		41.00		0.81		332,100
	Indicated		26.17		0.62		162,254
Sulfide	Measured + Indicated		67.17		0.73		490,341
	Inferred		1.35		0.56		7,560
Secondary Sulfide	Inferred		2.05		0.69		14,145
Total	Measured		41.00		0.81		332,100
	Indicated		26.17		0.62		162,254
	Measured + Indicated		67.17		0.73		490,341
	Inferred		3.40		0.64		21,760

Source: SRK

Effective Date: June 1, 2017

(1) Tonnes and grade are rounded to reflect approximation.

(2) Mineral Resources are stated at a cut-off grade of 0.2% Cu and are fully contained within an optimized pit shell.

(3) Stated Mineral Resources are inclusive of Mineral Reserves.

Mineral Resources are not Mineral Reserves and have not demonstrated economic viability. Mineral Resource estimates do not account for mineability, selectivity, mining loss and dilution. These Mineral Resource estimates include Inferred Mineral Resources that are normally considered too geologically speculative to allow for the application of economic considerations that would see them categorized as Mineral Reserves. There is also no certainty that these Inferred Mineral Resources will be converted to Measured and Indicated categories through further drilling or into Mineral Reserves once economic considerations have been applied.

58 

1.6 Mineral Reserve Estimate

The conversion of Mineral Resources to Mineral Reserves requires accumulated knowledge achieved through pit optimization, pit design, economics and associated modifying parameters.

The Mineral Reserves were calculated based on a cut-off grade of 0.28% Cu and a life of mine (“LoM”) copper price of US$ 7,000/t LME Cu.

In accordance with the CIM classification guidelines, only Measured and Indicated Mineral Resource categories are converted to Proven and Probable Mineral Reserves respectively (through inclusion within the open-pit mining limits). Inferred Mineral Resources, where unavoidably mined, have been treated as waste and assigned zero grade.

Table 2 shows the Boa Esperança mine open pit ore reserve statement.

Table 2: Mineral Reserve Statement for the Boa Esperança copper deposit, State of Para,
Brazil, SRK Consultores do Brasil Ltda. as of June 1, 2017

Mineral Reserve Classification	Volume		Density		Dry Tonnes		Cu		Contained Cu
	m3 x 1,000		t/m3		t x 1,000		%		t x 1,000
Proven		5,744.50		3.225		18,528.1		0.96		178.05
Probable		315.6		3.089		975.0		0.72		7.02
Total		6,060.10		3.218		19,503.1		0.95		185.07

(1)	Effective Date: June 1, 2017
(2)	Open pit Mineral Reserves assume full mine recovery;
(3)	Open pit Mineral Reserves are diluted along lithological boundaries and assume selective mining unit of 2.5 m x 2.5 m x 5 m;
(4)	The strip ratio was calculated to be 1.93 (waste to ore);
(5)	Reserves are based on a price of US$ 7,000/t LME Cu throughout the life of the mine;
(6)	Reserves are based on a cut-off grade of 0.28% Cu;
(7)	Mineral Resource tonnage and contained metal have been rounded to reflect the accuracy of the estimate. As a result of this rounding, the numbers may not add up;
(8)	Contained copper is reported as in-situ and does not include process recovery; and
(9)	The Mineral Reserve estimate was calculated by Rubens Mendonça, BSc, MBA, Chartered Professional Member of the AusIMM, Mining Manager of SRK Consultores do Brasil as at the date of the report (currently Director of Planminas), in accordance with the standards set out in CSA, NI 43-101 and generally accepted CIM “Estimation of Mineral Resource and Mineral Reserves Best Practices” guidelines.

1.7 Mining Methods

Boa Esperança is a copper deposit, averaging approximately 0.95% Cu diluted grade within the minable pit. The mineralization is close to the surface and the resource is appropriate for an open pit mining operation.

The final pit design in this feasibility phase of the Boa Esperança project totals 19.5 Mt of Proven and Probable Mineral Reserves with an average diluted grade of 0.95% Cu. From this total, 17.5 Mt is classified as high grade material with an average Cu content of 1.02% and the remaining 2.0 Mt as low grade material, with a grade of 0.34% Cu.

Waste materials amount to 37.7 Mt, which is comprised of 19.6 Mt of saprolite, 8.9 Mt of weathered rock and 9.2 Mt of fresh rocks. The LoM strip ratio of waste to ore is 1.93.

The operation of the Boa Esperança mine will utilize conventional open pit mining techniques and small size mining equipment to mine a total of 57.2 Mt of material over the life of the mine. This comprises 19.5 Mt of ore and 37.7 Mt of waste materials. A total of 5.1 Mt of ore will be moved from the stockpiles to the plant.

The main mine equipment selected for the Boa Esperança project consists of 4.0 m³ hydraulic excavators, on-highway 35t trucks and drills.

It has been assumed that 100% of weathered and fresh rocks and 10% of saprolites will be drilled and blasted in 10-meter-high benches. Ore will be hauled to the primary crusher or to the run of mine (ROM) stockpiles close to the primary crusher. Waste materials will be hauled to different dumps and destinations. Grade control will be performed through drilling, sampling and assaying materials within the pit limits using the production drills.

The mine is scheduled to operate in three 8 hour shifts, 7 days per week, 365 days per year. Whenever mine production needs to be reduced or interrupted, the primary crusher will be fed from the regularization pile using a front-end loader.

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1.7.1 Geotechnical

Three distinct layers of materials were identified: saprolite, weathered rocks and fresh rocks.

Based on the Planer Rupture models between berms performed in studies 8 and 9, steeper angles for the excavated slopes in the weathered and fresh rocks have been proposed. However, for the saprolite, a shallower angle is recommended, as this material forms a less cohesive soil and is more likely to fail at steep slope face or inter-ramp angles.

Table 3 shows the slope geometry proposed by SRK for each type of material.

Table 3: Proposed angles for each type of material

	Saprolite	Weathered Rock	Fresh Rock
Bench Heigth	10,0 m	10,0 m	10,0 m
Berm Widtht	7,0 m	5,0 m	5,0 m
Slope Face Angle	45º	70º	83º
Inter-Ramp Angle	31,5º	49º	58º

1.8 Mineral Processing and Metallurgical Testing

This section describes the experimental work performed with the samples of two different rock types from Boa Esperança deposit, Tucumã, PA, namely "breccia" and "granite".

In early test work, the Boa Esperança deposit was considered as a conventional disseminated copper deposit. However, it has two distinct geological features, a breccia and a granite rock type. The sulphide minerals have been concentrated in faults and open spaces within the granite body.

An experimental program was developed in two primary stages to characterize the ore and evaluate pre-concentration methods: bench scale testing performed on a trays jig, followed by continuous tests with a small-scale pilot plant.

Their results confirmed the previous experimental conclusions:

· 30% of the crushing product is under 3mm and shows copper enrichment factors between 1.55 and 2.0 as compared to the ROM copper grade. The coarse fraction which fed the jig had a copper grade enrichment factor between 0.75 and 0.8 of the ROM grade, implying copper is mostly contained in the minus 3mm fraction.

· 50% of the mass was rejected in jigging. The copper recovery varied from 86% to 96%. Adding to this recovery the recovery of the copper contained in the finer fraction (-3 mm) of the crushed product, the total recovery of the circuit incresaed to 90% to96%.

· After the jigging continuous testing, the jig concentrate was crushed to minus 3.35 mm and recombined with the natural fines (minus 3 mm) from each rock type then ground to 106 µm. Locked cycle froth flotation locked tests were performed to concentrate the copper sulphide.

· The tailings of this initial flotation were refloated to concentrate pyrite (sequential flotation).

· The tailings of this second stage flotation were submitted to magnetic separation and yielded an iron ore concentrate and the final fine tailing.

· The conclusion of this work is that pre-concentration is an effective method for rejecting a significant mass of ROM feed, with minimum copper losses. In practice, this will reduce the size of the crushing and concentrating plant and as a result - the capital and operating costs.

· It was also demonstrated that jigging using simple equipment as the AllMineral jig (a Baum-type pneumatic jig) is effective. More sophisticated equipment, such as dense media separators, or specialized jigs with artificial beds or for special use, are unnecessary.

· The pre-concentration study was followed by blending the jig concentrate with the minus 3 mm of the ROM, grinding and performing froth flotation and magnetic separation testing.

· The main deleterious contaminants like F, Cl, U, As, P, Pb and Zn are present in the concentrate in traces such that significant smelter penalties are not anticipated.

· Bond crushability indexes varied from 14.9 to 18.1 kWh/t, averaging 16.7 kWh/t indicating difficult crushing plant feed.

· Bond ball mill work indexes ranged from 13.9 to 17.0 kWh/t with an average of 15.7 kWh/t, indicating a medium/hard plant feed.

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The result used to estimate the predicted recovery, as a function of feed grade is summarized in Figure 1. The blue line shows the recovery for ROM grades greater or equal to 0.57% Cu and the red shows expected recovery for grades bellow 0.57% Cu.

Figure 1: Overall recovery (%) x ROM grade (% Cu)

1.9 Recovery Methods

Open pit mining is planned for a production rate of 2.31 million tonnes (Mt) per year at an average ore grade of 1.14% Cu. Ore will be processed in a concentrator at a rate of 9,033.6 tonnes per day (t/d) (primary crushing) using conventional processes considered standard to the industry. The processing flowsheet, as well as the initial mass balance is based on work performed in 2011 by, “Consolidação do Desenvolvimento de Processo – Projeto Boa Esperança”, dated January 2011 (the “2011 Metallurgical Report”), the results of which were reviewed and verified by SRK.

Although not used specifically as the basis for process design criteria, confirmatory variability test work was undertaken by SGS-Geosol and reported in the following studies: “Final Report – Flotation Testwork on Copper Samples from the Boa Esperança Project”, dated May 10, 2012 (the “2012 Metallurgical Report”). Subsequent to that work, several additional confirmatory campaigns were conducted, producing the following reports:

· “VLC-Testes de sedimentação e filtração-15/12/14”;

· “Simulação de britagem Metso, novembro 2014”; and,

· “SGS Geosol – Testes de Wi-04/09/14”, “SGS Geosol – Final Report-Jigging, flotation and magnetic separation on a composite sample for the Boa Esperança Project – Final Report – SG0014-1403/rev02 – 10/04/2015”.

The final process design and mass balance was performed by incorporating a jigging pre-concentration stage prior to flotation, based on favorable metallurgical testwork results.

1.9.1 Final Process Flowsheet Design

The process flowsheet includes three-stage crushing, screening, jigging, ball mill grinding, copper rougher flotation, two stages of copper cleaner flotation and pyrite flotation from the copper rougher and scavenger flotation tailing. The final copper concentrate is thickened prior to pressure filtration and the flotation tailing is cycloned, dewatered, thickened and filtered prior to discharge to the tailing storage facility. The pyrite concentrate from the pyrite flotation is sent to the high sulfur pond.

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1.9.2 Final Process Material Balance

Process plant material balances have been developed for the crushing circuit, screening circuits, jigging, grinding, copper flotation, regrind, pyrite flotation, concentrate / tailing thickeners and dewatering circuits.

1.9.3 Final Process Plant Water Balance

The water balance includes the water requirements for both raw water and recycled process water. A fresh water requirement of 143 m³/hr is estimated and is based on an overall process plant water requirement of 560.8 m³/hr with 552.0 m³/hr being provided as recycled process water. Water losses of 156.3 m³/hr are estimated. It is assumed that the gland seal water for pumps, water for reagents preparation, potable water and make-up water will be provided by clean raw water. The rest of the water requirements within the process plant will be from recycled process water.

1.10 Tailings

SRK reviewed and relied upon the work performed by VOGBR Recursos Hídricos & Geotecnia (Minas Gerais, Brazil) during 2014-2015 who developed the Basic Design of the B2 Dam and the Conceptual Design of the Water Pond that will be implemented at the Boa Esperança Mine. The dams will have distinct purposes as shown below.

1.10.1 Water Pond

The reservoir of the water pond will have the purpose of storing clean water to meet the supply demands of the plant, considering a flow of 150 m³/hour during uninterrupted operations for a year. In December 2014, MCSA contracted VOGBR to develop the current work. The Water Pond will be built in the Jatobá Creek, within the limits of the MCSA properties.

1.10.2 B2 Dam

The reservoir of the B2 Dam will have the purpose of containing the hazardous tailings resulting from the copper ore beneficiation and to recover water to rationalize the use of new water, minimizing the need to collect water in the waterbodies of the region. In December 2014, MCSA contracted VOGBR to develop the current work. At that time, the construction of a waterproof dam constituted by a compacted soil embankment to meet the new tailings volumes generated in the Boa Esperança Copper Mine project was assessed. The considered operational life of the mine was 11 years.

The tailings to be deposited in the B2 Dam will be classified according to the ABNT NBR 10.004/2006 Standard as Class I tailings (hazardous). Since the tailings are Class I, the B2 Dam shall be watertight observing a minimum layer of non-saturated soil of 1.50m, measured between the bottom of the deposit and the critical water level. In addition, the design shall include the definition of the leak detection system and waterproofing system.

1.10.3 Tailings Storage

Studies for the Basic Design of saprolite and tailing dump aimed to define the geometry of its final arrangement and to size the proposed structures to internal and surface drainage systems.

The geometry proposed for the dump was adequate with regards to the geotechnical stability, showing security factors for normal and critical conditions equal to 1.5 and 1.3, respectively.

The final configuration of the dumps will consist of berms measuring 10 meters wide and benches with 10 meters’ height, with final angle of 2H:1V, after compaction of the tailing and enveloping with compacted soil of the saprolite and tailings dump. The volumetric capacity for the disposal of tailing and waste in the final configuration is 15.4 Mm³.

The bottom drain system will be used to collect the contributions from the input of incident waters in the dump, avoiding its saturation. These drains should be protected by a saprolite layer, to prevent that the traffic or surface draining damages the granular material of the section.

The materials to be disposed will be transported by conveyor belts, in the case of the waste processing plant, and dump trucks from the pit, in the case of the saprolite.

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1.10.4 Hydrology

Studies conducted in the period of January to November 2011, consisted of the following steps:

· Inventory of water sources and users;

· Flow measurements in major drainages;

· Preparation of hydrogeological conceptual model;

· Evaluation of impacts to water resources;

· Assessment of water availability; and

· Projection of the monitoring network.

During the months of February and September 2011 flow measurements related to the rainy and dry periods were conducted in the Project area in conjunction with environmental permit work. In each of these periods five different points located in the main drainages were established for the implementation of flow measurements. Also in the month of September a flow measurement was held in the Branco River, located approximately 15 km south of the Project.

The hydrogeological system in the region has the typical characteristics of formations located in crystalline basement aquifers. This is an aquifer consisting of a shallow weathered mantle with metric thickness (Porous Aquifer), superimposed over the crystalline basement (Fractured Aquifer), deformed and fractured.

The results indicate that the Project area has a low water potential, as many springs and surface water bodies have intermittent flow, becoming dried during the dry season. The underground reservoirs were also evaluated as an alternative to water capturing. However, tests performed in tubular wells showed low production capacity, with pump flow rate of about 6 m³/h.

The water pond designed by VOGBR will have the purpose of storing clean water to meet the demand of the plant, estimated at a flow of 150m³/hour, working for a year without interruption. The water pond will be located in the Jatobá stream, within the area owned by MCSA.

1.10.5 Project Infrastructure

Based on the estimated production volumes of copper concentrates, the best logistic alternatives between the Project and ports have been reviewed.

Tucumã, PA was considered as the starting point for the Project, considering:

· Domestic transportation;

· Cargo handling at the port;

· Sea transportation.

For domestic transportation, haulage by truck appears to be the only viable ground transportation. Although Para’s State is crossed by the Carajas’ Railroad and the Tocantins River, both of these alternatives present some deficiencies that hinder the utilization of the routes.

Vila do Conde has shown the best conditions for loading since Itaqui is limited to train transport options. Further, Vila do Conde is a better organized industrial port, with ample area which can be leased from the port authorities or from third companies.

The primary logistic challenges facing the Project are:

· Long distance to port;

· Limited accessibility to the railroad, owned by a private company with a track record of poor third-party service levels;

· Limited port infrastructure; and,

· Chronic congestion at ports near the Project.

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1.10.6 Environmental Management and Permitting

The Pará State Environmental Agency granted a Preliminary License (PL) to MCSA on March 7, 2012 which was subsequently renewed on June 19, 2013. MCSA filed for an Installation License request on April 1, 2013 which is currently under analysis.

A grant for well drilling and evaluation of water potential (considering future groundwater collection for the installation phase) was issued. The formal request for water use will be submitted immediately after the issuance of the Installation License (IL).

The IL is prepared when the project design has advanced far enough for engineering plans to be submitted to the government for approval. The IL is accompanied by an Environmental Control Plan referred to as a PCA (Plano de Controle Ambiental) and a Degraded Area Recovery Plan or PRAD (Plano de Recuperação de Áreas Degradadas). Once the IL has been granted, the DNPM can issue a Mining Concession. It is at this licensing stage that the Legal Reserve is defined. The Legal Reserve is an area whose size depends on state rules requiring the preservation of a portion of the natural biota. It is legalized by the Rural Environmental Register (Cadastro Ambiental Rural – CAR) or at the Real Estate Notary Office as property of the enterprising party, in accordance with Federal Law # 12.651/2012. In Pará the law has established that 80% of the propriety area should remain as a Legal Reserve. This percentage may be changed depending on the specific conditions of Environmental – Economical Zone in each region. This is regulated by the Brazilian Forest Code, Law # 12.651/2012 and Pará State Decree # 2.099/2010.

The area earmarked for deforestation covers 38.65 ha at this stage of the project. The Legal Reserve is being discussed with the Environmental Agency (SEMA) and will be a condition of the IL. The environmental agency is analyzing the IL process for the granting of this license.

The Operating License (OL) allows the project to begin operations and is issued after all of the appropriate environmental measures have been implemented and verified by the authorities. The OL must be renewed during the life of the mine. When the OL is up for renewal, a report summarizing environmental performance must be presented.

If, during the operation, there are substantial changes to the initial project plan (e.g. an additional treatment plant), this will require another specific IL, which will subsequently become an OL.

The baseline characterization studies and environmental impact assessment (EIA) for the Project were prepared and submitted to SEMA in 2008.

The EIA classifies areas of influence into three categories:

· Área Diretamente Afetada (ADA) = Directly Affected Area;

· Área de Influência Direta (AID) = Directly Influenced Area; and

· Área de Influência Indireta (AII) = Indirectly Influenced Area.

Changes to the boundary of the Project area were necessary due to a demand made by the Pará State Environmental Agency during the review of the PL application. The ADA now includes village P07 and drainage of about 200m, which were previously not included. This update added approximately 1,202.1 ha to the ADA. Additionally, the AID now includes springs which flow to the Branco River and Jatobá Creek. The main drainage affected by the project totals 7,204.4 ha.

The final Environmental Control Plan (PCA) was submitted to the environmental agency in April, 2013, and the Company is waiting for grant of the Installation License which is necessary for construction, and ultimately, mining activities, post conversion to an Operating License.

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1.11 Economic Analysis

Forecast copper prices over the LOM are presented in Table 4.

Table 4: Copper Prices - US$/t-Cu

Commodity	Yr -2		Yr -1		Yr 1		Yr 2		Yr 3		Yr 4		Yr 5		Yr 6		Yr 7		Yr 8		Yr 9
Metallic Copper		6,063		6,614		6,614		6,614		6,614		6,614		6,614		6,614		6,614		6,614		6,614

The price of the copper concentrate is considered CIF at the port of Shanghai, China. Logistics costs to transport copper concentrate from Boa Esperança to China are presented in Table 5 and Table 6. The logistic cost was considered as 50% "Bulk" and 50% "Container". The economic analysis also considered losses of 0.2% in concentrate transportation for both cases.

Table 5: Logistic Costs - Container

Items	Cost (R$/t-conc)
Copper Project Conc (Truck)	175.01
Handling & Storage (Port)	124.39
Ocean Freight	132.30
Total Freight	R$	431.71

Table 6: Logistic Costs - Bulk

Items	Cost (R$/t-conc)
Copper Project Conc (Truck)	175.01
Handling & Storage (Port)	67.57
Ocean Freight	236.25
Total Freight	R$	478.83

All currency is in Brazilian Reais ($R) unless otherwise stated. The following exchange rates have been considered throughout the economic section of the report.

Table 7: Exchange Rates

	Exchange Rate (R$ per US$)
Currency	Yr -2		Yr -1 – Yr 9
Reais	$	3.60	$	3.80

1.11.1 Capital Expenditures

The capital cost estimate developed for this Feasibility Study comprises the costs associated with the engineering, procurement, construction, commissioning and pre-operation required for all project facilities. SRK relied upon third-party estimation based on studies developed for the project by engineering firms according to the following scope:

· SRK Consulting - Mine Equipment Schedule, Mineral Resources, Mineral Reserves, mine equipment capital and mining operating costs, environment and mine closure;

· Tecnomin Projects e Consultoria Ltda (Minas Gerais, Brazil) - Plant basic engineering;

· Tyno Consultoria Tributária e Empresarial Ltda (Bahia, Brazil) - Fiscal;

· VOGBR Recursos Hídricos & Geotecnia (Minas Gerais, Brazil) - Basic Project of Tailings Dam and Conceptual Design of Water Pond.

The required quotations for equipment, materials and services were obtained mainly by MCSA’s Procurement Department (MCPD) and formal enquiries to well-known vendors in the mining business mainly in the 2^nd quarter 2015. Based on the deceleration in global mining activity and contraction in the Brazilian economy from the period of 2015 to 2017, no escalation was applied for the current capital cost estimates. SRK has reviewed the costing and third-party reports and is of the opinion that the the estimates are valid for the purposes of this report.

The capital estimate is shown in Table 8.

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Table 8: Capital Costs Summary by Area

Area	% of Total			LoM Cost (R$000’s)				Initial (R$000’s)			Ongoing (R$000’s)
Pre-Production		14			89,306				89,306			0
Infrastructure		1			6,615				6,615			0
Mine		8			48,075				35,778			12,298
Plant		39			244,109				244,109			0
Power & Automation		12			76,709				76,709			0
Utility Systems		2			12,065				12,065			0
Administration & Support		4			23,562				23,562			0
Tailings Storage Facilities		7			45,439				45,439			0
Water Pond		1			6,398				6,398			0
Indirect Costs		10			59,740				59,740			0
Salvage		-4			(24,796		)		0			(24,796		)
Closure		6			39,898				0			39,898
Total		100	%		R$	627,120			R$	599,721		R$	27,400

1.11.2 Operating Costs

Operating costs are based on mine, process, tailings and infrastructure facilities design criteria, engineering, as well as budgetary and vendor quotes. All operating costs include supervision staff, operations labor, maintenance labor, consumables, electricity, fuels, lubricants, maintenance parts and any other operating expenditure identified by contributing engineers. The operating costs are shown on Table 9.

Table 9: Project Operating Costs

Item	R$/t-RoM			R$/t-Conc			LoM  (R$000’s)
Mining		15.69			561.27			305,774
Processing		19.28			689.72			375,741
G&A		9.54			341.59			186,086
Total		R$	44.48		R$	1,592.58		R$	867,598

1.11.3 Economic Results

The financial analysis results, shown on Table 10, indicate an after-tax net present value (NPV) for the project at an 8% discount rate of US$195.3 million with an IRR of 32.7%. Payback from Project start is approximately 3.6 years.

Table 10: Economic Results

Item	Unit or Factor	Value
Ore Mined	kt		19,500.3
Mined Cu (contained)	kt		185.0
Recovered Cu	kt		163.4
Payable Cu	kt		156.9
Sales Volumes, Prices and Delivery Costs
Cu Price (average over production period)	$/t-Cu		6,614
Treatment Charges (TC)	US$/t conc.		78.50
Refining Charges (RC)	¢/lb		7.85
Tonnes Cu sold	kt		156.9
Revenue
Gross Revenue	R$000’s		3,943,195
Logistics & Sales Costs	R$000’s		(333,113	)
CFEM Royalty	R$000’s		(63,104	)
Gross Income	R$000’s		3,546,942
TC / RCs	R$000’s		(454,875	)
Net Revenue	R$000’s		3,488,320
Operating Costs
Mining	R$000’s		(305,774	)

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Item	Unit or Factor	Value
Process	R$000’s		(375,741	)
G&A	R$000’s		(186,086	)
Total Operating Costs	R$000’s		(867,600	)
Project Capital (Equity)	R$000’s		(626,126	)
Financing Interest	R$000’s		-
Income & Social Contribution Taxes	R$000’s		(251,907	)
Operating Cash Flow	R$000’s		1,972,596
Initial Capital	R$000’s		599,719
Equity for funding	R$000’s		-
Share Holders Equity	R$000’s		599,719
Ongoing Capital	R$000’s		12,298
Free Cash Flow	R$000’s		1,345,477
After-tax NPV 8% (per annum)	U$000’s		195,295
IRR			32.7	%
Payback	Yrs		3.6

1.12       Conclusions and Recommendations

Conclusions

SRK concurs with the geological interpretation of the mineralization of the Boa Esperança deposit as silica- and sulfide-filled breccias containing copper and cobalt mineralization associated with magnetite, as a variant of an iron-oxide-copper-gold (IOCG) hydrothermal deposit type. SRK concludes that the mineralization has been sufficiently defined through exploration methods, including core drilling, to support the Mineral Resource and Mineral Reserve estimation for use in a Feasibility Study.

SRK has carried out the appropriate review work to satisfy itself that the Mineral Reserve can be technically and profitably extracted through to the production and sale of copper concentrate. Consideration has been given to all technical areas of study, the associated capital and operating costs, and relevant factors including marketing, permitting, environmental and social. SRK is satisfied that the technical and economic feasibility has been demonstrated.

The Mineral Resource and Mineral Reserve Estimates are compliant within the guidelines of NI 43-101 and SRK has not identified any mining, metallurgical, infrastructure, permitting, legal, political, environmental, technical, or other relevant factors that could materially affect the potential development of estimated Mineral Reserves and Mineral Resources.

Recommendations

SRK recommends that analytical procedures be standardized, including documentation of procedures, performing check assays and duplicate sampling to provide increased confidence in the database.

SRK also recommends that the tailings filter sizing should be confirmed based on updated material characterization incorporating cyclone and dewatering screen additions to optimize the process and to support the analysis of a filter press to replace the vacuum filter belt.

In addition, it is recommended that social-environmental management practices be undertaken to ensure the success of the operation as well as a review of acid rock potential, and the potential operating costs associated with its treatment.

Finally, SRK recommends that a conceptual geomechanical model be developed to ensure final pit dimensions.

The estimated cost for the recommended work is presented below in Table 11.

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Table 11: Proposed Budget for Recommended Work

Program	Budget (US$)
Check assays at secondary laboratory	$	6,000
Duplicate core samples, including cutting, shipping & analysis		12,000
Confirm tailings thickener design and filter sizing		40,000
Expand studies on acid rock drainage and treatment		32,000
Develop a conceptual geomechanical model		30,000
Total	$	120,000

RISK FACTORS

An investment in the Company is speculative and involves a high degree of risk due to the nature of the Company’s business. The following risks, as well as risks currently unknown to the Company or that the Company currently deems immaterial, could adversely affect the Company’s current or future business, properties, operations, results, cash flows, financial condition and prospects; could cause future results, cash flows, financial condition, prospects, events or circumstances to differ materially from those currently expected, including the estimates and projections contained in this AIF; and, could cause actual events to differ materially from those described in forward looking statements relating to the Company. Investors should carefully consider the risks described below and elsewhere in this AIF. The risks described below and elsewhere in this AIF do not purport to be an exhaustive summary of the risks affecting the Company and additional risks and uncertainties not currently known to the Company or not currently perceived as being material may have an adverse effect on the Company.

Risks Related to the Company

Copper and gold prices are volatile and may be lower than expected

The Company’s business and its ability to sustain operations are dependent on, amongst other things, the market price of copper and gold. The prices of copper and gold realized by the Company will affect future exploration and development decisions, production levels, earnings, cash flows, the financial condition and prospects of the Company. If the world market prices of copper and/or gold were to drop and the prices realized by the Company on copper and/or gold sales were to decrease significantly and remain at such level for any substantial period, the Company’s business, financial condition, results of operations, cash flows and prospects would be negatively affected.

Some factors that affect the price of copper and gold include: industrial demand; forward or short sales of copper and gold by producers and speculators; future levels of copper and gold production; and rapid short-term changes in supply and demand due to speculative or hedging activities by producers, individuals or funds. Copper and gold prices are also affected by macroeconomic factors including: confidence in the global economy; expectations of the future rate of inflation; the availability and attractiveness of alternative investment vehicles; the strength of, and confidence in, the US dollar, the currency in which the price of copper and gold is generally quoted, and other major currencies; global political or economic events; global pandemics, such as COVID-19, and other health crises; and, costs of production of other copper and gold producing companies. All of the above factors can, through their interaction, affect the price of copper and gold by increasing or decreasing the demand for or supply of copper and gold.

The price of copper and gold has fluctuated widely in recent years, and future material price declines could cause commercial production from the MCSA Mining Complex or the NX Gold Property or the development of, and commercial production from, the Boa Esperança Property to be less profitable than expected and could render such properties uneconomic. Continuing to conduct mining in a low copper and/or gold price environment would have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and prospects. Depending on the current and expected price of copper and gold, projected cash flows from planned or current mining operations may not be sufficient to warrant commencing or continuing mining, and the Company could be forced to discontinue exploration, development or commercial production. The Company may be forced to sell one or more portions of the MCSA Mining Complex, NX Gold Property or the Boa Esperança Property to generate cash. Future production from the MCSA Mining Complex, NX Gold Property and the Boa Esperança Property will be dependent on a price of copper or gold, as the case may be, that is adequate to make a deposit economically viable. Furthermore, future mine plans using significantly lower copper or gold prices could result in material write-downs of the Company’s investment in the MCSA Mining Complex, NX Gold Property and the Boa Esperança Property, as the case may be, and in reductions in Mineral Reserve and Mineral Resource estimates. The occurrence of any of the foregoing could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and prospects.

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A declining or sustained low price of copper could negatively impact the profitability of the MCSA Mining Complex or gold could negatively impact the profitability of the NX Gold Property, and could affect the Company’s ability to finance the exploration and development of the Company’s current properties or other properties in the future. In addition, a declining or sustained low price of copper could require a reassessment of the feasibility of the Boa Esperança Property. Although the price of copper is only one of several factors that the Company will consider in making a development and production decision on the Boa Esperança Property, if the Company determines from a reassessment that the Boa Esperança Property is not economically viable in whole or in part, then operations may cease or be curtailed and the Boa Esperança Property may never be fully developed or developed at all. The occurrence of any of the foregoing could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and prospects.

Mining operations are risky

The Company’s current business, and any future exploration, development or mining operations, involve various types of risks and hazards typical of companies engaged in the mining industry. Such risks include, but are not limited to: (i) industrial accidents; (ii) unusual or unexpected rock formations; (iii) structural cave-ins or slides and pitfall, ground or slope failures and accidental release of water from surface storage facilities; (iv) fire, flooding and earthquakes; (v) rock bursts; (vi) metal losses in handling and transport; (vii) periodic interruptions due to inclement or hazardous weather conditions; (viii) environmental hazards; (ix) discharge of pollutants or hazardous materials; (x) failure of retaining dams and tailings disposal areas; (xi) failure of processing and mechanical equipment and other performance problems; (xii) geotechnical risks, including the stability of the underground hanging walls and unusual and unexpected geological conditions; (xiii) unanticipated variations in grade and other geological problems, water, surface or underground conditions; (xiv) labour disputes or slowdowns; (xv) work force health issues as a result of working conditions or epidemics, pandemics or other health risks, such as COVID-19; and (xvi) force majeure events, or other unfavourable operating conditions.

These risks, conditions and events could result in: (i) damage to, or destruction of, the value of the MCSA Mining Complex, the NX Gold Property, the Boa Esperança Property or their facilities; (ii) personal injury or death; (iii) environmental damage to the MCSA Mining Complex, the NX Gold Property, the Boa Esperança Property, surrounding lands and waters, or the properties of others; (iv) temporary or permanent loss of key personnel; (v) delays or prohibitions on mining or the transportation of minerals; (vi) monetary losses; and (vii) potential legal liability and any of the foregoing could have a material adverse effect on the Company’s business, financial condition, results of operation, cash flows or prospects. In particular, underground exploration, development and mining activities present inherent risks of injury to people and damage to equipment. Significant mine accidents could occur, potentially resulting in a complete shutdown of the Company’s operations at the MCSA Mining Complex or the NX Gold Property which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

There are also risks related to the reliance on, and the reliability of, current and new or developing technology; the reliance on the work performance of outside consultants, contractors, and manufacturers; changes to project parameters over which the Company does not have complete control such as the copper, gold and silver prices or labour or material costs; unknown or unanticipated or underestimated costs or expenses; unknown or unanticipated or underestimated additions to the scope of work due to changing or adverse conditions encountered as a mine is developed; unexpected variances in the geometry or quality of ore zones; unexpected reclamation requirements or expenses; permitting time lines; unexpected or unknown ground conditions; unexpected changes to estimated parameters utilized to estimate past timelines, projections, or costs; and liquidity risks. An adverse change in any one of such factors, hazards and risks may result in a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Mining operations require geologic, metallurgic, engineering, title, environmental, economic and financial assessments that may be materially incorrect and thus the Company may not produce as expected

The operations of mining properties or mining companies are based in large part on geologic, metallurgic, engineering, title, environmental, economic and financial assessments, which involve uncertainty. Such assessments may differ materially from actual results, which may result in a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects. These assessments include a series of assumptions regarding such factors as the ore body geometries, grades, recoverability, regulatory and environmental restrictions, future prices of metals and operating costs, future capital expenditures and royalties and government levies which will be imposed over the producing life of the Mineral Reserves. There are numerous uncertainties inherent in estimating quantities of Mineral Resources and Mineral Reserves and estimates in projecting potential future rates of mineral production, including factors subject to change and beyond the Company’s control. Mineral Reserves and Mineral Resources estimates are based on limited samples and interpretations, which may not be representative of actual Mineral Reserves and Mineral Resources. In addition, title and rights of access to the Company’s properties can never be guaranteed. Although select title and environmental reviews were conducted in connection with the Company’s acquisition of shares of MCSA and NX Gold on December 12, 2016 (the “Acquisitions”), this review cannot guarantee that any unforeseen defects in the chain of title will not arise to defeat the Company’s title to certain assets or that environmental defects, liabilities or deficiencies do not exist or are not greater than anticipated.

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The Company’s calculations of Mineral Resources and Mineral Reserves are estimates and depend upon geological interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be inaccurate. Actual recoveries of copper and gold from mineralized material may be lower than those indicated by test work. Any material change in the quantity of mineralization, grade or stripping ratio, may affect the economic viability of Ero’s properties. In addition, there can be no assurance that metal recoveries in small-scale laboratory tests will be duplicated in larger scale tests under on-site conditions or during production. Notwithstanding pilot plant tests for metallurgical recovery and other factors, there remains the possibility that the mineralized material may not perform in commercial production in the same manner as it did in testing. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. Mining and metallurgy are inexact sciences and, accordingly, there always remains an element of risk that a mine may not prove to be commercially viable.

Until a deposit is actually mined and processed, the quantity of Mineral Resources and Mineral Reserves and grades must be considered as estimates only. In addition, the quantity of Mineral Resources and Mineral Reserves may vary depending on, amongst other things, metal prices, cut-off grades and operating costs. Any material change in quantity of Mineral Reserves, Mineral Resources, grade, percent extraction of those Mineral Reserves recoverable by underground and open pit mining techniques may affect the economic viability of Ero’s mining projects and could have a material adverse effect on its future revenues, cash flows, profitability, results of operations, financial condition and prospects and result in write-downs of the Company's investment in mining properties and increased amortization charges.

Inferred Mineral Resources are also considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves. Due to the uncertainty which may attach to Inferred Mineral Resources, there is no assurance that Inferred Mineral Resources will be upgraded to Proven Mineral Reserves or Probable Mineral Reserves as a result of continued exploration or as a result of economic considerations being applied to them.

In addition, market fluctuations in the price of copper, gold and silver, as well as increased production costs, reduced recovery rates or increased operating and capital costs due to inflation or other factors, may render the exploitation of certain Mineral Reserves and Mineral Resources uneconomic and may ultimately result in a restatement of Mineral Reserves, Mineral Resources or both. Such a restatement could affect depreciation and amortization rates and have an adverse effect on the Company's financial performance.

Geotechnical, hydrological and climatic events could suspend mining operations or increase costs

All mining operations face geotechnical, hydrological and climate challenges. Unanticipated adverse geotechnical and hydrological conditions, such as landslides, subsidence and uplift, embankment failures and rock fragility may occur in the future and such events may not be detected in advance. Geotechnical instabilities and adverse climatic conditions can be difficult to predict and are often affected by risks and hazards outside of the Company’s control, such as severe weather and seismic activity.

Geotechnical failures could result in limited or restricted access to mines, suspension of operations, environmental damage, government investigations, increased monitoring costs, remediation costs, loss of ore and other impacts, which could result in loss of revenue or increased costs, and could result in a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and prospects.

Actual production, capital and operating costs may be different than those anticipated

Ero prepares estimates of future productions, capital costs and operating costs of production for operations at the MCSA Mining Complex and the NX Gold Property. In addition, as a result of the substantial expenditures involved in the development of a mineral project such as the Boa Esperança Property, the need to project years into the future, the need to make assumptions and use models that may not adequately approximate reality, and the fluctuation of costs over time, a development project is prone to material cost overruns. The MCSA Mining Complex Technical Report, the NX Gold Technical Report and the Boa Esperança Technical Report estimate capital costs and cash operating costs based upon, among other things:

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· anticipated tonnage, grades and metallurgical characteristics of the ore to be mined and processed;

· anticipated recovery rates of copper, gold and other metals from the ore;

· cash operating costs of comparable facilities and equipment;

· anticipated availability of labour and equipment; and

· anticipated foreign exchange rates.

Capital costs, operating costs, production and economic returns, and other estimates may differ significantly from those anticipated by the MCSA Mining Complex Technical Report, the NX Gold Technical Report and the Boa Esperança Technical Report, and there can be no assurance that the Company’s actual capital or operating costs will not be higher than currently anticipated or that returns will not be lower than anticipated. The Company’s actual costs may vary from estimates for a variety of reasons including, without limitation: limitations inherent in modelling; changes to assumed third party costs; short term operating factors; operational decisions made by the Company; revisions to mine plans; risks and hazards associated with development and mining described elsewhere in this AIF; natural phenomena, such as inclement weather conditions, water availability, floods, and earthquakes; and unexpected supply chain distributions, labour shortages or strikes. Operating costs may also be affected by a variety of factors including, without limitation: changing strip ratios, ore metallurgical grade-recovery curves, the availability of processing operations, the availability of storage capacity, the availability of supplies, equipment and facilities necessary to continue operations at the MCSA Mining Complex or the NX Gold Property and to complete development work at the Boa Esperança Property, the cost and availability of consumables and mining and processing equipment, labour costs, the availability and productivity of skilled labour, the cost of commodities, general inflationary pressures, currency exchange rates, technological and engineering problems, accidents or acts of sabotage or terrorism, the regulation of the mining industry by various levels of government and quasi-governmental organizations, global pandemics such as COVID-19, and political factors. Many of these factors are beyond the Company’s control. Furthermore, significant cost overruns could make the Boa Esperança Property uneconomical. Failure to achieve estimates or material increases in costs could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and prospects.

Furthermore, unforeseen delays in the construction and commissioning of mining projects or other technical difficulties may result in even further capital expenditures being required. Any delay in the development of a project or cost overruns or operational difficulties with regards to the MCSA Mining Complex, the NX Gold Property or the Boa Esperança Property may have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and prospects.

Infectious diseases, such as COVID-19, may affect the Company’s business and operations

The continued presence of infectious diseases, such as COVID-19, emerging infectious diseases or the threat of widespread outbreaks, pandemics or epidemics of viruses or other contagions or diseases, could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects by causing operational and supply chain delays and disruptions (including as a result of governmental regulations and prevention measures), labour shortages and shutdowns, social unrest, breach of material contracts and customer agreements, governmental or regulatory actions or inactions, increased insurance premiums, decreased demand for or the inability to sell and delivery the Company’s products, declines in the price of copper, gold and other metals, delays in permitting or approvals, stock market volatility (including volatility in the trading price of the Common Shares), capital markets volatility, interest rate volatility, exchange rate volatility, or other unknown but potentially significant impacts. In addition, governments may impose strict emergency measures in response to the threat or existence of an infectious disease.

The full extent and impact of COVID-19 is unknown and to date has included extreme market volatility in financial markets, a slowdown in economic activity, extreme volatility in commodity prices, and has raised the prospect of global recession. The international response to COVID-19 has led to significant restrictions on travel, temporary business closures, quarantines, global stock market volatility, and a general reduction in global consumer activity.

The Company continues to have no material disruption to operations, supply chains or sales channels as a result of the COVID-19 pandemic. Since the onset of the COVID-19 in early 2020, the Company has continued to take extraordinary measures to mitigate the possible impact of COVID-19 on its workforce and operations (see “General Development and Business of the Company – Three Year History” above for details on mitigation measures). There is no guarantee that this will continue to be the case. The extent to which COVID-19 will impact the Company’s workforce, operations, supply chains, or sales channels will depend on future developments which are highly uncertain and cannot be predicted with confidence. These future developments include, but are not limited to, the duration of the outbreak, new information that may emerge concerning the severity of COVID-19 and the mutations thereto, and the actions taken to contain COVID-19 (e.g., further restrictions on travel, business closures and quarantines) or treat it. The impact of governmental restrictions and health and safety protocols could improve or worsen relative to the Company’s assumptions, depending on how each jurisdiction manages potential outbreaks of COVID-19 and mutations thereto, the development and adequate supply of vaccines, and the roll-out of vaccination programs in each jurisdiction.

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Accordingly, the continued presence, or spread, of COVID-19 and mutations thereto, and any future emergence and spread of COVID-19 mutations or other infectious diseases could have a material adverse effect on to the Company’s business, financial condition, results of operations, cash flows or prospects.

Changes in climate conditions may affect the Company’s operations

We recognize that climate change is a global challenge that may have both favourable and adverse effects on our business in a range of possible ways. Mining and processing operations are energy intensive and result in a carbon footprint. As such, we are impacted by current and emerging policy and regulations relating to greenhouse gas emission levels, energy efficiency, and reporting of climate-change related risks. While some of the costs associated with reducing emissions may be offset by increased energy efficiency, technological innovation, or the increased demand for copper as part of technological innovations, the current regulatory trend may result in additional transition costs at some of our operations.

A number of governments have introduced or are moving to introduce climate change legislation and treaties at the international, national, state/provincial and local levels. Regulation relating to emission levels (such as carbon taxes) and energy efficiency is becoming more stringent. If the current regulatory trend continues, this may result in increased costs at the Company’s operations. Concerns around climate change may also affect the market price of the Common Shares as institutional investors and others may divest interests in industries that are thought to have more environmental impacts. While Ero is committed to operating responsibly and reducing the impact of its operations on the environment, its ability to reduce emissions, energy and water usage by increasing efficiency and by adopting new innovation is constrained by technological advancement, operational factors and economics. Adoption of new technologies, the use of renewable energy, and infrastructure and operational changes necessary to reduce water usage may also increase operating costs significantly. Concerns over climate change, and the Company’s ability to respond to regulatory requirements and societal pressures, may have significant impacts on the Company’s operations and reputation, and may event result in reduced demand for its products.

In addition, the physical risks of climate change may also have an adverse effect on the Company’s operations. These risks include, among others, the following:

· changes in sea levels could affect ocean transportation and shipping facilities that are used to transport supplies, equipment and workforce, and products from the Company's operations to world markets;

· extreme weather events (such as prolonged drought or rainy seasons) have the potential to disrupt operations at the Company’s mines and may require the Company to make additional expenditures to mitigate the impact of such events; and

· the Company’s facilities depend on regular supplies of consumables (diesel, tires, reagents, etc.) to operate efficiently. In the event that the effects of climate change or extreme weather events cause prolonged disruption to the delivery of essential commodities, production levels at the Company’s operations may be reduced.

There can be no assurance that the Company will be able to anticipate, respond to, manage or effectively mitigate the risks associated with physical climate change events or impacts, and this may have a material adverse effect on to the Company’s business, financial condition, results of operations, cash flows or prospects.

Currency fluctuations can result in unanticipated losses

Currency fluctuations may affect the Company’s capital costs and the costs that the Company incurs at its operations. Copper and gold are sold throughout the world based principally on a US dollar price, but a portion of the Company’s operating and capital expenses are incurred in Brazilian Reais and Canadian dollars. The appreciation of foreign currencies, particularly the Brazilian Real against the US dollar would increase the costs of copper and gold production at such mining operations, which could materially and adversely affect the Company’s earnings and financial condition. The Company has entered into foreign exchange swap contracts to help manage the currency fluctuation risk of the Brazilian Real against the US dollar. However, there is no assurance that such hedging contracts or any other steps taken to help mitigate foreign currency fluctuations will be effective.

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The successful operation of the MCSA Mining Complex and the NX Gold Property and the successful development and operation of the Boa Esperança Property depend on the skills of the Company’s management and teams

The Company’s business is dependent on retaining the services of its key management personnel with a variety of skills and experience, including in relation to the development and operation of mineral projects. The success of the Company is, and will continue to be, dependent to a significant extent on the expertise and experience of its directors and senior management. Failure to retain, or loss of, one or more of these people could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects. The Company’s success will also depend to a significant degree upon the contributions of qualified technical personnel and the Company’s ability to attract and retain highly skilled personnel. Competition for such personnel is intense, and the Company may not be successful in attracting and retaining qualified personnel, or in obtaining the necessary work permits to hire qualified expatriates. The Company’s inability to attract and retain these people could have a material adverse effect on its business, financial condition, results of operations, cash flows or prospects.

Operations during mining cycle peaks are more expensive

During times of increased demand for metals and minerals, price increases may encourage expanded mining exploration, development and construction activities. These increased activities may result in escalating demand for and cost of contract exploration, development and construction services and equipment. Increased demand for and cost of services and equipment could cause exploration, development and construction costs to increase materially, resulting in delays if services or equipment cannot be obtained in a timely manner due to inadequate availability, and increased potential for scheduling difficulties and cost increases due to the need to coordinate the availability of services or equipment, any of which could materially increase project exploration, development or construction costs, result in project delays, or increase operating costs.

Title to the MCSA Mining Complex, the NX Gold Property and/or the Boa Esperança Property may be disputed

Although the Company has received title opinions for the MCSA Mining Complex, the NX Gold Property and the Boa Esperança Property there is no guarantee that title to such properties will not be challenged or impugned. The Company’s claims may be subject to prior unregistered agreements or transfers and title may be affected by unidentified or unknown defects. The Company has conducted an investigation on the title of properties that it has acquired to confirm that there are no known claims or agreements that could affect its title to its mineral tenure or surface rights. There is no guarantee that such title will not be challenged or impaired. If title to the Company’s properties is disputed, it may result in the Company paying substantial costs to settle the dispute or clear title and could result in the loss of the property, which events may affect the economic viability of the Company. Title insurance generally is not available for mineral tenure or surface rights and the Company’s ability to ensure that it has obtained secure claim to title may be constrained.

The Company may fail to comply with the law or may fail to obtain or renew necessary permits and licenses

The Company’s operations are subject to extensive laws and regulations governing, among other things, such matters as environmental protection, management and use of toxic substances and explosives, health, exploration and development of mines, commercial production and sale of by-products, ongoing and post-closure reclamation, construction and operation of tailings dams, safety and labour, taxation and royalties, maintenance of mineral tenure, and expropriation of property. The activities of the Company require licenses and permits from various governmental authorities.

The costs associated with compliance with these laws and regulations and of obtaining licenses and permits are substantial, and possible future laws and regulations, changes to existing laws and regulations and more stringent enforcement of current laws and regulations by governmental authorities, could cause additional expenses, capital expenditures, restrictions on or suspensions of the Company’s operations and delays in the development of its properties. There is no assurance that future changes in such laws and regulations, if any, will not adversely affect the Company’s operations. Moreover, these laws and regulations may allow governmental authorities and private parties to bring lawsuits based upon damages to property and injury to persons resulting from the environmental, health and safety practices of the Company’s past and current operations, or possibly even the actions of former property owners, and could lead to the imposition of substantial fines, penalties or other civil or criminal sanctions. The Company may fail to comply with current or future laws and regulations. Such non-compliance can lead to financial restatements, civil or criminal fines, penalties, and other material negative impacts on the Company.

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The Company is required to obtain or renew further government permits and licenses for its current and contemplated operations, including the issuance of an installation license and operation license with respect to the Boa Esperança Property. Obtaining, amending or renewing the necessary governmental permits and licenses can be a time-consuming process potentially involving numerous regulatory agencies, involving public hearings and costly undertakings on the Company’s part. The duration and success of the Company’s efforts to obtain, amend and renew permits and licenses are contingent upon many variables not within its control, including the interpretation of applicable requirements implemented by the relevant permitting or licensing authority and staffing shortages at such permitting and licensing authorities. The Company may not be able to obtain, amend or renew permits or licenses that are necessary to its operations, or the cost to obtain, amend or renew permits or licenses may exceed what the Company believes it can ultimately recover from a given property once in production. Any unexpected delays or costs associated with the permitting and licensing process could impede the ongoing operation of the MCSA Mining Complex and the NX Gold Property, and could delay the development or impede the operation of the Boa Esperança Property. To the extent necessary permits or licenses are not obtained, amended or renewed, or are subsequently suspended or revoked, the Company may be curtailed or prohibited from proceeding with planned development, commercialization, operation and exploration activities. Such curtailment or prohibition may result in a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Compliance with environmental regulations can be costly

The Company’s mining operations at the MCSA Mining Complex and the NX Gold Property, the Company’s development of the Boa Esperança Property, and the exploration of these properties are all subject to environmental regulation. Regulations cover, among other things, water quality standards, land reclamation, the generation, transportation, storage and disposal of hazardous waste, the construction and operation of tailings dams, and general health and safety matters. There is no assurance that the Company has been or will at all times be in full compliance with all environmental laws and regulations or hold, and be in full compliance with, all required environmental and health and safety approvals and permits. The potential costs and delays associated with compliance with such laws, regulations, approvals and permits could prevent the Company from economically operating or proceeding with the further development and exploration of the MCSA Mining Complex, the NX Gold Property and/or the Boa Esperança Property, and any non-compliance with such laws, regulations, approvals and permits at the MCSA Mining Complex, the NX Gold Property and/or the Boa Esperança Property could result in a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Environmental approvals and permits are currently, and may in the future be, required in connection with the Company’s current and planned operations. To the extent such environmental approvals and permits are required and not obtained, the Company’s plans and the operation of mines may be curtailed, or it may be prohibited from proceeding with planned exploration or development of additional mineral properties. Failure to comply with applicable environmental laws, regulations and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions.

There is no assurance that any future changes in environmental regulation will not adversely affect the Company’s operations. Changes in government regulations have the potential to significantly increase compliance costs and thus reduce the profitability of current or future operations.

Environmental hazards may also exist on the properties on which the Company holds interests that are unknown to the Company at present and that have been caused by previous or existing owners or operators of the properties and for which the Company may be liable for remediation. Parties engaged in mining operations, including the Company, may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable environmental laws or regulations, regardless of whether the Company actually caused the loss or damage. The costs of such compensation, fines or penalties could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Social and environmental activism can negatively impact exploration, development and mining activities

There is an increasing level of public concern relating to the effects of mining on the natural landscape, on communities and on the environment. Certain non-governmental organizations, public interest groups and reporting organizations (“NGOs”) who oppose resource development can be vocal critics of the mining industry. In addition, there have been many instances in which local community groups have opposed resource extraction activities, which have resulted in disruption and delays to the relevant operation. While the Company seeks to operate in a socially responsible manner and believes it has good relationships with local communities in the regions in which it operates, NGOs or local community organizations could direct adverse publicity against and/or disrupt the operations of the Company in respect of one or more of its properties, regardless of its successful compliance with social and environmental best practices, due to political factors, activities of unrelated third parties on lands in which the Company has an interest or the Company’s operations specifically. Any such actions and the resulting media coverage could have an adverse effect on the reputation and financial condition of the Company or its relationships with the communities in which it operates, which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

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The construction and start-up of new mines and projects at existing mines is subject to a number of factors and the Company may not be able to successfully complete new construction projects

The success of construction projects and the start-up of new mines by the Company is subject to a number of factors including the availability and performance of engineering and construction contractors, mining contractors, suppliers and consultants, the receipt of required governmental approvals and permits in connection with the construction of mining facilities and the conduct of mining operations (including environmental and regulatory permits), the successful completion and operation of mining stopes, ventilation systems, shafts, processing plants and conveyors to move ore, among other operational elements. Any delay in the performance of any one or more of the contractors, suppliers, consultants or other persons on which the Company is dependent in connection with its construction activities, a delay in or failure to receive the required governmental approvals and permits in a timely manner or on reasonable terms, or a delay in or failure in connection with the completion and successful operation of the operational elements in connection with construction projects and/or new mines could delay or prevent the construction and start-up of new mines or projects at existing mines as planned. There can be no assurance that current or future construction and start-up plans implemented by the Company will be successful, that the Company will be able to obtain sufficient funds to finance construction and start-up activities, that personnel and equipment will be available in a timely manner or on reasonable terms to successfully complete construction projects, that the Company will be able to obtain all necessary governmental approvals and permits or that the completion of the construction, the start-up costs and the ongoing operating costs associated with the development of new mines or projects at existing mines will not be significantly higher than anticipated by the Company. Any of the foregoing factors could adversely impact the Company’s business, financial condition, results of operations, cash flows and prospects.

The capital expenditures and time required to develop new mines or other projects are considerable and changes in costs or construction schedules can affect project economics. Thus, it is possible that actual costs may change significantly, and economic returns may differ materially from the Company’s estimates.

Commercial viability of a new mine or development project is predicated on many factors. Mineral Reserves and Mineral Resources projected by feasibility studies and technical assessments performed on the Company’s projects may not be realized, and the level of future metal prices needed to ensure commercial viability may not materialize. Consequently, there is a risk that startup of new mine and development projects may be subject to write-down and/or closure as they may not be commercially viable.

Any uncertainty and inability in the estimation, recalculation or replacement of Mineral Reserves and Mineral Resources could materially affect the Company's results of operations, cash flows and financial position.

To ensure the continued operation of the business and realize the Company’s growth strategy, it is essential that the Company continues to realize its existing identified Mineral Reserves, convert Mineral Resources into Mineral Reserves, increase the Company’s Mineral Resource base by adding new Mineral Resources from areas of identified mineralized potential and otherwise successfully undertaking exploration, and/or acquire new Mineral Reserves and Mineral Resources. The life of mine estimates included herein may not be correct.

Land reclamation and mine closure requirements may be burdensome and costly.

Land reclamation and mine closure requirements are generally imposed on mining companies, which may require the Company, among other things, to minimize the effects of land disturbance. Such requirements may include control and treatment of any discharge of potentially dangerous effluents, including solutions that may contain cyanide and heavy metals, from the site and restoring the site’s landscape to its pre-disturbance form. The actual costs of reclamation and mine closure are uncertain and planned expenditures as outlined in the MCSA Mining Complex Technical Report, the NX Gold Technical Report and the Boa Esperança Technical Report may differ materially from the actual expenditures required. Therefore, the amount that the Company will be required to spend could be materially higher than current estimates. Any additional amounts required to be spent on reclamation and mine closure may have a material adverse effect on the Company’s financial performance, financial position and results of operations and may cause the Company to alter its operations. Although liabilities for estimated reclamation and mine closure costs have been included in the Company’s financial statements, it may be necessary to spend higher amounts than what has been estimated in the financial statements to fund all required reclamation and mine closure activities.

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The mining industry is intensely competitive

The mining industry is intensely competitive. The Company competes with other mining companies, many of which have greater resources and experience. Competition in the mining industry is primarily for: (i) properties which can be developed and can produce economically; (ii) the technical expertise to find, develop, and operate such properties; (iii) labour to operate such properties; and (iv) capital to fund such properties. Such competition may result in the Company being unable to acquire desired properties, to recruit or retain qualified employees and consultants or to acquire the capital necessary to fund its operations and develop its properties. The Company’s inability to compete with other mining companies for these resources could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Many competitors not only explore for and mine minerals but conduct refining and marketing operations on a worldwide basis. In the future, the Company may also compete with such mining companies in refining and marketing its products to international markets. Any inability to compete with established competitors could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Inadequate infrastructure may constrain mining operations

Continued production at the MCSA Mining Complex and the NX Gold Property and any potential commercial production at the Boa Esperança Property, each depend on adequate infrastructure. In particular, reliable power sources, water supply, ventilation systems, transportation and surface facilities are all necessary to develop and operate mines. Failure to adequately meet these infrastructure requirements or changes in the cost of such requirements could affect the Company’s ability to continue production at the MCSA Mining Complex and the NX Gold Property or to develop or commence production at the Boa Esperança Property and could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Operating cash flow may be insufficient for future needs

The exploration, development and operation of the Company’s mineral properties will require the commitment of substantial financial resources that may not be available. The amount and timing of expenditures will depend on a number of factors, including the progress of ongoing exploration and development, success of the Company’s ongoing operations, the results of consultants’ analyses and recommendations, the rate at which operating losses are incurred, the execution of any joint venture agreements with strategic partners and the acquisition of additional property interests, some of which are beyond the Company’s control. The Company’s business strategies may not be successful, and it may not be profitable in any future period.

The Company had positive operating cash flow for the financial years ended December 31, 2018, 2019 and 2020. The Company’s future operating results may not follow any past trends. To the extent that the Company has negative operating cash flow in future periods, the Company may need to allocate a portion of its cash reserves to fund such negative operating cash flow. The Company may also be required to raise additional funds through the issuance of equity or debt securities. There can be no assurance that additional capital or other types of financing will be available when needed or that these financings will be on terms favourable to the Company.

Fluctuations in the market prices and availability of commodities and equipment affect the Company’s business

The cash flows and profitability of the Company’s business will also be affected by the market prices and availability of commodities and equipment that are consumed or otherwise used in connection with the Company’s operations and development projects. Prices of such commodities and resources are also subject to volatility, which can be material and can occur over short periods of time due to factors beyond the Company’s control.

If there is a significant and sustained increase in the cost of certain commodities, the Company may decide that it is not economically feasible to continue certain or all of the Company’s commercial production, development and exploration activities and this could have an adverse effect on profitability. Higher worldwide demand for critical resources like input commodities, drilling equipment, mobile mining equipment, tires and skilled labour could affect the Company’s ability to acquire them and lead to delays in delivery and unanticipated cost increases, which could have an effect on the Company’s operating costs, capital expenditures and production schedules. The occurrences of one or more of these events may result in a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

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A failure to maintain satisfactory labour relations can adversely impact the Company

The Company’s operations and further development of the MCSA Mining Complex, the NX Gold Property and the Boa Esperança Property are dependent upon the efforts of its employees and the Company’s relations with its unionized and non-unionized employees, and the Company’s operations would be adversely affected if it failed to maintain satisfactory labour relations. Some of MCSA’s and NX Gold’s employees are represented by labour unions under various collective bargaining agreements. Collective bargaining agreements of MCSA must be renewed annually, in September of each year, while NX Gold’s collective bargaining agreements were renewed in May 2020, and every two years thereafter. The Company may not be able to satisfactorily renegotiate its collective bargaining agreements when they expire and may face tougher negotiations or higher compensation demands than would be the case for non-unionized labour. In addition, the existing collective bargaining agreements may not prevent a strike or work stoppage at the Company’s facilities in the future. Further, relations between the Company and its employees may be affected by changes in the scheme of labour relations that may be introduced by the relevant governmental authorities who have jurisdiction over the various aspects of the Company’s business. Changes in such legislation or in the relationship between the Company and its employees may have a material adverse effect on the Company’s business, results of operations and financial condition.

The Company’s insurance coverage may be inadequate to cover potential losses

The Company’s business is subject to a number of risks and hazards (as further described in this AIF). Although the Company maintains insurance to protect against certain risks in such amounts as it considers to be reasonable, its insurance will not cover all the potential risks associated with its activities, including current and any future mining operations. The Company may also be unable to obtain or maintain insurance to cover its risks at economically feasible premiums, or at all. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. Moreover, insurance against risks such as environmental pollution or other hazards as a result of exploration, development or production may not be available to the Company on acceptable terms. The Company might also become subject to liability for pollution or other hazards which it is not currently insured against and/or in the future may not insure against because of premium costs or other reasons. Losses from these events may cause the Company to incur significant costs which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

It may be difficult to enforce judgments and effect service of process on directors, officers and experts named herein

Some of the directors and officers of the Company reside outside of Canada, and each of GE21, BNA, Planminas and SRK Brazil is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction. Some or all of the assets of those persons may be located outside of Canada. Therefore, it may not be possible for investors to collect or to enforce judgments obtained in Canadian courts predicated upon the civil liability provisions of applicable Canadian securities laws against such persons. Moreover, it may not be possible for investors to effect service of process within Canada upon such persons.

The directors and officers may have conflicts of interest with the Company

Certain directors and officers of the Company are or may become associated with other mining and/or mineral exploration and development companies which may give rise to conflicts of interest. Directors who have a material interest in any person who is a party to a material contract or a proposed material contract with the Company are required, subject to certain exceptions, to disclose that interest and generally abstain from voting on any resolution to approve such a contract. In addition, directors and officers are required to act honestly and in good faith with a view to the best interests of the Company. Some of the directors and officers of the Company have either other full-time employment or other business or time restrictions placed on them and accordingly, the Company will not be the only business enterprise of these directors and officers. Further, any failure of the directors or officers of the Company to address these conflicts in an appropriate manner or to allocate opportunities that they become aware of to the Company could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Future acquisitions may require significant expenditures and may result in inadequate returns

The Company may seek to expand through future acquisitions; however, there can be no assurance that the Company will locate attractive acquisition candidates, or that the Company will be able to acquire such candidates on economically acceptable terms, if at all, or that the Company will not be restricted from completing acquisitions pursuant to the terms and conditions from time to time of arrangements with third parties, such as the Company’s creditors. Future acquisitions may require the Company to expend significant amounts of cash, resulting in the Company’s inability to use these funds for other business or may involve significant issuances of equity or debt. Future acquisitions may also require substantial management time commitments, and the negotiation of potential acquisitions and the integration of acquired operations could disrupt the Company’s business by diverting management and employees’ attention away from day-to-day operations. The difficulties of integration may be increased by the necessity of coordinating geographically diverse organizations, integrating personnel with different backgrounds and combining different corporate cultures.

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Any future acquisition involves potential risks, including, among other things: (i) mistaken assumptions and incorrect expectations about mineral properties, Mineral Resources, Mineral Reserves and costs; (ii) an inability to successfully integrate any operation the Company acquired or acquires, as applicable; (iii) an inability to recruit, hire, train or retain qualified personnel to manage and operate the operations acquired; (iv) the assumption of unknown liabilities; (v) mistaken assumptions about the overall cost of equity or debt; (vi) unforeseen difficulties operating acquired projects, which may be in geographic areas new to the Company; and (vii) the loss of key employees and/or key relationships at the acquired project. In addition, the Acquisitions were completed with certain of the prior shareholders thereof on an “as is where is” basis, and therefore the Company has no rights of recourse and indemnities against the sellers. Future acquisitions may be subject to similar or other limitations as to rights of recourse and indemnities against the sellers.

Future acquisition candidates may have liabilities or adverse operating issues that the Company failed or fails to discover through due diligence prior to the acquisition. If the Company consummates any future acquisitions with, unanticipated liabilities or adverse operating issues or if acquisition-related expectations are not met, the Company’s business, results of operations, cash flows, financial condition or prospects may be materially adversely affected. The potential impairment or complete write-off of goodwill and other intangible assets related to any such acquisition may reduce the Company’s overall earnings and could negatively affect the Company’s balance sheet.

Disclosure and internal control deficiencies may adversely affect the Company

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Disclosure controls and procedures are designed to ensure that the information required to be disclosed by the Company in reports filed with securities regulatory agencies is recorded, processed, summarized and reported on a timely basis and is accumulated and communicated to the Company’s management, as appropriate, to allow timely decisions regarding required decisions. The Company has invested resources to document and analyze its system of disclosure controls and its internal control over financial reporting. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance with respect to the reliability of financial reporting and financial statement preparation. The Company’s failure to satisfy the requirements of applicable Canadian securities laws on an ongoing, timely basis could result in the loss of investor confidence in the reliability of its financial statements, which in turn could harm its business and negatively impact the trading price of the Common Shares. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm the Company’s operating results or cause it to fail to meet its reporting obligations.

Failures of information systems or information security threats can be costly

The secure processing, maintenance and transmission of information and date is critical to the Company’s business. The Company has entered into agreements with third party service providers for hardware, software, telecommunications and other information technology services in connection with its operations. The Company and its third party service providers collect and store sensitive data in the ordinary course of the Company’s business, including personal information of employees, as well as proprietary and confidential business information relating to the Company and, in some cases, the Company’s customers, suppliers and other stakeholders. With the increasing dependence and interdependence on electronic data communication and storage, including the use of cloud-based services and personal devices, the Company is exposed to evolving technological risks relating to this information and data. These risks include targeted attacks on the Company’s systems or on systems of third parties that the Company relies on, failure or non-availability of a key information technology system, or a breach of security measures designed to protect the Company’s systems. While the Company employs security measures in respect of its information and data, including implementing systems to monitor and detect threats, information security training for employees with access to sensitive information and data, including the use of multi-factor encryption on all personal devices, the performance of periodic audits, and penetration testing, the Company cannot be certain that it will be successful in securing this information and data and there may be instances where the Company is exposed to malware, cyber attacks or other unauthorized access or use of the Company’s information and data.

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Although to date the Company has not experienced any material losses relating to cyber-attacks or other information security breaches, there can be no assurance that it will not incur such losses in the future. The Company’s risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats. Any data breach or other improper or unauthorized access or use of its information could have a material adverse effect on the Company’s business and could severely damage its reputation, compromise its network or systems and result in a loss or escape of sensitive information, a misappropriation of assets or incidents of fraud, disrupt its normal operations, and cause it to incur additional time and expense to remediate and improve its information systems. As a result, cyber security and the continued development and enhancement of controls, processes and practices designed to protect systems, computers, software, data and networks from attack, damage or unauthorized access remain a priority. As cyber threats continue to evolve, the Company may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities. Any of these factors could have a material adverse effect on the Company’s results of operations, cash flows and financial position.

The Company may be subject to costly legal proceedings

The Company may be subject to regulatory investigations, civil claims, lawsuits and other proceedings in the ordinary course of its business. The results of these legal proceedings cannot be predicted with certainty due to the uncertainty inherent in regulatory actions and litigation, the difficulty of predicting decisions of regulators, judges and juries and the possibility that decisions may be reversed on appeal. Defense and settlement costs of legal disputes can be substantial, even with claims that have no merit. Management is committed to conducting business in an ethical and responsible manner, which it believes will reduce the risk of legal disputes. However, if the Company is subject to legal disputes, there can be no assurances that these matters will not have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Moreover, pursuant to the Acquisitions, the Company acquired operations that have been ongoing for a significant period of time. The Company inherited certain liabilities as a result and has been subject to a number of claims (including claims related to tax, labour and social security matters and civil action) in the course of its business which individually are not material and have not been accrued for in its financial statements as it is not probable that a cash outflow will occur. While the Company believes that a significant number of these claims are unlikely to be successful, if all such existing claims were decided against it, the Company could be exposed to liability of up to approximately US$22.2 million as at December 31, 2020, which could have an adverse impact on the Company’s business, financial condition, results of operations, cash flows or prospects.

Additionally, the legal system in Brazil has inherent uncertainties that could limit the legal protections available to the Company, which include: (i) inconsistencies between and within laws; (ii) limited judicial and administrative guidance on interpreting Brazilian legislation, particularly that relating to business, corporate and securities laws; (iii) substantial gaps in the regulatory structure due to a delay or absence of enabling regulations; (iv) a lack of judicial independence from political, social and commercial forces; (v) corruption; and (vi) bankruptcy procedures that are subject to abuse, any of which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects. Furthermore, it may be difficult to obtain swift and equitable enforcement of a Brazilian judgement, or to obtain enforcement of a judgement by a court of another jurisdiction, which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

The Company may be subject to shareholder activism

In recent years, publicly-traded companies have been increasingly subject to demands from activist shareholders advocating for changes to corporate governance practices, such as executive compensation practices, social issues, or for certain corporate actions or reorganizations. There can be no assurances that activist shareholders will not publicly advocate for the Company to make certain corporate governance changes or engage in certain corporate actions. Responding to challenges from activist shareholders, such as proxy contests, media campaigns or other activities, could be costly and time consuming and could have an adverse effect on the Company reputation and divert the attention and resources of the Company management and the Board, which could have an adverse effect on the Company’s business and results of operations. Even if the Company does undertake such corporate governance changes or corporate actions, activist shareholders may continue to promote or attempt to effect further changes, and may attempt to acquire control of the Company to implement such changes. If shareholder activists seeking to increase short-term shareholder value are elected to the Board, this could adversely effect the Company’s business and future operations. Additionally, shareholder activism could create uncertainty about the Company’s future strategic direction, resulting in loss of future business opportunities, which could adversely effect the Company’s business, future operations, profitability and ability to attract and retain qualified personnel.

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The Boa Esperança Property is located in an underdeveloped rural area

The Boa Esperança Property is located in an underdeveloped rural area, resulting in technical challenges for conducting mineral exploration and development and any potential mining activities at the property. The Company benefits from modern mining transportation skills and technologies for exploring and operating in such areas. Nevertheless, the Company may sometimes be unable to overcome problems related to underdevelopment or unseasonable weather at a commercially reasonable cost, which could negatively affect the Company’s mineral exploration and development and any potential mining activities at the property and have a material adverse effect on the Company. The rural location of the Boa Esperança Property also results in increased costs associated with land access and infrastructure, including powerlines, water pipelines and transportation.

Product alternatives may reduce demand for the Company’s products

Copper and gold have a number of different applications. Alternative technologies are continually being investigated and developed with a view to reducing production costs or for other reasons, such as minimizing environmental or social impact. If competitive technologies emerge that use other materials in place of copper or gold, demand and price for copper or gold might fall, which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

The Company is subject to restrictive covenants that limit its ability to operate its business

The Company and its subsidiaries are subject to certain affirmative and restrictive covenants contained in the Credit Agreement. The loan agreements contain operating and financial covenants that could restrict the Company’s and its subsidiaries’ ability to, among other things: incur additional indebtedness needed to fund its respective operations; pay dividends or make certain other distributions; make investments; create liens; sell or transfer assets; or enter into transactions with affiliates. In addition, the Company and its subsidiaries must maintain certain financial ratios and satisfy non-financial maintenance and other covenants. Compliance with the covenants and financial ratios may impair the Company and its subsidiaries and thereby the Company’s ability to finance future operations or capital needs or to take advantage of other favourable corporate opportunities. The restrictions on the Company’s ability to manage its business in management’s sole discretion could adversely affect the Company’s business by, among other things, limiting its ability to take advantage of business opportunities that management believes would be beneficial to shareholders and limiting their ability to adjust to changing market conditions. The Company’s and its subsidiaries’ ability to comply with such covenants and financial ratios will depend on future performance and may be affected by events beyond the control of the Company and its subsidiaries, including economic, financial and industry conditions.

Risks Related to the Company’s Foreign Operations

The Company’s Brazilian operations are subject to political and other risks associated with operating in a foreign jurisdiction

The MCSA Mining Complex, the NX Gold Property and the Boa Esperança Property are located in Brazil, exposing the Company to the socioeconomic conditions as well as the laws governing the mining industry in the country. Inherent risks with conducting foreign operations include, but are not limited to: high rates of inflation; extreme fluctuations in currency exchange rates, military repression; war or civil war; social and labour unrest; organized crime; hostage taking; terrorism; violent crime; expropriation and nationalization; renegotiation or nullification of existing concessions, licenses, approvals, permits and contracts; illegal mining; changes in taxation policies; restrictions on foreign exchange and repatriation; and changing political norms, currency controls and governmental regulations that favour or require the Company to award contracts in, employ citizens of, or purchase supplies from, the jurisdiction.

The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes significant changes in policies and regulations. Changes, if any, in mining or investment policies or shifts in political attitude in Brazil may adversely affect the Company’s operations or profitability. Operations may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on production, price controls, export controls, currency remittance, importation of parts and supplies, income and other taxes, royalties, the repatriation of profits, expropriation of property, foreign investment, awarding of concessions under the new land tender system in Brazil, maintenance of concessions, licenses, approvals and permits, environmental matters, construction and operation of tailings dams, land use, land claims of local people, water use and mine safety. Failure to comply strictly with applicable laws, regulations and local practices relating to mineral right applications and tenure could result in loss, reduction or expropriation of entitlements, or the imposition of additional local or foreign parties as joint venture partners with carried or other interests.

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In addition, uncertainty over whether the Brazilian government will implement changes in policy or regulation may contribute to economic uncertainty in Brazil. Historically, Brazilian politics have affected the performance of the Brazilian economy. Past political crises have affected the confidence of investors and the public, generally resulting in an economic slowdown.

Global economic crises, including the economic impacts of COVID-19, could negatively affect investor confidence in emerging markets or the economies of the principal countries in Latin America, including Brazil. Such events could materially and adversely affect the Company's business, financial condition, results of operations, cash flows or prospects.

To manage and mitigate the spread of COVID-19, the Brazilian government has implemented various regulations, orders, protocols and guidelines, many of which affect the Company’s business, employees, contractors, suppliers and local communities. COVID-19 has also impacted the Brazilian government and economy, and in addition to impacts on labour, supplies, and services that are needed to conduct the Company’s business, this may also increase the likelihood of additional taxes, duties, royalties or similar financial commitments being placed on mining operators in an effort to generate municipal, state and federal revenues. Please refer to the more detailed discussion on the risks related to COVID-19 on the Company’s business and operations under the heading “Risk Factors - Infectious diseases, such as COVID-19, may affect the Company’s business and operations”.

The Company continues to monitor developments and policies in Brazil and the impact thereof to its operations; however, they cannot be accurately predicted and could have an adverse effect on the Company’s operations or profitability.

The Company may be negatively impacted by changes to mining laws and regulations

The Company’s activities are subject to various laws governing prospecting, exploration, development, production, taxes, labour standards and occupational health, mine safety, toxic substances, construction and operation of tailings dams and other matters. Mining, exploration and development activities are also subject to various laws and regulations relating to the protection of the environment. Although the Company believes that its activities are currently carried out in accordance with all applicable rules and regulations, no assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner that could limit or curtail production or development of the Company’s properties. Amendments to current laws and regulations governing the Company’s operations and activities or more stringent implementation of such laws and regulations could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

It is uncertain how the current and past operations of the Company will be affected by future legal changes or more stringent enforcement of past and current laws and regulations by governmental authorities. The Company may be subject to administrative, civil and criminal sanctions should a more conservative interpretation of past and current laws and regulations be adopted by governmental authorities.

In October 2020, the Brazilian government enacted certain changes to the National Dams Safety Policy and Mining Code, which, among other things, bans the construction and lifting of tailings dams using the upstream method; requires the decommissioning of existing tailings dams utilizing the upstream method by February 22, 2022 or such later date as agreed between the operator and applicable regulatory agencies; places a higher degree of safety planning, monitoring and reporting obligations on operators; provides broader enforcement rights to regulatory agencies (such as ANM and environmental agencies); and, introduces administrative penalties for non-compliance, including, but not limited to, warnings, fines between R$2,000 and R$1,000,000,000, partial or total suspension of activities, seizure of mining products, assets and equipment, cancellation of mining concessions and/or restriction of other rights.  Such penalties are to be applied independently of criminal sanctions or damage repair obligations.

The Company currently manages seven tailings facilities at its operations in Brazil (four at the MCSA Mining Complex and three at the NX Gold Mine), which are all constructed using a downstream method. Each of these facilities is routinely inspected by the Company's internal technical teams, third-party engineering firms and applicable regulatory agencies. At the MCSA Mining Complex, the Company's largest operation, a conventional tailings dam is no longer in use due to the implementation of co-disposal. The co-disposal method entails utilizing the inherent void space within surface waste rock stockpiles by allowing tailings to permeate the piles. The method has produced excellent results since 2011, allowing increased process water recycling, significantly reduced pumping costs, creating substrate for revegetation of the waste rock stockpiles and, since implementation, has eliminated the need for conventional tailings storage. The historic tailings facility is currently being reclaimed as part of the Company's revegetation program. At the NX Gold Mine, non-inert tails from the Company's carbon in leach process are stored in a high density polyethylene (HDPE) lined excavated pit. Inert tails are stored in a single-lift rockfill dam of segmented ring-dyke design, with only one cell operational at any given time until the tails are de-watered. De-watered inert tails are transported periodically from the tailings storage facility to legacy areas disturbed by artisanal mining activity prior to construction of the mine or within permitted long-term storage facilities. Once filled, these areas are revegetated and reclaimed as part of the Company's ongoing environmental sustainability efforts. A comprehensive guide to the Company’s tailings facilities can be found on the Company’s website (www.erocopper.com) under “Sustainability - Tailings Management”. For additional scientific and technical information regarding the Company’s tailings management practices, please refer to the MCSA Mining Complex Technical Report and the NX Gold Technical Report, each of which is available for review on the Company’s website and under the Company’s profile on SEDAR at www.sedar.com.

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Should a breach of these facilities occur due to extreme weather, seismic event, or other incident, the Company could cause a significant environmental incident and/or suffer a material financial impact on its operations and financial condition, including the potential for criminal and financial liability, suspension of its operations and/or loss of its mining concessions.

A failure to maintain relationships with the communities in which the Company operates and other stakeholders may adversely affect the Company’s business.

The Company’s relationships with the communities in which it operates and other stakeholders are critical to ensure the future success of its existing operations and the construction and development of its projects. There is an increasing level of public concern relating to the perceived effect of mining activities on the environment and on communities impacted by such activities. The evolving expectations related to human rights and environmental protection may result in opposition to the Company’s current and future operations or further development or new development of the Company’s projects and mines. Such opposition may be directed through legal or administrative proceedings or expressed in manifestations such as protests, roadblocks or other forms of public expression against the Company’s activities and may have a negative impact on the Company’s reputation and operations.

Opposition by any of the aforementioned groups to the Company’s operations may require modification of, or preclude the operation or development of, the Company’s projects and mines or may require the Company to enter into agreements with such groups or local governments with respect to the Company’s projects and mines, in some cases, causing increased cost and considerable delays to the advancement of the Company’s projects. Further, publicity adverse to the Company, its operations or extractive industries generally, could have an adverse effect on the Company and may impact relationships with the communities in which Ero operates and with other stakeholders. While the Company is committed to operating in a socially responsible manner, there can be no assurance that its efforts in this respect will mitigate this potential risk.

Corruption and fraud in Brazil relating to ownership of real property may adversely affect the Company’s business

Under Brazilian law, real property ownership is normally transferred by means of a transfer deed, and subsequently registered at the appropriate real property registry office under the corresponding real property record. There are uncertainties, corruption and fraud relating to title ownership of real property in Brazil, mostly in rural areas. In certain cases, a real property registry office may register deeds with errors, including duplicate and/or fraudulent entries, and, therefore, deed challenges frequently occur, leading to judicial actions. Property disputes over title ownership are frequent in Brazil, and, as a result, there is a risk that errors, fraud or challenges could adversely affect the Company’s ability to operate, although ownership of mining rights are separate from ownership of land.

The Company is exposed to the possibility that applicable taxing authorities could take actions that result in increased tax or other costs that might reduce the Company’s cash flow

The Company pays a variety of taxes, fees and other governmental charges in connection with the operation of the Company’s business, including income taxes, mining royalties, ad valorem property taxes, sales and use taxes, inventory taxes, social security contributions and various assessments. These taxes, fees and other charges are assessed by a variety of taxing authorities pursuant to applicable laws, regulations and rules. The Brazilian tax regime is complex and subject to a variety of interpretations by government authorities. Such complexity may expose the Company to unpredicted challenges to day to day practices in bookkeeping, accounting and payment of taxes. From time to time, the Company may enter into specific agreements with such taxing authorities that provide for the reduction, abatement or deferral of such taxes, fees or charges in exchange for certain payments or undertakings on the Company’s part. If the Company enters into any such arrangements, the Company can give no assurance that any such reduction, abatement or deferral arrangements will be honored or that the applicable taxing authorities will not take actions that materially increase the amount of such taxes, fees or other governmental charges that the Company is required to pay. In addition, the Company may incur additional and unanticipated costs and expenses in connection with the Company’s efforts to resist any proposed increases in such taxes, fees or other charges or in connection with the Company’s efforts to enforce any reduction, abatement or deferral arrangements that the Company has previously put in place.

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The Brazilian government may implement changes to the Brazilian tax regime that may affect the Company. These changes could include changes in prevailing tax rates and the imposition of new or temporary taxes, the proceeds of which are earmarked for designated government purposes. Some of these changes may result in increases in the Company’s tax payments, which could have an adverse effect on the Company’s operations or profitability. The Company cannot provide assurance that it will be able to be profitable following any increases in Brazilian taxes applicable to the Company and its operations.

The Company is subject to a number of ongoing proceedings in Brazil related to tax matters that have not been accounted for in its financial statements, given the Company’s assessment of the probability of adverse judgment against it. If all such tax matters were decided against it, the Company could be exposed to liability of up to approximately US$14.8 million as at December 31, 2020 (this amount forms part of the US$22.2 million referred to above under the subheading “The Company may be subject to costly legal proceedings”), which could have an adverse impact on the Company’s business, financial condition, results of operations, cash flows or prospects.

Inflation in Brazil, along with Brazilian governmental measures to combat inflation, may have a significant negative effect on the Brazilian economy and also on the Company’s financial condition and results of operations

In the past, high levels of inflation have adversely affected the economies and financial markets of Brazil, and the ability of its government to create conditions that stimulate or maintain economic growth. Moreover, governmental measures to curb inflation and speculation about possible future governmental measures have contributed to the negative economic impact of inflation in Brazil and have created general economic uncertainty. As part of these measures, the Brazilian government has at times maintained a restrictive monetary policy and high interest rates that have limited the availability of credit and economic growth. Brazil may experience high levels of inflation in the future. Inflationary pressures may weaken investor confidence in Brazil and lead to further government intervention in the economy, including interest rate increases, restrictions on tariff adjustments to offset inflation, intervention in foreign exchange markets and actions to adjust or fix currency values, which may trigger or exacerbate increases in inflation, and consequently have an adverse impact on the Company. In an inflationary environment, the value of uncollected accounts receivable, as well as of unpaid accounts payable, declines rapidly. If Brazil experiences high levels of inflation in the future and price controls are imposed, the Company may not be able to adjust the rates the Company charges its customers to fully offset the impact of inflation on the Company's cost structures, which could adversely affect the Company's results of operations or financial condition.

Exchange rate instability may have a material adverse effect on the Brazilian economy

The Brazilian Real has experienced frequent and substantial variations in relation to the US dollar and other foreign currencies during the last decades. Depreciation of the Brazilian Real against the US dollar could create inflationary pressures in Brazil and cause increases in interest rates, which could negatively affect the growth of the Brazilian economy as a whole and harm the Company's financial condition and results of operations. On the other hand, appreciation of the Brazilian Real relative to the US dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange current accounts, as well as dampen export-driven growth. Depending on the circumstances, either depreciation or appreciation of the Brazilian Real could have a material adverse effect on the Brazilian economy.

The Company’s operations may be impaired as a result of restrictions to the acquisition or use of rural properties by foreigner investors or Brazilian companies under foreign control

Non-resident individuals and non-domiciled foreign legal entities are subject to restrictions for the acquisition or lease for agricultural purpose or ownership or access rights in respect of rural properties in Brazil. Limitations also apply to legal entities domiciled in Brazil controlled by foreign investors, such as the Company’s subsidiaries through which the Company operates in Brazil.

Accordingly, the Company’s current and future operations may be impaired as a result of such restrictions on the acquisition or use of rural properties, and the Company’s ownership or access rights in respect of any rural properties in Brazil may be subject to legal challenges, all of which could result in a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.

Recent disruptions in international and domestic capital markets may lead to reduced liquidity and credit availability for the Company

The disruptions recently experienced in the international and domestic capital markets have led to reduced liquidity and increased credit risk premiums for certain market participants and have resulted in a reduction of available financing.

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Companies located in countries in the emerging markets may be particularly susceptible to these disruptions and reductions in the availability of credit or increases in financing costs, which could result in them experiencing financial difficulty. In addition, the availability of credit to entities operating within the emerging and developing markets is significantly influenced by levels of investor confidence in such markets as a whole and as such any factors that impact market confidence (for example, the impacts of global health crises, such as COVID-19, a decrease in credit ratings, state or central bank intervention in one market or terrorist activity and conflict) could affect the price or availability of funding for entities within any of these markets.

The Company may be responsible for corruption and anti-bribery law violations

The Company’s business is subject to the United States Foreign Corrupt Practices Act of 1977 (“FCPA”) and the Corruption of Foreign Public Officials Act (Canada) (“CFPOA”), which generally prohibit companies and company employees from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. The FCPA also requires companies to maintain accurate books and records and internal controls, including at foreign-controlled subsidiaries. Since all of the Company’s presently held interests are located in Brazil, there is a risk of potential FCPA violations. In addition, the Company is subject to the anti-bribery laws of Brazil and of any other countries in which it conducts business in the future. The Company's employees or other agents may, without its knowledge and despite its efforts, engage in prohibited conduct under the Company’s policies and procedures and the FCPA, the CFPOA or other anti-bribery laws for which the Company may be held responsible. The Code and the Anti-Corruption Policy mandate compliance with these anti-corruption and anti-bribery laws and the Company has implemented training programs, internal monitoring and controls, and reviews and audits to ensure compliance with such laws. However, there can be no assurance that the Company’s internal control policies and procedures will always protect it from recklessness, fraudulent behavior, dishonesty or other inappropriate acts committed by its affiliates, employees, contractors or agents. If the Company’s employees or other agents are found to have engaged in such practices, the Company could suffer severe penalties and other consequences that may have a material adverse effect on its business, financial condition and results of operations.

Risks Related to the Common Shares

Investors may lose their entire investment

An investment in the Common Shares is speculative and may result in the loss of an investor’s entire investment. Only potential investors who are experienced in high risk investments and who can afford to lose their entire investment should consider an investment in the Company.

Dilution from equity financing could negatively impact holders of Common Shares

The Company may from time to time raise funds through the issuance of Common Shares or the issuance of debt instruments or other securities convertible into Common Shares. The Company cannot predict the size or price of future issuances of Common Shares or the size or terms of future issuances of debt instruments or other securities convertible into Common Shares, or the effect, if any, that future issuances and sales of the Company’s securities will have on the market price of the Common Shares. Sales or issuances of substantial numbers of Common Shares, or the perception that such sales or issuances could occur, may adversely affect prevailing market prices of the Common Shares. With any additional sale or issuance of Common Shares, or securities convertible into Common Shares, investors will suffer dilution to their voting power and the Company may experience dilution in its earnings per share.

Equity securities are subject to trading and volatility risks

The securities of publicly traded companies can experience a high level of price and volume volatility and the value of the Company’s securities can be expected to fluctuate depending on various factors, not all of which are directly related to the success of the Company and its operating performance, underlying asset values or prospects. These include the risks described elsewhere in this AIF. Factors which may influence the price of the Company’s securities, including the Common Shares, include, but are not limited to:

· worldwide economic conditions;

· changes in government policies;

· investor perceptions;

· movements in global interest rates and global stock markets;

· variations in operating costs;

· the cost of capital that the Company may require in the future;

· metals prices;

· the price of commodities necessary for the Company’s operations;

· recommendations by securities research analysts;

· issuances of equity securities or debt securities by the Company;

· operating performance and, if applicable, the share price performance of the Company’s competitors;

· the addition or departure of key management and other personnel;

· significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving the Company or its competitors;

· news reports relating to trends, concerns, technological or competitive developments, regulatory changes, global health crises, such as COVID-19, and other related industry and market issues affecting the mining sector;

· litigation;

· publicity about the Company, the Company’s personnel or others operating in the industry;

· loss of a major funding source; and

· all market conditions that are specific to the mining industry.

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There can be no assurance that such fluctuations will not affect the price of the Company’s securities, and consequently purchasers of Common Shares may not be able to sell Common Shares at prices equal to or greater than the price or value at which they purchased the Common Shares or acquired them by way of the secondary market.

Sales by existing shareholders can reduce share prices

Sales of a substantial number of Common Shares in the public market could occur at any time. These sales, or the market perception that the holders of a large number of Common Shares intend to sell Common Shares, could reduce the market price of the Common Shares. If this occurs and continues, it could impair the Company’s ability to raise additional capital through the sale of securities.

The Company does not intend to pay dividends

The Company has not, since the date of its incorporation, declared or paid any dividends or other distributions on its Common Shares. The Company is currently restricted from declaring or paying dividends or distributions until the secured obligations under the Credit Agreement have been satisfied pursuant to the terms and conditions set out in the Credit Agreement.

The declaration and payment of any dividends in the future is at the discretion of the Board and will depend on numerous factors, including compliance with applicable laws, financial performance, contractual restriction (as noted above), working capital requirements of the Company and its subsidiaries and such other factors as its directors consider appropriate.

Public companies are subject to securities class action litigation risk

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. If Ero Copper faces such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could materially harm its business.

If securities or industry analysts do not publish research or publish inaccurate or unfavourable research about the Company’s business, the price and trading volume of the Common Shares could decline

The trading market for the Common Shares will depend on the research and reports that securities or industry analysts publish about the Company and its business. The Company does not have any control over these analysts. The Company cannot assure that analysts will cover it or provide accurate or favourable coverage. If one or more of the analysts who cover the Company downgrade its stock or change their opinion of the Common Shares, price of Common Shares would likely decline. If one or more of these analysts cease coverage of the Company or fail to regularly publish reports, the Company could lose visibility in the financial markets, which could cause the price and trading volume of the Common Shares to decline.

Global economic conditions can reduce the price of the Common Shares

Global economic conditions may adversely affect Ero’s growth, profitability and ability to obtain financing. Events in global financial markets in the past several years have had a profound impact on the global economy. Many industries, including the copper and gold mining industry, have been and continue to be impacted by these market conditions. Some of the key impacts of the current financial market turmoil include contraction in credit markets resulting in a widening of credit risk, devaluations, high volatility in global equity, commodity, foreign exchange and metal markets and a lack of market confidence and liquidity. A continued or worsened slowdown in the financial markets or other economic conditions, including but not limited to, consumer spending, employment rates, business conditions, inflation, fuel and energy costs, consumer debt levels, lack of available credit, the state of the financial markets, interest rates and tax rates, may adversely affect Ero’s growth, profitability and ability to obtain financing. A number of issues related to economic conditions could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects, including: (i) contraction in credit markets could impact the cost and availability of financing and the Company’s overall liquidity; (ii) the volatility of copper, gold and other metal prices would impact the Company’s revenues, profits, losses and cash flow; (iii) recessionary pressures could adversely impact demand for Ero’s production; (iv) volatile energy, commodity and consumables prices and currency exchange rates could impact Ero’s production costs; and, (v) the devaluation and volatility of global stock markets could impact the valuation of Ero’s equity and other securities.

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As noted, COVID-19 has had dramatic impacts on many countries and on the global economy. The ongoing efforts against the spread of COVID-19, including with respect to recent mutations, will likely continue to result in governmental restrictions that will impact economies around the world, reduce the availability of workforces, and drive up consumer costs for supplies and services. It is uncertain whether vaccines will be successful in combating COVID-19 and any mutations thereto, and there remains concerns that vaccines may not be available or distributed adequately. The presence of COVID-19 and its continued spread could have negative impacts on Ero Copper’s business and financial performance, and such impacts could be material.

DIVIDENDS AND DISTRIBUTIONS

The Company has not, since the date of its incorporation, declared or paid any dividends or other distributions on its Common Shares, and does not currently have a policy with respect to the payment of dividends or other distributions. The Company is currently restricted from declaring or paying dividends or distributions until the secured obligations under the Credit Agreement have been satisfied pursuant to the terms and conditions set out in the Credit Agreement.

The declaration and payment of any dividends in the future is at the discretion of the Board and will depend on numerous factors, including compliance with applicable laws, financial performance, contractual restrictions (as noted above), working capital requirements of the Company and its subsidiaries and such other factors as the Board considers appropriate.

DESCRIPTION OF CAPITAL STRUCTURE

The Company’s authorized share capital consists of an unlimited number of Common Shares without par value. As at March 16, 2021, there are 88,101,909 Common Shares issued and outstanding, 4,485,781 Common Shares issuable pursuant to outstanding options of the Company to purchase Common Shares (“Options”) pursuant to the stock option plan of the Company approved by the shareholders of the Company on May 7, 2020, 727,761 Common Shares issuable pursuant to outstanding performance share units of the Company (“PSUs”) pursuant to the share unit plan of the Company approved by the shareholders of the Company on May 7, 2020 and 1,533,330 Common Shares issuable pursuant to outstanding Founder Warrants (as defined below).

In anticipation of the Acquisition, the Company completed a private placement offering of 10,000,000 units (the “Founder Units”) of the Company on September 2, 2016, at US$0.01 per Founder Unit for aggregate gross proceeds of US$100,000. Each one Founder Unit was comprised of one Common Share and one-third of a Common Share purchase warrant (the “Founder Warrants”), with each one Founder Warrant entitling the holder thereof to acquire one Common Share at a price of US$1.20 until December 12, 2021, in accordance with the terms thereof and the Warrant Indenture. As at the date of this AIF, a total of 1,533,330 Founder Warrants are issued and outstanding.

All of the Common Shares rank equally as to voting rights, participation in a distribution of the assets of the Company on a liquidation, dissolution or winding-up of the Company and entitlement to any dividends declared by the Company. The holders of the Common Shares are entitled to receive notice of, and to attend and vote at, all meetings of shareholders (other than meetings at which only holders of another class or series of shares are entitled to vote). Each Common Share carries the right to one vote. In the event of the liquidation, dissolution or winding-up of the Company, or any other distribution of the assets of the Company among its shareholders for the purpose of winding-up its affairs, the holders of the Common Shares will be entitled to receive, on a pro rata basis, all of the assets remaining after the payment by the Company of all of its liabilities. The holders of Common Shares are entitled to receive dividends as and when declared by the Board in respect of the Common Shares on a pro rata basis.

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Any alteration of the rights, privileges, restrictions and conditions attaching to the Common Shares under the Company’s Articles of Incorporation (“Articles”) must be approved by at least two-thirds of the Common Shares voted at a meeting of the Company’s shareholders.

MARKET FOR SECURITIES

Market

The Common Shares are listed for trading on the TSX under the trading symbol “ERO”.

Trading Price and Volume

The following table sets out information relating to the monthly trading of the Common Shares on the TSX for each of the months indicated.

Period	High ($)		Low ($)		Volume
January 2020		23.81		18.05		3,361,135
February 2020		19.97		13.40		4,638,716
March 2020		15.09		8.40		6,769,134
April 2020		16.54		9.43		4,333,938
May 2020		16.68		14.31		2,812,244
June 2020		19.94		15.55		3,792,759
July 2020		19.94		15.98		3,523,522
August 2020		20.00		16.03		2,974,980
September 2020		20.68		17.61		3,875,891
October 2020		21.71		17.31		3,336,940
November 2020		23.02		17.31		4,549,713
December 2020		22.74		17.82		4,762,247

The closing price of the Common Shares as quoted by the TSX on December 31, 2020 was $20.42.

Prior Sales

The following table summarizes the securities of the Company (each convertible into one Common Share) that are outstanding but not listed or quoted on a marketplace and that have been issued by the Company during the financial year ended December 31, 2020:

Date of Issue	Type of Securities	Aggregate Number Issued			Exercise Price ($)
January 2, 2020	Options		73,456			23.42
January 2, 2020	PSUs		1,000	(1)		N/A
December 17, 2020	Options		415,839			18.90
December 17, 2020	PSUs		289,298	(1)		N/A

Note:

⁽¹⁾ Assumes that 100% of the 1,000 PSUs granted on January 2, 2020 and the 289,298 PSUs granted on December 17, 2020 will vest. The PSUs will vest three years from the date of grant and the actual number of PSUs that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain performance conditions. Please refer to the Company’s management information circular dated March 16, 2021 (“Statement of Executive Compensation - Compensation Committee Decisions Relating to 2020 Compensation – Options and Share Based Awards”), a copy of which is available for review under the Company’s profile on SEDAR at www.sedar.com.

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DIRECTORS AND EXECUTIVE OFFICERS

Director and Executive Officer Profiles

The following table sets forth the name of each director and executive officer of the Company as at December 31, 2020 and the date of this AIF, their province or state and country of residence, their position(s) and office(s) held with the Company, their principal occupation(s) during the preceding five years, the date they became a director of the Company, if applicable, and the number and percentage of Common Shares they beneficially own, or control or direct, directly or indirectly. Each director’s term will expire immediately prior to the next annual meeting of shareholders of the Company.

Name and Residence	Position(s) and Office(s) with Ero	Principal Occupation(s) During Past Five Years	Director Since	Number of Common Shares Held(1)
Christopher Noel Dunn Massachusetts, USA	Executive Chairman Director	Executive Chairman, Ero Copper Corp. since May 16, 2016; Co-Managing Partner of Ero Resource Partners LLC since February 2014 (currently inactive); Managing Director of Liberty Metals & Mining LLC from 2011 until 2013.	May 16, 2016	2,627,281(2)
David Strang British Columbia, Canada	Chief Executive Officer Director	Chief Executive Officer, Ero Copper Corp. since May 16, 2016; President and Chief Executive Officer, Ero Copper Corp. from May 16, 2016 until January 4, 2021; Co-Managing Partner of Ero Resource Partners LLC since February 2014 (currently inactive); CEO and Director, Lumina Copper Corp. from August 2008 until August 2014.	May 16, 2016	5,846,936(3)
Makko DeFilippo Arizona, USA	President	President, Ero Copper Corp. since January 4, 2021; Vice President, Corporate Development, Ero Copper Corp. from February 23, 2017 until January 4, 2021; Director Corporate Finance, Global Mining Advisory Practice from January 2016 until January 2017; Partner, Ero Resource Partners from January 2014 until January 2016; Investment Analyst, Liberty Metals & Mining, LLC from October 2011 until December 2013.	-	10,324(4)
Anthea Bath British Columbia, Canada	Chief Operating Officer	Chief Operating Officer, Ero Copper Corp. since January 4, 2021; Vice President, Technical Services, Ero Copper Corp. from July 16, 2018 until January 4, 2021; Vice President, Strategic Market Development and Commercial, Sibanye-Stillwater from September 2016 until June 2018; and Chief Executive Officer of PentaQuark Energy from August 2012 until August 2016.	-	Nil(5)
Wayne Drier British Columbia, Canada	Chief Financial Officer	Chief Financial Officer, Ero Copper Corp. since March 2017; Executive, Corporate Development, Asanko Gold Inc. from July 2014 until March 2017; Vice President: Strategy & Development, Coalspur Mines Ltd. from July 2011 until June 2014.	-	231,666(6)

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Name and Residence	Position(s) and Office(s) with Ero	Principal Occupation(s) During Past Five Years	Director Since	Number of Common Shares Held(1)
Michel (Mike) Richard British Columbia, Canada	Chief Geological Officer	Chief Geological Officer (previously, Senior Vice President Exploration), Ero Copper Corp. since January 2017; Director New Business Development South America, Lundin Mining Corporation from April 2012 to January 2016; General Manager TEMCL, Teck Resources Limited from May 1994 until March 2012.	-	2,050,000(7)
Deepk Hundal British Columbia, Canada	Vice President, General Counsel and Corporate Secretary	Vice President, General Counsel & Corporate Secretary, Ero Copper Corp. since July 2017; General Counsel, Retirement Concepts Senior Services Ltd. & Pacific Reach Properties Ltd., from July 2014 until July 2017; Vice President, Legal, Elgin Mining Ltd. from May 2012 until July 2013; Vice President, Legal and Corporate Secretary, Aura Minerals Inc. from June 2007 until April 2012.	-	10,526(8)
Courtney Lynn California, USA	Vice President, Corporate Development and Investor Relations	Vice President, Corporate Development and Investor Relations, Ero Copper Corp. since March 11, 2021; Vice President and Treasurer, Kaiser Aluminium Corp. from August 2018 until December 2020; and Coeur Mining, Inc. from April 2013 until June 2018 (Vice President Treasurer from April 2014 until June 2016 and then Vice President, Investor Relations and Treasurer from June 2016 to June 2018).	-	Nil
Pablo Mejia British Columbia, Canada	Vice President, Exploration	Vice President, Exploration, Ero Copper Corp. since June 2018; Senior Consultant, Mira Geoscience Ltd. from January 2016 until May 2018; and Assistant Professor, Escuela de Ingenieria de Antioquia from July 2015 until December 2015.	-	Nil(9)
Michal Romanowski Arizona, USA	Vice President, Evaluations and Planning	Vice President, Evaluations and Planning, Ero Copper Corp. since January 2017; Partner, Ero Resource Partners LLC from May 2014 until December 2016; Investment Analyst, Liberty Metals & Mining LLC from January 2013 until April 2014; Principal Consultant, Romanowski & Company from January 2011 until December 2013.	-	200,000(10)
Jonathan Singh British Columbia, Canada	Vice President, Finance	Vice President, Finance, Ero Copper Corp. since February 2017; Chief Financial Officer of: Aurora Mineral Resources Group from September 2011 until January 2016, Kaminak Gold Corporation, from October 2011 until January 2016, Kivalliq Energy Corporation, from October 2011 until January 2016, West Melville Metals Inc., from September 2011 until September 2015, and Bluestone Resources Inc., September 2011 until February 2014.	-	51,000(11)
Lyle Braaten(12)(13) British Columbia, Canada	Director (Independent)	President and Chief Executive Officer, Miedzi Copper Corp. since March 2012; Vice President, Legal, Lumina Gold Corp. since June 2014; Vice President, Legal Counsel, Luminex Resources Corp. since August 2018; Vice President, Legal, Anfield Gold Corp. from May 2016 until December 2017; Special Counsel, Innergex Renewable Energy Inc. (a successor to Alterra Power Corp.) since June 2008.	July 27, 2016	316,666(14)

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Name and Residence	Position(s) and Office(s) with Ero	Principal Occupation(s) During Past Five Years	Director Since	Number of Common Shares Held(1)
Steven Busby(13)(15) British Columbia, Canada	Director (Independent)	Chief Operating Officer of Pan American Silver Corp. since 2008.	July 27, 2016	366,666(16)
Dr. Sally Eyre(13)(17) British Columbia, Canada	Director (Independent)	Corporate Director since March 2014; President and Chief Executive Officer of Copper North Mining from August 2011 until January 2014.	August 12, 2019	Nil(18)
Robert Getz(13)(17) Connecticut, USA	Director (Independent)	Managing Partner, Pecksland Capital Partners since December 2015. Partner and Co-Founder, Cornerstone Equity Investors from September 1996 until December 2016.	June 14, 2018	172,666(19)
Chantal Gosselin(12)(15) British Columbia, Canada	Director (Independent)	Corporate Director since September 2013; Vice President and Portfolio Manager, Goodman Investment Counsel from September 2011 until September 2013.	August 12, 2019	625(20)
John Wright(12)(15) British Columbia, Canada	Director (Independent)	Corporate Director since 2004; and Business Development with Capstone Mining Corp. since December 2006	July 27, 2016	820,332(21)
Matthew Wubs(12)(17) British Columbia, Canada	Director (Independent)	Director, Westland Insurance Group Ltd. since January 2020; Co-Chief Executive Officer, Westland Insurance Group Ltd. from January 2016 until  December 2019; Chief Financial Officer, Westland Insurance Group Ltd. from January 2002 until December 2015.	July 27, 2016	1,867,735(16)

Notes:

(1)	On a non-diluted basis.
(2)	Mr. Dunn also holds 1,000,000 Founder Warrants, 525,185 Options and 118,404 PSUs, entitling him to acquire in the aggregate an additional 1,643,589 Common Shares, assuming that 100% of the PSUs vest. The PSUs will vest three years from the date of grant and the actual number of PSUs that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain performance conditions. Please refer to the Company’s management information circular dated March 16, 2021 (under “Statement of Executive Compensation - Compensation Committee Decisions Relating to 2020 Compensation – Options and Share Based Awards”), a copy of which is available for review under the Company’s profile on SEDAR at www.sedar.com.
(3)	Mr. Strang also holds 525,185 Options and 118,404 PSUs, entitling him to acquire in the aggregate an additional 643,589 Common Shares, assuming that 100% of the PSUs vest.
(4)	Mr. DeFilippo also holds 257,706 Options and 36,367 PSUs, entitling him to acquire in the aggregate an additional 294,073 Common Shares, assuming 100% of the PSUs vest.
(5)	Ms. Bath holds 221,242 Options and 34,035 PSUs, entitling her to acquire in the aggregate 255,277 Common Shares, assuming 100% of the PSUs vest.
(6)	Mr. Drier also holds 446,567 Options and 44,406 PSUs, entitling him to acquire in the aggregate an additional 490,973 Common Shares, assuming 100% of the PSUs vest.
(7)	Mr. Richard also holds 166,666 Founder Warrants, 309,814 Options and 47,770 PSUs, entitling him to acquire in the aggregate an additional 524,250 Common Shares, assuming 100% of the PSUs vest.
(8)	Mr. Hundal also holds 243,532 Options and 27,844 PSUs, entitling him to acquire in the aggregate an additional 271,376 Common Shares, assuming 100% of the PSUs vest.
(9)	Mr. Mejia holds 194,891 Options and 24,066 PSUs, entitling him to acquire in the aggregate 218,957 Common Shares, assuming 100% of the PSUs vest.
(10)	Mr. Romanowski also holds 66,666 Founder Warrants, 183,532 Options and 27,844 PSUs, entitling him to acquire in the aggregate an additional 278,042 Common Shares, assuming 100% of the PSUs vest.
(11)	Mr. Singh also holds 171,163 Options and 20,519 PSUs, entitling him to acquire in the aggregate an additional 191,682 Common Shares, assuming 100% of the PSUs vest.
(12)	Member of the Audit Committee. Mr. Wubs is the Chairman of this committee.
(13)	Member of the Nominating and Corporate Governance Committee. Mr. Braaten is the Chairman of this committee.
(14)	Mr. Braaten also holds 64,809 Options, entitling him to acquire an additional 64,809 Common Shares.
(15)	Member of the Environmental, Health, Safety and Sustainability Committee. Mr. Busby is the Chairman of this committee.
(16)	Each of Messrs. Busby and Wubs also hold 66,666 Founder Warrants and 64,809 Options, entitling each of them to acquire in the aggregate an additional 131,475 Common Shares.
(17)	Member of the Compensation Committee. Mr. Getz is the Chairman of this committee.
(18)	Dr. Eyre also holds 29,809 Options, entitling her to acquire an additional 29,809 Common Shares.
(19)	Mr. Getz also holds 58,809 Options, entitling him to acquire an additional 58,809 Common Shares.
(20)	Ms. Gosselin also holds 29,809 Options, entitling her to acquire an additional 29,809 Common Shares.
(21)	Mr. Wright also holds 64,809 Options, entitling him to acquire an additional 64,809 Common Shares.

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Based on the disclosure available on the System for Electronic Disclosure by Insiders (SEDI), as of the date of this AIF, the directors and executive officers of the Company, as a group, beneficially own, or control or direct, directly or indirectly, 14,572,423 Common Shares, representing approximately 16.54% of the total number of Common Shares outstanding before giving effect to the conversion of any Options, PSUs and Founder Warrants held by such directors and executive officers.

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

None of the Company’s directors or executive officers is, as at the date hereof, or was within 10 years before the date hereof, a director, chief executive officer or chief financial officer of any company (including the Company) that (a) was subject to a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days (an “Order”) that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer, or (b) was subject to an Order that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer.

None of the Company’s directors or executive officers, nor, to its knowledge, any shareholder holding a sufficient number of its securities to affect materially the control of the Company (a) is, as at the date hereof, or has been within the 10 years before the date hereof, a director or executive officer of any company (including the Company) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, or (b) has, within the 10 years before the date hereof, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of such director, executive officer or shareholder.

None of the Company’s directors or executive officers, nor, to its knowledge, any shareholder holding a sufficient number of its securities to affect materially the control of the Company, has been subject to (a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority, or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.

Conflicts of Interest

To the best of the Company’s knowledge, there are no existing or potential material conflicts of interest between the Company and any of its directors or officers as of the date hereof. However, certain of the Company’s directors and officers are, or may become, directors or officers of other companies with businesses which may conflict with its business. Accordingly, conflicts of interest may arise which could influence these individuals in evaluating possible acquisitions or in generally acting on the Company’s behalf.

Pursuant to the BCABC, directors and officers of the Company are required to act honestly and in good faith with a view to the best interests of the Company. As required under the BCABC and the Articles:

· a director or senior officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual’s duty or interest as a director or senior officer of the Company, must promptly disclose the nature and extent of that conflict; and

· a director who holds a disclosable interest (as such term is defined under the BCABC) in a contract or transaction into which the Company has entered or proposes to enter may generally not vote on any directors’ resolution to approve such contract or transaction.

Generally, as a matter of practice, directors and officers who have disclosed a material interest in any contract or transaction that the Board is considering will not take part in any Board discussion respecting that contract or transaction. If on occasion such directors do participate in the discussions, they will refrain from voting on any matters relating to matters in which they have disclosed a material interest. In appropriate cases, the Company will establish a special committee of independent directors to review a matter in which directors or officers may have a conflict.

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AUDIT COMMITTEE

The Audit Committee provides assistance to the Board in fulfilling its obligations relating to the integrity of the internal financial controls and financial reporting of the Company. The external auditors of the Company report directly to the Audit Committee. The Audit Committee’s primary duties and responsibilities include: (i) reviewing and reporting to the Board on the annual audited financial statements (including the auditor’s report thereon) and unaudited interim financial statements and any related management’s discussion and analysis, if any, and other financial disclosure related thereto that may be required to be reviewed by the Audit Committee pursuant to applicable legal and regulatory requirements; (ii) reviewing material changes in accounting policies and significant changes in accounting practices and their impact on the financial statements; (iii) overseeing the audit function, including engaging in required discussions with the Company’s external auditor and reviewing a summary of the annual audit plan at least annually, overseeing the independence of the Company’s external auditor, overseeing the Company’s internal auditor, and pre-approving any non-audit services to the Company; (iv) reviewing and discussing with management the appointment of key financial executives and recommending qualified candidates to the Board; (v) reviewing with management and the Company’s external auditors, at least annually, the integrity of the internal controls over financial reporting and disclosure; (vi) reviewing management reports related to legal or compliance matters that may have a material impact on the Company and the effectiveness of the Company’s compliance policies; and (vii) establishing whistleblowing procedures and investigating any complaints or concerns it deems necessary. The full text of the Audit Committee mandate is attached to this AIF as Appendix “A”.

Composition of the Audit Committee

The Audit Committee is composed of Matthew Wubs (Chair), Lyle Braaten, Chantal Gosselin and John Wright, all of whom are independent directors and all of whom are financially literate, in each case within the meaning of National Instrument 52-110, Audit Committees. In addition to being independent directors as described above, each members of the Audit Committee meets an additional “independence” test under NI 52-110 in that (i) they do not accept, directly or indirectly, any consulting, advisory or other compensatory fees from the Company or any of its subsidiaries, other than as remuneration for acting in their capacity as a member of the Board or any committee of the Board; and (ii) they are not affiliated with the Company or any of its subsidiaries.

Relevant Education and Experience

Each of the members of the Audit Committee has extensive education and experience relevant to the performance of their responsibilities as members of the Audit Committee.

Matthew Wubs graduated with a B.A. from the University of British Columbia in 1992 and has been a Chartered Professional Accountant since 1996.  Mr. Wubs is a director of Westland Insurance Group Ltd., one of the largest private insurance brokerage operations in Canada. Westland directly manages approximately $1.4 billion in premium volume through its brokerage, insurance company and wholesale operations. Prior to joining Westland’s board on January 1, 2020, Mr. Wubs was the Co-Chief Executive Officer of Westland from January 2016 to December 2019 and was responsible for oversight of insurance, reinsurance, risk management, finance and M&A. He joined Westland in the role of Controller in 1997, and thereafter held the position of Chief Financial Officer from January 2002 until December 2015.  Previous to Westland, he held a consulting role in Management Information Systems at International Forest Products Ltd. and obtained his Chartered Professional Accountant designation while working at Deloitte LLP. Mr. Wubs has been a member of Westland’s audit committee for 13 years.

Lyle Braaten graduated with a B.Sc. from the University of Calgary in 1986 and an LL.B. from the University of British Columbia in 1989. He has been the President and Chief Executive Officer of Miedzi Copper Corp. since March 2012, the Vice President, Legal Counsel and a director of Lumina Gold Corp. since June 2014 and the Vice President, Legal Counsel and a director of Luminex Resources Corp. since August 2018. He was the General Counsel of Magma Energy Corp. from June 2008 to May 2011 when it acquired Plutonic Power Corp. and changed its name to Alterra Power Corp. Prior to joining Magma, he was involved in the management of a mid-sized law firm and served as its Managing Director from 2001 to 2008 with overall responsibility for the oversight of the firm’s financial results and reporting. He has been an audit committee member of Lumina Gold Corp. since July 2014 and has at least six years’ experience in audit committee positions. Mr. Braaten is a member of the Law Societies of British Columbia and the Yukon.

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Chantal Gosselin is an experienced corporate board member with 30 years of combined experience in mining operations and capital markets. Her involvement in the financial markets range from asset management to sell side analyst. She recently held positions as Vice President and Portfolio Manager at Goodman Investment Counsel and Senior Mining Analyst at Sun Valley Gold LLP, along with various analyst positions earlier in her career. Ms. Gosselin has also held various mine-site management positions in Canada, Peru and Nicaragua, giving her firsthand experience in underground and open pit mine development and production in diverse cultural and social environments. Ms. Gosselin has a Masters of Business Administration from Concordia University and a Bachelor of Science (Mining Engineering) from Laval University and has completed the Institute of Corporate Director program. She currently serves as a director and member of the audit committee of Wheaton Precious Metals Corp. (formerly Silver Wheaton Corp.) and Lundin Gold Inc. Ms. Gosselin formerly served as a director and a member of the audit committee of Peregrine Metals Ltd. from 2008 to October 2011 and Capstone Mining Corp. from 2010 to November 2016. Ms. Gosselin has at least 13 years of experience in audit committee positions.   

John Wright was a co-founder, and former Director, President and Chief Operating Officer of Pan American Silver Corp. Mr. Wright was also the co-founder of Equinox Resources. Previously, he spent 10 years with Teck Cominco where he worked at the Trail Smelter operations and later participated in the management of the feasibility studies, marketing and mine construction at the Afton, Highmont, Bull Moose and David Bell Mines. Mr. Wright is a director of SilverCrest Metals Inc. and Luminex Resources Corp. and a former director of Bitterroot Resources Ltd., Lumina Copper Corp., Northern Peru Copper Corp., Global Copper Corp. and Regalito Copper Corp. Mr. Wright has been involved in multiple asset purchases and sales and the accounting associated therewith. Mr. Wright was an audit committee member of Northern Peru Copper Corp. and Regalito Copper Corp. and has at least nine years’ experience in audit committee positions. Mr. Wright is a Member of the Canadian Institute of Mining and Metallurgy and has a P.Eng. designation from the Association of Professional Engineers and Geoscientists of British Columbia.

Pre-Approval Policies and Procedures

The Audit Committee mandate requires that the Audit Committee pre-approve any retainer of the auditor of the Company to provide any non-audit services to the Company that it deems advisable in accordance with applicable legal and regulatory requirements and policies and procedures of the Board. The Audit Committee is permitted to delegate pre-approval authority to one of its members; however, the decision of any member of the Audit Committee to whom such authority has been delegated must be presented to the full Audit Committee at its next scheduled meeting.

External Auditor Service Fees

The following table discloses the aggregate fees billed to the Company and its subsidiaries by its external auditors, KPMG LLP, Chartered Professional Accountants (“KPMG”), in the financial years ended December 31, 2020 and 2019:

Financial Year End	Audit Fees(1)		Audit Related Fees(2)		Tax Fees			All Other Fees
December 31, 2020	US$	351,361	US$	3,877	Nil			Nil
December 31, 2019	US$	363,403	US$	2,562	US$	5,049	(3)	Nil

Note:

(1)	The aggregate fees billed for the audit of the annual consolidated financial statements of the Company, quarterly interim review of the Company and of its Brazilian subsidiaries and statutory audits of the Company’s Brazilian subsidiaries.
(2)	The aggregate fees billed for professional services rendered by the external auditors in connection with general training provided with respect to new International Financial Reporting Standards for the Company’s subsidiaries in Brazil.
(3)	The aggregate fees billed for professional services rendered by the external auditors in connection with the review of IRPJ (income tax for legal entity) / CSLL (social contribution on net profit) deferred tax calculations of the Company’s subsidiaries in Brazil.

LEGAL PROCEEDINGS AND REGULATORY ACTIONS

To the Company’s knowledge, there are no legal proceedings material to the Company to which it is a party, or has been a party to, or of which any of its property is the subject matter of, or was the subject matter of, since the beginning of the financial year ended December 31, 2020, and no such proceedings or actions are known by the Company to be contemplated.

There have been no penalties or sanctions imposed against the Company by a court relating to securities legislation or by a securities regulatory authority during the financial year ended December 31, 2020 or other penalties or sanctions imposed by a court or regulatory body against the Company since incorporation that would likely be considered important to a reasonable investor in making an investment decision, and the Company has not entered into any settlement agreements before a court relating to securities legislation or with a securities regulatory authority during the financial year ended December 31, 2020.

94

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Other than as described below or as disclosed elsewhere herein, no director or executive officer of the Company or any of its subsidiaries or any person or company that beneficially owns, or controls or directs, directly or indirectly, more than 10 percent of the outstanding Common Shares, or any of their respective associates or affiliates, has or has had any material interest, direct or indirect, in any transaction within the three most recently completed financial years or during the current financial year that has materially affected or is reasonably expected to materially affect the Company or any of its subsidiaries.

On January 18, 2017, the Company completed a private placement offering, issuing an aggregate principle amount of US$2,750,000 in General Debentures as described in this AIF under the heading “General Development and Business of the Company – Three Year History”. David Strang, the President and Chief Executive Officer of the Company and Matthew Wubs, a director of the Company, each participated in the offering by subscribing to US$500,000 of General Debentures. In January 2018, Messrs. Strang and Wubs both exercised their option to convert the outstanding principal and accrued and unpaid interest (US$53,562) on their General Debentures into General Debenture Units and concurrently exercised the underlying General Warrants. As a result, they were each issued an aggregate of 922,602 Common Shares by the Company, of which, 184,520 Common Shares were issued upon exercise of the underlying General Warrants.

AUDITORS, TRANSFER AGENT AND REGISTRAR

The Company’s auditors are KPMG LLP, Chartered Professional Accountants, having an address at Suite 1100 – 777 Dunsmuir Street, PO Box 10426 Pacific Centre, Vancouver, British Columbia, Canada V7Y 1K3.

The transfer agent and registrar for the Common Shares is Computershare Investor Services Inc., having an address at 510 Burrard Street, 3^rd Floor, Vancouver, British Columbia V6C 3B9. The warrant agent for the Founder Warrants is Computershare Trust Company of Canada, having an address at 510 Burrard Street, 2^nd Floor, Vancouver, British Columbia V6C 3B9.

MATERIAL CONTRACTS

Except for material contracts entered into in the ordinary course of business, set out below are material contracts to which the Company or any of its subsidiaries are a party, entered into prior to or since the date of incorporation of the Company and which still remain in effect and material to the Company. Copies of such material contracts are available for review under the Company’s profile on SEDAR at www.sedar.com.

· The investor rights agreement dated March 22, 2017 between the Company and Tembo Capital Mining Fund II LP, acting by its general partner, Tembo Capital Mining GP LP, acting by its general partner, Tembo Capital Mining GP Ltd. (“Tembo”) entered into in connection with the Company’s private placement offering of 18,423,593 Common Shares at a price of US$1.50 per Common Share on March 22, 2017 (“Tembo Investor Rights Agreement”). Pursuant to the Tembo Investor Rights Agreement, for so long as Tembo’s affiliate, Ndovu Capital IX B.V. (“Ndovu”), holds at least 5% of the issued and outstanding Common Shares, Ndovu is entitled to request from the Company, among other things, monthly reports of financial and operation performance, and meetings with management of the Company, and has a participation right to subscribe for Common Shares, securities convertible into or exchangeable for Common Shares, or any other securities of the Company, as applicable, in order to preserve its proportionate interest in the total issued and outstanding Common Shares, in connection with any equity financings and certain other non-cash transactions involving the issuance of equity securities by the Company; and

· the Credit Agreement, as amended, referred to under the heading “General Development and Business of the Company – Three Year History”.

95

INTEREST OF EXPERTS

The following persons and companies have prepared or certified a statement, report, valuation or opinion on behalf of the Company during the twelve months ended December 31, 2020, and to the date of this AIF:

(a) Porfirio Cabaleiro Rodrigues, FAIG, Bernardo Horta de Cerqueira Viana, MAIG, Paulo Roberto Bergmann, FAusIMM, Fábio Valério Câmara Xavier, MAIG and Dr. Augusto Ferreira Mendonça, RM SME, all of GE21, and Dr. Beck (Alizeibek) Nader, FAIG of BNA, who are “qualified persons” and “independent” of the Company within the meanings of NI 43-101, prepared the MCSA Mining Complex Technical Report in accordance with NI 43-101 and also reviewed and approved the scientific and technical information relating to the MCSA Mining Complex contained in this AIF other than the information of a scientific or technical nature in respect of the MCSA Mining Complex set out under the heading “MCSA Mining Complex – Update Information with respect to the MCSA Mining Complex”.

(b) Porfirio Cabaleiro Rodrigues, FAIG, Paulo Roberto Bergmann, FAusIMM, Bernardo Horta de Cerqueira Viana, MAIG and Leonardo de Moraes Soares, MAIG, all of GE21, who are “qualified persons” and “independent” of the Company within the meanings of NI 43-101, prepared the NX Gold Technical Report in accordance with NI 43-101 and also reviewed and approved the scientific and technical information relating to the NX Gold Property contained in this AIF other than the information of a scientific or technical nature in respect of the NX Gold Property set out under the heading “NX Gold Property – Update Information with respect to the NX Gold Property”.

(c) Ricardo Emerson Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company, who is a “qualified person” within the meaning of NI 43-101, has supervised the preparation of and approved the information of a scientific or technical nature in respect of the MCSA Mining Complex set out in the AIF under the heading “MCSA Mining Complex – Update Information with respect to the MCSA Mining Complex” and in respect of the NX Gold Property set out under the heading “NX Gold Property – Update Information with respect to the NX Gold Property”.

(d) Rubens Mendonça, MAusIMM, of SRK Brazil as at the date of the report (now of Planminas) and Carlos Barbosa, MAIG, and Girogio di Tomi, MAusIMM, both of SRK Brazil, who are “qualified persons” and “independent” of the Company within the meanings of NI 43-101, prepared the Boa Esperança Technical Report in accordance with NI 43-101 and also reviewed and approved the scientific and technical information relating to the Boa Esperança Property contained in this AIF.

The aforementioned companies and persons beneficially owned, or controlled or directed, directly or indirectly, either less than one percent or no securities of the Company or of any associate or affiliate of the Company when they prepared the reports and statements referred to, or following the preparation of the reports and statements, and did not receive any direct or indirect interest in any securities of the Company or of any associate or affiliate of the Company in connection with the preparation of such reports and statements other than Mr. Re, who is employed by the Company as Resource Manager and holds 11,467 Options and 4,020 PSUs as at the date of this AIF.

In addition, KPMG prepared the 2019 and 2020 audit reports as auditor of the Company for the financial years ended December 31, 2019 and 2020. KPMG has advised the Company that it is independent of the Company in accordance with the Rules of Professional Conduct of the Chartered Professional Accountants of British Columbia.

None of the aforementioned firms or persons, nor any directors, officers or employees of such firms, are currently, or are expected to be elected, appointed or employed as, a director, officer or employee of the Company or of any associate or affiliate of the Company other than Mr. Re, who has been employed by the Company, as Resource Manager, since September 2019.

ADDITIONAL INFORMATION

Additional information relating to the Company may be found under the Company’s profile on SEDAR at www.sedar.com or on the Company’s website at www.erocopper.com. Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities, and securities authorized for issuance under equity compensation plans, is contained in the Company’s information circular for its most recent annual meeting of shareholders that involves the election of directors.

Financial information is provided in the Company’s annual audited consolidated financial statements for the year ended December 31, 2020 and Management’s Discussion and Analysis relating thereto and may also be found on SEDAR or on the Company’s website.

Copies of these documents may be obtained by contacting the Company at:

Ero Copper Corp.

Suite 1050 – 625 Howe Street

Vancouver, B.C. V6C 2T6

Tel: (604) 449-9244

Fax: (604) 398-3767

Email: info@erocopper.com

96

APPENDIX “A”
ERO COPPER CORP.
AUDIT COMMITTEE MANDATE

1.       Introduction

The Audit Committee (the “Committee” or the “Audit Committee”) of Ero Copper Corp. (“Ero” or the “Company”) is a committee of the Board of Directors (the “Board”) of the Company. The Committee shall oversee the accounting and financial reporting practices of the Company and the audits of the Company’s financial statements and exercise the responsibilities and duties set out in this Mandate.

2.       Membership

Number of Members

The Committee shall be composed of three or more members of the Board.

Independence of Members

Each member of the Committee must be independent, subject to any exemptions or relief that may be granted from such requirement. “Independent” shall have the meaning, as the context requires, given to it in National Instrument 52-110 Audit Committees, as may be amended from time to time.

Chair

At the time of the annual appointment of the members of the Audit Committee, the Board shall appoint a Chair of the Audit Committee. The Chair shall be a member of the Audit Committee, preside over all Audit Committee meetings, coordinate the Audit Committee’s compliance with this Mandate, work with management to develop the Audit Committee’s annual work-plan and provide reports of the Audit Committee to the Board.

Financial Literacy of Members

At the time of his or her appointment to the Committee, each member of the Committee shall have, or shall acquire within a reasonable time following appointment to the Committee, the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements.

Term of Members

The members of the Committee shall be appointed annually by the Board. Each member of the Committee shall serve at the pleasure of the Board until the member resigns, is removed, or ceases to be a member of the Board. Unless a Chair is elected by the Board, the members of the Committee may designate a Chair by majority vote of the full Committee membership.

3.       Meetings

Number of Meetings

The Committee may meet as many times per year as necessary to carry out its responsibilities.

Quorum

No business may be transacted by the Committee at a meeting unless a quorum of the Committee is present. A majority of members of the Committee shall constitute a quorum.

A-1 

Calling of Meetings

The Chair, any member of the Audit Committee, the external auditors, the Chairman of the Board, the Chief Executive Officer or the Chief Financial Officer may call a meeting of the Audit Committee by notifying the Company’s Corporate Secretary who will notify the members of the Audit Committee. The Chair shall chair all Audit Committee meetings that he or she attends, and in the absence of the Chair, the members of the Audit Committee present may appoint a chair from their number for a meeting.

Minutes; Reporting to the Board

The Committee shall maintain minutes or other records of meetings and activities of the Committee in sufficient detail to convey the substance of all discussions held. Upon approval of the minutes by the Committee, the minutes shall be circulated to the members of the Board. However, the Chair may report orally to the Board on any matter in his or her view requiring the immediate attention of the Board.

Attendance of Non-Members

The external auditors are entitled to attend and be heard at each Audit Committee meeting. In addition, the Committee may invite to a meeting any officers or employees of the Company, legal counsel, advisors and other persons whose attendance it considers necessary or desirable in order to carry out its responsibilities. At least once per year, the Committee shall meet with the internal auditor and management in separate sessions to discuss any matters that the Committee or such individuals consider appropriate.

Meetings without Management

The Committee shall hold unscheduled or regularly scheduled meetings, or portions of meetings, at which management is not present.

Procedure

The procedures for calling, holding, conducting and adjourning meetings of the Committee shall be the same as those applicable to meetings of the Board.

Access to Management

The Committee shall have unrestricted access to the Company’s management and employees and the books and records of the Company.

4.       Duties and Responsibilities

The Committee shall have the functions and responsibilities set out below as well as any other functions that are specifically delegated to the Committee by the Board and that the Board is authorized to delegate by applicable laws and regulations. In addition to these functions and responsibilities, the Committee shall perform the duties required of an audit committee by any exchange upon which securities of the Company are traded, or any governmental or regulatory body exercising authority over the Company, as are in effect from time to time (collectively, the “Applicable Requirements”).

A-2 

Financial Reports

(a)       General

The Audit Committee is responsible for overseeing the Company’s financial statements and financial disclosures. Management is responsible for the preparation, presentation and integrity of the Company’s financial statements and financial disclosures and for the appropriateness of the accounting principles and the reporting policies used by the Company. The auditors are responsible for auditing the Company’s annual consolidated financial statements and for reviewing the Company’s unaudited interim financial statements.

(b)       Review of Annual Financial Reports

The Audit Committee shall review the annual consolidated audited financial statements of the Company, the auditors’ report thereon and the related management’s discussion and analysis of the Company’s financial condition and results of operation (“MD&A”). After completing its review, if advisable, the Audit Committee shall approve and recommend for Board approval the annual financial statements and the related MD&A.

(c)       Review of Interim Financial Reports

The Audit Committee shall review the interim consolidated financial statements of the Company, the auditors’ review report thereon and the related MD&A. After completing its review, if advisable, the Audit Committee shall approve and recommend for Board approval the interim financial statements and the related MD&A.

(d)       Review Considerations

In conducting its review of the annual financial statements or the interim financial statements, the Audit Committee shall:

(i) meet with management and the auditors to discuss the financial statements and MD&A;

(ii) review the disclosures in the financial statements;

(iii) review the audit report or review report prepared by the auditors;

(iv) discuss with management, the auditors, and internal legal counsel (if any), as requested, any litigation claim or other contingency that could have a material effect on the financial statements;

(v) review the accounting policies followed and critical accounting and other significant estimates and judgements underlying the financial statements as presented by management;

(vi) review any material effects of regulatory accounting initiatives or off-balance sheet structures on the financial statements as presented by management, including requirements relating to complex or unusual transactions, significant changes to accounting principles and alternative treatments under Canadian GAAP;

(vii) review any material changes in accounting policies and any significant changes in accounting practices and their impact on the financial statements as presented by management;

(viii) review management’s report on the effectiveness of internal controls over financial reporting;

(ix) review the factors identified by management as factors that may affect future financial results;

(x) review results of the Company’s audit committee whistleblower hotline program; and

(xi) review any other matters, related to the financial statements, that are brought forward by the auditors, management or which are required to be communicated to the Audit Committee under accounting policies, auditing standards or Applicable Requirements.

(e)       Approval of Other Financial Disclosures

The Audit Committee shall review and, if advisable, approve and recommend for Board approval financial disclosure in a prospectus or other securities offering document of the Company, press releases disclosing, or based upon, financial results of the Company and any other material financial disclosure, including financial guidance provided to analysts, rating agencies or otherwise publicly disseminated.

A-3 

Auditors

(a)       General

The Audit Committee shall be responsible for oversight of the work of the auditors, including the auditors’ work in preparing or issuing an audit report, performing other audit, review or attest services or any other related work.

(b)       Nomination and Compensation

The Audit Committee shall review and, if advisable, select and recommend for Board approval the external auditors to be nominated and the compensation of such external auditor. The Audit Committee shall have ultimate authority to approve all audit engagement terms and fees, including the auditors’ audit plan.

(c)       Resolution of Disagreements

The Audit Committee shall resolve any disagreements between management and the auditors as to financial reporting matters brought to its attention.

(d)       Discussions with Auditors

At least annually, the Audit Committee shall discuss with the auditors such matters as are required by applicable auditing standards to be discussed by the auditors with the Audit Committee.

(e)       Audit Plan

At least annually, the Audit Committee shall review a summary of the auditors’ annual audit plan. The Audit Committee shall consider and review with the auditors any material changes to the scope of the plan.

(f)       Quarterly Review Report

The Audit Committee shall review a report prepared by the auditors in respect of each of the interim financial statements of the Company.

(g)       Independence of Auditors

At least annually, and before the auditors issue their report on the annual financial statements, the Audit Committee shall obtain from the auditors a formal written statement describing all relationships between the auditors and the Company; discuss with the auditors any disclosed relationships or services that may affect the objectivity and independence of the auditors; and obtain written confirmation from the auditors that they are objective and independent within the meaning of the applicable Rules of Professional Conduct/Code of Ethics adopted by the provincial institute or order of chartered professional accountants to which the auditors belong and other Applicable Requirements. The Audit Committee shall take appropriate action to oversee the independence of the auditors.

(h)       Evaluation and Rotation of Lead Partner

At least annually, the Audit Committee shall review the qualifications and performance of the lead partner(s) of the auditors and determine whether it is appropriate to adopt or continue a policy of rotating lead partners of the external auditors.

(i)       Requirement for Pre-Approval of Non-Audit Services

The Audit Committee shall approve in advance any retainer of the auditors to perform any non-audit service to the Company that it deems advisable in accordance with Applicable Requirements and Board approved policies and procedures. The Audit Committee may delegate pre-approval authority to a member of the Audit Committee. The decisions of any member of the Audit Committee to whom this authority has been delegated must be presented to the full Audit Committee at its next scheduled Audit Committee meeting.

A-4 

(j)       Approval of Hiring Policies

The Audit Committee shall review and approve the Company’s hiring policies regarding partners, employees and former partners and employees of the present and former external auditors of the Company.

(k)       Communication with Internal Auditor

The internal auditor shall report regularly to the Committee. The Committee shall review with the internal auditor any problem or difficulty the internal auditor may have encountered including, without limitation, any restrictions on the scope of activities or access to required information, and any significant reports to management prepared by the internal auditing department and management’s responses thereto.

The Committee shall periodically review and approve the mandate, plan, budget and staffing of the internal audit department. The Committee shall direct management to make changes it deems advisable in respect of the internal audit function.

The Committee shall review the appointment, performance and replacement of the senior internal auditing executive and the activities, organization structure and qualifications of the persons responsible for the internal audit function.

(l)       Financial Executives

The Committee shall review and discuss with management the appointment of key financial executives and recommend qualified candidates to the Board, as appropriate.

Internal Controls

(a)       General

The Audit Committee shall review the Company’s system of internal controls.

(b)       Establishment, Review and Approval

The Audit Committee shall require management to implement and maintain appropriate systems of internal controls in accordance with Applicable Requirements, including internal controls over financial reporting and disclosure and to review, evaluate and approve these procedures. At least annually, the Audit Committee shall consider and review with management and the auditors:

(i) the effectiveness of, or weaknesses or deficiencies in: the design or operation of the Company’s internal controls (including computerized information system controls and security); the overall control environment for managing business risks; and accounting, financial and disclosure controls (including, without limitation, controls over financial reporting), non-financial controls, and legal and regulatory controls and the impact of any identified weaknesses in internal controls on management’s conclusions;

(ii) any significant changes in internal controls over financial reporting that are disclosed, or considered for disclosure, including those in the Company’s periodic regulatory filings;

(iii) any material issues raised by any inquiry or investigation by the Company’s regulators;

(iv) the Company’s fraud prevention and detection program, including deficiencies in internal controls that may impact the integrity of financial information, or may expose the Company to other significant internal or external fraud losses and the extent of those losses and any disciplinary action in respect of fraud taken against management or other employees who have a significant role in financial reporting; and

(v) any related significant issues and recommendations of the auditors together with management’s responses thereto, including the timetable for implementation of recommendations to correct weaknesses in internal controls over financial reporting and disclosure controls.

A-5 

Compliance with Legal and Regulatory Requirements

The Audit Committee shall review reports from the Company’s management members on: legal or compliance matters that may have a material impact on the Company; the effectiveness of the Company’s compliance policies; and any material communications received from regulators. The Audit Committee shall review management’s evaluation of and representations relating to compliance with specific applicable law and guidance, and management’s plans to remediate any deficiencies identified.

Audit Committee Hotline Whistleblower Procedures

The Audit Committee shall establish procedures for (a) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and (b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters. Any such complaints or concerns that are received shall be reviewed by the Audit Committee and, if the Audit Committee determines that the matter requires further investigation, it will direct the Chair of the Audit Committee to engage outside advisors, as necessary or appropriate, to investigate the matter and will work with management and the general counsel to reach a satisfactory conclusion.

Audit Committee Disclosure

The Audit Committee shall prepare, review and approve any audit committee disclosures required by Applicable Requirements in the Company’s disclosure documents.

Delegation

The Audit Committee may, to the extent permissible by Applicable Requirements, designate a sub-committee to review any matter within this mandate as the Audit Committee deems appropriate.

5.       Independent Advisors

The Audit Committee shall have the authority to retain external legal counsel, consultants or other advisors to assist it in fulfilling its responsibilities and to set and pay the respective compensation for these advisers without consulting or obtaining the approval of the Board or any Company officer. The Company shall provide appropriate funding, as determined by the Audit Committee, for the services of these advisors.

6.       No Rights Created

This Mandate is a statement of broad policies and is intended as a component of the flexible governance framework within which the Audit Committee, functions. While it should be interpreted in the context of all applicable laws, regulations and listing requirements, as well as in the context of the Company’s Notice of Articles and Articles, it is not intended to establish any legally binding obligations.

7.       Mandate Review

The Committee shall review and update this Mandate annually and present it to the Board for approval.

Adopted: May 15, 2017

A-6 

EX-99.2

Exhibit 99.2 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED DECEMBER 31, 2020

1050 – 625 Howe Street, Vancouver, B.C., Canada V6C 2T6

Phone: 604-449-9244 | Website: www.erocopper.com | Email: info@erocopper.com 

MANAGEMENT’S DISCUSSION AND ANALYSIS

This Management’s Discussion and Analysis (“MD&A”) has been prepared as at March 16, 2021 and should be read in conjunction with the audited consolidated financial statements of Ero Copper Corp. (“Ero”, the “Company”, or “we”) as at, and for the year ended December 31, 2020, and related notes thereto, which are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”). All references in this MD&A to “Q4 2020” and “Q4 2019” are to the three months ended December 31, 2020 and December 31, 2019, respectively, and all references to “Fiscal 2020”, “Fiscal 2019”, and “Fiscal 2018” are to the years ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively. All dollar amounts are expressed in United States (“US”) dollars and tabular amounts are expressed in thousands of US dollars, unless otherwise indicated. References to “$”, “US$”, “dollars”, or “USD” are to US dollars, references to “C$” are to Canadian dollars, and references to “R$” or “BRL” are to Brazilian Reais.

This MD&A refers to various non-IFRS measures, such as C1 cash cost of copper produced (per lb), C1 cash cost of gold produced (per ounce), all-in sustaining cost (“AISC”) of gold produced (per ounce), EBITDA, Adjusted EBITDA, Adjusted net income attributable to owners of the Company, Adjusted net income per share attributable to owners of the Company, Working Capital (Deficit), Available Liquidity, and Net Debt. Please refer to the section titled "NON-IFRS MEASURES" within this MD&A for a discussion of non-IFRS measures.

This MD&A contains “forward-looking information” that is subject to risk factors set out in a cautionary note contained at the end of this MD&A. The Company cannot assure investors that such information will prove to be accurate, and actual results and future events may differ materially from those anticipated in such information. The results for the periods presented are not necessarily indicative of the results that may be expected for any future period. Investors are cautioned not to place undue reliance on this forward-looking information. All information contained in this MD&A is current and has been approved by the Board of Directors of the Company (the “Board”) as of March 16, 2021, unless otherwise stated.

BUSINESS OVERVIEW

Ero, headquartered in Vancouver, B.C., is focused on copper production growth from the MCSA Mining Complex located in Bahia State, Brazil, with over 40 years of operating history in the region. The Company's primary asset is a 99.6% interest in the Brazilian copper mining company, MCSA, 100% owner of the MCSA Mining Complex, which is comprised of operations located in the Curaçá Valley, Bahia State, Brazil, wherein the Company currently mines copper ore from the Pilar and Vermelhos underground mines, and the Boa Esperança development project, an IOCG-type copper project located in Pará, Brazil. The Company also owns 97.6% of the NX Gold Mine, an operating gold and silver mine located in Mato Grosso, Brazil. Additional information on the Company and its operations, including technical reports on the MCSA Mining Complex, Boa Esperança and NX Gold properties, can be found on the Company’s website (www.erocopper.com) and on SEDAR (www.sedar.com).

Ero Copper Corp. December 31, 2020 MD&A | Page 1 

HIGHLIGHTS

	2020 - Q4		2020 - Q3			2020		2019 - Q4			2019
Operating Information
Copper (MCSA Operations)
Ore Processed (tonnes)		483,447		553,148			2,271,625		589,065			2,424,592
Grade (% Cu)		2.26		2.18			2.08		2.16			1.93
Cu Production (tonnes)		10,018		10,961			42,814		11,526			42,318
Cu Production (lbs)		22,085,927		24,163,829			94,387,605		25,411,100			93,295,598
Cu Sold in Concentrate (tonnes)		10,265		11,530			42,813		11,595			42,759
Cu Sold in Concentrate (lbs)		22,629,431		25,420,164			94,387,312		25,562,212			94,267,101
C1 cash cost of copper produced (per lb)*	$	0.69	$	0.63		$	0.67	$	0.80		$	0.93
Gold (NX Gold Operations)
Au Production (ounces)		10,789		9,436			36,830		6,043			30,434
C1 cash cost of gold produced (per ounce)*	$	405	$	421		$	457	$	980		$	691
AISC of gold produced (per ounce)*	$	608	$	579		$	628	$	1,253		$	889
Financial information ($millions, except per share amounts)
Revenues	$	91.2	$	94.3		$	324.1	$	75.7		$	284.8
Gross profit	$	58.3	$	59.6		$	188.1	$	31.1		$	117.1
EBITDA	$	91.3	$	52.1		$	116.2	$	34.3		$	141.4
Adjusted EBITDA*	$	67.2	$	62.5		$	207.1	$	31.2		$	134.1
Cash flow from operations	$	38.6	$	44.4		$	162.8	$	35.9		$	127.8
Net income	$	66.3	$	31.4		$	52.5	$	45.4		$	92.5
Net income attributable to owners of the Company	$	65.8	$	31.1		$	51.6	$	45.2		$	91.9
Net income per share attributable to owners of the Company
- Basic	$	0.75	$	0.36		$	0.60	$	0.53		$	1.08
- Diluted	$	0.71	$	0.34		$	0.56	$	0.49		$	1.01
Adjusted net income attributable to owners of the Company*	$	37.4	$	36.7		$	117.3	$	40.7		$	86.3
Adjusted net income per share attributable to owners of the Company*
- Basic	$	0.43	$	0.42		$	1.36	$	0.47		$	1.01
- Diluted	$	0.40	$	0.40		$	1.27	$	0.44		$	0.94
Cash and Cash Equivalents	$	62.5	$	54.3		$	62.5	$	21.5		$	21.5
Working Capital (Deficit)*	$	35.8	$	(9.4	)	$	35.8	$	(4.9	)	$	(4.9	)
Net Debt*	$	105.6	$	118.4		$	105.6	$	136.4		$	136.4

*Please refer to the section titled "NON-IFRS MEASURES" within this MD&A for a discussion of non-IFRS measures.

Ero Copper Corp. December 31, 2020 MD&A | Page 2 

2020 Highlights

2020 Operational Highlights

Strong year-end – full-year production guidance achieved, below revised operating cost guidance range

· Increased year-on-year copper production at high-end of Company’s guidance range with 42,814 tonnes of copper produced in concentrate.

· Approximately 2.3 million tonnes of ore grading 2.08% copper processed with average metallurgical recoveries of 90.5%.

· C1 cash cost of $0.67 per pound of copper produced, $0.03 cents below the low-end of the Company’s revised guidance range of $0.70 to $0.85 per pound of copper produced for 2020.

· Full-year C1 cash costs reflect a year-on-year reduction of $0.26 per pound of copper produced as compared to 2019.

· Advanced several key capital programs in 2020 including completion of the Company’s high-intensity grinding (“HIG”) Mill installation, ore-sorting pilot plant program, and drilling and integration of the Deepening Extension Project (as defined below) into the Company’s recently announced life-of-mine plan update for 2020.

· Achieved one-year without a lost-time injury at the Company’s MCSA Mining Complex prior to the end of 2020, a record in the mine’s 40 plus year operating history.

·  Total annual gold and silver production at the NX Gold Mine of 36,830 ounces gold and 22,694 ounces silver at C1 cash costs of $457 per ounce of gold produced, in-line with the Company’s revised 2020 NX Gold guidance, and AISC of $628 per ounce of gold produced.

2020 Financial Highlights

Cash position and available lines of credit: Total cash and cash equivalents and available lines of credit at December 31, 2020 was $62.5 million and $11.6 million compared to $21.5 million and $30.0 million, respectively, at the end of 2019. The Company’s working capital improved from a deficit of $4.9 million at the end of 2019 to a surplus of $35.8 million at the end of 2020, primarily as a result of a record $162.8 million in cash flow from operations for Fiscal 2020, compared with $127.8 million in cash flow from operations for Fiscal 2019. As at the end of 2020, the Company had R$60.4 million in available undrawn lines of credit in Brazil.

Revenue: The Company increased year-on-year revenues from its copper operations at MCSA by 6.0%, totalling $260.9 million in 2020 compared to $246.2 million in 2019. The increase in revenue was primarily attributed to an increase in realized copper prices.

Year-on-year increase in gold revenue from the Company’s gold operations at NX Gold was a result of increased gold and silver prices and increased production volumes, resulting in an increase in gold revenue of 63.5% to $63.2 million in 2020 compared to $38.6 million in 2019.

Mine gross profit: The Company significantly increased year-on-year mine gross profit from its copper operations at MCSA totaling $146.4 million in 2020 compared to $105.6 million in 2019. The increase in mine gross profit was primarily driven by increased revenues from higher realized copper prices, increased copper concentrate sales, lower operating costs over the prior year as a result of higher grades processed, and a weakened BRL against the USD. The Company also recognized mine gross profit of $41.8 million in 2020 compared to $11.4 million in 2019 from its gold operations at NX Gold as a result of higher gold production volumes, higher gold sales, and higher realized gold prices.

Net income: The Company recognized net income attributable to the Company of $51.6 million (net income per share, basic, of $0.60) in 2020 compared to $91.9 million (net income per share, basic, of $1.08) in 2019. While revenue and mine gross profit increased, net income decreased, primarily driven by increased foreign exchange losses from the weakening of the BRL against the USD and increased income tax expense, partially offset by decreased costs associated with the weakened BRL in which cost is incurred. Additionally, during 2019, the Company recognized a recovery of $21.6 million in net income related to value added taxes in Brazil due to a 2017 Brazil Supreme Court ruling that concluded the relevant tax authorities had historically used an incorrect methodology to determine such taxes, as well as a $28.3 million net deferred tax recovery primarily resulting from the recognition of available tax losses and tax credits in MCSA. No such recoveries were recognized during 2020.

Ero Copper Corp. December 31, 2020 MD&A | Page 3 

Q4 2020 Highlights

Proactive mitigation of the potential impacts of the COVID-19 pandemic throughout 2020

· The Company continues to have no material disruption to operations, supply chains or sales channels as a result of the COVID-19 pandemic. Since the onset of the COVID-19 pandemic in early 2020, the Company has continued to take extraordinary measures to mitigate the impact of COVID-19 on its workforce and operations. Some of these measures include:

(i) eliminating all non-essential travel to and from the Company’s mining operations;

(ii) routine engagement with all suppliers and active stockpiling of key consumables to protect against any supply chain disruptions;

(iii) reducing physical interaction throughout the organization as much as possible by closing administrative offices and moving to a work-from-home format, increasing social distancing by limiting the number of employees travelling on provided buses between the Company’s mining communities and mines, limiting the number of employees in the cafeteria at any given time, cancelling all group meetings, implementing social-distancing for essential line-out meetings and encouraging work-from-home and video/telephone conferencing where feasible;

(iv) establishing COVID-19 committees with senior leadership and local health administrators for the regions in which the Company operates;

(v) purchasing thousands of COVID-19 testing kits for the Company’s operations, with the donation of a portion of these test kits, as well as other personal protective equipment, to each of the Company’s local municipalities to facilitate rapid testing throughout each community; and,

(vi) implementing wellness education, health screenings, and self-isolation protocols along with enhanced sanitization throughout the Company’s operations.

· The Company continues to closely monitor the COVID-19 pandemic and is engaged in active operational and financial contingency planning to prudently manage the potential impact of the pandemic on its operations.

Strong operational performance at MCSA Mining Complex and NX Gold Mine during Q4 2020

· 483,447 tonnes processed grading 2.26% copper producing 10,018 tonnes of copper in concentrate after metallurgical recoveries that averaged 91.7% during Q4 2020 at the MCSA Mining Complex.

· 45,574 tonnes of ore grading 7.72 grams per tonne gold producing 10,789 ounces of gold and 6,763 ounces of silver as by-product after metallurgical recoveries that averaged 95.4% during Q4 2020 at the NX Gold Mine.

· Q4 2020 C1 cash costs of $0.69 per pound of copper produced at the MCSA Mining Complex, C1 cash costs of $405 per ounce of gold produced and AISC of $608 per ounce of gold produced at the NX Gold Mine (see Non-IFRS Measures).

· As a result of strong operating and financial performance throughout 2020, the Company ended the period with a robust cash and cash equivalents position of $62.5 million, a quarter-on-quarter improvement of $8.2 million and a $41.0 million improvement since December 31, 2019.

2020 updated mineral resource, reserve and life-of-mine plans outline significant increases in mineral reserves and extension of mine life across the Company’s operations

· At the MCSA Mining Complex, significant year-on-year increases in contained copper within the Proven and Probable mineral reserves, Measured and Indicated, and Inferred mineral resource categories, were outlined with each increasing by 23%, 29% and 62% respectively, inclusive of the newly defined Deepening Extension Zone at the same long-term copper price assumption of US$2.75 per pound.

· Updated life-of-mine copper production for the MCSA Mining Complex, totalling approximately 480,800 tonnes of copper at an average C1 cash costs of $0.97 per pound of copper produced, at a US Dollar to Brazilian Real foreign exchange rate of 5.00.

· At the NX Gold Mine, a 78% increase in contained gold within the Probable mineral reserve category was outlined, totalling 862,134 tonnes grading 8.83 grams per tonne containing 244,650 ounces of gold.

· Updated life-of-mine gold production from the NX Gold Mine totalling approximately 227,000 ounces of gold produced over a six-year mine life, at an average annual production rate of approximately 36,000 ounces of gold (approximately 41,400 ounces over the first four years) at life-of-mine (“LOM”) average C1 cash costs of US$505 per ounce of gold produced and life-of-mine average AISC of US$720 per ounce (see Non-IFRS Measures).

Ero Copper Corp. December 31, 2020 MD&A | Page 4 

MCSA exploration programs continue to demonstrate continuity of high-grade mineralization post life-of-mine plan update as well as newly discovered PGM occurrences throughout the Curaçá Valley

· During the period, the Company identified an unexpected new zone of high-grade “Superpod” style mineralization in the south-central section of the zone that has the potential to meaningfully increase copper grades within the Deepening Extension Zone of the Pilar Mine. Results in this area include hole FC48155 that intersected 46.5 meters grading 4.96% copper including 36.5 meters grading 6.08% copper and 6.0 meters grading 11.98% copper. On the same section, hole FC48161 intersected 20.3 meters grading 4.76% copper including 9.5 meters grading 7.12% copper providing further evidence of high-grade mineralization.

· In addition, a new target zone, interpreted as a potential parallel lens at depth within the Pilar Mine, was identified approximately 70 to 120 meters east of the main Deepening Extension Zone. Initially defined by hole FC47173 that intersected 7.2 meters grading 3.28% copper including 3.0 meters grading 4.35% copper and hole FC5381 that intersected 6.0 meters grading 1.07% copper, drilled approximately 300 meters apart, the zone has been interpreted to extend approximately 600 meters in strike length.

· Exploration drilling in the Southern Vermelhos Corridor of the Vermelhos District continued to intercept stacked mineralized lenses within a modeled structural corridor, extending over 700 meters in strike length. Five drill rigs are scheduled to systematically drill this target area during 2021 and down-hole electromagnetic (“EM”) targeting work remains ongoing.

· Initial results from a program designed to evaluate platinum group metal (“PGM”) associations within the Curaçá Valley were received during the period. The program, which commenced in early-2020, has resulted in the interpretation of three distinct styles of PGM mineralization that can be observed in samples throughout each of the Company’s main operating districts. Occurrences of elevated PGMs have now been documented from near-surface open pit deposits to the deepest known extent of mineralization within the Pilar Mine. Results for each style of mineralization are highlighted by:

(i) Style 1, high-grade copper-nickel-PGMs (this style of mineralization shows similarities to footwall zones described within the Sudbury District, Canada and localized copper-rich mineralized zones at Noril’sk, Russia), highlighted by previously announced Siriema results: FSI-40, 9.1 meters grading 2.59% copper, 1.74% nickel and 1.61 grams per tonne (“gpt”) 4PGE+Au including 5.6 meters grading 3.37% copper, 2.59% nickel and 2.28gpt 4PGE+Au (platinum group elements (“PGEs”) in this context are defined as platinum, palladium, rhodium and ruthenium);

(ii) Style 2, high-grade PGM low-sulphide content, reef-style mineralization (this style of mineralization shows similarities described in PGM deposits, such as the Bushveld Complex, South Africa and some zones within the Marathon Intrusion, Canada), highlighted by: hole FC47139, within the Pilar Deepening Extension, 1.0 meter grading 0.76% copper, 0.05% nickel and 4.12gpt 4PGE+Au; and,

(iii) Style 3, copper-palladium rich (this style of mineralization shows similarities to zones described within the Sudbury District and Marathon Intrusion), highlighted by: FS-E002, a near-surface sample from beneath the Surubim open pit mine, 27.0 meters grading 2.04% copper, 0.06% nickel and 0.33gpt 4PGE+Au including 6.0 meters grading 3.03% copper, 0.13% nickel and 0.87gpt 4PGE+Au.

· Based upon these results, a comprehensive review of PGM occurrences, comprising approximately 5,000 additional samples, is underway to better understand continuity and significance of these initial results.

Ero Copper Corp. December 31, 2020 MD&A | Page 5 

Exploration of the Santo Antonio Vein at the NX Gold Mine continues to demonstrate continuity of mineralization

· The Company continued to have success in demonstrating down-plunge continuity and extensions of the high-grade mineralization of the Santo Antonio Vein at the NX Gold Mine. The results were highlighted during the period by hole SA89 that intersected 2.7 meters grading 15.38 grams per tonne gold, representing the deepest intercept drilled to date by the Company at the Santo Antonio Vein.

Q4 2020 Financial Report

· Cash flow from operations: Q4 2020 cash flow from operations was $38.6 million, an increase of $2.7 million from $35.9 million in Q4 2019.

· Adjusted net income per share (see Non-IFRS Measures): Q4 2020 adjusted net income per share was $0.43 and $0.40, on a basic and diluted basis, respectively, compared with Q4 2019 adjusted net income per share of $0.47 and $0.44, on a basic and diluted basis, respectively.

· Unrealized foreign exchange gains: Q4 2020 financial results were impacted by the strengthening of the BRL against the USD in comparison to the end of the third quarter of 2020, mainly through the change in the mark-to-market valuation of derivatives used to hedge BRL revenues. During Q4 2020, the Company recognized a $27.7 million non-cash valuation gain on its USD/BRL foreign exchange collars.

- The Company uses these structures to hedge Brazilian Real measured revenues. As a result of the COVID-19 pandemic and its impact on macro-economic interrelationships, there was a continual increase in implied volatility of the BRL versus USD.

- Generally accepted accounting standards dictate that the liability be recognized at fair value, which requires management to estimate fair value using a Black-Scholes valuation methodology and assumptions for the foreign exchange rate and volatility.

- The Company does not believe that this impact on the income statement reflects the underlying profitability of the Company as it provides no offset for the expected future benefits/costs of a lower/higher BRL/USD exchange rate on operating costs and capital expenditures of the Company’s underlying business. These benefits/costs may outweigh the Company’s projected hedge losses/gains that may result from these collars.

· Credit facilities amendment: Subsequent to the year ended December 31, 2020, the Company’s existing US$75 million term facility and US$75 million revolving credit facility previously entered into with a syndicate of Canadian financial institutions were amended with a US$150 million senior secured revolving credit facility (the “New Revolving Credit Facility”) payable entirely on March 31, 2025.

Benefits of the amendment include a reduction of up to 25 basis points in the Company’s cost of borrowing, depending on consolidated leverage ratio. The New Revolving Credit Facility will bear interest on a sliding scale at a rate of LIBOR plus 2.25% to 4.25% depending on the Company’s consolidated leverage ratio at the time. Commitment fees for any undrawn portion of the Revolving Credit Facility will also be on a sliding scale between 0.56% to 1.06%.

The New Credit Facility includes standard and customary terms and conditions with respect to fees, representations, warranties, and financial covenants that remain unchanged from prior amendments.

Ero Copper Corp. December 31, 2020 MD&A | Page 6 

REVIEW OF OPERATIONS

Mineração Caraíba S.A. (Vale do Curaçá):

	2020 - Q4		2020 - Q3		2020		2019 - Q4		2019
Operating Information
Copper (MCSA Operations)
Ore Processed (tonnes)		483,447		553,148		2,271,625		589,065		2,424,592
Grade (% Cu)		2.26		2.18		2.08		2.16		1.93
Cu Production (tonnes)		10,018		10,961		42,814		11,526		42,318
Cu Production (lbs)		22,085,927		24,163,829		94,387,605		25,411,100		93,295,598
Concentrate Grade (% Cu)		33.3		34.0		33.7		35.0		34.8
Recovery (%)		91.7		90.8		90.5		90.7		90.5
Concentrate Sales (tonnes)		30,416		34,324		127,007		33,926		122,966
Cu Sold in Concentrate (tonnes)		10,265		11,530		42,813		11,595		42,759
Cu Sold in Concentrate (lbs)		22,629,431		25,420,164		94,387,312		25,562,212		94,267,101
C1 cash cost of copper produced (per lb)	$	0.69	$	0.63	$	0.67	$	0.80	$	0.93

Q4 2020 was the culmination of a strong operating year for the Company’s MCSA Mining Complex, which despite the COVID-19 pandemic, continued to perform well. Quarter-on-quarter declines in tonnes mined, were offset by increases in copper grades (2.26% vs. 2.18% copper in Q3 2020) and metallurgical recoveries (91.7% vs. 90.8% in Q3 2020). Improved metallurgical recoveries were driven, in part, by the installation of commissioning of the Company’s new HIG Mill, which was completed at the end of Q3 2020. While feed system work remained ongoing during Q4 2020, the Company continues to expect an improvement in metallurgical recoveries in the future as a result of the successful implementation to date.

At the Pilar Mine, 356,016 tonnes of ore were mined grading 1.74% copper during Q4 2020 (as compared to 375,296 tonnes of ore mined grading 1.36% copper during Q3 2020). At the Vermelhos Mine, 187,659 tonnes of ore were mined grading 3.19% copper (as compared to 227,963 tonnes of ore mined grading 3.76% copper during Q3 2020). In total, contributions from both mines during the period resulted in 543,675 tonnes of ore mined grading 2.24% copper. For the full-year 2020, a total of 2,345,002 tonnes of ore grading 2.10% copper was mined. During Q4 2020, 483,447 tonnes of ore grading 2.26% copper was processed, producing 10,018 tonnes of copper after average metallurgical recoveries of 91.7%. For the full-year of 2020, a total of 2,271,625 tonnes of ore grading 2.08% copper was processed, producing 42,814 tonnes of copper after average metallurgical recoveries of 90.5%.

C1 cash costs per pound of copper produced averaged $0.69 (see Non-IFRS Measures) during Q4 2020, reflecting strong operational performance at the Company’s MCSA operations, continued weakness of the BRL versus the US dollar and strength in the price of gold and silver produced as by-products. Decreased copper production, a strengthening of the BRL vs. the US dollar relative to the prior period, and scheduled mill maintenance at year-end contributed to a $0.06 increase in C1 cash costs per pound of copper produced as compared to Q3 2020. Full-year 2020 C1 cash costs averaged $0.67 per pound of copper produced – a $0.26 decrease as compared to 2019.

Ero Copper Corp. December 31, 2020 MD&A | Page 7 

During Q4 2020, the Company announced updated mineral resources, mineral reserves and an updated LOM plans for the MCSA Mining Complex encompassing the exploration drill programs conducted during the year. Within the MCSA Mining Complex LOM production plan, for the 2020 update, the Company included production, capital and operating cost projections based upon the mineral reserves derived from the Measured and Indicated mineral resources from within the Deepening Extension Zone of the Pilar Mine (the “Deepening Extension Project”), which was a core objective of the Company during the year. In addition, the Company included an independent preliminary economic assessment based upon the Inferred mineral resources within the Deepening Extension Zone of the Pilar Mine (the “Deepening Inferred Project”), that shows the expected synergies associated with utilizing the infrastructure that will be built in support of the Deepening Extension Project. With the inclusion of the Deepening Extension Project at the Pilar Mine, a significant increase in production from the current 1.2 million tonnes per annum of ore mined to approximately 2.2 million tonnes of ore mined is planned. The expansion of the Pilar Mine will be supported by the installation of a new 4.5 meter diameter external shaft, scheduled to commence construction in Q3 2021, that will not only support the planned increases in copper production at the Pilar Mine, as outlined in the LOM, but has also been designed to support the potential for longer term copper production increases from both the Deepening Inferred Project and as additional mineralization is defined. In keeping with the Company’s return on invested capital focus, the expansion of the mine and development of the infrastructure in support of the Deepening Extension Project is expected to be delivered at a low capital-intensity ratio of approximately US$1,677 per tonne of incremental copper production delivered.

In addition, integration of ore sorting into the Company’s LOM plan for the Vermelhos District open pit deposits of N8/N9 and Siriema is expected to contribute to improved mill head-grades and maintaining first-quartile C1 cash costs over the LOM. In total, approximately 20 million tonnes of ore grading 0.56% are expected to be mined and sorted, producing a sorted mill-feed of approximately 8.9 million tonnes of ore grading 1.18% copper. As a result of the integration of ore sorting approximately 11.0 million tonnes of waste material will be prevented from being transported and processed at the Company’s mill over the LOM. In addition to the associated economic benefits, this reduction is expected to substantially reduce consumption of fresh-water, diesel and electricity as well as reduce flotation tailings generated per tonne of copper produced, further advancing the Company’s long-term environmental and sustainability commitments within the Curaçá Valley.

Please refer to the Company’s press releases dated November 30, 2020 for complete information related to the LOM plan for the MCSA Mining Complex.

On exploration, the Company’s organic growth strategy remains supported by one of the world’s largest exploration programs, which continued following the release of the latest LOM plan update. During Q4 2020, the Company continued to focus its exploration efforts on three primary exploration areas within the Curaçá Valley (please refer to the Company’s press release dated December 15, 2020 for complete results). These areas included:

(i)	continued drilling of the Pilar Mine Deepening Extension Zone in an effort to further demonstrate high-grade continuity outside the previously known limits of mineralization within the mine;
(ii)	extensional drilling of the Southern Vermelhos Corridor, a target zone extending over 700 meters in strike length between Siriema and the Vermelhos Mine to further evaluate continuity of mineralization and the potential for multiple “stacked” high-grade lenses; and,
(iii)	a strategic review of PGM occurrences throughout the Curaçá Valley.

In the Pilar Mine, exploration activities during the period sought to commence a new phase of drilling following the release of the Company’s updated LOM to further demonstrate continuity of mineralization as well as upgrade the inferred mineral resources that comprise the Deepening Inferred Project. A surface drill program utilizing directional drilling technology to evaluate the mineralized potential of the Deepening Extension Zone north of section 57 continued as planned during the period and this program will continue into 2021. The known limits of mineralization within the Deepening Extension Zone, which remain open, extend over approximately 900 meters in strike length, over a total depth of approximately 525 meters and over average thicknesses ranging from 10 to 20 meters with localized thickening throughout the zone. Within the total strike length, a higher-grade continuous zone of approximately 400 to 500 meters in strike length continues to be supported in the central and northern segments of the target area, and a new zone of high-grade mineralization is emerging at depth in the south-central segment of this area. The zone remains open to the north and to depth. Five underground exploration drill rigs will continue to systematically drill the defined exploration target area within the Deepening Extension Zone in 2021.

Ero Copper Corp. December 31, 2020 MD&A | Page 8 

Also within the Pilar Mine, a new zone of parallel mineralization at depth, and a new target zone, was identified during the period, located approximately 70 to 120 meters east of the main Deepening Extension Zone. Results during the period are highlighted by hole FC47173 that intersected 7.2 meters grading 3.28% copper including 3.0 meters grading 4.35% copper and hole FC5381 that intersected 6.0 meters grading 1.07% copper. The intercept in hole FC47173 is approximately 300 meters south of the intercept in hole FC5381, approximately 80 meters to the east of the main Deepening Extension Zone and approximately 400 meters south of previously drilled holes that also intersected this target area. The potential for a new, parallel structure extends over a north-south strike length of approximately 600 meters.

In the Vermelhos District, approximately 80 kilometers to the north of the Caraíba Mill complex, which includes the high-grade operating Vermelhos Mine, exploration activities during the period focused on two primary objectives: (i) testing continuity of high-grade copper mineralization within the Southern Vermelhos Corridor and (ii) conducting down-hole EM surveys to identify high-grade exploration targets. Preliminary results of this program, which remains ongoing, continues to demonstrate the presence of multiple stacked mineralized lenses, including high-grade mineralization within the corridor. Five drill rigs are expected to be operational within the Southern Vermelhos Corridor during 2021 focused on systematic drill testing. The program has been designed on 50 meter drill spacing. Initially, the focus will be the northern section of the Southern Vermelhos Corridor given its proximity to the existing mine infrastructure of the Vermelhos Mine and the potential for exploration success to meaningfully enhance the near-term base-case grade profile through replacement of lower grade production in addition to extending mine life.

Following the discovery of the Siriema Deposit (within the Vermelhos District) in mid-2019 and, the discovery of the high-grade Keel Zone at Siriema at the end of 2019 (including new massive sulphide breccia zones containing elevated copper, nickel, cobalt and PGMs), the Company collected and sent a series of samples from each of the Company’s three primary operating districts of Vermelhos, Pilar and Surubim for additional PGM analysis to further evaluate the prevalence of PGMs within the broader Curaçá Valley. Based upon the assay results from this initial program, which were delayed due to the impacts of COVID-19, occurrences of elevated PGMs can be found throughout the entirety of the Curaçá Valley.

The results, while preliminary, demonstrate that elevated PGM grades within the Curaçá Valley occur in association with both the high-sulphide copper and copper-nickel mineralized envelopes of deposits such as the Keel Zone of Siriema, as well as outside of the primary copper-mineralized zones where the highest-grade PGM samples collected to date occur in low-sulphide reef-style mineralized envelopes lying in zones that traditionally would have been classified as waste due to their inherently low association with copper. To date, the Company has observed three distinct styles of PGM mineralization, which are supported by relevant examples from the early-2020 sample program and previously released multi-element results from within the Keel Zone.

The Company has commenced a comprehensive program comprised of approximately 5,000 additional samples to continue evaluating the potential for additional occurrences of PGMs as well as evaluate continuity of PGM mineralization within zones identified to date. Approximately 3,000 samples of the total 5,000 sample program have been submitted to third-party laboratories for PGM analysis, and the Company has commenced integrating systematic PGM assaying into its ongoing exploration efforts. This effort is supported by the Company’s new in-house PGM assay capability, built in response to early results from this program. The Company continues to undertake additional quality-assurance, quality-control procedures on its newly installed multi-element Inductively Coupled Plasma analytical equipment to transition away from third-party laboratories in the future.

Ero Copper Corp. December 31, 2020 MD&A | Page 9

NX Gold S.A.

	2020 - Q4			2020 - Q3			2020			2019 - Q4			2019
Operating Information
Gold (NX Gold Operations)
Ore mined (tonnes)		45,574			41,749			162,642			40,453			154,271
Ore milled (tonnes)		45,574			41,749			162,642			43,207			158,275
Head grade (grams per tonne Au)		7.72			7.64			7.72			6.32			6.98
Recovery (%)		95.4	%		92.0	%		91.3	%		68.9	%		85.7	%
Gold ounces produced (oz)		10,789			9,436			36,830			6,043			30,434
Silver ounces produced (oz)		6,763			5,736			22,694			4,315			19,641
Gold sold (oz)		10,100			9,845			35,855			5,810			29,755
Silver sold (oz)		6,349			5,982			22,109			4,247			19,142
C1 cash cost of gold produced (per ounce)	$	405		$	421		$	457		$	980		$	691
AISC of gold produced (per ounce)	$	608		$	579		$	628		$	1,253		$	889

At the NX Gold Mine, continued quarter-on-quarter improvement in tonnes and grade mined and processed, along with record metallurgical performance, contributed to increased gold production during the period. Production during Q4 2020 totaled 10,789 ounces of gold and 6,673 ounces of silver (as by-product) from total mill feed of 45,574 tonnes grading 7.72 g/t gold after metallurgical recoveries of 95.4% during the period. Ore mined and gold production improved in Q4 2020 by 9% and 14%, respectively relative to Q3 2020, and gold production increased by 37% as compared to the first quarter of 2020. These quarter-on-quarter improvements have been driven by both increases in the number of working faces in operation within the Santo Antonio Vein and improvements in metallurgical recoveries. The NX Gold Mine achieved record quarterly C1 cash costs during Q4 2020 of $405 per ounce of gold produced, resulting in full-year 2020 C1 cash costs of $457 per ounce of gold produced (see Non-IFRS Measures). AISC during Q4 2020 averaged $608 per ounce of gold produced resulting in full-year 2020 AISC of $628 per ounce of gold produced (see Non-IFRS Measures).

During Q4 2020, the Company announced updated mineral resources, mineral reserves and an updated LOM production plan for the NX Gold Mine encompassing the exploration drill programs conducted during the year.

The Company’s updated LOM production plan, prepared in conjunction with the updated mineral resource and reserve estimate, outlines a six-year LOM with total production of approximately 227,000 ounces and average annual production of approximately 41,400 ounces of gold over the first four years. In total, approximately 860,000 tonnes of ore are projected to be mined and processed grading an average of approximately 8.80 grams per tonne of gold. LOM average C1 cash costs are projected to be US$505 per ounce of gold produced with LOM average AISC of US$720 per ounce (see Non-IFRS Measures).

The updated LOM plan at the NX Gold Mine reflects the culmination of a multi-year commitment to organically grow the asset by the Company, beginning in mid-2018 with the first real exploration program conducted at the property since 2012. The updated LOM production plan outlines a highly profitable six-year operation with an actionable road-map to further grow production and extend mine-life through conversion of newly defined high-grade Inferred mineral resources (573,772 tonnes grading 10.55 grams per tonne containing approximately 194,556 ounces of gold). During the fourth quarter and into 2021, the Company has committed to continue its organic growth efforts at NX Gold as evidenced through the installation of a modular paste-fill plant, expected to be operational during the second half of 2021, as well as additional allocation of capital for exploration at the mine. The Company ramped up drilling efforts to encompass eight drill rigs at year-end operating on both near-mine and regional programs throughout the extensive land package controlled by NX Gold.

Ero Copper Corp. December 31, 2020 MD&A | Page 10

Please refer to the Company’s press releases dated November 15, 2020 for complete information as it relates to the updated LOM production plan for the NX Gold Mine.

Following the release of the updated LOM, exploration at the NX Gold Mine continued to focus primarily on testing down-plunge extensions of the Santo Antonio Vein. Drill results during the period further extended the known limits of mineralization within the Santo Antonio Vein. Results are highlighted by the deepest intercept drilled within the Santo Antonio Vein drilled to date. In addition, the first regional exploration campaign continued to progress at the NX Gold Mine during the period targeting both near-mine targets as well as distal exploration targets up to 20 kilometers from the mine.

2021 Guidance/Outlook

· 2021 annual production guidance for the MCSA Mining Complex of 42,000 to 45,000 tonnes of copper in concentrate at C1 cash cost guidance^[1] range of US$0.75 to US$0.85 per pound of copper produced; and,

· 2021 annual production guidance for the NX Gold Mine of 34,500 to 37,500 ounces of gold at C1 cash cost and AISC guidance^[1] range of US$500 to US$600 and US$875 to US$975 per ounce of gold produced, respectively.

[1] C1 Cash Costs of copper produced (per lb.), C1 Cash Costs of gold produced (per oz.), and AISC are non-IFRS measures – Please refer to the section titled "NON-IFRS MEASURES" within this MD&A for a discussion of non-IFRS measures. Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s AIF (as defined herein) and Management of Risks and Uncertainties in this MD&A for complete risk factors.

2021 Production Outlook

MCSA Mining Complex	2020 Guidance[1]			2020 Result			2021 Guidance[2]
Tonnes Processed		2,150,000			2,271,625			2,700,000
Copper Grade (% Cu)		2.15	%		2.08	%		1.75	%
Copper Recovery (%)		91.0	%		90.5	%		93.0	%
Cu Production (000 tonnes)		41.0 – 43.0			42.8			42.0 – 45.0

NX Gold Mine	2020 Guidance[1]			2020 Result			2021 Guidance[2]
Tonnes Processed		165,000			162,642			167,000
Gold Grade (gpt)		7.70			7.72			7.20
Gold Recovery (%)		90.0	%		91.3	%		92.0	%
Au Production (000 ounces)		36.0 – 37.0			36.8			34.5 – 37.5
Ag Production (000 ounces)		n/a			22.7			n/a

[1] 2020 production guidance for the MCSA Mining Complex as outlined in the Company’s press release dated January 15, 2020. 2020 production guidance for the NX Gold Mine as outlined in the Company’s press release dated November 5, 2020.

[2] Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s SEDAR filings for complete risk factors, including the AIF (as defined herein) and Management of Risks and Uncertainties in this MD&A for complete risk factors.

Ero Copper Corp. December 31, 2020 MD&A | Page 11

2021 Cash Cost Guidance

The Company’s guidance for 2021 assumes a USD:BRL foreign exchange rate of 5.00, gold price of $1,750 per ounce and silver price of $20.00 per ounce.

	2020 Guidance[1]		2020 Result		2021 Guidance
MCSA Mining Complex C1 Cash Cost Guidance (US$/lb)[2]	$0.70 - $0.85		$	0.67		$0.75 - $0.85
NX Gold Mine C1 Cash Cost Guidance (US$/oz)[2]	$425 - $525		$	457		$500 - $600
NX Gold Mine All-in Sustaining Cost (AISC) Guidance (US$/oz)[2]		n/a	$	628		$875 - $975

[1] 2020 cash cost guidance represents revised guidance as outlined in the Company’s press release dated May 7, 2020.

[2] C1 Cash Costs of copper produced (per lb.), C1 Cash Costs of gold produced (per oz.), and AISC are non-IFRS measures – Please refer to the section titled "NON-IFRS MEASURES" within this MD&A for a discussion of non-IFRS measures. Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s AIF (as defined herein) and Management of Risks and Uncertainties in this MD&A for complete risk factors.

2021 Capital Expenditure Guidance

The Company’s capital expenditure guidance for 2021 assumes a USD:BRL foreign exchange rate of 5.00 and has been presented below in USD millions.

MCSA Operations	2020 Guidance[1]		2020 Result		2021 Guidance
Pilar Mine and Caraíba Mill Complex (excluding Deepening Extension Project)		$ 45.0 – 55.0		54.5		$ 45.0 - 50.0
Deepening Extension Project		-		-		12.5 – 15.0
Vermelhos Mine & District[2]		11.0 – 13.0		14.0		14.0 – 16.0
Surubim Open Pit Mine		-		-		10.0 – 12.0
Boa Esperanҫa Project		0.2 – 0.2		0.2		1.0 – 1.5
Capital Expenditure Guidance		$ 56.2 – 68.2		68.7		$ 82.5 - 94.5
Curaçá Valley Exploration		$ 25.0 – 30.0		31.9		$ 30.0 – 35.0

NX Gold Mine	2020 Revised Guidance[1]		2020 Result		2021 Guidance
Capital Expenditure Guidance		$    9.0 – 11.0		13.0		$ 13.0 – 15.0
Exploration		3.0 – 5.0		4.3		8.0 – 10.0
Total, NX Gold Mine		$ 12.0 – 16.0		17.3		$ 21.0 – 25.0

[1] 2020 capital cost guidance and revised guidance (NX Gold Mine) as outlined in the Company’s press releases dated May 7, 2020 and November 5, 2020.

[2] Vermelhos District includes open pit mining infrastructure expenditures of approximately US$6.0 million in 2021.

Mineração Caraíba S.A.

Copper production from the MCSA Mining Complex for 2021 is expected to come from ore mined from the Pilar and Vermelhos underground mines as well as the Surubim open pit mine, which is expected to restart operations later in 2021. Production from the Pilar Mine is expected to contribute a total of approximately 1.5 million tonnes grading 1.40% copper, production from the Vermelhos Mine is expected to contribute a total of approximately 0.8 million tonnes grading 2.40% copper and production from the Surubim Mine is expected to contribute a total of 0.2 million tonnes grading 0.60% copper as it is a partial year of operation. The blended mill head grade incorporating these sources is expected to be approximately 1.75% copper for the full year.

Ero Copper Corp. December 31, 2020 MD&A | Page 12

NX Gold S.A.

Gold production from NX Gold for 2021 is expected to come from ore mined from the Santo Antônio vein. Mining operations during the year are expected to total approximately 167,000 tonnes of ore grading 7.20 grams per tonne gold.

Boa Esperança

A full review of the Boa Esperança Feasibility Study^[1] remains ongoing with the goal of extending the potential mine life and increasing copper production among other desktop optimization initiatives. As a result of an ongoing internal technical review, several potential opportunities were identified to optimize and further realize the potential of the Boa Esperança project, including, but not limited to:

· Separating high-grade and low-grade copper domains within the mineral resource estimate to better optimize mining sequence, mineral reserve conversion and improve overall project economics;

· Increasing the overall size of the open pit, targeting an increase in in-pit mineral reserves, extension of mine life and an increase in life-of-mine copper production;

· Implementing bulk ore-sorting with the goal of enhancing mine selectivity; and,

· Re-designing processing plant reflecting optimization initiatives around selective mining and the implementation of ore-sorting.

The Company’s technical team continues to actively review these opportunities and is making headway in advancing them into actionable deliverables. Should this work continue to yield favorable results, the Company will commission an Optimized Feasibility Study (“OFS”), incorporating these initiatives. The Company expects to provide additional guidance on these developments mid-year 2021.

[1] As defined herein under “NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION”.

Ero Copper Corp. December 31, 2020 MD&A | Page 13

REVIEW OF FINANCIAL RESULTS

The following table provides a summary of the financial results of the Company for Q4 2020 and Q4 2019. Tabular amounts are in thousands of US dollars, except share and per share amounts.

			Three months ended			Three months ended
	Notes		December 31, 2020			December 31, 2019
Revenue		1	$	91,243		$	75,688
Cost of product sold		2		(31,323	)		(43,017	)
Sales expenses				(1,572	)		(1,595	)
Gross profit				58,348			31,076
Expenses
General and administrative		3		(8,165	)		(12,707	)
Share-based compensation				(2,549	)		(1,304	)
Income before the undernoted				47,634			17,065
Other income (expenses)
Finance income				145			358
Finance expense		4		(2,556	)		(2,014	)
Foreign exchange gain		5		27,142			4,423
Recovery of value added taxes		6		8,886			-
Other income (expense)				(1,675	)		368
Income before income taxes				79,576			20,200
Income tax recovery (expense)
Current				(4,044	)		(2,232	)
Deferred				(9,190	)		27,441
		7		(13,234	)		25,209
Net income for the period				66,342			45,409
Other comprehensive income
Foreign currency translation gain		8		19,679			6,528
Comprehensive income			$	86,021		$	51,937
Net income attributable to:
Owners of the Company			$	65,786		$	45,169
Non-controlling interests				556			240
			$	66,342		$	45,409
Comprehensive income attributable to:
Owners of the Company			$	85,386		$	51,671
Non-controlling interests				635			266
			$	86,021		$	51,937
Net income per share attributable to owners of the Company
Net income per share
Basic			$	0.75		$	0.53
Diluted			$	0.71		$	0.49
Weighted average number of common shares outstanding
Basic				87,321,832			85,620,168
Diluted				92,642,103			91,670,989
Cash and cash equivalents			$	62,508		$	21,485
Total assets			$	497,099		$	462,674
Non-current liabilities			$	191,304		$	183,135

Ero Copper Corp. December 31, 2020 MD&A | Page 14

Notes:

1. Revenues for Q4 2020 from copper sales was $72.6 million (Q4 2019 - $67.7 million), which included the sale of 10,265 copper tonnes in concentrate as compared to 11,595 copper tonnes for Q4 2019. The increase in revenues is primarily attributed to higher realized prices, partially offset by lower sales volume. Revenues for Q4 2020 from gold sales was $18.6 million (Q4 2019 - $8.0 million), which included the sale of 10,100 ounces of gold, compared to 5,810 ounces of gold for Q4 2019, at a significantly higher average gold price than in the comparative quarter.

2. Cost of product sold for Q4 2020 from copper sales was $25.8 million (Q4 2019 - $35.6 million) which consisted of $8.0 million (Q4 2019 - $11.1 million) in depreciation and depletion, $6.2 million (Q4 2019 - $9.4 million) in salaries and benefits, $3.8 million (Q4 2019 - $4.6 million) in materials and consumables, $3.1 million (Q4 2019 - $3.9 million) in maintenance costs, $2.9 million (Q4 2019 - $4.3 million) in contracted services, $1.7 million (Q4 2019 - $2.2 million) in utilities, and $0.1 million (Q4 2019 - $0.2 million) in other costs.

Cost of product sold for Q4 2020 from gold sales was $5.5 million (Q4 2019 - $7.4 million) which primarily comprised of $1.4 million (Q4 2019 - $2.2 million) in salaries and benefits, $1.2 million (Q4 2019 - $0.9 million) in depreciation and depletion, $1.1 million (Q4 2019 - $1.2 million) in contracted services, $0.9 million (Q4 2019 - $1.1 million) in materials and consumables, $0.5 million (Q4 2019 - $0.7 million) in utilities, and $0.4 million (Q4 2019 - $1.2 million) in maintenance costs.

The overall decrease in cost of product sold in Q4 2020 as compared to Q4 2019 is primarily attributable to the weakened BRL, in which cost is incurred, against the USD, in which cost is reported.

3. General and administrative expenses for Q4 2020 include $5.0 million (Q4 2019 - $10.3 million) with respect to MCSA for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, $0.6 million (Q4 2019 - $0.5 million) with respect to NX Gold for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, and $2.6 million (Q4 2019 - $1.9 million) with respect to the corporate head office in Vancouver. Corporate head office costs are primarily comprised of $2.2 million (Q4 2019 - $1.4 million) in salaries, incentive payments, and consulting fees, $0.2 million (Q4 2019 - $0.2 million) in accounting and legal costs, and $0.2 million (Q4 2019 - nominal) in office and sundry costs. General and administrative expenses in Q4 2020 decreased from that in Q4 2019, primarily attributable to a decrease in incentive payments, and a weakened BRL, in which costs from MCSA and NX Gold are incurred, against the USD, in which cost is reported.

4. Finance expense for Q4 2020 was $2.6 million (Q4 2019 - $2.0 million) and is primarily comprised of interest on loans at the corporate head office of $1.6 million (Q4 2019 - $2.0 million), interest on loans and borrowings at MCSA and NX Gold of $0.5 million (Q4 2019 - $0.7 million), loss on interest rate swap derivatives of $0.7 million (Q4 2019 - $0.2 million gain), accretion of the asset retirement obligations of $0.2 million (Q4 2019 - $0.2 million recovery), and nominal commitment fees (Q4 2019 - $0.5 million), partially offset by other finance income of $0.6 million (Q4 2019 - $1.0 million).

5. Foreign exchange gain for Q4 2020 was $27.1 million (Q4 2019 - $4.4 million). This amount is primarily comprised of foreign exchange gain on unrealized derivative contracts of $27.7 million (Q4 2019 - $1.4 million) and a foreign exchange gain on USD denominated debt of $7.7 million (Q4 2019 - $3.8 million) in MCSA for which the functional currency is the BRL, partially offset by a realized foreign exchange loss on derivative contracts of $7.8 million (Q4 2019 - $0.5 million) and other foreign losses of $0.4 million (Q4 2019 - $0.2 million gain). The foreign exchange gains were primarily a result of a strengthening of BRL against USD in Q4 2020 as compared to the prior quarter. The foreign exchange gains on unrealized derivative contracts are a result of mark-to-market calculations at period end and may not represent the amount that will ultimately be realized, which will depend on future changes to the USD/BRL foreign exchange rates.

6. In Q4 2020, the Company recognized a recovery of $8.9 million (Q4 2019 - $nil) in net income related to value added taxes. The recovery was recognized as a result of a study conducted to revisit certain tax positions which concluded that it is probable that additional tax credits are available to be used to offset a variety of taxes.

7. In Q4 2020, the Company recognized $13.2 million in income tax expense (Q4 2019 - $25.2 million recovery). Income taxes from operations are partially offset by the recognition of temporary deductible differences associated with MCSA’s unrealized foreign exchange losses on derivatives and loans and borrowings denominated in USD. In Q4 2019 the Company recognized a $25.2 million income tax recovery, primarily resulting from the recognition of previously unrecognized available tax losses and tax credits in MCSA, partially offset by current tax expense in the period. At December 31, 2019 the Company considered taxable income generated since acquisition of MCSA and forecasted future taxable income and determined that it was probable that the benefit of these losses and tax credits in MCSA would be realized.

8. The foreign currency translation gain is a result of a strengthening of the BRL against the USD during Q4 2020 when translating the net assets of the Company’s Brazilian subsidiaries to USD for presentation in the Company’s consolidated financial statements.

Ero Copper Corp. December 31, 2020 MD&A | Page 15

The following table provides a summary of the financial results of the Company for Fiscal 2020, Fiscal 2019, and Fiscal 2018. Tabular amounts are in thousands of US dollars, except share and per share amounts.

			Year ended			Year ended			Year ended
	Notes		December 31, 2020			December 31, 2019			December 31, 2018
Revenue		1	$	324,076		$	284,843		$	233,105
Cost of product sold		2		(130,585	)		(162,817	)		(147,611	)
Sales expenses				(5,354	)		(4,962	)		(3,268	)
Gross profit				188,137			117,064			82,226
Expenses
General and administrative		3		(27,927	)		(32,817	)		(29,000	)
Share-based compensation				(9,064	)		(5,792	)		(3,225	)
Income before the undernoted				151,146			78,455			50,001
Other income (expenses)
Finance income				1,346			701			1,303
Finance expense		4		(15,449	)		(20,428	)		(22,562	)
Foreign exchange loss		5		(79,805	)		(5,148	)		(20,713	)
Loss on debt settlement		6		-			(1,783	)		(5,476	)
Recovery of value added taxes		7		8,886			21,584			-
Other income (expense)				(4,701	)		1,448			108
Income before income taxes				61,423			74,829			2,661
Income tax recovery (expense)
Current				(9,675	)		(10,645	)		(2,899	)
Deferred				750			28,271			(2,753	)
		8		(8,925	)		17,626			(5,652	)
Net income (loss) for the year				52,498			92,455			(2,991	)
Other comprehensive loss
Foreign currency translation loss		9		(49,553	)		(4,941	)		(27,801	)
Comprehensive income (loss)			$	2,945		$	87,514		$	(30,792	)
Net income (loss) attributable to:
Owners of the Company			$	51,622		$	91,883		$	(3,155	)
Non-controlling interests				876			572			164
			$	52,498		$	92,455		$	(2,991	)
Comprehensive income (loss) attributable to:
Owners of the Company			$	2,267		$	86,962		$	(30,845	)
Non-controlling interests				678			552			53
			$	2,945		$	87,514		$	(30,792	)
Net income (loss) per share attributable to owners of the Company
Net income (loss) per share
Basic			$	0.60		$	1.08		$	(0.04	)
Diluted			$	0.56		$	1.01		$	(0.04	)
Weighted average number of common shares outstanding
Basic				86,368,535			85,244,277			83,927,977
Diluted				92,213,628			91,390,425			83,927,977

Ero Copper Corp. December 31, 2020 MD&A | Page 16

Notes:

1. Revenues for Fiscal 2020 from copper sales was $260.9 million (Fiscal 2019 - $246.2 million), which included the sale of 42,813 copper tonnes in concentrate as compared to 42,759 copper tonnes for Fiscal 2019. Revenues for Fiscal 2020 from gold sales was $63.2 million (Fiscal 2019 - $38.6 million), which included the sale of 35,855 ounces of gold, compared to 29,755 ounces of gold for Fiscal 2019, at a significantly higher average gold price than the comparative period. The increase in revenues is primarily attributed to higher realized prices from copper and gold sales.

2. Cost of product sold for Fiscal 2020 from copper sales was $109.6 million (Fiscal 2019 - $135.6 million) which consisted of $35.7 million (Fiscal 2019 - $40.1 million) in depreciation and depletion, $24.6 million (Fiscal 2019 - $33.7 million) in salaries and benefits, $15.1 million (Fiscal 2019 - $17.9 million) in materials and consumables, $14.8 million (Fiscal 2019 - $20.5 million) in contracted services, $12.5 million (Fiscal 2019 - $14.1 million) in maintenance costs, $6.5 million (Fiscal 2019 - $8.7 million) in utilities, and $0.4 million (Fiscal 2019 - $0.7 million) in other costs.

Cost of product sold for Fiscal 2020 from gold sales was $21.0 million (Fiscal 2019 - $27.2 million) which primarily comprised of $5.5 million (Fiscal 2019 - $7.1 million) in salaries and benefits, $3.8 million (Fiscal 2019 - $3.9 million) in materials and consumables, $3.7 million (Fiscal 2019 - $3.2 million) in contracted services, $3.5 million (Fiscal 2019 - $5.9 million) in depreciation and depletion, $2.2 million (Fiscal 2019 - $2.5 million) in utilities, $2.1 million (Fiscal 2019 - $4.3 million) in maintenance costs, and $0.2 million (Fiscal 2019 - $0.3 million) in other costs.

The overall decrease in cost of product sold for Fiscal 2020 as compared to Fiscal 2019 is primarily attributable to the weakened BRL, in which cost of products sold are incurred, against the USD, in which cost is reported.

3. General and administrative expenses for Fiscal 2020 include $16.5 million (Fiscal 2019 - $21.0 million) with respect to MCSA for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, $1.7 million (Fiscal 2019 - $2.3 million) with respect to NX Gold for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, and $9.7 million (Fiscal 2019 - $9.5 million) with respect to the corporate head office in Vancouver. Corporate head office costs are primarily comprised of $7.3 million (Fiscal 2019 - $6.7 million) in salaries, incentive payments, and consulting fees, $0.9 million (Fiscal 2019 - $0.7 million) in office and sundry costs, $0.5 million (Fiscal 2019 - $1.2 million) in travel-related costs, $0.5 million (Fiscal 2019 - $0.5 million) in professional fees, and $0.3 million (Fiscal 2019 - $0.2 million) in transfer agent and filing fees.

General and administrative expenses in Fiscal 2020 decreased compared to that in Fiscal 2019, reflecting slightly lower general and administrative expenses at the corporate head office from reduced consulting fees and travel-related costs during a period of pandemic-imposed travel restrictions, and the weakening of the BRL, in which costs from MCSA and NX Gold are incurred, against the USD, in which cost is reported.

4. Finance expense for Fiscal 2020 was $15.4 million (Fiscal 2019 - $20.4 million) and was primarily comprised of interest on loans at the corporate head office of $6.7 million (Fiscal 2019 - $8.3 million), interest on loans and borrowings at MCSA and NX Gold of $3.2 million (Fiscal 2019 - $3.0 million), loss on interest rate swap derivatives of $2.7 million (Fiscal 2019 - $1.8 million), other finance expenses of $1.2 million (Fiscal 2019 - $1.8 million), and accretion of asset retirement obligations of $0.9 million (Fiscal 2019 - $3.5 million).

5. Foreign exchange loss for Fiscal 2020 was $79.8 million (Fiscal 2019 - $5.1 million). This amount was primarily comprised of a foreign exchange loss on unrealized derivative contracts of $34.5 million (Fiscal 2019 - $0.3 million), a foreign exchange loss on USD denominated debt of $24.2 million (Fiscal 2019 - $4.4 million) in MCSA for which the functional currency is the BRL, and a realized foreign exchange loss on derivative contracts of $20.8 million (Fiscal 2019 - $1.0 million). The foreign exchange losses were primarily a result of a strengthening of the USD against the BRL during a time of worldwide instability as a result of the COVID-19 pandemic. The foreign exchange loss on unrealized derivative contracts are a result of mark-to-market calculations at period end and may not represent the amount that will ultimately be realized, which will depend on future changes to the USD/BRL foreign exchange rates.

6. In Fiscal 2019, the Company recognized a loss on debt settlement of $1.8 million, which represented the difference between the accounting fair value made to legally extinguish a bank loan held by MCSA and the carrying value of the loan at the time.

7. In Fiscal 2020, the Company recognized a recovery of $8.9 million in net income related to value added taxes. The recovery was recognized as a result of a study conducted to revisit certain tax positions which concluded that it is probable that additional tax credits are available to be used to offset a variety of taxes.

In Fiscal 2019, the Company recognized a recovery of $21.6 million in net income related to value added taxes previously paid on sales in Brazil. The recovery was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant tax authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim, which approval was received in July 2019. These credits can be used to offset a variety of other taxes, including taxes on future sales.

Ero Copper Corp. December 31, 2020 MD&A | Page 17

8. In Fiscal 2020, the Company recognized a $8.9 million income tax expense (Fiscal 2019 - income tax recovery of $17.6 million), primarily comprised of current tax arising from taxable income in mining operations. In Fiscal 2019, the Company recognized a significant deferred income tax recovery primarily resulting from the recognition of previously unrecognized available tax losses and tax credits in MCSA, partially offset by current tax expense in the period. At December 31, 2019 the Company considered the taxable income generated since the acquisition of MCSA, forecasted future taxable income, and determined that it was considered probable that the benefit of those losses and tax credits in MCSA would be realized. Accordingly, a tax recovery of $25.2 million was recognized related to these losses in 2019.

9. The foreign currency translation loss is a result of a strengthening of the USD against the BRL during a time of worldwide instability as a result of the COVID-19 pandemic when translating the net assets of the Company’s Brazilian subsidiaries to USD for presentation in the Company’s consolidated financial statements.

SUMMARY OF QUARTERLY RESULTS

The following table presents selected financial information for each of the most recent eight quarters. Tabular amounts are in millions of US Dollars, except share and per share amounts.

	2020												2019
Selected Financial Information	Dec 31 (1)			Sept 30			June 30 (2)			Mar 31 (3)			Dec 31 (4)			Sept 30 (5)			June 30			March 31
Revenue	$	91.2		$	94.3		$	70.8		$	67.7		$	75.7		$	60.6		$	76.5		$	72.0
Cost of product sold	$	(31.3	)	$	(33.3	)	$	(30.1	)	$	(35.8	)	$	(43.0	)	$	(38.4	)	$	(43.3	)	$	(38.1	)
Gross profit	$	58.3		$	59.6		$	39.5		$	30.7		$	31.1		$	21.3		$	32.1		$	32.6
Net income (loss) for period	$	66.3		$	31.4		$	7.7		$	(53.0	)	$	45.4		$	16.3		$	15.3		$	15.5
Income (loss) per share attributable to owners of the Company
- Basic	$	0.75		$	0.36		$	0.09		$	(0.62	)	$	0.53		$	0.19		$	0.18		$	0.18
- Diluted	$	0.71		$	0.34		$	0.08		$	(0.62	)	$	0.49		$	0.18		$	0.17		$	0.17
Weighted average number of common shares outstanding
- Basic		87,321,832			86,448,318			85,933,443			85,759,194			85,620,168			85,505,675			85,032,841			84,804,389
- Diluted		92,642,103			91,961,897			91,428,969			85,759,194			91,670,988			91,320,363			90,696,926			89,917,828

Notes:

1. During Q4 2020, the Company recognized $27.1 million in foreign exchange gains. The foreign exchange gains were primarily comprised of foreign exchange gain on unrealized derivative contracts of $27.7 million and a foreign exchange gain on USD denominated debt of $7.7 million in MCSA for which the functional currency is the BRL, partially offset by a realized foreign exchange loss on derivative contracts of $7.8 million and other foreign losses of $0.4 million. The foreign exchange gains were primarily a result of a strengthening of BRL against USD in Q4 2020. The foreign exchange gains on unrealized derivative contracts are a result of mark-to-market calculations at period end and may not represent the amount that will ultimately be realized, which will depend on future changes to the USD/BRL foreign exchange rates.

During Q4 2020, the Company recognized a recovery of $8.9 million in net income related to value added taxes. The recovery was recognized as a result of a study conducted to revisit certain tax positions which concluded that it is probable that additional tax credits are available to be used to offset a variety of taxes.

2. During the quarter ended June 30, 2020, the Company had an overall net income of $7.7 million, despite $16.3 million in foreign exchange losses. The foreign exchange losses were comprised of a foreign exchange loss on unrealized derivative contracts of $8.5 million, a foreign exchange loss on realized derivative contracts of $4.4 million, and a foreign exchange loss on USD denominated debt of $3.0 million in MCSA for which the functional currency is the BRL. As with the preceding quarter, the foreign exchange losses were unusually high this quarter due to volatility in the foreign exchange rates between the USD and BRL resulting from the worldwide instability in currency rates as a result of the COVID-19 pandemic.

3. During the quarter ended March 31, 2020, the Company recognized a $81.9 million in foreign exchange losses. The foreign exchange losses were mainly comprised of a $26.9 million loss associated with USD denominated debt held by MCSA, whose functional currency is the BRL, and $52.7 million losses associated with unrealized losses on foreign exchange currency collar contracts. These foreign exchange losses were unusually high this quarter due to volatility in the foreign exchange rates between the USD and the BRL resulting from the worldwide instability in currency rates as a result of the COVID-19 pandemic.

Ero Copper Corp. December 31, 2020 MD&A | Page 18

4. During Q4 2019, the Company recognized a $25.2 million income tax recovery primarily resulting from the recognition of available tax losses and tax credits in MCSA. At December 31, 2019, the Company considered the taxable income generated since acquisition of MCSA and forecasted future taxable income and determined that it was now considered probable that the benefit of these losses and tax credits in MCSA would be realized.

5. During the quarter ended September 30, 2019, the Company recognized a recovery of $21.6 million in net income related to value added taxes previously paid on sales in Brazil. The recovery was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant taxing authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim, for which approval was received in July 2019. These credits can be used to offset a variety of other taxes, including income taxes and taxes on future sales.

LIQUIDITY, CAPITAL RESOURCES, AND CONTRACTUAL OBLIGATIONS

Liquidity

As at December 31, 2020, the Company held cash and cash equivalents of $62.5 million. Cash and cash equivalents are primarily comprised of cash held with reputable financial institutions and are invested in highly liquid short-term investments with maturities of three months or less. The funds are not exposed to liquidity risk and there are no restrictions on the ability of the Company to use these funds to meet its obligations.

Cash and cash equivalents have increased by $41.0 million since December 31, 2019. The Company’s cash flows from operating, investing, and financing activities during Fiscal 2020 are summarized as follows:

· Cash from operating activities of $162.8 million

· Cash from financing activities of $0.3 million, including:

o   $69.0 million proceeds from new loans and borrowings;

o   $4.4 million proceeds from exercise of stock options and warrants;

o   $1.5 million released from restricted cash

net of:

o   $57.4 million of repayment on loans and borrowings;

o   $9.7 million of payment of interest on loans and borrowings;

o   $4.3 million of lease payments;

o   $3.2 million of other finance expenses

Partially offset by:

· Cash used in investing activities of $116.6 million, including:

o   $117.6 million of additions to mineral property, plant and equipment;

o   $0.2 million of additions to exploration and evaluation assets

net of:

o   $1.3 million from other investments

As at December 31, 2020, the Company had working capital of $35.8 million, primarily as a result of a record cash flow from operations.

Capital Resources

The Company’s primary sources of capital are comprised of cash from operations, and cash and cash equivalents on hand. The Company will continuously monitor its capital structure and, based on changes in operations and economic conditions, may adjust such structure by issuing new common shares or new debt as necessary. While the Company has been successful in securing financing to date, there are no guarantees that it will be able to secure such financing in the future on terms acceptable to the Company, if at all. Taking into consideration cash flow from existing operations, management believes that the Company has sufficient working capital and financial resources to maintain its planned operations and activities for the foreseeable future.

Ero Copper Corp. December 31, 2020 MD&A | Page 19

At December 31, 2020, we had unrestricted cash and cash equivalents of $62.5 million compared to $21.5 million at December 31, 2019. The increase is primarily due to an increase in cash from operations.

The Company’s $150 million Facilities are fully drawn at December 31, 2020. The Company is required to comply with certain financial covenants. As of the date of the consolidated financial statements, the Company is in compliance with these covenants. Subsequent to December 31, 2020, the Company amended terms of the Facilities. Refer to sub-section titled “Q4 2020 Financial Report” within the “Highlights” section in this MD&A.

Contractual Obligations and Commitments

Certain loan agreements contain operating and financial covenants that could restrict the ability of the Company and its subsidiaries, MCSA, Ero Gold, and NX Gold S.A., to, among other things, incur additional indebtedness needed to fund its respective operations, pay dividends or make other distributions, make investments, create liens, sell or transfer assets or enter into transactions with affiliates. There are no other restrictions or externally imposed capital requirements of the Company.

MANAGEMENT OF RISKS AND UNCERTAINTIES

The Company thoroughly examines the various financial instruments and risks to which it is exposed and assesses the impact and likelihood of those risks. These risks may include credit risk, liquidity risk, currency risk, commodity price risk and interest rate risk. Where material, these risks are reviewed and monitored by the Board.

COVID-19 Pandemic Risk

The outbreak of COVID-19 has had a significant impact on the volatility of commodity prices and USD/BRL exchange rates, and governmental actions to contain the outbreak may impact our ability to transport or market our concentrate or cause disruptions in our supply chains or interruption of production. A material spread of COVID-19 in jurisdictions where we operate could impact our ability to staff operations. A reduction in production or other COVID-19 related impacts, including but not limited to, low copper prices could cause a significant reduction in profitability of ongoing operations.

The global pandemic could cause temporary closure of businesses in regions that are significantly impacted by the health crises, or cause governments to take or continue to take preventative measures such as the closure of points of entry, including ports and borders.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers. The carrying amount of the financial assets below represents the maximum credit risk exposure as at December 31, 2020 and December 31, 2019:

	December 31, 2020		December 31, 2019
Cash and cash equivalents	$	62,508	$	21,485
Restricted cash		-		1,500
Accounts receivable		20,353		7,680
Deposits and other non-current assets		595		2,396
	$	83,456	$	33,061

Ero Copper Corp. December 31, 2020 MD&A | Page 20

The Company invests cash and cash equivalents with financial institutions that are financially sound based on their credit rating. The Company’s exposure to credit risk associated with accounts receivable is influenced mainly by the individual characteristics of each customer. The Company currently has only three significant customers, all of which have no history of credit default with the Company. The Company has not incurred credit losses during the year ended December 31, 2020 nor recognized a provision for credit losses.

Liquidity risk

Liquidity risk is the risk associated with the difficulties that the Company may have meeting the obligations associated with financial liabilities that are settled with cash payments or with another financial asset. The Company's approach to liquidity management is to ensure as much as possible that sufficient liquidity exists to meet their maturity obligations on the expiration dates, under normal and stressful conditions, without causing unacceptable losses or with risk of undermining the normal operation of the Company.

The table below shows the Company's maturity of non-derivative financial liabilities on December 31, 2020:

	Carrying		Contractual		Up to 12						More than 5
Non-derivative Financial Liabilities	value		cash flows		months		1-2 years		3-5 years		years
Loans and borrowings	$	168,102	$	169,889	$	12,223	$	36,998	$	119,976	$	692
Interest on loans and borrowings		-		15,025		5,859		4,863		4,296		7
Accounts payable and accrued liabilities		37,878		37,878		37,878		-		-		-
Value added, payroll and other taxes		14,829		16,332		13,361		1,484		1,487		-
	$	220,809	$	239,124	$	69,321	$	43,345	$	125,759	$	699

The Company also has derivative financial liabilities for foreign exchange and interest rate derivatives whose notional amounts and maturity information is disclosed below under foreign exchange currency risk and interest rate risk.

Foreign exchange currency risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage market risks. At December 31, 2020, the Company has entered into foreign exchange collar contracts at zero cost for notional amounts of $285.7 million with an average floor rate of 4.05 BRL to US Dollar and an average cap rate of 4.76 BRL to US Dollar (December 31, 2019 - notional amount of $336.6 million in foreign exchange forward collar contracts). The maturity dates of these contracts are from January 27, 2021 to July 27, 2022 and are financially settled on a net basis. The fair value of these contracts at December 31, 2020 was a liability of $34.5 million, (December 31, 2019 - $nil) which is included in Derivatives in the statement of financial position. The fair value of these forward contracts as at December 31, 2020 was determined using an option pricing mode with the following assumptions: discount rate of 5.015%, foreign exchange rate of approximately 5.20, and volatility of 7.46% - 21.20%. The change in fair value of foreign exchange collar contracts was a loss of $34.5 million for the year ended December 31, 2020 (a loss of $0.3 million for the year ended December 31, 2019) and has been recognized in foreign exchange loss. In addition, during the year ended December 31, 2020, the Company recognized a realized loss of $20.8 million ($1.0 million for the year ended December 31, 2019) related to the settlement of foreign currency forward collar contracts.

Interest rate risk

The Company is principally exposed to the variation in interest rates on loans and borrowings with variable rates of interest. Management reduces interest rate risk exposure by entering into loans and borrowings with fixed rates of interest or by entering into derivative instruments that fix the ultimate interest rate paid.

Ero Copper Corp. December 31, 2020 MD&A | Page 21

The Company is principally exposed to interest rate risk through its Term Facilities of $150.0 million, Brazilian Real denominated bank loans of $4.5 million, Brazilian Real denominated lines of credit of $1.4 million, and Brazilian Real denominated equipment finance loans of $1.1 million. Based on the Company’s net exposure at December 31, 2020, a 1% change in the variable rates would have an impact of $1.6 million on pre-tax annual net income, without consideration of the effects of the interest rate swap contract below.

In order to mitigate the above volatility due to variable rates on loans, as at December 31, 2020, the Company has entered into an interest rate swap contract to manage interest rate risk. At December 31, 2020, the floating interest on a notional amount of $60.0 million was swapped for a fixed interest rate of 2.69%. This interest rate swap transaction is in effect for the majority of the term of the Company’s term facility, with the notional amount reduced over time. The fair value of this contract at December 31, 2020 was a liability of $2.5 million (December 31, 2019 - $1.7 million) and was included in Derivatives in the statement of financial position. The fair value of this swap contracts as at December 31, 2020 was determined using a discounted cash flow model with the following assumptions: discount rates of 0.017% – 0.298% and forward foreign exchange rates of 0.421% - 0.164%. The realized loss on the interest rate swap contract was $1.2 million for the year ended December 31, 2020 (realized loss of $0.1 million for the year ended December 31, 2019) and was included in finance expense. In addition, the Company recognized an unrealized loss of $0.8 million on the interest rate swap contract for the year ended December 31, 2020 (unrealized loss of $1.6 million for the year ended December 31, 2019), which was included in finance expense.

In addition, as at December 31, 2020, MCSA has entered into an interest rate and currency swap contract on the Plural Loan. At December 31, 2020, the floating interest on a notional amount of BRL $12 million was swapped for a fixed interest rate of 9.9% and the BRL currency on the loan was swapped for USD at a rate of 3.95. The fair value of this contract at December 31, 2020 was a liability of $0.3 million (December 31, 2019 - nil) and is included in Derivatives in the statement of financial position. The realized loss on this swap contract was $0.4 million for the year ended December 31, 2020 and was included in finance expense. In addition, the Company recognized an unrealized loss of $0.3 million on the swap contract for the year ended December 31, 2020, which was also included in finance expense.

Price risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage commodity price risks. At December 31, 2020, the Company has not entered into any commodity derivative contracts. The Company recognized a realized loss of $1.4 million for the year ended December 31, 2019 related to the settlement of commodity forward contracts.

For a discussion of additional risks applicable to the Company and its business and operations, including risks related to the Company’s foreign operations, the environment and legal proceedings, see “Risk Factors” in the Company’s Annual Information Form for the year ended December 31, 2020 and dated March 16, 2021 (the “AIF”).

OTHER FINANCIAL INFORMATION

Off-Balance Sheet Arrangements

As at December 31, 2020, the Company had no material off-balance sheet arrangements.

Contingencies

MCSA is subject to a number of claims (including claims related to tax, labour and social security matters and civil action) in the course of its business which individually are not material and have not been accrued for in the Company’s financial statements as it is not probable that a material cash outflow will occur. While the Company believes that these claims are unlikely to be successful, if all such existing claims were decided against it, the Company could be exposed to a liability of up to approximately $21.8 million as at December 31, 2020 (December 31, 2019 - $31.1 million), which could have an adverse impact on the Company’s business, financial condition, results of operations, cash flows or prospects.

Ero Copper Corp. December 31, 2020 MD&A | Page 22

Outstanding Share Data

At March 16, 2021, the Company had 88,101,909 common shares, 4,485,781 stock options, 1,533,330 warrants, and 727,761 performance share units issued and outstanding.

Related Party Disclosures

For the three months and year ended December 31, 2020, amounts paid to related parties were incurred in the normal course of business and measured at the exchange amount, which is the amount agreed upon by the transacting parties and on terms and conditions similar to non-related parties.

The aggregate value of compensation paid to key management personnel for the year ended December 31, 2020 was $7.4 million ($7.5 million for the year ended December 31, 2019). In addition, 287,281 options, 197,269 share units and 79,230 DSUs were issued to key management personnel and non-executive directors during the year ended December 31, 2020 (444,265 options and 171,754 share units for the year ended December 31, 2019). For key management personnel, $5.1 million was recognized in share-based compensation expense for the year ended December 31, 2020 for options, share units, and DSUs issued ($4.1 million for the year ended December 31, 2019).

During the year ended December 31, 2020, key management personnel exercised 408,555 options and 1,266,666 warrants for total cash proceeds to the Company of $2.7 million (286,666 options and 300,000 warrants for total cash proceeds of $1.0 million for the year ended December 31, 2019).

As at December 31, 2020, $3.7 million was payable to key management as incentive compensation and is included in accounts payable and accrued liabilities in the statement of financial position (December 31, 2019 - $3.9 million). Such amounts are unsecured, non-interest bearing and will be paid under normal trade terms.

ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

Critical Accounting Judgments and Estimates

The preparation of consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions about future events that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, events or actions, actual results may differ from these estimates.

The Company’s significant accounting policies and accounting estimates are contained in the Company’s December 31, 2020 consolidated financial statements. Certain of these policies, such as, capitalization and depreciation of property, plant and equipment and mining interests, derivative instruments, and decommissioning liabilities provisions involve critical accounting estimates because they require management of the Company to make subjective or complex judgments about matters that are inherently uncertain, and because of the likelihood that materially different amounts could be reported under different conditions or using different assumptions.

In preparing its financial statements, management has made judgments, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of the assets, liabilities, revenues, and expenses. Actual results may differ from these estimates.

The estimates and assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

Ero Copper Corp. December 31, 2020 MD&A | Page 23

Critical Judgments

Functional currency

The functional currency of the Company and each of its subsidiaries is the currency of the primary economic environment in which the entities operate. The Company has determined that the functional currency for the Company is the US dollar while the functional currency for MCSA and NX Gold is the Brazilian Real. Assessment of functional currency involves certain judgements to determine the primary economic environment and the Company reconsiders the functional currency of its entities if there is a change in events and conditions which determined the primary economic environment.

Legal claims and contingent liabilities

The recognition of legal provisions and contingent liabilities involves the assessment of claims made against the Company and each of its subsidiaries. The recognition of a legal provision, or disclosure of a contingent liability, involves certain judgements to determine the probability of whether a cash outflow will occur. In making this judgment, management has assessed various criteria and also relies on the opinions of its legal advisers to assist in making this assessment.

Key Sources of Estimation Uncertainty

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates and such differences could be significant. Significant estimates made by management affecting the consolidated financial statements include:

Derivative instruments

The fair value of derivative instruments is determined using either present value techniques or option pricing models that utilize a variety of inputs that are a combination of quoted prices and market-corroborated inputs, including assumptions for forward interest and foreign exchange rates, volatilities and discount rates. The fair value of the Company’s derivative contracts includes an adjustment for credit risk for either the Company or the counter party as applicable. Changes in the assumptions for inputs into the models affect the fair value of the derivatives recognized in the statement of financial position as well as the unrealized gains or losses recognized in net income.

Mineral reserve and resource estimates including life of mine plan

The Company estimates its mineral reserves and mineral resources based on information compiled by competent individuals. Mineral reserves are used in the calculation of depreciation, impairment assessments and for forecasting the timing of payment of mine closure and rehabilitation costs.

There are numerous uncertainties inherent in estimating mineral reserves, and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the estimation methodology, forecasted prices of commodities, exchange rates, production costs or recovery rates may change the economic status of mineral reserves and may, ultimately, result in changes in the mineral reserves.

The carrying amounts of the Company’s mineral properties, plant and equipment are depleted in part based on recoverable mineral reserve tonnes processed, depending on the use of the asset. Changes to estimates of recoverable quantities of metals, mineral reserve tonnes and depletable costs, including changes resulting from revisions to the Company’s mine plans and changes in metals prices forecasts, can result in a change to future depreciation and depletion rates and may result in impairment charges.

Ero Copper Corp. December 31, 2020 MD&A | Page 24

Mine closure and rehabilitation costs

Significant estimates and assumptions are made in determining the provision for mine closure and rehabilitation as there are numerous factors that will affect the ultimate liability payable. These factors include estimation of the extent and cost of rehabilitation activities, timing of future cash flows, discount rates, inflation rate, and regulatory requirements.

Changes in the above factors can result in a change to the provision recognized by the Company. Changes to mine closure and rehabilitation costs are recorded with a corresponding change to the carrying amounts of related mineral properties, plant and equipment. Adjustments to the carrying amounts of related mineral properties, plant and equipment can result in a change to future depreciation and depletion expense.

Significant assumptions used to determine mine closure and rehabilitation costs are included in Note 11(a) to the consolidated financial statements.

Income taxes

The determination of the Company’s tax expense for the period and deferred tax assets and liabilities involves significant estimation and judgement by management. In determining these amounts, management interprets tax legislation in a variety of jurisdictions and makes estimates of the expected timing of the reversal of deferred tax assets and liabilities. Management also makes estimates of future earnings, which affect the extent to which potential future tax benefits may be used. The Company is subject to assessments by various taxation authorities, which may interpret legislation differently. These differences may affect the final amount or the timing of the payment of taxes. The Company provides for such differences where known based on management’s best estimate of the probable outcome of these matters.

The Company operates in Brazil where tax authorities may audit income tax treatments and the resolution of such audits may span multiple years. Tax law in Brazil is complex and often subject to changes and to varied interpretations; accordingly, the ultimate outcome with respect to income tax treatments may differ from the amounts recognized. The Company’s assessment of whether it is probable that uncertain income tax treatments will be accepted by tax authorities in Brazil is a significant management judgment.

New Accounting Standards and Interpretations Adopted in the Year

The following new and amended IFRS pronouncements were adopted effective January 1, 2020 and had no impact to the Company’s financial statements:

· Amendments to References to the Conceptual Framework in IFRS Standards

· In September 2019, the IASB issued first phase amendments IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Hedging, and IFRS 7 Financial Instrument Disclosures to address the financial reporting impact of the reform on interest rate benchmarks, such as the discontinuance of the interbank offered rates. The first phase amendment is focused on the impact to hedge accounting requirements. The Company adopted the first phase amendment and there was no material impact on its consolidated financial statements. The Company will continue to assess the effect of amendments related to the interest rate benchmark reform on its consolidated financial statements.

Ero Copper Corp. December 31, 2020 MD&A | Page 25

The following amendment to accounting standards has been issued but not yet adopted in the financial statements:

· On May 14, 2020, the IASB published a narrow scope amendment to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use. The amendment prohibits deducting from the cost of property, plant and equipment amounts received from selling items produced while preparing the asset for its intended use. Instead, amounts received will be recognized as sales proceeds and related cost in profit or loss. The effective date is for annual periods beginning on or after January 1, 2022. The Company does not expect to adopt this amendment until the effective date, and does not anticipate a material impact on its consolidated financial statements.

Local Currency Operating Metrics – Presented in Brazilian Real

		2020 - Q4			2020 - Q3			2020			2019 - Q4			2019
Costs (MCSA Operations)
Mining[1] - UG (Pilar)	R$		40,532			35,661			140,335			36,237			152,994
- UG (Vermelhos)			28,149			32,421			121,950			25,360			96,100
- OP-			-			-			-			29			8,521
Processing			21,657			22,703			82,905			22,250			83,041
Indirect			18,897			15,774			60,756			12,822			46,607
Production costs[1]			109,235			106,559			405,946			96,698			387,263
By-product credits			(24,246	)		(27,128	)		(88,328	)		(16,876	)		(50,823	)
Treatment, refining and other			(2,854	)		2,367			6,637			3,895			7,358
C1 cash costsR	R$		82,135			81,798			324,255			83,717			343,798
Breakdown Mined and Processed (tonnes)
UG Mined			588,792			647,281			2,521,263			675,258			2,527,386
OP Mined			-			-			-			-			727,578
Total Mined (t):			588,792			647,281			2,521,263			675,258			3,254,964
Total Processed (t)			483,447			553,148			2,271,625			589,065			2,424,592
Cu Production (t)			10,018			10,961			42,814			11,526			42,318
UG Mining Total - R$/tonne mined			116.65			105.18			104.03			91.22			98.56
Pilar - R$/tonne mined103.55			103.55			87.16			89.60			78.56			91.26
Vermelhos - R$/tonne mined142.63			142.63			136.14			127.70			118.52			112.93
OP Mining - R$/tonne mined[2]			n/a			n/a			n/a			n/a			11.71
Processing - R$/tonne processed			44.80			41.04			36.50			37.77			34.25
Indirect - R$/tonne processed			39.09			28.52			26.75			21.77			19.22

Footnotes

General - Above only includes amounts from MCSA. NX Gold operations are excluded.

[1] - Beginning in Q3 2020, production costs are presented net of capex development. Comparative figures have been adjusted to conform with the revised presentation.

[2] - There was no OP production in Fiscal 2020.

Ero Copper Corp. December 31, 2020 MD&A | Page 26

Capital Expenditures

The following table presents capital expenditures at the Company’s operations.

	2020 - Q4		2020 - Q3		2020		2019 - Q4		2019
MCSA Operations
Pilar Mine and Caraíba Mill Complex		12,464		14,283		54,487		14,876		43,933
Vermelhos Mine		3,579		3,804		14,022		4,063		19,751
Boa Esperanҫa Project		61		58		178		53		1,139
Capital Expenditure		16,104		18,145		68,687		18,992		64,823
Capex Development (included in above)		7,111		8,156		31,929		10,936		31,705
Exploration		7,702		9,446		31,880		8,742		33,738
NX Gold Operations
Capital Expenditure		3,843		3,028		12,981		2,280		7,606
Capex Development (included in above)		1,407		1,698		6,675		540		1,147
Exploration		1,454		965		4,257		859		3,600

NON-IFRS MEASURES

Financial results of the Company are prepared in accordance with IFRS. The Company utilizes certain non-IFRS measures, including C1 cash cost of copper produced (per lb), C1 cash cost of gold produced (per ounce), AISC of gold produced (per ounce), EBITDA, Adjusted EBITDA, Adjusted net income attributable to owners of the Company, Adjusted net income per share, net debt, working capital (deficit) and available liquidity, which are not measures recognized under IFRS. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The tables below provide a reconciliation of these non-IFRS measures to the most directly comparable IFRS measures as contained in the Company’s financial statements.

Unless otherwise noted, the non-IFRS measures presented below have been calculated on a consistent basis for the periods presented.

Ero Copper Corp. December 31, 2020 MD&A | Page 27 

C1 Cash Cost of Copper Produced (per lb)

C1 cash cost of copper produced (per lb) is the sum of production costs, net of capital expenditure development costs and by-product credits, divided by the copper pounds produced. C1 cash costs reported by the Company include treatment, refining charges, offsite costs, and certain tax credits relating to sales invoiced to the Company’s Brazilian customer on sales. By-product credits are calculated based on actual precious metal sales (net of treatment costs) during the period divided by the total pounds of copper produced during the period. C1 cash cost of copper produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

The following table provides a reconciliation of C1 cash cost of copper produced per pound to cost of goods sold, its most directly comparable IFRS measure.

	2020 - Q4			2020 - Q3			2020			2019 - Q4			2019
Reconciliation:
Cost of Product Sold	$	25,800		$	28,168		$	109,567		$	35,620		$	135,607
Add (less):
Depreciation/amortization/depletion		(7,950	)		(9,593	)		(35,674	)		(11,128	)		(40,107	)
Incentive payments		(761	)		(714	)		(2,741	)		(2,870	)		(2,870	)
Net change in inventory		888			891			2,271			322			1,062
Transportation costs & other		1,040			1,043			3,947			1,479			4,598
By-product credits		(4,493	)		(5,042	)		(17,005	)		(4,101	)		(12,822	)
Treatment, refining, and other		(554	)		469			1,192			935			1,814
Foreign exchange translation adjustments		1,225			11			1,525			74			(70	)
C1 cash costs	$	15,195		$	15,233		$	63,082		$	20,330		$	87,212

	2020 - Q4			2020 - Q3			2020			2019 - Q4			2019
Costs
Mining [1]	$	12,727		$	12,654		$	51,007		$	14,974		$	65,603
Processing		4,013			4,220			16,124			5,406			21,035
Indirect		3,502			2,932			11,764			3,116			11,581
Production costs [1]		20,242			19,806			78,895			23,496			98,219
By-product credits		(4,493	)		(5,042	)		(17,005	)		(4,101	)		(12,822	)
Treatment, refining and other		(554	)		469			1,192			935			1,814
C1 cash costs	$	15,195		$	15,233		$	63,082		$	20,330		$	87,212
Costs per pound
Payable copper produced (lb)		22,086			24,164			94,388			25,411			93,295
Mining[1]	$	0.58		$	0.52		$	0.54		$	0.59		$	0.70
Processing	$	0.18		$	0.17		$	0.17		$	0.21		$	0.23
Indirect	$	0.16		$	0.12		$	0.12		$	0.12		$	0.12
By-product credits	$	(0.20	)	$	(0.21	)	$	(0.18	)	$	(0.16	)	$	(0.14	)
Treatment, refining and other	$	(0.03	)	$	0.02		$	0.01		$	0.04		$	0.02
C1 cash cost of copper produced (per lb)	$	0.69		$	0.63		$	0.67		$	0.80		$	0.93

[1] - Beginning in Q3 2020, production costs are presented net of capex development. Comparative figures have been adjusted to conform with the revised presentation.

Ero Copper Corp. December 31, 2020 MD&A | Page 28 

C1 Cash Cost of Gold produced (per ounce) and AISC of Gold produced (per ounce)

C1 cash cost of gold produced (per ounce) is the sum of production costs, net of capital expenditure development costs and silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. C1 cash cost of gold produced per ounce is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

AISC of gold produced (per ounce) is the sum of production costs, site general and administrative costs, accretion of mine closure and rehabilitation provision, sustaining capital expenditures, sustaining leases, and royalties and production taxes, net of silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. All-in sustaining cost of gold produced per ounce is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

The following table provides a reconciliation of C1 cash cost of gold produced per ounce and AISC of gold produced per ounce to cost of goods sold, its most directly comparable IFRS measure.

	2020 - Q4			2020 - Q3			2020			2019 - Q4			2019
Reconciliation:
Cost of Product Sold	$	5,523		$	5,169		$	21,018		$	7,397		$	27,210
Add (less):
Depreciation/amortization/depletion		(1,174	)		(818	)		(3,538	)		(881	)		(5,907	)
Incentive payments		(120	)		(116	)		(511	)		-			-
Net change in inventory		255			(134	)		140			120			710
By-product credits		(141	)		(134	)		(424	)		(67	)		(281	)
Foreign exchange translation adjustments		26			3			140			(18	)		(46	)
C1 cash costs	$	4,369		$	3,970		$	16,825		$	5,917		$	21,052
Site general and administrative		721			641			2,420			716			2,216
Accretion of mine closure and rehabilitation provision		88			49			268			194			1,018
Sustaining capital expenditure		600			179			1,033			218			773
Sustaining leases		502			345			1,613			399			1,423
Royalties and production taxes		281			281			952			125			589
AISC	$	6,561		$	5,465		$	23,111		$	7,569		$	27,071

Ero Copper Corp. December 31, 2020 MD&A | Page 29 

	2020 - Q4			2020 - Q3			2020			2019 - Q4			2019
Costs
Mining[1]	$	2,280		$	1,980		$	8,194		$	2,715		$	10,266
Processing		1,624			1,544			6,462			2,274			7,588
Indirect		606			580			2,593			995			3,479
Production costs[1]		4,510			4,104			17,249			5,984			21,333
By-product credits		(141	)		(134	)		(424	)		(67	)		(281	)
C1 cash costs	$	4,369		$	3,970		$	16,825		$	5,917		$	21,052
Site general and administrative		721			641			2,420			716			2,216
Accretion of mine closure and rehabilitation provision		88			49			268			194			1,018
Sustaining capital expenditure		600			179			1,033			218			773
Sustaining leases		502			345			1,613			399			1,423
Royalties and production taxes		281			281			952			125			589
AISC	$	6,561		$	5,465		$	23,111		$	7,569		$	27,071

Costs per ounce
Payable gold produced (ounces)		10,789			9,436			36,830			6,043			30,434
Mining[1]	$	211		$	210		$	222		$	449		$	337
Processing	$	151		$	164		$	175		$	376		$	249
Indirect	$	56		$	61		$	70		$	165		$	114
By-product credits	$	(13	)	$	(14	)	$	(12	)	$	(11	)	$	(9	)
C1 cash cost of gold produced (per ounce)	$	405		$	421		$	457		$	980		$	691
AISC of gold produced (per ounce)	$	608		$	579		$	628		$	1,253		$	889

[1] - Beginning in Q3 2020, production costs are presented net of capex development. Comparative figures have been adjusted to conform with the revised presentation.

Ero Copper Corp. December 31, 2020 MD&A | Page 30 

Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and Adjusted EBITDA

EBITDA represents earnings before interest expense, income taxes, depreciation, and amortization. Adjusted EBITDA includes further adjustments for non-recurring items and/or items not indicative to the future operating performance of the Company. The Company believes EBITDA and adjusted EBITDA are appropriate supplemental measures of debt service capacity and performance of its operations.

Adjusted EBITDA is calculated by removing the following income statement items:

- Recovery of valued added taxes

- Foreign exchange loss (gain)

- Loss on gold hedge contracts

- Share based compensation

- Incremental costs in response to COVID-19 pandemic

- Loss on debt settlement

	2020 - Q4			2020 - Q3		2020		2019 - Q4			2019
Reconciliation:
Net income	$	66,342		$	31,443	$	52,498	$	45,409		$	92,455
Adjustments:
Finance expenses		2,556			3,397		15,449		2,014			20,428
Tax expense (recovery)		13,234			6,806		8,925		(25,209	)		(17,626	)
Depreciation/amortization/depletion		9,161			10,445		39,348		12,042			46,171
EBITDA		91,293			52,091		116,220		34,256			141,428
Recovery of value added taxes		-			-		-		-			(21,584	)
Foreign exchange loss (gain)		(27,142	)		8,703		79,805		(4,423	)		5,148
Loss on gold hedge contracts		-			-		-		15			1,505
Share based compensation		2,549			1,743		9,064		1,304			5,792
Incremental costs in response to COVID-19 pandemic		481			-		1,968		-			-
Loss on debt settlement		-			-		-		-			1,783
Adjusted EBITDA	$	67,181		$	62,537	$	207,057	$	31,152		$	134,072

Note: In Q4 2020 and Fiscal 2020, incremental costs in response to COVID-19 pandemic is included as an adjustment to the calculation of Adjusted EBITDA.

In Q4 2020 and Fiscal 2020, recovery of value added taxes was not included as an adjustment to the calculation of Adjusted EBITDA.

Adjusted net income attributable to owners of the Company and Adjusted net income per share attributable to owners of the Company

The Company uses the financial measure “Adjusted net income attributable to owners of the Company” and “Adjusted net income per share attributable to owners of the Company” (“Adjusted EPS”) to supplement information in its consolidated financial statements. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, the Company and certain investor and analysts use this information to evaluate the Company’s performance. The Company excludes the following items from net income to provide a measure which allows the Company and investors to evaluate the operating results of the underlying core operations: i) net recovery of value added taxes, ii) share based compensation, iii) unrealized foreign exchange loss (gain) on USD denominated debt in MCSA, iv) unrealized loss (gain) on foreign exchange derivative contracts, net of tax, v) incremental costs in response to COVID-19 pandemic, vi) unrealized loss (gain) on interest rate derivative contracts, vii) loss on debt settlement, and viii) unrealized loss on gold hedge contracts. The presentation of Adjusted EPS is not meant to substitute the net income (loss) per share attributable to owners of the Company (“EPS”) presented in accordance with IFRS, but rather it should be evaluated in conjunction with such IFRS measures.

The following table provides a detailed reconciliation of net income (loss) attributable to owners of the Company as reported in the Company’s consolidated financial statements to adjusted net income attributable to owners of the Company and Adjusted EPS.

Ero Copper Corp. December 31, 2020 MD&A | Page 31 

	2020 - Q4			2020 - Q3			2020		2019 - Q4			2019
Reconciliation:
Net income as reported attributable to the owners of the Company	$	65,786		$	31,063		$	51,622	$	45,169		$	91,883
Adjustments for:
Net recovery of value added taxes		-			-			-		-			(17,783	)
Share based compensation		2,549			1,743			9,064		1,304			5,792
Unrealized foreign exchange loss (gain) on USD denominated debt in MCSA		(7,682	)		2,026			24,093		(3,738	)		4,388
Unrealized loss (gain) on foreign exchange derivative contracts, net of tax		(23,077	)		2,256			29,411		(1,404	)		249
Incremental costs in response to COVID-19 pandemic		481			-			1,968		-			-
Unrealized loss (gain) on interest rate derivative contracts		(640	)		(386	)		1,137		-			-
Loss on debt settlement		-			-			-		-			1,776
Unrealized gain on gold hedge contracts		-			-			-		(677	)		-
Adjusted net income attributed to owners of the Company	$	37,417		$	36,702		$	117,295	$	40,654		$	86,305
Weighted average number of common shares - basic		87,321,832			86,448,318			86,368,535		85,620,168			85,244,277
Weighted average number of common shares - diluted		92,642,103			91,961,897			92,213,628		91,670,988			91,390,425
Adjusted EPS - basic	$	0.43		$	0.42		$	1.36	$	0.47		$	1.01
Adjusted EPS - diluted	$	0.40		$	0.40		$	1.27	$	0.44		$	0.94

Note: In Q4 2020 and Fiscal 2020, incremental costs in response to COVID-19 pandemic is included as an adjustment to the calculation of Adjusted EPS.

In Q4 2020 and Fiscal 2020, net recovery of value added taxes was not included as an adjustment to the calculation of Adjusted EPS.

Net Debt

Net debt is determined based on cash and cash equivalents, restricted cash and loans and borrowings as reported in the Company’s consolidated financial statements. The Company uses net debt as a measure of the Company’s ability to pay down its debt. The following table provides a calculation of net debt based on amounts presented in the Company’s consolidated financial statements as at December 31, 2020, September 30, 2020, and December 31, 2019.

	December 31,			September 30,			December 31,
	2020			2020			2019
Current portion of loans and borrowings	$	12,539		$	17,325		$	18,984
Long-term portion of loans and borrowings		155,563			155,403			140,386
Less: Cash and cash equivalents		(62,508	)		(54,341	)		(21,485	)
Restricted cash		-			-			(1,500	)
Net Debt	$	105,594		$	118,387		$	136,385

Working Capital (Deficit) and Available Liquidity

Working capital is determined based on current assets and current liabilities as reported in the Company’s consolidated financial statements. The Company uses working capital as a measure of the Company’s short-term financial health and operating efficiency. Available liquidity includes the Company’s working capital and undrawn revolving credit facilities in place. The following table provides a calculation for these based on amounts presented in the Company’s consolidated financial statements as at December 31, 2020 and December 31, 2019.

	December 31,			December 31,
	2020			2019
Current Assets	$	127,541		$	75,565
Less: Current Liabilities		(91,720	)		(80,481	)
Working Capital (Deficit)	$	35,821		$	(4,916	)
Available undrawn revolving credit facilities		11,621			30,000
Available Liquidity	$	47,442		$	25,084

Ero Copper Corp. December 31, 2020 MD&A | Page 32

Disclosure Controls and Procedures and Internal Control over Financial Reporting

The Company’s management, with the participation of the CEO and CFO, is responsible for establishing and maintaining adequate disclosure controls and procedures (“DC&P”) and internal control over financial reporting (“ICFR”).

The Company’s DC&P are designed to provide reasonable assurance that material information related to the Company is identified and communicated on a timely basis.

The Company’s ICFR is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Any system of ICFR, no matter how well designed, has inherent limitations and cannot provide absolute assurance that all misstatements and instances of fraud, if any, within the Company have been prevented or detected. The Company’s ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

The Company uses the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The Company’s management, under the supervision of the CEO and CFO, has evaluated the design and operating effectiveness of the Company’s DC&P and ICFR and concluded that the Company’s DC&P and ICFR were effective as of December 31, 2020.

There were no changes in the Company’s DC&P and ICFR that materially affected, or are reasonably likely to materially affect, ICFR during Q4 2020.

NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION

Unless otherwise indicated, scientific and technical information in this MD&A relating to Ero’s properties (“Technical Information”) is based on information contained in the following reports:

The report prepared in accordance with National Instrument 43-101, Standards of Disclosure for Mineral Projects (“NI 43-101”) and entitled “2020 Updated Mineral Resources and Mineral Reserves Statements of Mineração Caraíba’s Vale do Curaçá Mineral Assets, Curaçá Valley”, dated January 14, 2021 with an effective date of October 1, 2020, prepared by Porfirio Cabaleiro Rodrigues, MAIG, Bernardo Horta de Cerqueira Viana, MAIG, Paulo Roberto Bergmann, FAusIMM, Fábio Valério Câmara Xavier, MAIG, Dr. Augusto Ferreira Mendonça, RM SME, all of GE21 Consultoria Mineral Ltda. (“GE21”), and Dr. Beck (Alizeibek) Nader, FAIG, of BNA Mining Solutions, and each a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “MCSA Mining Complex Technical Report”).

The report prepared in accordance with NI 43-101 and entitled “Mineral Resource and Mineral Reserve Estimate of the NX Gold Mine, Nova Xavantina”, dated January 8, 2021 with an effective date of September 30, 2020, prepared by Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, Bernardo Horta de Cerqueira Viana, MAIG, and Paulo Roberto Bergmann, FAusIMM, each of GE21 and a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “NX Gold Technical Report”).

The report prepared in accordance with NI 43-101 and entitled “Feasibility Study, Technical Report for the Boa Esperança Copper Project, Pará State Brazil”, dated September 7, 2017 with an effective date of June 1, 2017, prepared by Rubens Mendonça, MAusIMM of SRK Consultores do Brasil Ltda. (“SRK” or “SRK Brazil”) as at the date of the report and Carlos Barbosa, MAIG and Girogio di Tomi, MAusIMM, both of SRK Brazil, and each a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “Boa Esperança Feasibility Study”).

Ero Copper Corp. December 31, 2020 MD&A | Page 33

Reference should be made to the full text of the MCSA Mining Complex Technical Report, the NX Gold Technical Report and the Boa Esperança Technical Report, each of which is available for review under the Company’s profile on SEDAR at www.sedar.com.

The disclosure of Technical Information in this MD&A was reviewed and approved by Emerson Ricardo Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

Cautionary Note Regarding Forward-Looking Statements

This MD&A contains “forward-looking information” within the meaning of applicable Canadian securities laws. Forward-looking information includes statements that use forward-looking terminology such as “may”, “could”, “would”, “will”, “should”, “intend”, “target”, “plan”, “expect”, “budget”, “estimate”, “forecast”, “schedule”, “anticipate”, “believe”, “continue”, “potential”, “view” or the negative or grammatical variation thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, statements with respect to mineral reserve and mineral resource estimates as well as LOM plans; targeting additional mineral resources and expansion of deposits; the Company’s expectations, strategies and plans for the MCSA Mining Complex, the NX Gold Property and the Boa Esperança Property, including the Company’s planned exploration, development and production activities; the significance of any particular exploration program or result and the Company’s expectations for current and future exploration plans including, but not limited to, planned areas of additional exploration, the significance of any drill results or new discoveries and targets, including without limitation, extensions of defined mineralized zones, possibilities for mine life extensions or continuity of high-grade mineralization, the recoverable value of any metals other than copper, further extensions and expansion of mineralization near the Company’s existing operations and throughout the Curaçá Valley or the NX Gold Mine, the timing and advancement of ongoing projects including the Deepening Extension Project and the re-start of the Surubim open pit mine; estimated completion dates for certain milestones; successfully adding or upgrading mineral resources and successfully developing new deposits; the costs and timing of future exploration and development including but not limited to the Deepening Extension Project at the MCSA Mining Complex; the significance of any potential optimization initiatives in connection with the Boa Esperança Property and the potential issuance, and timing of, an OFS; the impact of the COVID-19 pandemic on the Company’s planned drill programs; the timing and amount of future production at the MCSA Mining Complex and the NX Gold Property; the representativeness of the material tested in the Company’s ore sorting trial campaign to actual results of each of the mines tested during the campaign and the potential benefits of ore sorting in the LOM plans at any of the Company's operations including the Vermelhos District as well as any potential savings on transport costs, any potential reduction in water, diesel and electricity use, as well as any proposed reductions in flotation tailings as a result of ore sorting implementation, which may or may not occur in any capacity at the Company's operations or life-of-mine plans now or in the future, the Company's ability to service its ongoing obligations, the Company's future production outlook, cash costs, capital resources, expenditures, the impact of new accounting standards and amendments on the Company's financial statements, and current global macroeconomic uncertainty stemming from the COVID-19 pandemic and its impact on the Company’s business, financial condition, results of operations, cash flows and prospects.

Ero Copper Corp. December 31, 2020 MD&A | Page 34

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this MD&A including, without limitation, assumptions about: continued effectiveness of the measures taken by the Company to mitigate the possible impact of COVID-19 on its workforce and operations; favourable equity and debt capital markets; the ability to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Company’s properties and assets; future prices of copper and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any mineral reserve and mineral resource estimates; the geology of the MCSA Mining Complex, NX Gold Property and the Boa Esperanҫa Property being as described in the technical reports for these properties; production costs; the accuracy of budgeted exploration and development costs and expenditures; the price of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to operate in a safe, efficient and effective manner; work force conditions to remain healthy in the face of prevailing epidemics, pandemics or other health risks (including COVID-19), political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favourable terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour stability; stability in financial and capital goods markets; availability of equipment and critical supplies, spare parts and consumables; positive relations with local groups and the Company’s ability to meet its obligations under its agreements with such groups; and satisfying the terms and conditions of the Company’s current loan arrangements. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive, global health, and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.

Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. Such risks include, without limitation the risk factors listed under the heading “Risk Factors” in the AIF.  

Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking information, there may be other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended.

The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained herein. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.

Forward-looking information contained herein is made as of the date of this MD&A and the Company disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.

Cautionary Notes Regarding Mineral Resource and Reserve Estimates

In accordance with applicable Canadian securities regulatory requirements, all mineral reserve and mineral resource estimates of the Company disclosed or incorporated by reference in this MD&A have been prepared in accordance with NI 43-101 and are classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards for Mineral Resources and Mineral Reserves, adopted by the CIM Council on May 10, 2014 (the “CIM Standards”).

Ero Copper Corp. December 31, 2020 MD&A | Page 35

Mineral resources which are not mineral reserves do not have demonstrated economic viability. Pursuant to the CIM Standards, mineral resources have a higher degree of uncertainty than mineral reserves as to their existence as well as their economic and legal feasibility. Inferred mineral resources, when compared with Measured or Indicated mineral resources, have the least certainty as to their existence, and it cannot be assumed that all or any part of an Inferred mineral resource will be upgraded to an Indicated or Measured mineral resource as a result of continued exploration. Pursuant to NI 43-101, Inferred mineral resources may not form the basis of any economic analysis. Accordingly, readers are cautioned not to assume that all or any part of a mineral resource exists, will ever be converted into a mineral reserve, or is or will ever be economically or legally mineable or recovered.

ADDITIONAL INFORMATION

Additional information about Ero and its business activities, including the AIF, is available under the Company’s profile at www.sedar.com.

Ero Copper Corp. December 31, 2020 MD&A | Page 36

EX-99.3

Exhibit 99.3

 

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2020 AND 2019

 

KPMG LLP 

PO Box 10426 777 Dunsmuir Street

Vancouver BC V7Y 1K3

Canada

Telephone (604) 691-3000

Fax (604) 691-3031

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of Ero Copper Corp.

Opinion

We have audited the consolidated financial statements of Ero Copper Corp. (“the Entity”), which comprise:

– the consolidated statements of financial position as at December 31, 2020 and December 31, 2019;

– the consolidated statements of operations and comprehensive income, changes in shareholders’ equity and cash flows for the years then ended; and

– notes to the consolidated statements, including a summary of significant accounting policies

(Hereinafter referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at December 31, 2020 and December 31, 2019, and its consolidated financial performance and consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “Auditors’ Responsibilities for the Audit of the Financial Statements” section of our auditors’ report.

We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.  

 

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2020. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We have determined the matter described below to be the key audit matter to be communicated in our auditors’ report.

Assessment of recognition of uncertainties over income tax treatments in Brazil

Description of the matter

We draw your attention to Notes 2(d), 3(e) and 11(c)(ii) to the financial statements.

Uncertainties over income tax treatments are evaluated on the basis of whether it is probable that they will be accepted upon examination by the relevant taxing authorities. These uncertainties impact the amount of income taxes recognized.

The Entity operates in Brazil where tax authorities may audit income tax treatments and the resolution of such audits may span multiple years. Tax law in Brazil is complex and often subject to changes and to varied interpretations; accordingly, the ultimate outcome with respect to income tax treatments may differ from the amounts recognized. The Entity’s assessment of whether it is probable that uncertain income tax treatments will be accepted by tax authorities in Brazil is a significant management judgment.

Why the matter is a key audit matter

We identified the assessment of recognition of uncertainties over income tax treatments in Brazil as a key audit matter. This matter represented an area of significant risk of misstatement given the high degree of subjectivity and judgment required in evaluating management’s significant judgement. As a result, specialized skills and knowledge were required in evaluating management’s significant judgement.

How the matter was addressed in the audit

The primary procedures we performed to address this key audit matter included the following:

We involved income tax and legal professionals in Brazil with specialized skills and knowledge who assisted in assessing whether it was probable that uncertain income tax treatments would be accepted by:

– Developing an independent assessment based on our understanding and interpretation of tax laws in Brazil

2

 

– Inspecting correspondence documents with Brazilian tax authorities and evaluating the implications of the matters raised by such authorities

– Inspecting opinions provided by the Entity’s tax and legal advisors.

We also assessed whether it was probable that uncertain income tax treatments would be accepted by obtaining legal enquiry letter responses from law firms related to identified tax claims and contingencies.

Other Information

Management is responsible for the other information. Other information comprises:

– the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions; and

– information, other than the financial statements and the auditors’ report thereon, included in a document likely to be entitled “Annual Report”.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated.

We obtained the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions as at the date of this auditors’ report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditors’ report. We have nothing to report in this regard.

The information, other than the financial statements and the auditors’ report thereon, included in a document likely to be entitled “Annual Report” is expected to be made available to us after the date of this auditors’ report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.

3

 

Those charged with governance are responsible for overseeing the Entity‘s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

– Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

– Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity’s internal control.

– Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

– Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Entity to cease to continue as a going concern.

4

 

– Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represents the underlying transactions and events in a manner that achieves fair presentation.

– Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

– Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

– Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group Entity to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

/s/ KPMG LLP

Chartered Professional Accountants

The engagement partner on the audit resulting in this auditors’ report is Robert Ryan Owsnett.

Vancouver, Canada

March 16, 2021

5

Ero Copper Corp.  

Consolidated Statements of Financial Position  

(Amounts in thousands of US Dollars)

ASSETS	Notes		As at December 31, 2020			As at December 31, 2019
Current
Cash and cash equivalents			$	62,508		$	21,485
Restricted cash		9(b)		-			1,500
Accounts receivable				20,353			7,680
Inventories		4		25,496			19,377
Other current assets		5		19,184			25,523
				127,541			75,565
Non-Current
Mineral, property, plant and equipment		6		333,702			339,516
Exploration and evaluation assets		7		21,024			25,878
Deposits				513			1,200
Deferred income tax assets		19		14,223			13,099
Other non-current assets				96			7,416
				369,558			387,109
Total Assets			$	497,099		$	462,674
LIABILITIES
Current
Accounts payable and accrued liabilities		8	$	37,878		$	43,694
Current portion of loans and borrowings		9		12,539			18,984
Current portion of value added, payroll and other taxes payable		10		13,361			13,994
Current portion of derivatives		21		26,540			650
Current portion of lease liabilities				1,402			3,159
				91,720			80,481
Non-Current
Loans and borrowings		9		155,563			140,386
Provisions		11		21,450			33,581
Value added, payroll and other taxes		10		1,468			5,694
Derivatives		21		10,811			1,059
Lease liabilities				346			487
Other non-current liabilities				1,666			1,928
				191,304			183,135
Total Liabilities				283,024			263,616
SHAREHOLDERS’ EQUITY
Share capital		12		126,152			120,492
Equity reserves				(67,291	)		(24,489	)
Retained earnings				153,842			102,220
Equity attributable to owners of the Company				212,703			198,223
Non-controlling interests				1,372			835
				214,075			199,058
Total Liabilities and Equity			$	497,099		$	462,674

Nature of operations (Note 1); Contingencies (Note 11); Subsequent events (Note 9(a), 12(a) and (d))

APPROVED ON BEHALF OF THE BOARD:

“David Strang” , CEO & Director ”Matthew Wubs” , Director

The accompanying notes are an integral part of these consolidated financial statements

Page 1

Ero Copper Corp.  

Consolidated Statements of Operations and Comprehensive Income  

(Amounts in thousands of US Dollars, except share and per share amounts)

	Notes		Year ended December 31, 2020			Year ended December 31, 2019
Revenue		13	$	324,076		$	284,843
Cost of product sold		14		(130,585	)		(162,817	)
Sales expenses				(5,354	)		(4,962	)
Gross profit				188,137			117,064
Expenses
General and administrative		15		(27,927	)		(32,817	)
Share-based compensation		12(a) to (c)		(9,064	)		(5,792	)
Income before the undernoted				151,146			78,455
Other income (expenses)
Finance income				1,346			701
Finance expense		16		(15,449	)		(20,428	)
Foreign exchange loss		17		(79,805	)		(5,148	)
Loss on debt settlement				-			(1,783	)
Recovery of value added taxes		18		8,886			21,584
Other income (expenses)				(4,701	)		1,448
Income before income taxes				61,423			74,829
Income tax recovery (expense)
Current		19		(9,675	)		(10,645	)
Deferred		19		750			28,271
				(8,925	)		17,626
Net income for the year				52,498			92,455
Other comprehensive income (loss)
Foreign currency translation loss				(49,553	)		(4,941	)
Comprehensive income			$	2,945		$	87,514
Net income attributable to:
Owners of the Company				51,622			91,883
Non-controlling interests				876			572
			$	52,498		$	92,455
Comprehensive income attributable to:
Owners of the Company				2,267			86,962
Non-controlling interests				678			552
			$	2,945		$	87,514
Net income per share attributable to owners of the Company		12(e)
Net income per share
Basic			$	0.60		$	1.08
Diluted			$	0.56		$	1.01
Weighted average number of common shares outstanding
Basic				86,368,535			85,244,277
Diluted				92,213,628			91,390,425

The accompanying notes are an integral part of these consolidated financial statements

Page 2

Ero Copper Corp.  

Consolidated Statement of Changes in Shareholders’ Equity  

(Amounts in thousands of US Dollars, except share and per share amounts)

		Share Capital				Equity Reserves
	Notes	Number of shares		Amount		Contributed surplus			Foreign exchange			Retained earnings		Total			Non-controlling interest			Total equity
Balance, December 31, 2018			84,738,650	$	117,944	$	3,897		$	(28,652	)	$	10,337	$	103,526		$	296		$	103,822
Income for the year			-		-		-			-			91,883		91,883			572			92,455
Other comprehensive loss for the year			-		-		-			(4,921	)		-		(4,921	)		(20	)		(4,941	)
Total comprehensive income (loss) for the year			-		-		-			(4,921	)		91,883		86,962			552			87,514
Shares issued for:
Exercise of options and warrants			964,996		2,548		(605	)		-			-		1,943			-			1,943
Share-based compensation	12(a) to (c)		-		-		5,792			-			-		5,792			-			5,792
Dividends to non-controlling interest																		(13	)		(13	)
Balance, December 31, 2019			85,703,646	$	120,492	$	9,084		$	(33,573	)	$	102,220	$	198,223		$	835		$	199,058
Income for the year			-		-		-			-			51,622		51,622			876			52,498
Other comprehensive loss for the year			-		-		-			(49,355	)		-		(49,355	)		(198	)		(49,553	)
Total comprehensive income (loss) for the year			-		-		-			(49,355	)		51,622		2,267			678			2,945
Shares issued for:
Exercise of options and warrants			2,175,615		5,660		(1,258	)		-			-		4,402			-			4,402
Share-based compensation	12(a) to (c)		-		-		7,811			-			-		7,811			-			7,811
Dividends to non-controlling interest			-		-		-			-			-		-			(141	)		(141	)
Balance, December 31, 2020			87,879,261	$	126,152	$	15,637		$	(82,928	)	$	153,842	$	212,703		$	1,372		$	214,075

The accompanying notes are an integral part of these consolidated financial statements

Page 3

Ero Copper Corp.  

Consolidated Statements of Cash Flows  

(Amounts in thousands of US Dollars)

	Year ended December 31, 2020			Year ended December 31, 2019
Cash Flows from / (used in) Operating Activities
Net income for the year	$	52,498		$	92,455
Adjustments for:
Amortization and depreciation		39,348			46,171
Income tax expense (recovery)		8,925			(17,626	)
Loss on debt settlement		-			1,783
Recovery of value added taxes		(8,886	)		(21,584	)
Write-off of plant and equipment		1,842			3,475
Unrealized derivative contracts		-			1,427
Provisions		(145	)		(625	)
Share-based compensation		9,064			5,792
Finance income		(1,346	)		(701	)
Finance expenses		15,449			20,428
Foreign exchange loss		79,805			5,148
Changes in:
Accounts receivable		(13,266	)		(756	)
Inventories		(6,360	)		(5,946	)
Other assets		6,858			(4,636	)
Accounts payable and accrued liabilities		(3,885	)		11,604
Deferred revenue		-			(1,882	)
Value added, payroll and other taxes		7,121			43
		187,022			134,570
Derivative contract settlements		(20,804	)		(1,011	)
Provision settlements		(1,585	)		(1,786	)
Income taxes paid		(1,796	)		(3,943	)
		162,837			127,830
Cash Flows from / (used in) Investing Activities
Additions to mineral property, plant and equipment		(117,607	)		(105,382	)
Additions to exploration and evaluation assets		(199	)		(892	)
Other investments		1,250			(467	)
		(116,556	)		(106,741	)
Cash Flows from / (used in) Financing Activities
Restricted cash		1,500			1,500
Lease liability payments		(4,337	)		(4,082	)
New loans and borrowings, net of finance costs		68,997			37,867
Loans and borrowings paid		(57,425	)		(41,305	)
Interest paid on loans and borrowings		(9,693	)		(10,276	)
Other finance expenses		(3,156	)		(3,668	)
Issuance of share capital, net of issuance costs		4,402			1,943
		288			(18,021	)
Effect of exchange rate changes on cash and cash equivalents		(5,546	)		(524	)
Net increase in cash and cash equivalents		41,023			2,544
Cash and cash equivalents - beginning of year		21,485			18,941
Cash and cash equivalents - end of year	$	62,508		$	21,485

The accompanying notes are an integral part of these consolidated financial statements

Page 4

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

1. Nature of Operations

Ero Copper Corp. (“Ero” or the “Company”) was incorporated on May 16, 2016 under the Business Corporations Act (British Columbia) and maintains its head office at Suite 1050, 625 Howe Street, Vancouver, BC, V6C 2T6. The Company’s shares are publicly traded on the Toronto Stock Exchange under the symbol “ERO”.

The Company’s principal asset is its 99.6% ownership interest in Mineração Caraíba S.A. (“MCSA”). The Company also currently owns a 97.6% ownership interest in NX Gold S.A. (“NX Gold”) indirectly through its wholly-owned subsidiary, Ero Gold Corp. (“Ero Gold”).

MCSA is a Brazilian company which holds a 100% interest in the MCSA Mining Complex and the Boa Esperança Property (Note 7). MCSA’s predominant activity is the production and sale of copper concentrate from the MCSA Mining Complex, located in Bahia, Brazil, with gold and silver produced and sold as by-products. The Company currently mines copper ore from the Pilar underground mine (“Pilar UG Mine”) and the Vermelhos underground mine (“Vermelhos UG Mine”). The Boa Esperança Property is located within the municipality of Tucumã in the southeastern part of the state of Pará, Brazil, and consists of a single mineral concession covering an area of 4,034 hectares (“ha”).

NX Gold is a Brazilian gold mining company focused on the exploration and commercialization of gold as its main product and silver as its by-product. NX Gold wholly owns a 31,096 ha property, located approximately 18 kilometers west of the town of Nova Xavantina, in southeastern Mato Grosso State, Brazil, consisting of a single mining concession covering an area of 620 ha, where all gold mining and processing activities occur.

On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. Although COVID-19 has not materially impacted the Company’s operations during the year ended December 31, 2020, the situation is dynamic and the ultimate duration and magnitude of the impact on the economy and our business are not known at this time. These impacts could include an impact on the Company’s ability to obtain debt and equity financing, impairment of investments, impairments in the value of long-lived assets, continued fluctuation in the value of the Brazilian Real or potential future decreases in revenue or the profitability of ongoing operations.

2. Basis of Preparation

a) Statement of Compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee.

These consolidated financial statements were authorized for issue by the Board of Directors of the Company (the “Board”) on March 16, 2021.

b) Basis of Presentation and Principles of Consolidation

These consolidated financial statements have been prepared on a historical cost basis except for fair-value through-profit-or-loss and derivative financial instruments, which are measured at fair value.

These consolidated financial statements include the accounts of the Company and its subsidiaries. Subsidiaries are entities controlled by the Company. Control over a subsidiary is defined to exist when the Company is exposed to variable returns from involvement with an investee and has the ability to affect the returns through power over the investee. All intercompany balances and transactions are eliminated upon consolidation. 

Page 5

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The Company applies the acquisition method to account for business combinations. The consideration transferred by the Company to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities assumed and the equity interests issued by the Company, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred.

The Company recognizes identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognized in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values.

Goodwill arising from acquisitions is the excess of the sum of a) fair value of consideration transferred, b) the recognized amount of any non-controlling interest in the acquiree and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount would be recognized in profit or loss immediately.

Since the Company does not own 100% of its interests in MCSA and NX Gold, the interest attributable to non-controlling shareholders is reflected in non-controlling interests. Adjustments to non-controlling interests that do not involve the loss of control are accounted for as equity transactions and adjustments are based on a proportionate amount of the net assets of the subsidiary.

c) Foreign Currency Translation

The functional currency and presentation currency of the Company is the US dollar. The monetary assets and liabilities of the Company that are denominated in foreign currencies are translated at the rate of exchange at the statement of financial position date while non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at the exchange rates approximating those in effect on the date of the transactions. Exchange gains and losses arising on translation are included in profit or loss.

The functional currency of MCSA and NX Gold is the Brazilian Real (“BRL”). The assets and liabilities of MCSA and NX Gold are translated into the US dollar presentation currency using the rate of exchange at the statement of financial position date while revenues and expenses are translated at the exchange rates approximating those in effect on the date of the transactions. Exchange gains and losses arising on translation are included in a separate component of shareholders’ equity.

d) Use of Estimates and Judgments

In preparing these financial statements, management has made judgments, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of the assets, liabilities, revenues and expenses. Actual results may differ from these estimates.

The estimates and assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively. 

Page 6

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Critical Judgments

Functional currency

The functional currency of the Company and each of its subsidiaries is the currency of the primary economic environment in which the entities operate. The Company has determined that the functional currency for the Company is the US dollar while the functional currency for MCSA and NX Gold is the Brazilian Real. Assessment of functional currency involves certain judgements to determine the primary economic environment and the Company reconsiders the functional currency of its entities if there is a change in events and conditions which determined the primary economic environment.

Legal claims and contingent liabilities

The recognition of legal provisions and contingent liabilities involves the assessment of claims made against the Company and each of its subsidiaries. The recognition of a legal provision, or disclosure of a contingent liability, involves certain judgements to determine the probability of whether a cash outflow will occur. In making this judgment, management has assessed various criteria and also relies on the opinions of its legal advisers to assist in making this assessment.

Key Sources of Estimation Uncertainty

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates and such differences could be significant. Significant estimates made by management affecting the consolidated financial statements include:

Derivative instruments

The fair value of derivative instruments is determined using either present value techniques or option pricing models that utilize a variety of inputs that are a combination of quoted prices and market-corroborated inputs, including assumptions for forward interest and foreign exchange rates, volatilities and discount rates. The fair value of the Company’s derivative contracts includes an adjustment for credit risk for either the Company or the counter party as applicable. Changes in the assumptions for inputs into the models affect the fair value of the derivatives recognized in the statement of financial position as well as the unrealized gains or losses recognized in net income.

Mineral reserve and resource estimates including life of mine plan

The Company estimates its mineral reserves and mineral resources based on information compiled by competent individuals. Mineral reserves are used in the calculation of depreciation, impairment assessments and for forecasting the timing of payment of mine closure and rehabilitation costs.

There are numerous uncertainties inherent in estimating mineral reserves, and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the estimation methodology, forecasted prices of commodities, exchange rates, production costs or recovery rates may change the economic status of mineral reserves and may, ultimately, result in changes in the mineral reserves. 

Page 7

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The carrying amounts of the Company’s mineral, property, plant and equipment are depleted in part based on recoverable mineral reserve tonnes processed, depending on the use of the asset. Changes to estimates of recoverable quantities of metals, mineral reserve tonnes and depletable costs, including changes resulting from revisions to the Company’s mine plans and changes in metals prices forecasts, can result in a change to future depreciation and depletion rates and may result in impairment charges.

Mine closure and rehabilitation costs

Significant estimates and assumptions are made in determining the provision for mine closure and rehabilitation as there are numerous factors that will affect the ultimate liability payable. These factors include estimation of the extent and cost of rehabilitation activities, timing of future cash flows, discount rates, inflation rate, and regulatory requirements.

Changes in the above factors can result in a change to the provision recognized by the Company. Changes to mine closure and rehabilitation costs are recorded with a corresponding change to the carrying amounts of related mineral, property, plant and equipment. Adjustments to the carrying amounts of related mineral, property, plant and equipment can result in a change to future depreciation and depletion expense.

Significant assumptions used to determine mine closure and rehabilitation costs are included in Note 11(a).

Income taxes

The determination of the Company’s tax expense for the period and deferred tax assets and liabilities involves significant estimation and judgement by management. In determining these amounts, management interprets tax legislation in a variety of jurisdictions and makes estimates of the expected timing of the reversal of deferred tax assets and liabilities. Management also makes estimates of future earnings, which affect the extent to which potential future tax benefits may be used. The Company is subject to assessments by various taxation authorities, which may interpret legislation differently. These differences may affect the final amount or the timing of the payment of taxes. The Company provides for such differences where known based on management’s best estimate of the probable outcome of these matters.

The Company operates in Brazil where tax authorities may audit income tax treatments and the resolution of such audits may span multiple years. Tax law in Brazil is complex and often subject to changes and to varied interpretations; accordingly, the ultimate outcome with respect to income tax treatments may differ from the amounts recognized. The Company’s assessment of whether it is probable that uncertain income tax treatments will be accepted by tax authorities in Brazil is a significant management judgment.

e) New Accounting Standards and Interpretations Adopted in the Year

The following new and amended IFRS pronouncements were adopted effective January 1, 2020 and had no impact to the Company’s financial statements:

• Amendments to References to the Conceptual Framework in IFRS Standards

• In September 2019, the IASB issued first phase amendments IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Hedging and IFRS 7 Financial Instrument Disclosures to address the financial reporting impact of the reform on interest rate benchmarks, such as the discontinuance of the interbank offered rates. The first phase amendment is focused on the impact to hedge accounting requirements. The Company adopted the first phase amendment and there was no material impact on its consolidated financial statements. The Company will continue to assess the effect of amendments related to the interest rate benchmark reform on its consolidated financial statements.

Page 8

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The following amendment to accounting standards has been issued but not yet adopted in the financial statements: 

• On May 14, 2020, the IASB published a narrow scope amendment to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use. The amendment prohibits deducting from the cost of property, plant and equipment amounts received from selling items produced while preparing the asset for its intended use. Instead, amounts received will be recognized as sales proceeds and related cost in profit or loss. The effective date is for annual periods beginning on or after January 1, 2022. The Company does not expect to adopt this amendment until the effective date, and does not anticipate a material impact on its consolidated financial statements.

3. Significant Accounting Policies

a) Revenue

Revenue is generated from the sale of sale of metals in concentrate and gold doré. The Company’s performance obligations relate primarily to the delivery of the concentrate or gold doré to customers, with each shipment representing a separate performance obligation.

Revenue from the sale of metals in concentrate and gold doré is recognized at the point the customer obtains control of the product. Control is transferred when title has passed to the purchaser, the product is physically delivered to the customer, the customer controls the risks and rewards of ownership and the Company has a present right to payment for the product which is generally when the concentrate or ore is delivered to a location designated by the customer.

The sales amount is typically based on quoted market and contractual prices which are fixed at the time the shipment is received at the customers’ premises. In certain circumstances the sales price of metals in concentrate may be determined in a period subsequent to the date of sale (provisionally priced sales) based on the terms of specific copper concentrate contracts. Provisionally priced sales are recognized based on an estimate of metal contained using forward market prices corresponding with the expected date that final sales prices will be fixed. The period between provisional pricing and final settlement can be up to one month. The settlement receivable is recorded at fair value each reporting period by reference to forward market prices until the date of final pricing, with the changes in fair value recorded as an adjustment to revenue.

b) Tax Incentives

The Company receives certain tax incentives in Brazil. These tax incentives are recognized in profit or loss in the period the incentives are received or receivable and recorded against the expenditure that they are intended to compensate.

c) Finance Income and Finance Expense

Finance income includes interest on cash and cash equivalents, restricted cash and financial investments, and gains related to changes in the fair value of financial assets measured at fair value through profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest method.

Finance expense comprise interest expense on loans and borrowings, unwinding of the discount on provisions and leases, commitment fees and losses related to changes in the fair value of financial assets measured at fair value through profit or loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognized in profit or loss using the effective interest method. 

Page 9

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

d) Employee Benefits

Short-term employee benefit obligations are recognized as personnel expenses as the corresponding service is provided. Liabilities are recognized at the amount that is expected to be paid if the Company has a present legal or constructive obligation to pay that amount based on past services rendered by the employee, and the obligation can be estimated reliably. There are no long-term employee benefit plans.

e) Taxation

Income tax expense comprises current and deferred tax. Current income tax is the expected tax payable or receivable on the taxable income or loss for the year using tax rates enacted or substantively enacted at the reporting date.

Deferred income tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred income tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the tax laws that have been enacted or substantively enacted at the reporting date. Deferred income tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity. Deferred income tax is not recognized for the initial recognition of assets or liabilities in a transaction that is not a business combination and that effects neither accounting nor taxable income or loss, differences related to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future and taxable differences arising from the initial recognition of goodwill.

A deferred income tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred income tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Uncertainties over income tax treatments are evaluated on the basis of whether it is probable that they will be accepted upon examination by the relevant taxing authorities in Brazil. These uncertainties impact the amount of income taxes recognized. If it is determined that an uncertain income tax treatment is not probable of being accepted, the effect of the uncertain income tax treatment is reflected in the determination of income taxes based the most likely amount or, if there are a wide range of possible outcomes, the expected value.

f) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of consumable inventory is determined on a weighted average acquisition cost basis. Cost of stockpile inventory, products in progress and finished goods is determined based on a weighted average production cost basis and includes the cost of mining and processing ore including direct labour and materials; depreciation and amortization; and an appropriate share of production overheads based on normal operating capacity.

Net realizable value of stockpile inventory, products in progress and finished goods is the estimated selling price in the ordinary course of business, less estimated completion costs and selling expenses. 

Page 10

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Provisions for low turnover or obsolete supplies and consumables inventory are established by management as deemed necessary.

g) Mineral, Property, Plant and Equipment

Mineral, property, plant and equipment is measured at acquisition or construction cost, including capitalized borrowing costs, less accumulated depreciation and accumulated impairment losses.

i) Acquisition and disposal

The cost of mineral, property, plant and equipment include expenditures directly attributable to an asset’s acquisition. The cost of assets constructed by Company includes the cost of materials and direct labor, any other costs to bring the asset in the place and conditions required to be operated in the manner intended by management, costs of disassembly and restoration of the site and borrowing costs on qualifying assets.

When parts of mineral, property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of mineral, property, plant and equipment.

Gains and losses on disposal of mineral, property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of equipment and are recognized net within other income.

ii) Subsequent costs

The cost of replacing plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the item will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced item is derecognized. The costs of the day-to-day servicing of equipment are included in profit or loss.

iii) Development and construction-in-progress

When economically viable mineral reserves have been determined and the decision to proceed with development has been approved, exploration and evaluation assets are first assessed for impairment, then reclassified to construction-in-progress or mineral properties. The expenditures related to development and construction are capitalized as construction-in-progress and are included within mineral, property, plant and equipment. Costs associated with the commissioning of new assets incurred before they are operating in the way intended by management, including directly attributable costs of testing, are capitalized. Construction-in-progress includes the purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for its intended use including advances on long-lead items. Construction-in-progress is not depreciated.

Once the asset is operating in the way intended by management, construction-in-progress costs are reclassified to mineral properties or plant and equipment.

Pre-production costs of removing overburden to access ore in the open pit mines and developing access headings in the underground mines are capitalized as pre-production stripping or development costs respectively and are included within mineral, property, plant and equipment. Revenues earned during pre-production periods are also capitalized. 

Page 11

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

iv) Mineral properties

Mineral properties consist of the cost of acquiring and developing mineral properties. Once in production, mineral properties are amortized on a units-of-production basis over the component of the ore body to which they relate.

v) Stripping costs and development in the production phase

Where open pit production stripping or underground development activities do not result in inventory produced, but does provide improved access to the ore body, the costs are classified as mineral properties when these activities meet all of the following criteria: (1) it is probable that the future economic benefit associated with the activity will flow to the Company; (2) the Company can estimate the mineral reserve of the ore body for which access has been improved; and (3) the costs relating to the activity associated with that mineral reserve can be measured reliably.

For underground mines, costs incurred to access a mineral reserve of the ore body are capitalized to mineral properties or construction-in-progress and are depreciated on a units-of-production basis over the expected useful life of the identified mineral reserve of the ore body to which access has been improved as a result of the development activity. For open pit mines, stripping costs are capitalized to mineral properties or construction-in-progress until an average stripping ratio is achieved (waste/ore) for the mine. After the stripping ratio is achieved, all stripping costs are classified as production costs. The capitalized stripping costs are depreciated over the related mineral reserves accessed by the stripping activity.

vi) Mine closure and rehabilitation costs

The Company’s provision for mine closure and rehabilitation liabilities represents management’s best estimate of the present value of the future cash outflows required to settle estimated reclamation and closure costs at the end of a mine’s life. The provision reflects estimates of future costs, inflation, movements in foreign exchange rates and assumptions of risks associated with the future cash outflows, and the applicable risk-free interest rates for discounting the future cash outflows. Changes in the above factors can result in a change to the provision recognized by the Company.

vii) Depreciation

Items of mineral, property, plant and equipment are depreciated on a straight-line method based on the estimated economic useful life of each component as follows:

Buildings	Up to 25 years
Mining equipment	4 years
Mobile equipment & other assets	5 years
Mineral properties	Units of production
Mine closure and rehabilitation costs	Units of production or
	period until remediation
Right of use assets	Shorter of the term of
	lease and life of asset

The depletion of mineral, properties and mine closure and rehabilitation costs is determined based on the ratio of tons of copper/kg of gold contained in the ore mined and total proven and probable mineral reserve tonnes of contained copper/kg of contained gold. 

Page 12

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate.

h) Exploration and Evaluation Assets

Exploration and evaluation costs relate to the initial search for a mineral deposit, the cost of acquisition of a mineral property interest or exploration rights and the subsequent evaluation to determine the economic potential of the mineral deposit. The exploration and evaluation stage commences when the Company obtains the legal right or license to begin exploration. Once the legal rights or license is obtained, exploration and evaluation expenses are capitalized as exploration and evaluation assets. Costs incurred prior to the Company obtaining the legal rights are expensed.

When the exploration and evaluation of a mineral property indicates that development of the mineral property is technically and commercially feasible, the future economic benefits are probable, and the Company has the intention and sufficient resources to complete the development and use or sell the asset, the related costs are transferred from exploration and evaluation assets to mineral property, plant and equipment.

Management reviews the carrying value of capitalized exploration costs for indicators that the carrying value is impaired at least annually and when facts and circumstances suggest that the carrying amount may exceed the recoverable amount. The review is based on the Company’s intentions for further exploration and development of the undeveloped property, results of drilling, commodity prices and other economic and geological factors. Subsequent recovery of the resulting carrying value depends on successful development or sale of the undeveloped project. If a property does not prove viable, all non-recoverable costs associated with the project, net of any previous impairment provisions, are written off.

i) Financial Instruments

Non-derivative financial assets

The Company classifies its financial assets in the following categories: at fair value through profit or loss (“FVTPL”), at fair value through other comprehensive income (“FVTOCI”) or at amortized cost. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Measurement and classification of financial assets is dependent on the Company’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. Financial assets are derecognized when they mature or are sold, and substantially all the risks and rewards of ownership have been transferred.

Fair values

A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

When measuring the fair value of an asset or liability, the Company uses observable market data, as much as possible. Fair values are classified into different levels in a hierarchy based on the inputs used in the valuation techniques, as follows:

• Level 1: quoted prices (without adjustments) in active markets for identical assets or liabilities.

• Level 2: inputs other than Level 1 quoted prices, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Page 13

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

• Level 3: inputs, for assets or liabilities, that are not based on observable market information (non-observable inputs).

The Company recognizes transfers between levels of the hierarchy of fair value at the end of the reporting period during which the change occurred.

When applicable, additional information on the assumptions used in the fair value calculations are disclosed in the specific notes of the corresponding asset or liability.

Financial assets at FVTPL

Financial assets carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the income statement. Realized and unrealized gains and losses arising from changes in the fair value of the financial asset held at FVTPL are included in profit or loss in the period in which they arise. Derivatives are also categorized as FVTPL unless they are designated as hedges.

Financial assets at FVTOCI

Investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses arising from changes in fair value recognized in other comprehensive income. Gains or losses on financial assets classified as FVTOCI remain within accumulated other comprehensive income following the derecognition of the investment.

Financial assets at amortized cost

Financial assets at amortized cost are initially recognized at fair value and subsequently carried at amortized cost less any impairment. They are classified as current assets or non-current assets based on their maturity date. Gains and losses on derecognition of financial assets classified amortized cost are recognized in profit or loss.

Financial liabilities

Financial liabilities are recognized initially at fair value, net of transaction costs incurred, and are subsequently measured at amortized cost. Any difference between the amounts originally received, net of transaction costs, and the redemption value is recognized in profit and loss over the period to maturity using the effective interest method.

Derivative instruments

Derivative instruments, including embedded derivatives in executory contracts or financial liability contracts, are classified as at FVTPL and, accordingly, are recorded in the statement of financial position at fair value. Unrealized gains and losses on derivatives not designated in a hedging relationship are recorded as part of the revenue or expense item to which the derivative relates, depending on the nature of the derivative. Fair values for derivative instruments are determined using inputs based on market conditions existing at the balance sheet date or settlement date of the derivative. Derivatives embedded in non-derivative contracts are recognized separately unless they are closely related to the host contract. 

Page 14

Ero Copper Corp.  

Notes to Consolidated Financial Statements  

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Trade receivables related to provisionally priced sales are measured at fair value with changes recognized in profit or loss.

Compound instruments

Equity components of compound instruments, such as convertible debt, are separated from the debt host contract using the residual method. The Company determines the fair value of the debt component by discounting the expected principal and interest payments using an appropriate discount rate reflective of debt instruments with similar risks but without the equity component. The difference between the proceeds received and the amount assigned to the debt component is allocated to the equity component.

Share capital

Common shares are classified as equity. Incremental costs directly attributable to the issuance of common shares and share options are recognized as a deduction from equity, net of any tax effects. The Company includes the value of share purchase warrants included in the issuance of equity units, which consist of common shares and warrants, in share capital.

Classification and measurement

The Company has assessed the classification and measurement of its financial assets and financial liabilities under IFRS 9 in the following table:

	Measurement Category
Financial Assets:
Cash, cash equivalents and restricted cash	Amortized cost
Trade receivables	Amortized cost
Deposits	Amortized cost
Financial Liabilities:
Trade payables	Amortized cost
Loans and borrowings	Amortized cost
Derivatives	Fair value through profit or loss

Cash and cash equivalents, restricted cash and deposits

Cash is comprised of cash on hand and demand deposits. Cash equivalents, restricted cash and deposits are short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in fair value.

Trade receivables

Trade receivables relate to amounts receivable from sales with fixed or determinable payments that are not quoted in an active market. These receivables are non-interest bearing and are recognized at face amount, except when fair value is materially different, and are subsequently measured at amortized cost. Trade receivables recorded are net of lifetime expected credit losses.

Page 15

Ero Copper Corp.  

Notes to Consolidated Financial Statements  

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

j) Impairment

i) Financial assets

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the loss allowance for the financial asset is measured at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the loss allowance is measured for the financial asset at an amount equal to twelve months’ expected credit losses. For trade receivables the Company applies the simplified approach to providing for expected credit losses, which allows the use of a lifetime expected loss provision. Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease can be objectively related to an event occurring after the impairment was recognized. The expected lifetime credit loss provision for trade receivables is based on historical counterparty default rates and adjusted for relevant forward-looking information, when required. As the Company’s three primary significant customers are considered to have a low default rate and historical default rates are low, the lifetime expected credit loss allowance for trade receivables is nominal as at December 31, 2020. Accordingly, the Company did not record a provision for expected credit losses for trade receivables.

ii) Non-Financial assets

At each reporting date the carrying amounts of the Company’s mineral, property, plant and equipment and exploration and evaluation assets are reviewed to determine whether there is any indication that those assets are impaired. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use, which is the present value of future cash flows expected to be derived from the asset or its related cash generating unit. For purposes of impairment testing, assets are grouped at the lowest levels that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the associated assets are reduced to their recoverable amount and the impairment loss is recognized in the profit or loss for the period.

Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment charge is reversed through profit or loss only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of any applicable depreciation, if no impairment loss had been recognized.

k) Provisions

i) Mine closure and rehabilitation provision

The Company records the present value of estimated costs of legal and constructive obligations related to mine closure and rehabilitation in the period in which the obligation occurs. Mine closure and rehabilitation activities include facility decommissioning and dismantling; removal and treatment of waste materials; site and land rehabilitation, including compliance with and monitoring of environmental regulations; and related costs required to perform this work and/or operate equipment designed to reduce or eliminate environmental effects. The provision is adjusted each period for new disturbances, and changes in regulatory requirements, the estimated amount of future cash flows required to discharge the obligation, the timing of such cash flows and the pre-tax discount rate specific to the liability. The unwinding of the discount is recognized in profit or loss as a finance expense.

Page 16

Ero Copper Corp.  

Notes to Consolidated Financial Statements  

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

When the provision is initially recognized, the corresponding cost is capitalized by increasing the carrying amount of the related asset and is amortized to profit or loss on a unit-of-production basis.

ii) Other provisions

Other provisions are recognized, based on a past event, when the Company has a legal or constructive obligation that can be estimated reliably, and it is probable that an economic mineral resource will be required to settle the obligation. Provisions are measured by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and specific risks for the liability. The discount is unwound over the period over which the cash flows are expected to be incurred with the related expense included in finance expense.

l) Share-Based Compensation

The grant date fair value of equity settled share-based payment awards granted to employees and consultants, including directors and officers, is recognized as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be performed or satisfied such that the amount ultimately recognized as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. Deferred share units are liability awards settled in cash and measured at the quoted market price at the grant date with the corresponding expense recognized over the period that the employees unconditionally become entitled to the awards. The corresponding liability is adjusted for changes in fair value at each subsequent reporting date until the awards are settled.

m) Leases

A contract is or contains a lease when the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses, and adjusted for certain re-measurements of the lease liability. The cost of the right-of-use asset includes the amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date, less any lease incentives received, any initial direct costs; and if applicable, an estimate of costs to be incurred by the Company in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. The incremental borrowing rate reflects the rate of interest that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. Generally, the Company uses its incremental borrowing rate as the discount rate.

Page 17

Ero Copper Corp.  

Notes to Consolidated Financial Statements  

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.

The Company does not recognize right-of-use assets and lease liabilities for leases of low-value assets and leases with lease terms that are less than 12 months. Lease payments associated with these leases are instead recognized as an expense over the lease term on either a straight-line basis, or another systematic basis if more representative of the pattern of benefit.

The Company has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The assessment of whether the Company is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognized.

n) Income (Loss) per Share

Basic income (loss) per share is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted income (loss) per common share is calculated by adjusting the weighted average number of common shares outstanding for the effect of conversion of all potentially dilutive share equivalents, such as stock options, share units and warrants. The dilutive effect of share options and warrants assumes that the receipt of proceeds upon exercise of the options are used to repurchase common shares at the average market price during the period. The net effect of the shares issued less the shares assumed to be repurchased is added to the basic weighted average shares outstanding. For convertible instruments, the common shares to be included in the diluted per share calculation assumes that the instrument is converted at the beginning of the period (or the issue date if later). For Share Units (as defined herein, see note 12(b)), the common shares to be included in the diluted per share calculation is based on the number of shares that would be issuable if the reporting date were the end of the vesting period. The profit or loss attributable to common shareholders is adjusted to eliminate related interest costs of dilutive securities recognized in profit or loss for the period.

4. Inventories

	December 31, 2020		December 31, 2019
Supplies and consumables	$	15,619	$	13,878
Stockpile		3,569		2,556
Work in progress		5,234		2,164
Finished goods		1,074		779
	$	25,496	$	19,377

Page 18

Ero Copper Corp.  

Notes to Consolidated Financial Statements  

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

5. Other Current Assets

	December 31, 2020		December 31, 2019
Advances to suppliers	$	500	$	1,046
Prepaid expenses		2,635		4,779
Advances to employees (a)		2,091		2,829
Value added federal taxes recoverable (b)		13,958		16,869
	$	19,184	$	25,523

(a) Advances to employees include short term advances of salary, vacation and other benefits granted to employees of the Company’s subsidiaries MCSA and NX Gold.

(b) At December 31, 2020, $8.0 million of this balance relates to a study conducted to revisit certain tax positions, while $4.0 million of this balance relates to a 2019 favourable legal decision that recognizes MCSA’s right to a tax credit as a result of historical over-payment (December 31, 2019 - $12.2 million). See note 18 for details. MCSA is able to use these tax credits against a variety of taxes, including taxes on future sales.

Page 19

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

6. Mineral, Property, Plant and Equipment

	Buildings			Mining Equipment			Mineral Properties			Projects in Progress			Mobile Equipment & Other Assets			Mine Closure Costs			Right-of-Use Assets			Total
Cost:
Balance at December 31, 2018	$	15,739		$	74,847		$	209,899		$	42,147		$	9,836		$	12,341		$	4,708		$	369,517
Additions		-			15,429			5,255			91,392			1,348			2,266			3,220			118,910
Disposals		-			(1,819	)		-			(2,267	)		(1,414	)		-			(463	)		(5,963	)
Transfers		2,532			18,313			55,754			(76,672	)		73			-			-			-
Foreign exchange		(662	)		(3,595	)		(9,516	)		(1,895	)		(362	)		(500	)		(234	)		(16,764	)
Balance at December 31, 2019		17,609			103,175			261,392			52,705			9,481			14,107			7,231			465,700
Additions		54			10,515			6,747			81,332			18,942			197			2,982			120,769
Disposals and other adjustments		-			(16,671	)		-			(80	)		(522	)		(3,803	)		(291	)		(21,367	)
Transfers		1,546			19,940			56,346			(64,888	)		(12,958	)		-			14			-
Foreign exchange		(4,327	)		(24,257	)		(59,173	)		(12,297	)		(2,139	)		(2,965	)		(1,614	)		(106,772	)
Balance at December 31, 2020	$	14,882		$	92,702		$	265,312		$	56,772		$	12,804		$	7,536		$	8,322		$	458,330
Accumulated depreciation:
Balance at December 31, 2018	$	(3,269	)	$	(16,980	)	$	(58,598	)	$	-		$	(3,138	)	$	(2,020	)	$	-		$	(84,005	)
Depreciation expense		(922	)		(11,032	)		(29,286	)		-			(1,582	)		(1,033	)		(3,869	)		(47,724	)
Disposals		-			1,196			-			-			3			-			14			1,213
Foreign exchange		144			1,217			2,591			-			145			95			140			4,332
Balance at December 31, 2019		(4,047	)		(25,599	)		(85,293	)		-			(4,572	)		(2,958	)		(3,715	)		(126,184	)
Depreciation expense		(785	)		(10,882	)		(24,597	)		-			(1,317	)		(1,029	)		(3,865	)		(42,475	)
Disposals		-			14,999			-			-			446			-			168			15,613
Foreign exchange		916			5,827			19,351			-			860			672			792			28,418
Balance at December 31, 2020	$	(3,916	)	$	(15,655	)	$	(90,539	)	$	-		$	(4,583	)	$	(3,315	)	$	(6,620	)	$	(124,628	)
Net book value December 31, 2019	$	13,562		$	77,576		$	176,099		$	52,705		$	4,909		$	11,149		$	3,516		$	339,516
Net book value December 31, 2020	$	10,966		$	77,047		$	174,773		$	56,772		$	8,221		$	4,221		$	1,702		$	333,702

Page 20

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

6. Mineral, Property, Plant and Equipment (continued)

Of the additions to mineral, property, plant and equipment, $0.7 million (year ended December 31, 2019 – $8.6 million) was obtained through financing arrangements with equipment suppliers.

Certain equipment has been provided as security for the equipment finance loans (note 9).

During the year ended December 31, 2020, $7.3 million (year ended December 31, 2019 - $3.1 million) was transferred from mineral resources to amortizable mineral reserves as a result of an update to MCSA’s proven and probable reserves during the year. As such, there is no balance included in mineral, property, plant and equipment related to the value of mineral resources beyond proven and probable reserves not currently being amortized. In addition, $56.8 million (December 31, 2019 - $52.7 million) related to projects in progress are not currently being amortized.

7. Exploration and Evaluation Assets

Exploration and evaluation assets relate to the Boa Esperança Property located in the Municipality of Tucumã, in the state of Pará, Brazil which consists of a single mineral concession. This prospective copper/gold property is in advanced stages of exploration with various geological mineral resource studies and is the subject of a completed feasibility study.

8. Accounts Payable and Accrued Liabilities

	December 31, 2020		December 31, 2019
Trade suppliers	$	14,480	$	21,811
Payroll and related charges		17,914		20,058
Other accrued liabilities		5,484		1,825
	$	37,878	$	43,694

Page 21

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

9. Loans and Borrowings

							Carrying value, including accrued interest
Description	Denomination	Security	Time to Maturity	Coupon rate	Principal to be repaid		December 31, 2020		December 31, 2019
Bank loan (at acquisition)	BRL R$	Unsecured	71 months	CDI + 0.5%		4,469		3,980		5,941
Bank loan (MCSA)	USD	Unsecured	-	4.43%		-		-		1,503
Bank loan (MCSA)	BRL R$	Unsecured	-	CDI + 3.7%		-		-		204
Line of credit (MCSA)	BRL R$	Unsecured	3 months	CDI + 9.0%		1,443		1,447		-
Lines of credit (MCSA)	BRL R$	Unsecured	2 - 3 months	9.60%-13.20%		4,165		4,221		-
Lines of credit (NX Gold)	BRL R$	Unsecured	-	14.34%-14.98%		-		-		670
Equipment finance loan (Plural)	BRL R$	Secured	11 months	CDI + 7.0%		1,058		1,065		2,892
Equipment finance loans	BRL R$	Secured	5 - 42 months	11.88%-16.49%		1,445		1,607		5,585
Equipment finance loans	EURO	Secured	18 - 24 months	5.5%-7.0%		1,773		1,791		3,996
Equipment finance loans	USD	Secured	16-32 months	6.50%-7.95%		5,536		5,605		4,125
Senior non-revolving credit facility	USD	Secured	39 months	LIBOR + 2.50%-4.25%		75,000		74,193		79,091
Senior revolving credit facility	USD	Secured	39 months	LIBOR + 2.50%-4.25%		75,000		74,193		55,363
Total					$	169,889	$	168,102	$	159,370
Current portion:							$	12,539	$	18,984
Non-current portion:							$	155,563	$	140,386

	December 31, 2020			December 31, 2019
Balance, beginning of year	$	159,370		$	152,234
New senior revolving credit facility, net		13,652			10,565
New equipment finance loans		19,278			24,890
New lines of credit		36,726			10,976
Principal and interest payments		(67,118	)		(51,581	)
Interest accretion		9,921			11,236
Loss on debt modification		-			1,783
Effect of foreign exchange rate changes		(3,727	)		(733	)
Balance, end of period	$	168,102		$	159,370

(a) Senior credit facility

The Company has a $150 million facility from a syndicate of Canadian financial institutions. The facility is comprised of a $75 million (December 31, 2019 - $80 million) senior secured amortizing non-revolving credit facility (“Term Facility”) and a $75 million (December 31, 2019 - $70 million) senior secured revolving term credit facility (“Revolving Credit Facility”) (collectively the “Facilities”).

During the second quarter of 2019, the Company refinanced a loan held by the Company’s subsidiary, MCSA, by extending the Revolving Credit Facility. The credit limit of the Revolving Credit Facility was increased by $20.0 million to $70.0 million. All other terms of the Facilities remained unchanged. Upon completion of the amendment, the Company drew $11.0 million to repay certain of its bank loans held by MCSA.

On March 31, 2020, the Company amended the Facilities to reduce its cost of borrowing by 25 to 50 basis points, depending on the consolidated leverage ratio, and to defer the scheduled principal payments for two years.

The Term Facility matures on March 31, 2024 and requires principal repayments on a quarterly basis commencing on March 31, 2022, while the Revolving Credit Facility is payable in full at maturity on March 31, 2024. The Facilities bear interest on a sliding scale at a rate of LIBOR plus 2.50% to 4.25% depending on the Company’s consolidated leverage ratio at the time. Commitment fees for any undrawn portion of the Revolving Credit Facility are also on a sliding scale between 0.63% to 1.06%. The Company determined that the amendments were a non-substantial modification. In March 2020, the Company drew down the remainder of the amount available under the Facilities totaling $14.0 million ($13.7 million net of transaction costs). The Term Facility previously had a five-year term with equal quarterly principal payments beginning on December 13, 2020, while the Revolving Credit Facility was payable at maturity on December 13, 2022. The Facilities previously bore interest on a sliding scale at a rate of LIBOR plus 2.75% to 4.75% depending on the Company’s consolidated leverage ratio at the time.

Page 22

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The Facilities include standard and customary terms and conditions with respect to fees, representations, warranties, and financial covenants that remain unchanged from prior amendments.

The Facilities are secured by pledges of shares of MCSA, NX Gold and Ero Gold Corp., a wholly owned subsidiary which holds the Company’s interest in NX Gold. The Company is required to comply with certain financial covenants. As of the date of these consolidated financial statements, the Company is in compliance with these covenants.

In January 2019, the Company entered into an interest rate swap transaction with a Canadian financial institution whereby the floating interest on a notional amount of $65.0 million of the Term Facility was swapped for a fixed interest rate of 2.69%. This interest rate swap transaction is in effect for the majority of the term of the Term Facility, with the notional amount reduced over time. As at December 31, 2020, the notional amount of the interest rate swap transaction was $60.0 million. Interest swap settlements are being made on a quarterly basis.

Subsequent to the year ended December 31, 2020, the Facilities were amended with a $150.0 million senior secured revolving credit facility (“New Revolving Credit Facility”) payable entirely on March 31, 2025. The New Revolving Credit Facility will bear interest on a sliding scale at a rate of LIBOR plus 2.25 to 4.25% depending on the Company’s consolidated leverage ratio at the time. Commitment fees for any undrawn portion of the Revolving Credit Facility will also be on a sliding scale between 0.56% to 1.06%.

(b) Bank loan and equipment finance loans

The bank loan (at acquisition) relates to the Company’s subsidiary, MCSA, and was recognized at the date of acquisition at fair value and has subsequently been recognized at amortized cost, net of settlements. Interest is being recognized using the effective interest rate method at an interest rate of 11.29%.

In June 2019, the Company repaid one of MCSA’s bank loans (at acquisition) in full using funds from the Company’s Revolving Credit Facility and recognized a loss on settlement of $1.8 million.

As per the terms of one of MCSA’s bank loans, the Company was required to maintain a separate debt service bank account with sufficient funds to guarantee scheduled principal payments by MCSA. At December 31, 2020, this loan has been repaid and the separate debt service bank account has been closed. At December 31, 2019, $1.5 million was deposited in the designated debt service account and was presented as restricted cash in the statement of financial position.

MCSA is required to comply with certain financial covenants which MCSA is in compliance with at December 31, 2020. The equipment finance loans are secured by the corresponding equipment relating to them and a guarantee by the Company.

(c) MCSA and NX Gold lines of credit

At December 31, 2020, the Company’s subsidiaries, MCSA and NX Gold, have the following credit facilities available:

MCSA entered into a credit agreement in 2019 for a non-revolving line of credit of up to BRL $30.0 million at an interest rate of CDI (“Brazilian Interbank Deposit Rate”) + 9% per annum, which was available for draw down until November 30, 2020. At December 31, 2020, BRL $7.5 million ($1.4 million) (December 31, 2019 - $nil) had been drawn from this credit facility and the draw down period has now expired. The Company and NX Gold provide unsecured guarantees for this credit agreement and the amount drawn is due in March 2021.

Page 23

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

During the three months ended June 30, 2020, MCSA entered into a credit agreement for a line of credit of up to BRL $14.9 million at an interest rate of 14.30% per annum and MCSA drew down on the full amount of this line of credit. The Company and NX Gold provide unsecured guarantees for this credit agreement. During the three months ended December 31, 2020, the full amount of this line of credit was repaid, but the full amount of BRL $14.9 million remains available to be drawn at any time until May 24, 2021.

During the year ended December 31, 2020, MCSA entered into various credit agreements for lines of credit of up to a total of BRL $131.6 million, all of which were drawn down during the year ended December 31, 2020. The interest rates on these credit agreements ranges from 9.60% to 24.34%. The Company repaid a total of BRL $109.8 million in lines of credit during the year ended December 31, 2020 and as at December 31, 2020, BRL $21.8 million ($4.2 million) remains outstanding on these credit facilities, which represents the maximum remaining amount available under these credit facilities. This amount is repayable by March 2021.

During the three months ended September 30, 2020, MCSA repaid and terminated a previous line of credit entered into in 2019 in the amount of BRL $30.0 million with an interest rate of 14.98%. MCSA replaced this line of credit during the three months ended September 30, 2020 by entering into a new credit agreement for a line of credit of up to BRL $30.0 million at an interest rate of CDI + 8.858%. MCSA may drawdown on this line of credit at any time until September 20, 2021. At December 31, 2020, no amount has been drawn from this credit facility.

NX Gold entered into an agreement in 2019 for a line of credit of up to BRL $7.5 million at an interest rate of 14.98% per annum, which was available for drawdown until August 27, 2020. A total of BRL $7.5 million ($1.4 million) had been drawn from this line of credit, of which BRL $4.8 million was drawn during the year ended December 31, 2020. This line of credit was fully repaid and terminated as at December 31, 2020.

During the year ended December 31, 2020, NX Gold entered into a credit agreement for a line of credit of up to BRL $7.5 million at an interest rate of 14.30% per annum. NX Gold may drawdown on this line of credit at any time until February 22, 2022. The Company and MCSA provide unsecured guarantees for this credit agreement. At December 31, 2020, no amounts had been drawn from this line of credit.

During the year ended December 31, 2020, NX Gold entered into a credit agreement for a line of credit of up to BRL $8.0 million at an interest rate of CDI + 8.858%. NX Gold may drawdown on this line of credit at any time until September 20, 2021. At December 31, 2020, no amount has been drawn from this credit facility.

(d) Plural loan

During the year ended December 31, 2019, MCSA secured an equipment finance loan with Plural Bank for BRL $12.0 million for a term of 24 months and at an interest rate of 7% + CDI per annum. Concurrently, MCSA entered into an interest rate swap transaction and a foreign exchange swap transaction with Plural Bank whereby the floating interest of 7% + CDI on a notional amount of BRL $12.0 million was swapped for a fixed interest rate of 9.90%, and a notional principal amount of BRL $12.0 million was swapped for the USD currency at a foreign exchange rate of 3.9500. This interest rate and foreign exchange swap transactions are in effect for the term of the loan.

Page 24

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(e)        Debt repayments

Repayments of the principal portion of loans and borrowings is as follows:

2021	$	12,223
2022		36,998
2023		35,109
2024		84,112
2025		755
2026 and beyond		692
	$	169,889

10. Value Added, Payroll and Other Taxes

	December 31, 2020		December 31, 2019
Value-added taxes payable	$	3,420	$	2,865
Tax based on net sales of copper and gold		4,675		5,287
Federal sales tax		1,211		-
Social security installments (a)		2,841		9,519
Income taxes		1,280		1,108
Other taxes		1,402		909
Total value added, payroll and other taxes		14,829		19,688
Less: current portion of value added, payroll and other taxes		13,361		13,994
Non-current value added, payroll and other taxes	$	1,468	$	5,694

(a) The Company’s subsidiary, MCSA, has an agreement with the National Institute of Social Security in Brazil to pay outstanding social security contributions in installments over a period to 2024.

11. Provisions and Contingent Liabilities

	Mine Closure and Rehabilitation			Legal Claims			Total
Balance at December 31, 2018	$	27,354		$	4,155		$	31,509
Additions (reductions) due to change in estimated cash flows		2,266			(625	)		1,641
Unwinding of the discount		3,508			-			3,508
Settled		(1,786	)		-			(1,786	)
Foreign exchange		(1,145	)		(146	)		(1,291	)
Balance at December 31, 2019		30,197			3,384			33,581
Reductions due to change in estimates, including timing of cash flows		(3,803	)		(145	)		(3,948	)
Unwinding of the discount		902			-			902
Settled		(1,585	)		-			(1,585	)
Foreign exchange		(6,741	)		(759	)		(7,500	)
Balance at December 31, 2020	$	18,970		$	2,480		$	21,450

Page 25

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(a) Mine closure and rehabilitation

The Company’s provision for mine closure and rehabilitation consists of costs accrued based on the current best estimate of mine closure and reclamation activities that will be required upon completion of mining. The Company’s provision for future site closure and reclamation costs is based on the level of known disturbance at the reporting date, known legal requirements and cost estimates prepared by a third-party specialist.

Management used a pre-tax discount rates in the range of 5.75% – 7.37% (2019 – 4.34% - 6.5%) and an inflation factor in the range of 3.25% - 3.50% (2019 – 3.5% - 3.75%) in preparing the Company’s provision for mine closure and rehabilitation. Although the ultimate amount to be incurred is uncertain, based on development, legal requirements and estimated costs as at December 31, 2020, the undiscounted inflation-adjusted liability for provision for mine closure and rehabilitation is estimated to be approximately $37.0 million (2019 - $45.7 million), of which $31.4 million (2019 - $36.8 million) relates to MCSA and $5.6 million (2019 - $8.9 million) relates to NX Gold. The cash expenditures are expected to occur over a period of time extending several years after the projected closure, which for MCSA is in a range from 2026 to 2034 and for NX Gold is 2027.

(b) Legal claims

There are various legal actions that are in process against the Company’s Brazilian subsidiaries related to labor, civil and tax matters. Based on an analysis of individual judicial and administrative legal claims, the following provision has been made for probable losses associated with these claims:

	December 31, 2020		December 31, 2019
Labour claims (i)	$	2,416	$	3,311
Tax claims (ii)		-		73
Other claims		64		-
	$	2,480	$	3,384

(i) Labor claims

The labor claims related primarily to claims made by existing and former employees for alleged travel time reimbursements, overtime and severance payments. Of the claims made, the Company has assessed, with the assistance of its legal counsel, that the probable loss on such claims is $2.4 million and such amount has been accrued.

(ii) Tax claims

The provisions for tax claims relate to tax assessments, interest and penalties resulting from unpaid income and social contribution taxes by MCSA.

In relation to the above-mentioned claims and those discussed in Note 11(c) below, MCSA and NX Gold were required to place a total of $0.5 million in trust as of December 31, 2020 (December 31, 2019 - $1.2 million), which is included in Deposits on the statement of financial position.

(c) Contingent liabilities

As of December 31, 2020, based on the opinion of its legal advisers, the Company has not recognized a provision for the following claims of MCSA and NX Gold as it is not probable that a cash outflow will occur.

Page 26

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

	December 31, 2020		December 31, 2019
Social security tax (i)	$	2,879	$	3,681
Taxes (ii)		11,633		14,990
Labour (refer to note 11(b)(i))		968		6,303
Mining and other (iii)		6,346		6,080
	$	21,826	$	31,054

(i) Social security tax

Social security claims relate to potential social security tax payments related to past payments to employees, including profit sharing, and payments made to external contractors. The Company strongly believes, based on precedent court case rulings, that part of the claim will be cancelled after administrative and judicial discussions. The estimated portion of the claim expected to be cancelled of $2.9 million is included in the table above.

(ii) Tax

There are 121 tax claims (2019 – 129 tax claims) against MCSA which were evaluated as possible, but not probable, losses by external legal counsel. The main subjects under discussion for the tax claims involve the validity of tax credits used to offset federal taxes.

(iii) Mining

In June 2019, MCSA was notified of five administrative claims filed by the Nacional Mining Agency regarding alleged differences in the calculation of certain sales taxes on mining revenue by MCSA. The Company, based on the opinion of its legal advisors, does not believe such claims will result in a probable cash outflow.

12. Share Capital

As at December 31, 2020, the Company’s authorized share capital consists of an unlimited number of common shares without par value. As at December 31, 2020, 87,879,261 common shares were outstanding.

(a) Options

On January 2, 2019, the Company granted 125,000 options to directors of the Company at an exercise price of CAD$9.80 per share with a term to expiry of five years. These options vested immediately, and their total fair value on the grant date was $0.5 million.

On August 15, 2019, the Company granted 40,000 options to directors of the Company at an exercise price of CAD$21.09 per share with a term to expiry of five years. 23,828 of these options vested immediately, while 16,172 will vest upon shareholder approval. Their total fair value on the grant date was $0.3 million.

On December 12, 2019, the Company granted 470,228 options to certain officers, directors, consultants and employees of the Company at an exercise price of CAD$20.52 per share with a term to expiry of five years. These stock options vest in three equal installments on each annual anniversary date from the date of grant. The total fair value of these options on the grant date was $2.7 million, which is recognized over the vesting period.

Page 27

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

On January 2, 2020, the Company granted 73,456 options to directors and certain employees of the Company at an exercise price of CAD$23.42 per share with a term to expiry of five years. The 43,456 options to directors vested immediately, while the 30,000 options to employees vest in three equal installments on each annual anniversary date from the date of grant. The total fair value of these options on the grant date was $0.5 million, which is recognized over the vesting period.

On December 17, 2020, the Company granted 415,839 options to certain officers, directors, consultants and employees of the Company at an exercise price of CAD$18.90 per share with a term to expiry of five years. 25,207 options to directors vested immediately, while the remaining 390,632 stock options vest in three equal installments on each annual anniversary date from the date of grant. The total fair value of these options on the grant date was $2.4 million, which is recognized over the vesting period.

	Number of Stock Options			Weighted Average Exercise Price
Outstanding stock options, December 31, 2018		4,924,519			4.64
Issued		635,228			14.20
Exercised		(498,330	)		2.75
Outstanding stock options, December 31, 2019		5,061,417		$	6.23
Issued		489,295			15.38
Exercised		(908,949	)		3.13
Outstanding stock options, December 31, 2020		4,641,763		$	7.91

The weighted average share price on the date of exercise for options exercised during the year ended December 31, 2020 was $13.74 (year ended December 31, 2019 - $14.60).

As at December 31, 2020, the following stock options were outstanding:

Expiry Date	Number of Stock Options		Weighted Average Exercise Price		Vested and Exercisable Number of Stock Options		Weighted Average Remaining Life in Years
May 15, 2022		415,334		1.50 USD		415,334		1.37
July 10, 2022		60,000		1.50 USD		60,000		1.52
November 24, 2022		318,000		6.48 CAD		318,000		1.90
December 7, 2022		1,300,001		6.74 CAD		1,300,001		1.93
January 18, 2023		60,000		7.95 CAD		40,000		2.05
January 23, 2023		41,667		7.76 CAD		41,667		2.06
June 19, 2023		144,000		10.25 CAD		94,000		2.47
July 16, 2023		100,000		9.01 CAD		33,332		2.54
December 31, 2023		1,078,238		9.76 CAD		693,065		3.00
January 2, 2024		125,000		9.80 CAD		125,000		3.01
August 15, 2024		40,000		21.09 CAD		40,000		3.62
December 12, 2024		470,228		20.52 CAD		156,734		3.95
January 2, 2025		73,456		23.42 CAD		43,456		4.01
December 17, 2025		415,839		18.90 CAD		25,207		4.96
		4,641,763		7.91 USD		3,385,796		2.71

In determining the weighted average exercise price of all outstanding options in the tables above and below, the CAD prices were converted to USD at the December 31, 2020 exchange rate of 1.2732.

Page 28

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The fair value of options granted in the years ended December 31, 2020 and 2019 was determined using the Black-Scholes option pricing model. The weighted average inputs used in the measurement of fair values at grant date of the options are the following:

	2020			2019
Expected term (years)		3.0			3.0
Forfeiture rate		0	%		0	%
Volatility		53	%		53	%
Dividend yield		0	%		0	%
Risk-free interest rate		0.58	%		1.68	%
Weighted-average fair value per option	$	6.00		$	5.42

For the year ended December 31, 2020, the Company recorded share-based compensation of $3.9 million (year ended December 31, 2019 - $4.7 million) with respect to its outstanding stock options.

Subsequent to December 31, 2020, 155,982 options were exercised for total proceeds of $1.0 million.

(b) Share Unit Plan

The Company has a share unit plan (the “Share Unit Plan”) pursuant to which the Compensation Committee may grant share units to any director, officer, employee, or consultant of the Company or its subsidiaries. At the time of grant of a share unit, the Compensation Committee, may establish performance conditions for the vesting of the share units. The performance conditions may be graduated such that different percentages (which may be greater or lower than 100%) of the share units in a grant become vested depending on the satisfaction of one or more performance conditions. Performance conditions may include terms or conditions relating to: (i) the market price of the common shares; (ii) the return to holders of common shares, with or without reference to other comparable companies; (iii) the financial performance or results of the Company or its subsidiaries; (iv) the achievement of performance conditions or other performance criteria relating to the Company or its subsidiaries; (v) any other terms and conditions the Compensation Committee may in its sole discretion determine with respect to vesting or the acceleration of vesting; and (vi) the vesting date of the share units. The Compensation Committee may, in its discretion, subsequent to the grant of a share unit, waive any such performance condition or determine that it has been satisfied subject to applicable law. Each share unit entitles the holder thereof to receive one common share, without payment of additional consideration, on the redemption date selected by the Compensation Committee following the date of vesting of such share unit, which will be within 30 days of the date of vesting, or at a later deferred date, subject to certain exception and restrictions.

During the year ended December 31, 2020, 290,298 share units (year ended December 31, 2019 – 225,659 share units) were issued to certain officers, consultants and employees of the Company and as at December 31, 2020, 727,761 share units (December 31, 2019 - 437,463 share units) are outstanding. These share units will vest three years from the date of grant by the Compensation Committee and the number of share units that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain market and non-market performance conditions. Each vested share unit entitles the holder thereof to receive on or about the applicable date of vesting of such share unit (i) one common share; (ii) a cash amount equal to the fair market value of one common share as at the applicable date of vesting; or (iii) a combination of (i) and (ii), as determined by the Compensation Committee in its sole discretion. The Company currently intends to settle these share units using common shares. Accordingly, they are classified as equity settled instruments.

Page 29

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

For the share units with non-market performance conditions, the fair value of the share units granted was determined using the share price at the date of grant. For the share units with market performance conditions, the fair value of the share units granted was determined using a Geometric Brownian Motion model. The weighted average inputs used in the measurement of fair values at grant date of the share units issued are as follows:

	2020			2019
Expected term (years)		3.0			3.0
Forfeiture rate		0	%		0	%
Volatility		44	%		45	%
Dividend yield		0	%		0	%
Risk-free interest rate		0.30	%		1.69	%
Weighted-average fair value per Share Unit	$	18.95		$	18.97

During the year ended December 31, 2020, the Company recorded share-based compensation of $3.9 million (year ended December 31, 2019 - $1.0 million) with respect to the share units.

(c) Deferred Share Unit Plan

On December 12, 2019, a Deferred Share Unit Plan (“DSU Plan”) was established by the Board as a component of our compensation for independent directors. Only independent directors are eligible to participate and to receive deferred share units (“DSUs”) under the DSU Plan. DSUs may be awarded by the Board from time to time to provide independent directors with appropriate equity-based compensation for the services they render to the Company and may be subject to terms and conditions with respect to vesting of such DSUs. In addition, independent directors may elect to receive a portion or all of their respective annual cash remuneration in the form of DSUs, which will be fully vested upon such grant. The number of DSUs to be awarded to a participant under the DSU Plan is determined by dividing the portion of that participant’s annual cash remuneration by the fair market value of a common share on the last day of the quarter in which such portion of the annual cash remuneration was earned. Pursuant to the DSU Plan, DSUs may only be settled by way of cash payment. A participant is not entitled to payment in respect of the DSUs until his or her death, retirement or removal from the Board. The settlement amount of each DSU is based on the fair market value of a common share on the DSU redemption date multiplied by the number of DSUs being redeemed.

During the year ended December 31, 2020, 79,230 DSUs (year ended December 31, 2019 - nil) were issued to independent directors.

As at December 31, 2020, the fair value of the DSU liability was $1.3 million (December 31, 2019 - $nil) which has been recognized in accounts payable and accrued liabilities with a corresponding $1.3 million recognized in share-based compensation expense for the year ended December 31, 2020.

(d) Warrants

As at December 31, 2020, 1,599,996 (December 31, 2019 - 2,866,662) common share purchase warrants were outstanding with a weighted average exercise price of $1.20 and a weighted average remaining contractual life of 0.95 years. 1,266,666 warrants were exercised during the year ended December 31, 2020 for gross proceeds of $1.5 million (year ended December 31, 2019 – 466,666 warrants for gross proceeds of $0.6 million).

Subsequent to December 31, 2020, 66,666 warrants were exercised for gross proceeds of $0.1 million.

Page 30

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(e) Net Income per Share

	Year ended  December 31, 2020		Year ended  December 31, 2019
Weighted average number of common shares outstanding		86,368,535		85,244,277
Dilutive effect of warrants		2,397,518		2,788,885
Dilutive effect of stock options		2,355,933		2,919,799
Dilutive effect of Share Units		1,091,642		437,464
Weighted average number of diluted common shares outstanding		92,213,628		91,390,425
Net income attributable to owners of the Company	$	51,622	$	91,883
Basic net income per share attributable to owners of the Company		0.60		1.08
Diluted net income per share attributable to owners of the Company		0.56		1.01

13. Revenue

	Year ended  December 31, 2020		Year ended   December 31, 2019
Copper concentrate
- sales within Brazil	$	161,803	$	176,885
- export sales		96,852		69,499
- price adjustments on provisionally priced sales		2,233		(187	)
Gold
- export sales		63,188		38,646
	$	324,076	$	284,843

Under the terms of the Company’s contract with its primary customer, sales are provisionally priced on the date of sale based on the previous month’s average copper price. The final sales price for all shipments in a month is determined at the end of the month in which the sale is recognized. As at December 31, 2020, there were no sales subject to provisional pricing. During the year ended December 31, 2020, the Company recognized $2.2 million (year ended December 31, 2019 - $0.2 million) in price adjustments related to provisionally priced sales.

14. Cost of Product Sold

	Year ended  December 31, 2020		Year ended  December 31, 2019
Materials	$	18,912	$	21,788
Salaries and benefits		30,044		40,787
Depreciation and depletion		39,212		46,014
Contracted services		18,463		23,691
Maintenance costs		14,672		18,383
Utilities		8,728		11,154
Other costs		554		1,000
	$	130,585	$	162,817

Page 31

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

15. General and Administrative Expenses

	Year ended  December 31, 2020			Year ended   December 31, 2019
Accounting and legal	$	1,079		$	1,507
Amortization and depreciation		136			157
Office and sundry		7,066			7,192
Provisions		(145	)		(625	)
Salaries and consulting fees		12,206			13,427
Incentive payments		6,116			8,684
Transfer agent and filing fees		295			206
Travel and conference		1,174			2,269
	$	27,927		$	32,817

16. Finance Expense

	Year ended  December 31, 2020		Year ended   December 31, 2019
Interest on loans and borrowings	$	9,921	$	11,236
Loss on interest rate swap derivatives		2,720		1,799
Accretion of mine closure and rehabilitation provision		902		3,508
Commitment fees		484		1,681
Interest on lease liabilities		229		366
Other finance expenses		1,193		1,838
	$	15,449	$	20,428

17. Foreign Exchange Loss

The following foreign exchange gains (losses) arise as a result of balances and transactions in the Company’s Brazilian subsidiaries that are denominated in currencies other than the Brazilian Reais (BRL$), which is their functional currency.

	Year ended  December 31, 2020			Year ended   December 31, 2019
Foreign exchange on USD denominated debt in Brazil	$	(24,190	)	$	(4,406	)
Realized foreign exchange on derivative contracts (note 21)		(20,804	)		(1,011	)
Unrealized foreign exchange on derivative contracts (note 21)		(34,548	)		(250	)
Other		(263	)		519
	$	(79,805	)	$	(5,148	)

18. Recovery of Value Added Taxes

During the year ended December 31, 2020, the Company recognized a recovery of $8.9 million in net income related to value added taxes based on the tax treatment applicable to depletion charges. This recovery during 2020 was recognized as a result of a study conducted to revisit certain tax positions, which concluded that it is probable that additional tax credits are available to be used to offset a variety of taxes. During the year ended December 31, 2019, the Company recognized a recovery of $21.6 million in net income related to value added taxes previously paid on sales in Brazil. The recovery during 2019 was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant taxing authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim and were not recorded until such amounts were considered probable of being confirmed. These credits can be used to offset the payment of a variety of other taxes, including income taxes and taxes on future sales.

Page 32

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Of the recoveries recognized in 2019 and 2020, $15.3 million has been applied to taxes during the 2020 year (year ended December 31, 2019 - $3.2 million) and $12.0 million has been included in other current assets (December 31, 2019 - $12.2 million) based on the expected timing of their use, with no amounts (December 31, 2019 - $6.2 million) recognized in other non-current assets in the statement of financial position.

19. Income Taxes

(a) Reconciliation of income taxes

A reconciliation of the income tax expense to the amount calculated using the Company’s combined Canadian federal and provincial statutory income tax rate of 27% (2019 – 27%) is as follows:

	Year Ended December 31, 2020			Year Ended December 31, 2019
Net income in the year before tax	$	61,423		$	74,829
Tax rate		27	%		27	%
Income tax expense at statutory rate	$	16,584		$	20,204
Tax effect of:
Difference in tax rate of foreign jurisdictions		(6,227	)		(7,557	)
Non-deductible (taxable) items		(1,792	)		(6,334	)
Change in temporary differences not previously recognized		(113	)		(24,570	)
Other		473			631
Income tax expense (recovery)	$	8,925		$	(17,626	)

	Year Ended December 31, 2020			Year Ended December 31, 2019
Current income tax:
Relating to current income tax charge	$	9,675		$	10,645
Deferred income tax:
Relating to recognition of previously unrecognized temporary differences		-			(33,836	)
Relating to origination and reversal of temporary differences		(750	)		5,565
Income tax expense (recovery) recognized in net income	$	8,925		$	(17,626	)
Income tax recovery recognized in other comprehensive income		(3,073	)		-
Total income tax expense (recovery)		5,852			(17,626	)

Page 33

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(b) Deferred income tax assets (liabilities)

The general movement in the deferred income tax asset (liability) is as follows:

	Year Ended December 31, 2020			Year Ended December 31, 2019
At the beginning of the year	$	13,099		$	(15,811	)
Deferred income tax recovery (expense)		750			28,271
Income tax expense (recovery) recognized in OCI		3,073			-
Foreign exchange		(2,699	)		639
At the end of the year	$	14,223		$	13,099

Recognized deferred tax and assets and liabilities consist of the following:

	December 31, 2020			December 31, 2019
Deferred tax assets:
Non-capital losses - Brazil	$	15,688		$	28,793
Foreign exchange - Brazil	$	9,412		$	1,066
Other - Brazil		2,167			2,126
Mine closure and rehabilitation provision - Brazil		3,110			4,605
Non-capital losses - Canada		737			317
Financing fees and other - Canada		823			1,349
		31,937			38,256
Deferred tax liabilities
Mineral property, plant and equipment - Brazil		(6,179	)		(9,612	)
Loans and borrowings - Brazil		(9,431	)		(12,192	)
Other - Brazil		(544	)		(1,687	)
Loans and borrowings - Canada		(1,560	)		(1,666	)
		(17,714	)		(25,157	)
Net deferred income tax assets (liabilities)	$	14,223		$	13,099

Deferred tax assets of $13.5 million (December 31, 2019 - $11.7 million) have not been recognized for the following deductible temporary differences as it is not probable that the benefits of these temporary differences will be realized:

	Year Ended December 31, 2020				Year Ended December 31, 2019
	Brazil		Canada		Brazil		Canada
Exploration and evaluation assets	$	37,213	$	-	$	47,986	$	-
Mineral property, plant and equipment		-		90		-		72
Non-capital losses		-		22,194		-		14,196
Other		-		7,238		-		4,251
	$	37,213	$	29,522	$	47,986	$	18,519

The Company has loss carry forwards in Brazil totalling $46.7 million (December 31, 2019 - $83.0 million) which may be carried forward indefinitely to offset future taxable income in Brazil. Use of these losses is limited to 30% of taxable income annually. The Company also has loss carry forwards in Canada totalling $24.9 million (December 31, 2019 - $15.4 million) which may be carried forward for 20 years to offset future taxable income, which expire between 2036 and 2040.

Page 34

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

20. Related Party Transactions

Key management personnel consist of the Company’s directors and officers and their compensation includes director retainer fees and management salaries paid to these individuals, as well as share-based compensation. The aggregate value of compensation paid to key management personnel for the year ended December 31, 2020 was $7.4 million ($7.5 million for the year ended December 31, 2019). In addition, 287,281 options, 197,269 share units and 79,230 DSUs were issued to key management personnel and non-executive directors during the year ended December 31, 2020 (444,265 options and 171,754 share units for the year ended December 31, 2019). For key management personnel, $5.1 million was recognized in share-based compensation expense for the year ended December 31, 2020 for options, share units, and DSUs issued ($4.1 million for the year ended December 31, 2019).

During the year ended December 31, 2020, key management personnel exercised 408,555 options and 1,266,666 warrants for total cash proceeds to the Company of $2.7 million (286,666 options and 300,000 warrants for total cash proceeds of $1.0 million for the year ended December 31, 2019).

As at December 31, 2020, $3.7 million was payable to key management as incentive compensation and is included in accounts payable and accrued liabilities in the statement of financial position (December 31, 2019 - $3.9 million). Such amounts are unsecured, non-interest bearing and will be paid under normal trade terms.

21. Financial Instruments

Fair value

Fair values of financial assets and liabilities are determined based on available market information and valuation methodologies appropriate to each situation. However, some judgments are required in the interpretation of the market data to produce the most appropriate fair value estimates. The use of different market information and/or evaluation methodologies may have a material effect on the fair value amounts.

As at December 31, 2020, derivatives were measured at fair value based on Level 2 inputs.

The carrying values of cash and cash equivalents, accounts receivable, deposits, and accounts payable and accrued liabilities approximate their fair values due to their short terms to maturity or market rates of interest used to discount amounts. The carrying value of value added, payroll and other taxes approximate fair value based on the discount rate applied. At December 31, 2020, the carrying value of loans and borrowings is $168.1 million while the fair value is approximately $169.9 million. The stated interest rates are a close approximation of market rates of interest at December 31, 2020 (Level 2 of the fair value hierarchy).

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers. The carrying amount of the financial assets below represents the maximum credit risk exposure as at December 31, 2020 and December 31, 2019:

Page 35

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

	December 31, 2020		December 31, 2019
Cash and cash equivalents	$	62,508	$	21,485
Restricted cash		-		1,500
Accounts receivable		20,353		7,680
Deposits and other non-current assets		595		2,396
	$	83,456	$	33,061

The Company invests cash and cash equivalents with financial institutions that are financially sound based on their credit rating. The Company’s exposure to credit risk associated with accounts receivable is influenced mainly by the individual characteristics of each customer. The Company currently has only three significant customers, all of which have no history of credit default with the Company. The Company has not incurred credit losses during the years ended December 31, 2020 and 2019 nor recognized a provision for credit losses.

Liquidity risk

Liquidity risk is the risk associated with the difficulties that the Company may have meeting the obligations associated with financial liabilities that are settled with cash payments or with another financial asset. The Company’s approach to liquidity management is to ensure as much as possible that sufficient liquidity exists to meet their maturity obligations on the expiration dates, under normal and stressful conditions, without causing unacceptable losses or with risk of undermining the normal operation of the Company.

The table below shows the Company’s maturity of non-derivative financial liabilities on December 31, 2020:

Non-derivative Financial Liabilities	Carrying  value		Contractual  cash flows		Up to 12  months		1-2 years		3-5 years		More than 5  years
Loans and borrowings	$	168,102	$	169,889	$	12,223	$	36,998	$	119,976	$	692
Interest on loans and borrowings		-		15,025		5,859		4,863		4,296		7
Accounts payable and accrued liabilities		37,878		37,878		37,878		-		-		-
Value added, payroll and other taxes		14,829		16,332		13,361		1,484		1,487		-
	$	220,809	$	239,124	$	69,321	$	43,345	$	125,759	$	699

The Company also has derivative financial liabilities for foreign exchange and interest rate derivatives whose notional amounts and maturity information is disclosed below under foreign exchange currency risk and interest rate risk.

Market risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity prices. The purpose of market risk management is to manage and control exposures to market risks, within acceptable parameters, while optimizing return.

The Company may use derivatives, including forward contracts and swap contracts, to manage market risks.

(i) Foreign exchange currency risk

The Company’s subsidiaries in Brazil are exposed to exchange risks related to the US dollars and Euros. In order to minimize currency mismatches, the Company monitors its cash flow projections considering future sales expectations indexed to US dollar variation in relation to the cash requirement to settle the existing financings.

Page 36

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The Company’s exposure to foreign exchange currency risk at December 31, 2020 relates to $7.4 million (December 31, 2019 – $9.6 million) in loans and borrowings of MCSA denominated in US dollars and Euros. In addition, the Company is also exposed to foreign exchange currency risk at December 31, 2020 on $83.1 million due to an intercompany loan balance (December 31, 2019 - $97.8 million) which has contractual repayment terms. Strengthening (weakening) in the Brazilian Real against the US dollar at December 1, 2020 by 10% and 20%, would have increased (decreased) pre-tax net income by $8.9 million and $17.7 million, respectively (2019 – $10.3 million and $20.7 million). Strengthening (weakening) in the Brazilian Real against the Euro at December 31, 2020 by 10% and 20%, would have increased (decreased) pre-tax net income by $0.2 million and $0.4 million, respectively (2019– $0.4 million and $0.8 million). This analysis is based on the foreign currency exchange variation rate that the Company considered to be reasonably possible at the end of the year. The analysis assumes that all other variables, especially interest rates, are held constant.

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage market risks. At December 31, 2020, the Company has entered into foreign exchange collar contracts at zero cost for notional amounts of $285.7 million with an average floor rate of 4.05 BRL to US Dollar and an average cap rate of 4.76 BRL to US Dollar (December 31, 2019 - notional amount of $336.6 million in foreign exchange forward collar contracts). The maturity dates of these contracts are from January 27, 2021 to July 27, 2022 and are financially settled on a net basis. The fair value of these contracts at December 31, 2020 was a liability of $34.5 million, (December 31, 2019 - $nil) which is included in Derivatives in the statement of financial position. The fair value of these forward contracts as at December 31, 2020 was determined using an option pricing mode with the following assumptions: discount rate of 5.015%, foreign exchange rate of approximately 5.20, and volatility of 7.46% - 21.20%. The change in fair value of foreign exchange collar contracts was a loss of $34.5 million for the year ended December 31, 2020 (a loss of $0.3 million for the year ended December 31, 2019) and has been recognized in foreign exchange loss. In addition, during the year ended December 31, 2020, the Company recognized a realized loss of $20.8 million ($1.0 million for the year ended December 31, 2019) related to the settlement of foreign currency forward collar contracts.

(ii) Interest rate risk

The Company is principally exposed to the variation in interest rates on loans and borrowings with variable rates of interest. Management reduces interest rate risk exposure by entering into loans and borrowings with fixed rates of interest or by entering into derivative instruments that fix the ultimate interest rate paid.

The Company is principally exposed to interest rate risk through its Term Facilities of $150.0 million, Brazilian Real denominated bank loans of $4.5 million, Brazilian Real denominated lines of credit of $1.4 million, and Brazilian Real denominated equipment finance loans of $1.1 million. Based on the Company’s net exposure at December 31, 2020, a 1% change in the variable rates would have an impact of $1.6 million on pre-tax annual net income, without consideration of the effects of the interest rate swap contract below.

In order to mitigate the above volatility due to variable rates on loans, as at December 31, 2020, the Company has entered into an interest rate swap contract to manage interest rate risk (see note 9(a)). At December 31, 2020, the floating interest on a notional amount of $60.0 million was swapped for a fixed interest rate of 2.69%. This interest rate swap transaction is in effect for the majority of the term of the Term Facility (note 9), with the notional amount reduced over time. The fair value of this contract at December 31, 2020 was a liability of $2.5 million (December 31, 2019 - $1.7 million) and was included in Derivatives in the statement of financial position. The fair value of this swap contracts as at December 31, 2020 was determined using a discounted cash flow model with the following assumptions: discount rates of 0.017% – 0.298% and forward foreign exchange rates of 0.421% - 0.164%. The realized loss on the interest rate swap contract was $1.2 million for the year ended December 31, 2020 (realized loss of $0.1 million for the year ended December 31, 2019) and was included in finance expense. In addition, the Company recognized an unrealized loss of $0.8 million on the interest rate swap contract for the year ended December 31, 2020 (unrealized loss of $1.6 million for the year ended December 31, 2019), which was included in finance expense.

Page 37

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

In addition, as at December 31, 2020, MCSA has entered into an interest rate and currency swap contract on the Plural Loan (see note 9). At December 31, 2020, the floating interest on a notional amount of BRL$12 million was swapped for a fixed interest rate of 9.9% and the BRL currency on the loan was swapped for USD at a rate of 3.95. The fair value of this contract at December 31, 2020 was a liability of $0.3 million (December 31, 2019 - nil) and is included in Derivatives in the statement of financial position. The realized loss on this swap contract was $0.4 million for the year ended December 31, 2020 and was included in finance expense. In addition, the Company recognized an unrealized loss of $0.3 million on the swap contract for the year ended December 31, 2020, which was also included in finance expense.

(iii) Price risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage commodity price risks. At December 31, 2020, the Company has not entered into any commodity derivative contracts. The Company recognized a realized loss of $1.4 million for the year ended December 31, 2019 related to the settlement of commodity forward contracts.

22. Capital Management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue the development and production of its mine properties and to maintain a flexible capital structure for its projects for the benefit of its stakeholders.

In the management of capital, the Company includes the components of shareholders’ equity and debt facilities.

The Company manages the capital structure and makes adjustments to it considering changes in the economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new loans and borrowings, common shares, or acquire or dispose of assets.

Management reviews the capital structure on a regular basis to ensure that the above-noted objectives are met.

Certain loan agreements contain operating and financial covenants that could restrict the ability of the Company and its subsidiary, MCSA, to, among other things, incur additional indebtedness needed to fund its respective operations, pay dividends or make other distributions, make investments, create liens, sell or transfer assets or enter into transactions with affiliates. There are no other restrictions or externally imposed capital requirements of the Company.

Page 38

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

23. Segment Disclosure

The Company’s operations are segmented by entity between MCSA, NX Gold and corporate head office, which is consistent with internal reporting purposes. The Company monitors the operating results of its operating segments separately for the purpose of making decisions about resource allocation and performance assessment.

Total revenue from MCSA is from two customers while total revenue from NX Gold is from one customer.

Segmented information is as follows:

Year ended December 31, 2020	MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	260,888		$	63,188		$	-		$	324,076
Depreciation and depletion		(35,674	)		(3,538	)		-			(39,212	)
Other cost of product sold expenses		(73,893	)		(17,480	)		-			(91,373	)
Cost of product sold		(109,567	)		(21,018	)		-			(130,585	)
Sales expenses		(4,937	)		(417	)		-			(5,354	)
Gross profit		146,384			41,753			-			188,137
Expenses
General and administrative		(16,471	)		(1,712	)		(9,744	)		(27,927	)
Share-based compensation		-			-			(9,064	)		(9,064	)
Finance income		430			143			773			1,346
Finance expenses		(5,789	)		(805	)		(8,855	)		(15,449	)
Foreign exchange loss		(77,235	)		(2,563	)		(7	)		(79,805	)
Recovery of value added taxes		7,564			1,322			-			8,886
Other income		(3,825	)		(876	)		-			(4,701	)
Income (loss) before taxes		51,058			37,262			(26,897	)		61,423
Current tax expense		(5,117	)		(4,558	)		-			(9,675	)
Deferred tax recovery		418			332			-			750
Net Income (Loss)	$	46,359		$	33,036		$	(26,897	)	$	52,498
Assets
Current	$	72,080		$	31,516		$	23,945		$	127,541
Non-current		340,487			26,364			2,707			369,558
Total Assets	$	412,567		$	57,880		$	26,652		$	497,099
Total Liabilities	$	102,789		$	19,467		$	160,768		$	283,024

Page 39

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Year ended December 31, 2019	MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	246,197		$	38,646		$	-		$	284,843
Depreciation and depletion		(40,107	)		(5,907	)		-			(46,014	)
Other cost of product sold expenses		(95,500	)		(21,303	)		-			(116,803	)
Cost of product sold		(135,607	)		(27,210	)		-			(162,817	)
Sales expenses		(4,962	)		-			-			(4,962	)
Gross profit		105,628			11,436			-			117,064
Expenses
General and administrative		(20,993	)		(2,308	)		(9,516	)		(32,817	)
Share-based compensation		-			-			(5,792	)		(5,792	)
Finance income		520			143			38			701
Finance expenses		(8,877	)		(1,366	)		(10,185	)		(20,428	)
Foreign exchange gain (loss)		(5,039	)		(76	)		(33	)		(5,148	)
Loss on debt settlement		(1,783	)		-			-			(1,783	)
Recovery of value added taxes		21,584			-			-			21,584
Other income		242			1,206			-			1,448
Income (loss) before taxes		91,282			9,035			(25,488	)		74,829
Current tax expense		(8,764	)		(1,881	)		-			(10,645	)
Deferred tax recovery		27,267			1,004			-			28,271
Net Income (Loss)	$	109,785		$	8,158		$	(25,488	)	$	92,455
Assets
Current	$	62,413		$	9,166		$	3,986		$	75,565
Non-current		364,117			20,180			2,812			387,109
Total Assets	$	426,530		$	29,346		$	6,798		$	462,674
Total Liabilities	$	107,045		$	15,934		$	140,637		$	263,616

Page 40

EX-99.4

Exhibit 99.4

ERO COPPER | 2020 ANNUAL REPORT | 1

 

Table of Contents

2020 Highlights	3
Letter from the Executive Chairman	4
Letter from the CEO	5
Management’s Discussion and Analysis	7
Consolidated Financial Statements	44
Corporate Information	88
Ero Copper is a first-quartile copper producer focused on continued development of an emerging world-class mineral district in Brazil
Our primary asset is a 99.6% interest in the Brazilian copper mining company, Mineração Caraíba S.A. (“MCSA”), 100% owner of the MCSA Mining Complex, which is comprised of operations located in the Curaçá Valley, Bahia State, Brazil, wherein the Company currently mines copper ore from the Pilar and Vermelhos underground mines

TSX : ERO

WWW.EROCOPPER.COM

ERO COPPER | 2020 ANNUAL REPORT | 2

 

Safety
■	Celebrated 1-year without an LTI at our flagship MCSA Mining Complex in September 2020
■	LTIFR of 0.27 on over seven million man-hours worked in 2020
Operating
■	Record annual copper production at the MCSA Mining Complex of 42,814 tonnes copper in concentrate
■	Record annual C1 cash costs of US$0.67/lb copper produced(*), a US$0.27/lb year-over-year improvement
■	Successfully installed and commissioned the high-intensity grinding (“HIG”) mill
■	Completed comprehensive ore sorting trial campaign with excellent results
Sustainability
■	Released inaugural sustainability report for the year ended 2019, setting the foundation for enhanced transparency and stakeholder alignment
Financial
■	Record revenues of US$324.1 million
■	Record cash flow from operations of US$162.8 million
■	Ending cash and cash equivalents of US$62.5 million
■	As a result of early and aggressive COVID-19 mitigation efforts across the organization, the Company experienced no material impacts from COVID-19 during 2020
Exploration
■	Approximately 235,000 meters drilled at MCSA Mining Complex
■	Delineated 7.5 Mt grading 1.86% Cu and 4.5 Mt grading 2.12% Cu of Indicated and Inferred mineral resources, respectively, within the new Deepening Extension Zone of the Pilar Mine
■	Successfully outlined a high-grade and low-cost six-year mine life for the NX Gold Mine
*C1 Cash Costs per pound of copper produced is a non-IFRS measure – see the Notes section within the Disclaimer of this Annual Report for additional information

ERO COPPER | 2020 ANNUAL REPORT | 3

 

Christopher Noel Dunn

Executive Chairman

“Ero Copper’s ESG performance and commitment to sustainability are focus areas of the Board and Management and we look forward to executing on the sustainability goals we set in 2020.”

2020 was a year of critical execution for Ero Copper. Despite 2020’s global macro-economic uncertainties and a challenging operating environment, it was another record year for the Company.

The Company’s achievements in 2020 are, yet again, an important reflection of the outstanding operating and committed management teams at our operations in Brazil. Our COVID-19 mitigation efforts that were implemented across our organization during the first quarter of 2020 allowed continuity and execution to plan at our operations and, more importantly, sought to ensure the health and well-being of our employees, contractors, their families and local communities throughout the year.

Strong performance in 2020 has placed the Company on solid foundation for future growth.

Our balance sheet is the strongest it has been since the Company’s inception. Record annual copper production, strong copper and gold commodity prices and a weak Brazilian Real relative to the US Dollar contributed to our record performance in 2020. Amendments made to the Company’s existing credit facilities in the first quarter of 2020 provide financial flexibility as we advance our organic growth initiatives in the years to come.

In 2020, we adopted five new corporate policies related to social responsibility, diversity environment, global human rights and health and safety. Additionally, our inaugural sustainability report, released in Q1 2020, highlights our commitment to all stakeholders of the Company. Ero Copper’s ESG performance and commitment to sustainability are focus areas of the Board and Management and we look forward to executing on the sustainability goals we set in 2020.

Christopher Noel Dunn

Executive Chairman

March 16, 2021

ERO COPPER | 2020 ANNUAL REPORT | 4

 

 

David Strang

Chief Executive Officer

“We will continue to focus on delivering low-capital and high-margin growth through innovation and operational excellence, while remaining fully committed to the health and well-being of our employees, contractors and their families in the years to come.”

Ero Copper had a very strong operating year in 2020. In addition, we meaningfully extended the mine life of the MCSA Mining Complex and the NX Gold Mine and continue to surface shareholder value through the drill bit.

COVID-19 Pandemic

Brazil, like much of the world, was significantly impacted by the COVID-19 pandemic in 2020. Our management and operating teams worked tirelessly throughout the year to keep our employees, contractors and communities safe. The tremendous mitigation efforts across our organization resulted in no material disruptions to our supply chains, sales channels or production during 2020. I am incredibly proud of our entire organization in achieving this result. Continuing to manage COVID-19 remains a top priority for our organization into 2021.

Safety Performance

Health and safety remains our top priority. I am extremely pleased to report that we had a record low lost time injury frequency rate of 0.27 across our organization in 2020. Additionally, our flagship MCSA Mining Complex celebrated 1 year without a lost time injury at the end of September 2020 – the first time in the 40+ year operating history of MCSA that this has been achieved.

2020 Operating Performance

At the MCSA Mining Complex we achieved record copper production, at the high-end of our annual production guidance, and at record-low C1 cash costs during the year.

Our adjusted net income attributable to owners of the Company was a record $117.3 million ($1.27 per diluted share) in 2020 compared to $86.3 million in 2019. We finished the year with $62.5 million in cash and cash equivalents, a $41.0 million improvement compared to year-end 2019.

The successful installation and commissioning of the HIG mill during a challenging year was a notable accomplishment and we continue to be pleased with the early improvement in metallurgical recoveries being realized.

ERO COPPER | 2020 ANNUAL REPORT | 5

A comprehensive ore sorting trial campaign was completed during 2020 confirming the amenability of several deposits within the Curaçá Valley to upgrading. Based on the strong operating results, we anticipate implementing the technology into the Vermelhos District open pit operations as outlined in the updated life of mine (“LOM”) plan, released in November 2020.

Our updated LOM plan for the MCSA Mining Complex represents a step-change improvement in the longevity of our business and establishes a strong foundation for future low-cost production. The new mine plan, including the Deepening Extension Project, provides the Company with long-term, low-cost production while retaining excess mill capacity for continued organic growth.

At the NX Gold Mine, challenging ground conditions encountered in the upper panel of the Santo Antonio Vein in early 2020 resulted in a reduction in our production guidance and full-year production. A modular paste-fill plant will be installed in 2021 to allow us to safely and efficiently mine the upper panel, while providing enhanced mining recovery throughout the mine.

The updated LOM plan for the NX Gold Mine, released in November 2020, represents a doubling of the mine life relative to the previously released LOM plan from 2019. We remain excited and encouraged by the continued drill results as well as regional potential of the broader NX Gold Mine District and expect the mine to continue producing gold well beyond the current mine life.

Outlook for 2021

Ero Copper is in the best position it has been in since inception and I look forward to another year of executing upon our vision for the Company. We will continue to focus on delivering low-capital and high-margin growth through innovation and operational excellence, while remaining fully committed to the health and well-being of our employees, contractors and their families in the years to come.

David Strang

Chief Executive Officer

March 16, 2021

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MANAGEMENT’S DISCUSSION

AND ANALYSIS

FOR THE YEAR ENDED DECEMBER 31, 2020

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MANAGEMENT’S DISCUSSION AND ANALYSIS

This Management’s Discussion and Analysis (“MD&A”) has been prepared as at March 16, 2021 and should be read in conjunction with the audited consolidated financial statements of Ero Copper Corp. (“Ero”, the “Company”, or “we”) as at, and for the year ended December 31, 2020, and related notes thereto, which are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”). All references in this MD&A to “Q4 2020” and “Q4 2019” are to the three months ended December 31, 2020 and December 31, 2019, respectively, and all references to “Fiscal 2020”, “Fiscal 2019”, and “Fiscal 2018” are to the years ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively. All dollar amounts are expressed in United States (“US”) dollars and tabular amounts are expressed in thousands of US dollars, unless otherwise indicated. References to “ $”, “US$”, “dollars”, or “USD” are to US dollars, references to “C$” are to Canadian dollars, and references to “R$” or “BRL” are to Brazilian Reais.

This MD&A refers to various non-IFRS measures, such as C1 cash cost of copper produced (per lb), C1 cash cost of gold produced (per ounce), all-in sustaining cost (“AISC”) of gold produced (per ounce), EBITDA, Adjusted EBITDA, Adjusted net income attributable to owners of the Company, Adjusted net income per share attributable to owners of the Company, Working Capital (Deficit), Available Liquidity, and Net Debt. Please refer to the section titled "NON-IFRS MEASURES" within this MD&A for a discussion of non-IFRS measures.

This MD&A contains “forward-looking information” that is subject to risk factors set out in a cautionary note contained at the end of this MD&A. The Company cannot assure investors that such information will prove to be accurate, and actual results and future events may differ materially from those anticipated in such information. The results for the periods presented are not necessarily indicative of the results that may be expected for any future period. Investors are cautioned not to place undue reliance on this forward-looking information. All information contained in this MD&A is current and has been approved by the Board of Directors of the Company (the “Board”) as of March 16, 2021, unless otherwise stated.

BUSINESS OVERVIEW

Ero, headquartered in Vancouver, B.C., is focused on copper production growth from the MCSA Mining Complex located in Bahia State, Brazil, with over 40 years of operating history in the region. The Company's primary asset is a 99.6% interest in the Brazilian copper mining company, MCSA, 100% owner of the MCSA Mining Complex, which is comprised of operations located in the Curaçá Valley, Bahia State, Brazil, wherein the Company currently mines copper ore from the Pilar and Vermelhos underground mines, and the Boa Esperança development project, an IOCG-type copper project located in Pará, Brazil. The Company also owns 97.6% of the NX Gold Mine, an operating gold and silver mine located in Mato Grosso, Brazil. Additional information on the Company and its operations, including technical reports on the MCSA Mining Complex, Boa Esperança and NX Gold properties, can be found on the Company’s website (www.erocopper.com) and on SEDAR (www.sedar.com).

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HIGHLIGHTS

	2020 - Q4		2020 - Q3			2020		2019 - Q4			2019
Operating Information
Copper (MCSA Operations)
Ore Processed (tonnes)		483,447		553,148			2,271,625		589,065			2,424,592
Grade (% Cu)		2.26		2.18			2.08		2.16			1.93
Cu Production (tonnes)		10,018		10,961			42,814		11,526			42,318
Cu Production (lbs)		22,085,927		24,163,829			94,387,605		25,411,100			93,295,598
Cu Sold in Concentrate (tonnes)		10,265		11,530			42,813		11,595			42,759
Cu Sold in Concentrate (lbs)		22,629,431		25,420,164			94,387,312		25,562,212			94,267,101
C1 cash cost of copper produced (per lb)*	$	0.69	$	0.63		$	0.67	$	0.80		$	0.93
Gold (NX Gold Operations)
Au Production (ounces)		10,789		9,436			36,830		6,043			30,434
C1 cash cost of gold produced (per ounce)*	$	405	$	421		$	457	$	980		$	691
AISC of gold produced (per ounce)*	$	608	$	579		$	628	$	1,253		$	889
Financial information ($millions, except per share amounts)
Revenues	$	91.2	$	94.3		$	324.1	$	75.7		$	284.8
Gross profit	$	58.3	$	59.6		$	188.1	$	31.1		$	117.1
EBITDA	$	91.3	$	52.1		$	116.2	$	34.3		$	141.4
Adjusted EBITDA*	$	67.2	$	62.5		$	207.1	$	31.2		$	134.1
Cash flow from operations	$	38.6	$	44.4		$	162.8	$	35.9		$	127.8
Net income	$	66.3	$	31.4		$	52.5	$	45.4		$	92.5
Net income attributable to owners of the
Company	$	65.8	$	31.1		$	51.6	$	45.2		$	91.9
Net income per share attributable to owners of
the Company
- Basic	$	0.75	$	0.36		$	0.60	$	0.53		$	1.08
- Diluted	$	0.71	$	0.34		$	0.56	$	0.49		$	1.01
Adjusted net income attributable to owners of
the Company*	$	37.4	$	36.7		$	117.3	$	40.7		$	86.3
Adjusted net income per share attributable to
owners of the Company*
- Basic	$	0.43	$	0.42		$	1.36	$	0.47		$	1.01
- Diluted	$	0.40	$	0.40		$	1.27	$	0.44		$	0.94
Cash and Cash Equivalents	$	62.5	$	54.3		$	62.5	$	21.5		$	21.5
Working Capital (Deficit)*	$	35.8	$	(9.4	)	$	35.8	$	(4.9	)	$	(4.9	)
Net Debt*	$	105.6	$	118.4		$	105.6	$	136.4		$	136.4

*Please refer to the section titled "NON-IFRS MEASURES" within this MD&A for a discussion of non-IFRS measures. 

ERO COPPER | 2020 ANNUAL REVIEW | 9

2020 Highlights

2020 Operational Highlights

Strong year-end – full-year production guidance achieved, below revised operating cost guidance range

• Increased year-on-year copper production at high-end of Company’s guidance range with 42,814 tonnes of copper produced in concentrate.

• Approximately 2.3 million tonnes of ore grading 2.08% copper processed with average metallurgical recoveries of 90.5%.

• C1 cash cost of $0.67 per pound of copper produced, $0.03 cents below the low-end of the Company’s revised guidance range of $0.70 to $0.85 per pound of copper produced for 2020.

• Full-year C1 cash costs reflect a year-on-year reduction of $0.26 per pound of copper produced as compared to 2019.

• Advanced several key capital programs in 2020 including completion of the Company’s high-intensity grinding (“HIG”) Mill installation, ore-sorting pilot plant program, and drilling and integration of the Deepening Extension Project (as defined below) into the Company’s recently announced life-of-mine plan update for 2020.

• Achieved one-year without a lost-time injury at the Company’s MCSA Mining Complex prior to the end of 2020, a record in the mine’s 40 plus year operating history.

• Total annual gold and silver production at the NX Gold Mine of 36,830 ounces gold and 22,694 ounces silver at C1 cash costs of $457 per ounce of gold produced, in-line with the Company’s revised 2020 NX Gold guidance, and AISC of $628 per ounce of gold produced.

2020 Financial Highlights

Cash position and available lines of credit: Total cash and cash equivalents and available lines of credit at December 31, 2020 was $62.5 million and $11.6 million compared to $21.5 million and $30.0 million, respectively, at the end of 2019. The Company’s working capital improved from a deficit of $4.9 million at the end of 2019 to a surplus of $35.8 million at the end of 2020, primarily as a result of a record $162.8 million in cash flow from operations for Fiscal 2020, compared with $127.8 million in cash flow from operations for Fiscal 2019. As at the end of 2020, the Company had R$60.4 million in available undrawn lines of credit in Brazil.

Revenue: The Company increased year-on-year revenues from its copper operations at MCSA by 6.0%, totalling $260.9 million in 2020 compared to $246.2 million in 2019. The increase in revenue was primarily attributed to an increase in realized copper prices.

Year-on-year increase in gold revenue from the Company’s gold operations at NX Gold was a result of increased gold and silver prices and increased production volumes, resulting in an increase in gold revenue of 63.5% to $63.2 million in 2020 compared to $38.6 million in 2019.

Mine gross profit: The Company significantly increased year-on-year mine gross profit from its copper operations at MCSA totaling $146.4 million in 2020 compared to $105.6 million in 2019. The increase in mine gross profit was primarily driven by increased revenues from higher realized copper prices, increased copper concentrate sales, lower operating costs over the prior year as a result of higher grades processed, and a weakened BRL against the USD. The Company also recognized mine gross profit of $41.8 million in 2020 compared to $11.4 million in 2019 from its gold operations at NX Gold as a result of higher gold production volumes, higher gold sales, and higher realized gold prices.

Net income: The Company recognized net income attributable to the Company of $51.6 million (net income per share, basic, of $0.60) in 2020 compared to $91.9 million (net income per share, basic, of $1.08) in 2019. While revenue and mine gross profit increased, net income decreased, primarily driven by increased foreign exchange losses from the weakening of the BRL against the USD and increased income tax expense, partially offset by decreased costs associated with the weakened BRL in which cost is incurred. Additionally, during 2019, the Company recognized a recovery of $21.6 million in net income related to value added taxes in Brazil due to a 2017 Brazil Supreme Court ruling that concluded the relevant tax authorities had historically used an incorrect methodology to determine such taxes, as well as a $28.3 million net deferred tax recovery primarily resulting from the recognition of available tax losses and tax credits in MCSA. No such recoveries were recognized during 2020.

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Q4 2020 Highlights

Proactive mitigation of the potential impacts of the COVID-19 pandemic throughout 2020

• The Company continues to have no material disruption to operations, supply chains or sales channels as a result of the COVID-19 pandemic. Since the onset of the COVID-19 pandemic in early 2020, the Company has continued to take extraordinary measures to mitigate the impact of COVID-19 on its workforce and operations. Some of these measures include:

(i) eliminating all non-essential travel to and from the Company’s mining operations;

(ii) routine engagement with all suppliers and active stockpiling of key consumables to protect against any supply chain disruptions;

(iii) reducing physical interaction throughout the organization as much as possible by closing administrative offices and moving to a work-from-home format, increasing social distancing by limiting the number of employees travelling on provided buses between the Company’s mining communities and mines, limiting the number of employees in the cafeteria at any given time, cancelling all group meetings, implementing social-distancing for essential line-out meetings and encouraging work-from-home and video/telephone conferencing where feasible;

(iv) establishing COVID-19 committees with senior leadership and local health administrators for the regions in which the Company operates;

(v) purchasing thousands of COVID-19 testing kits for the Company’s operations, with the donation of a portion of these test kits, as well as other personal protective equipment, to each of the Company’s local municipalities to facilitate rapid testing throughout each community; and,

(vi) implementing wellness education, health screenings, and self-isolation protocols along with enhanced sanitization throughout the Company’s operations.

• The Company continues to closely monitor the COVID-19 pandemic and is engaged in active operational and financial contingency planning to prudently manage the potential impact of the pandemic on its operations.

Strong operational performance at MCSA Mining Complex and NX Gold Mine during Q4 2020

• 483,447 tonnes processed grading 2.26% copper producing 10,018 tonnes of copper in concentrate after metallurgical recoveries that averaged 91.7% during Q4 2020 at the MCSA Mining Complex.

• 45,574 tonnes of ore grading 7.72 grams per tonne gold producing 10,789 ounces of gold and 6,763 ounces of silver as by-product after metallurgical recoveries that averaged 95.4% during Q4 2020 at the NX Gold Mine.

• Q4 2020 C1 cash costs of $0.69 per pound of copper produced at the MCSA Mining Complex, C1 cash costs of $405 per ounce of gold produced and AISC of $608 per ounce of gold produced at the NX Gold Mine (see Non-IFRS Measures).

• As a result of strong operating and financial performance throughout 2020, the Company ended the period with a robust cash and cash equivalents position of $62.5 million, a quarter-on-quarter improvement of $8.2 million and a $41.0 million improvement since December 31, 2019.

2020 updated mineral resource, reserve and life-of-mine plans outline significant increases in mineral reserves and extension of mine life across the Company’s operations

• At the MCSA Mining Complex, significant year-on-year increases in contained copper within the Proven and Probable mineral reserves, Measured and Indicated, and Inferred mineral resource categories, were outlined with each increasing by 23%, 29% and 62% respectively, inclusive of the newly defined Deepening Extension Zone at the same long-term copper price assumption of US$2.75 per pound.

• Updated life-of-mine copper production for the MCSA Mining Complex, totalling approximately 480,800 tonnes of copper at an average C1 cash costs of $0.97 per pound of copper produced, at a US Dollar to Brazilian Real foreign exchange rate of 5.00.

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• At the NX Gold Mine, a 78% increase in contained gold within the Probable mineral reserve category was outlined, totalling 862,134 tonnes grading 8.83 grams per tonne containing 244,650 ounces of gold.

• Updated life-of-mine gold production from the NX Gold Mine totalling approximately 227,000 ounces of gold produced over a six-year mine life, at an average annual production rate of approximately 36,000 ounces of gold (approximately 41,400 ounces over the first four years) at life-of-mine (“LOM”) average C1 cash costs of US$505 per ounce of gold produced and life-of-mine average AISC of US$720 per ounce (see Non-IFRS Measures).

MCSA exploration programs continue to demonstrate continuity of high-grade mineralization post life-of-mine plan update as well as newly discovered PGM occurrences throughout the Curaçá Valley

• During the period, the Company identified an unexpected new zone of high-grade “Superpod” style mineralization in the south-central section of the zone that has the potential to meaningfully increase copper grades within the Deepening Extension Zone of the Pilar Mine. Results in this area include hole FC48155 that intersected 46.5 meters grading 4.96% copper including 36.5 meters grading 6.08% copper and 6.0 meters grading 11.98% copper. On the same section, hole FC48161 intersected 20.3 meters grading 4.76% copper including 9.5 meters grading 7.12% copper providing further evidence of high-grade mineralization.

• In addition, a new target zone, interpreted as a potential parallel lens at depth within the Pilar Mine, was identified approximately 70 to 120 meters east of the main Deepening Extension Zone. Initially defined by hole FC47173 that intersected 7.2 meters grading 3.28% copper including 3.0 meters grading 4.35% copper and hole FC5381 that intersected 6.0 meters grading 1.07% copper, drilled approximately 300 meters apart, the zone has been interpreted to extend approximately 600 meters in strike length.

• Exploration drilling in the Southern Vermelhos Corridor of the Vermelhos District continued to intercept stacked mineralized lenses within a modeled structural corridor, extending over 700 meters in strike length. Five drill rigs are scheduled to systematically drill this target area during 2021 and down-hole electromagnetic (“EM”) targeting work remains ongoing.

• Initial results from a program designed to evaluate platinum group metal (“PGM”) associations within the Curaçá Valley were received during the period. The program, which commenced in early-2020, has resulted in the interpretation of three distinct styles of PGM mineralization that can be observed in samples throughout each of the Company’s main operating districts. Occurrences of elevated PGMs have now been documented from near-surface open pit deposits to the deepest known extent of mineralization within the Pilar Mine. Results for each style of mineralization are highlighted by:

(i) Style 1, high-grade copper-nickel-PGMs (this style of mineralization shows similarities to footwall zones described within the Sudbury District, Canada and localized copper-rich mineralized zones at Noril’sk, Russia), highlighted by previously announced Siriema results: FSI-40, 9.1 meters grading 2.59% copper, 1.74% nickel and 1.61 grams per tonne (“gpt”) 4PGE+Au including 5.6 meters grading 3.37% copper, 2.59% nickel and 2.28gpt 4PGE+Au (platinum group elements (“PGEs”) in this context are defined as platinum, palladium, rhodium and ruthenium);

(ii) Style 2, high-grade PGM low-sulphide content, reef-style mineralization (this style of mineralization shows similarities described in PGM deposits, such as the Bushveld Complex, South Africa and some zones within the Marathon Intrusion, Canada), highlighted by: hole FC47139, within the Pilar Deepening Extension, 1.0 meter grading 0.76% copper, 0.05% nickel and 4.12gpt 4PGE+Au; and,

(iii) Style 3, copper-palladium rich (this style of mineralization shows similarities to zones described within the Sudbury District and Marathon Intrusion), highlighted by: FS-E002, a near-surface sample from beneath the Surubim open pit mine, 27.0 meters grading 2.04% copper, 0.06% nickel and 0.33gpt 4PGE+Au including 6.0 meters grading 3.03% copper, 0.13% nickel and 0.87gpt 4PGE+Au.

• Based upon these results, a comprehensive review of PGM occurrences, comprising approximately 5,000 additional samples, is underway to better understand continuity and significance of these initial results.

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Exploration of the Santo Antonio Vein at the NX Gold Mine continues to demonstrate continuity of mineralization

• The Company continued to have success in demonstrating down-plunge continuity and extensions of the high-grade mineralization of the Santo Antonio Vein at the NX Gold Mine. The results were highlighted during the period by hole SA89 that intersected 2.7 meters grading 15.38 grams per tonne gold, representing the deepest intercept drilled to date by the Company at the Santo Antonio Vein.

Q4 2020 Financial Report

• Cash flow from operations: Q4 2020 cash flow from operations was $38.6 million, an increase of $2.7 million from $35.9 million in Q4 2019.

• Adjusted net income per share (see Non-IFRS Measures): Q4 2020 adjusted net income per share was $0.43 and $0.40, on a basic and diluted basis, respectively, compared with Q4 2019 adjusted net income per share of $0.47 and $0.44, on a basic and diluted basis, respectively.

• Unrealized foreign exchange gains: Q4 2020 financial results were impacted by the strengthening of the BRL against the USD in comparison to the end of the third quarter of 2020, mainly through the change in the mark-to-market valuation of derivatives used to hedge BRL revenues. During Q4 2020, the Company recognized a $27.7 million non-cash valuation gain on its USD/BRL foreign exchange collars.

- The Company uses these structures to hedge Brazilian Real measured revenues. As a result of the COVID-19 pandemic and its impact on macro-economic interrelationships, there was a continual increase in implied volatility of the BRL versus USD.

- Generally accepted accounting standards dictate that the liability be recognized at fair value, which requires management to estimate fair value using a Black-Scholes valuation methodology and assumptions for the foreign exchange rate and volatility.

- The Company does not believe that this impact on the income statement reflects the underlying profitability of the Company as it provides no offset for the expected future benefits/costs of a lower/higher BRL/USD exchange rate on operating costs and capital expenditures of the Company’s underlying business. These benefits/costs may outweigh the Company’s projected hedge losses/gains that may result from these collars.

• Credit facilities amendment: Subsequent to the year ended December 31, 2020, the Company’s existing US$75 million term facility and US$75 million revolving credit facility previously entered into with a syndicate of Canadian financial institutions were amended with a US$150 million senior secured revolving credit facility (the “New Revolving Credit Facility”) payable entirely on March 31, 2025.

Benefits of the amendment include a reduction of up to 25 basis points in the Company’s cost of borrowing, depending on consolidated leverage ratio. The New Revolving Credit Facility will bear interest on a sliding scale at a rate of LIBOR plus 2.25% to 4.25% depending on the Company’s consolidated leverage ratio at the time. Commitment fees for any undrawn portion of the Revolving Credit Facility will also be on a sliding scale between 0.56% to 1.06%.

The New Credit Facility includes standard and customary terms and conditions with respect to fees, representations, warranties, and financial covenants that remain unchanged from prior amendments.

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REVIEW OF OPERATIONS

Mineração Caraíba S.A. (Vale do Curaçá):

	2020 - Q4		2020 - Q3		2020		2019 - Q4		2019
Operating Information
Copper (MCSA Operations)
Ore Processed (tonnes)		483,447		553,148		2,271,625		589,065		2,424,592
Grade (% Cu)		2.26		2.18		2.08		2.16		1.93
Cu Production (tonnes)		10,018		10,961		42,814		11,526		42,318
Cu Production (lbs)		22,085,927		24,163,829		94,387,605		25,411,100		93,295,598
Concentrate Grade (% Cu)		33.3		34.0		33.7		35.0		34.8
Recovery (%)		91.7		90.8		90.5		90.7		90.5
Concentrate Sales (tonnes)		30,416		34,324		127,007		33,926		122,966
Cu Sold in Concentrate (tonnes)		10,265		11,530		42,813		11,595		42,759
Cu Sold in Concentrate (lbs)		22,629,431		25,420,164		94,387,312		25,562,212		94,267,101
C1 cash cost of copper produced (per lb)	$	0.69	$	0.63	$	0.67	$	0.80	$	0.93

Q4 2020 was the culmination of a strong operating year for the Company’s MCSA Mining Complex, which despite the COVID-19 pandemic, continued to perform well. Quarter-on-quarter declines in tonnes mined, were offset by increases in copper grades (2.26% vs. 2.18% copper in Q3 2020) and metallurgical recoveries (91.7% vs. 90.8% in Q3 2020). Improved metallurgical recoveries were driven, in part, by the installation of commissioning of the Company’s new HIG Mill, which was completed at the end of Q3 2020. While feed system work remained ongoing during Q4 2020, the Company continues to expect an improvement in metallurgical recoveries in the future as a result of the successful implementation to date.

At the Pilar Mine, 356,016 tonnes of ore were mined grading 1.74% copper during Q4 2020 (as compared to 375,296 tonnes of ore mined grading 1.36% copper during Q3 2020). At the Vermelhos Mine, 187,659 tonnes of ore were mined grading 3.19% copper (as compared to 227,963 tonnes of ore mined grading 3.76% copper during Q3 2020). In total, contributions from both mines during the period resulted in 543,675 tonnes of ore mined grading 2.24% copper. For the full-year 2020, a total of 2,345,002 tonnes of ore grading 2.10% copper was mined. During Q4 2020, 483,447 tonnes of ore grading 2.26% copper was processed, producing 10,018 tonnes of copper after average metallurgical recoveries of 91.7%. For the full-year of 2020, a total of 2,271,625 tonnes of ore grading 2.08% copper was processed, producing 42,814 tonnes of copper after average metallurgical recoveries of 90.5%.

C1 cash costs per pound of copper produced averaged $0.69 (see Non-IFRS Measures) during Q4 2020, reflecting strong operational performance at the Company’s MCSA operations, continued weakness of the BRL versus the US dollar and strength in the price of gold and silver produced as by-products. Decreased copper production, a strengthening of the BRL vs. the US dollar relative to the prior period, and scheduled mill maintenance at year-end contributed to a $0.06 increase in C1 cash costs per pound of copper produced as compared to Q3 2020. Full-year 2020 C1 cash costs averaged $0.67 per pound of copper produced – a $0.26 decrease as compared to 2019.

During Q4 2020, the Company announced updated mineral resources, mineral reserves and an updated LOM plans for the MCSA Mining Complex encompassing the exploration drill programs conducted during the year. Within the MCSA Mining Complex LOM production plan, for the 2020 update, the Company included production, capital and operating cost projections based upon the mineral reserves derived from the Measured and Indicated mineral resources from within the Deepening Extension Zone of the Pilar Mine (the “Deepening Extension Project”), which was a core objective of the Company during the year. In addition, the Company included an independent preliminary economic assessment based upon the Inferred mineral resources within the Deepening Extension Zone of the Pilar Mine (the “Deepening Inferred Project”), that shows the expected synergies associated with utilizing the infrastructure that will be built in support of the Deepening Extension Project. With the inclusion of the Deepening Extension Project at the Pilar Mine, a significant increase in production from the current 1.2 million tonnes per annum of ore mined to approximately 2.2 million tonnes of ore mined is planned. The expansion of the Pilar Mine will be supported by the installation of a new 4.5 meter diameter external shaft, scheduled to commence construction in Q3 2021, that will not only support the planned increases in copper production at the Pilar Mine, as outlined in the LOM, but has also been designed to support the potential for longer term copper production increases from both the Deepening Inferred Project and as additional mineralization is defined. In keeping with the Company’s return on invested capital focus, the expansion of the mine and development of the infrastructure in support of the Deepening Extension Project is expected to be delivered at a low capital-intensity ratio of approximately US$1,677 per tonne of incremental copper production delivered.

ERO COPPER | 2020 ANNUAL REVIEW | 14

In addition, integration of ore sorting into the Company’s LOM plan for the Vermelhos District open pit deposits of N8/N9 and Siriema is expected to contribute to improved mill head-grades and maintaining first-quartile C1 cash costs over the LOM. In total, approximately 20 million tonnes of ore grading 0.56% are expected to be mined and sorted, producing a sorted mill-feed of approximately 8.9 million tonnes of ore grading 1.18% copper. As a result of the integration of ore sorting approximately 11.0 million tonnes of waste material will be prevented from being transported and processed at the Company’s mill over the LOM. In addition to the associated economic benefits, this reduction is expected to substantially reduce consumption of fresh-water, diesel and electricity as well as reduce flotation tailings generated per tonne of copper produced, further advancing the Company’s long-term environmental and sustainability commitments within the Curaçá Valley.

Please refer to the Company’s press releases dated November 30, 2020 for complete information related to the LOM plan for the MCSA Mining Complex.

On exploration, the Company’s organic growth strategy remains supported by one of the world’s largest exploration programs, which continued following the release of the latest LOM plan update. During Q4 2020, the Company continued to focus its exploration efforts on three primary exploration areas within the Curaçá Valley (please refer to the Company’s press release dated December 15, 2020 for complete results). These areas included:

(i) continued drilling of the Pilar Mine Deepening Extension Zone in an effort to further demonstrate high-grade continuity outside the previously known limits of mineralization within the mine;

(ii) extensional drilling of the Southern Vermelhos Corridor, a target zone extending over 700 meters in strike length between Siriema and the Vermelhos Mine to further evaluate continuity of mineralization and the potential for multiple “stacked” high-grade lenses; and,

(iii) a strategic review of PGM occurrences throughout the Curaçá Valley.

In the Pilar Mine, exploration activities during the period sought to commence a new phase of drilling following the release of the Company’s updated LOM to further demonstrate continuity of mineralization as well as upgrade the inferred mineral resources that comprise the Deepening Inferred Project. A surface drill program utilizing directional drilling technology to evaluate the mineralized potential of the Deepening Extension Zone north of section 57 continued as planned during the period and this program will continue into 2021. The known limits of mineralization within the Deepening Extension Zone, which remain open, extend over approximately 900 meters in strike length, over a total depth of approximately 525 meters and over average thicknesses ranging from 10 to 20 meters with localized thickening throughout the zone. Within the total strike length, a higher-grade continuous zone of approximately 400 to 500 meters in strike length continues to be supported in the central and northern segments of the target area, and a new zone of high-grade mineralization is emerging at depth in the south-central segment of this area. The zone remains open to the north and to depth. Five underground exploration drill rigs will continue to systematically drill the defined exploration target area within the Deepening Extension Zone in 2021.

Also within the Pilar Mine, a new zone of parallel mineralization at depth, and a new target zone, was identified during the period, located approximately 70 to 120 meters east of the main Deepening Extension Zone. Results during the period are highlighted by hole FC47173 that intersected 7.2 meters grading 3.28% copper including 3.0 meters grading 4.35% copper and hole FC5381 that intersected 6.0 meters grading 1.07% copper. The intercept in hole FC47173 is approximately 300 meters south of the intercept in hole FC5381, approximately 80 meters to the east of the main Deepening Extension Zone and approximately 400 meters south of previously drilled holes that also intersected this target area. The potential for a new, parallel structure extends over a north-south strike length of approximately 600 meters.

ERO COPPER | 2020 ANNUAL REVIEW | 15

In the Vermelhos District, approximately 80 kilometers to the north of the Caraíba Mill complex, which includes the high-grade operating Vermelhos Mine, exploration activities during the period focused on two primary objectives: (i) testing continuity of high-grade copper mineralization within the Southern Vermelhos Corridor and (ii) conducting down-hole EM surveys to identify high-grade exploration targets. Preliminary results of this program, which remains ongoing, continues to demonstrate the presence of multiple stacked mineralized lenses, including high-grade mineralization within the corridor. Five drill rigs are expected to be operational within the Southern Vermelhos Corridor during 2021 focused on systematic drill testing. The program has been designed on 50 meter drill spacing. Initially, the focus will be the northern section of the Southern Vermelhos Corridor given its proximity to the existing mine infrastructure of the Vermelhos Mine and the potential for exploration success to meaningfully enhance the near-term base-case grade profile through replacement of lower grade production in addition to extending mine life.

Following the discovery of the Siriema Deposit (within the Vermelhos District) in mid-2019 and, the discovery of the high-grade Keel Zone at Siriema at the end of 2019 (including new massive sulphide breccia zones containing elevated copper, nickel, cobalt and PGMs), the Company collected and sent a series of samples from each of the Company’s three primary operating districts of Vermelhos, Pilar and Surubim for additional PGM analysis to further evaluate the prevalence of PGMs within the broader Curaçá Valley. Based upon the assay results from this initial program, which were delayed due to the impacts of COVID-19, occurrences of elevated PGMs can be found throughout the entirety of the Curaçá Valley.

The results, while preliminary, demonstrate that elevated PGM grades within the Curaçá Valley occur in association with both the high-sulphide copper and copper-nickel mineralized envelopes of deposits such as the Keel Zone of Siriema, as well as outside of the primary copper-mineralized zones where the highest-grade PGM samples collected to date occur in low-sulphide reef-style mineralized envelopes lying in zones that traditionally would have been classified as waste due to their inherently low association with copper. To date, the Company has observed three distinct styles of PGM mineralization, which are supported by relevant examples from the early-2020 sample program and previously released multi-element results from within the Keel Zone.

The Company has commenced a comprehensive program comprised of approximately 5,000 additional samples to continue evaluating the potential for additional occurrences of PGMs as well as evaluate continuity of PGM mineralization within zones identified to date. Approximately 3,000 samples of the total 5,000 sample program have been submitted to third-party laboratories for PGM analysis, and the Company has commenced integrating systematic PGM assaying into its ongoing exploration efforts. This effort is supported by the Company’s new in-house PGM assay capability, built in response to early results from this program. The Company continues to undertake additional quality-assurance, quality-control procedures on its newly installed multi-element Inductively Coupled Plasma analytical equipment to transition away from third-party laboratories in the future.

ERO COPPER | 2020 ANNUAL REVIEW | 16

NX Gold S.A.

	2020 - Q4			2020 - Q3			2020			2019 - Q4			2019
Operating Information
Gold (NX Gold Operations)
Ore mined (tonnes)		45,574			41,749			162,642			40,453			154,271
Ore milled (tonnes)		45,574			41,749			162,642			43,207			158,275
Head grade (grams per tonne Au)		7.72			7.64			7.72			6.32			6.98
Recovery (%)		95.4	%		92.0	%		91.3	%		68.9	%		85.7	%
Gold ounces produced (oz)		10,789			9,436			36,830			6,043			30,434
Silver ounces produced (oz)		6,763			5,736			22,694			4,315			19,641
Gold sold (oz)		10,100			9,845			35,855			5,810			29,755
Silver sold (oz)		6,349			5,982			22,109			4,247			19,142
C1 cash cost of gold produced (per ounce)	$	405		$	421		$	457		$	980		$	691
AISC of gold produced (per ounce)	$	608		$	579		$	628		$	1,253		$	889

At the NX Gold Mine, continued quarter-on-quarter improvement in tonnes and grade mined and processed, along with record metallurgical performance, contributed to increased gold production during the period. Production during Q4 2020 totaled 10,789 ounces of gold and 6,673 ounces of silver (as by-product) from total mill feed of 45,574 tonnes grading 7.72 g/t gold after metallurgical recoveries of 95.4% during the period. Ore mined and gold production improved in Q4 2020 by 9% and 14%, respectively relative to Q3 2020, and gold production increased by 37% as compared to the first quarter of 2020. These quarter-on-quarter improvements have been driven by both increases in the number of working faces in operation within the Santo Antonio Vein and improvements in metallurgical recoveries. The NX Gold Mine achieved record quarterly C1 cash costs during Q4 2020 of $405 per ounce of gold produced, resulting in full-year 2020 C1 cash costs of $457 per ounce of gold produced (see Non-IFRS Measures). AISC during Q4 2020 averaged $608 per ounce of gold produced resulting in full-year 2020 AISC of $628 per ounce of gold produced (see Non-IFRS Measures).

During Q4 2020, the Company announced updated mineral resources, mineral reserves and an updated LOM production plan for the NX Gold Mine encompassing the exploration drill programs conducted during the year.

The Company’s updated LOM production plan, prepared in conjunction with the updated mineral resource and reserve estimate, outlines a six-year LOM with total production of approximately 227,000 ounces and average annual production of approximately 41,400 ounces of gold over the first four years. In total, approximately 860,000 tonnes of ore are projected to be mined and processed grading an average of approximately 8.80 grams per tonne of gold. LOM average C1 cash costs are projected to be US$505 per ounce of gold produced with LOM average AISC of US$720 per ounce (see Non-IFRS Measures).

The updated LOM plan at the NX Gold Mine reflects the culmination of a multi-year commitment to organically grow the asset by the Company, beginning in mid-2018 with the first real exploration program conducted at the property since 2012. The updated LOM production plan outlines a highly profitable six-year operation with an actionable road-map to further grow production and extend mine-life through conversion of newly defined high-grade Inferred mineral resources (573,772 tonnes grading 10.55 grams per tonne containing approximately 194,556 ounces of gold). During the fourth quarter and into 2021, the Company has committed to continue its organic growth efforts at NX Gold as evidenced through the installation of a modular paste-fill plant, expected to be operational during the second half of 2021, as well as additional allocation of capital for exploration at the mine. The Company ramped up drilling efforts to encompass eight drill rigs at year-end operating on both near-mine and regional programs throughout the extensive land package controlled by NX Gold.

ERO COPPER | 2020 ANNUAL REVIEW | 17

Please refer to the Company’s press releases dated November 15, 2020 for complete information as it relates to the updated LOM production plan for the NX Gold Mine.

Following the release of the updated LOM, exploration at the NX Gold Mine continued to focus primarily on testing down-plunge extensions of the Santo Antonio Vein. Drill results during the period further extended the known limits of mineralization within the Santo Antonio Vein. Results are highlighted by the deepest intercept drilled within the Santo Antonio Vein drilled to date. In addition, the first regional exploration campaign continued to progress at the NX Gold Mine during the period targeting both near-mine targets as well as distal exploration targets up to 20 kilometers from the mine.

2021 Guidance/Outlook

• 2021 annual production guidance for the MCSA Mining Complex of 42,000 to 45,000 tonnes of copper in concentrate at C1 cash cost guidance^[1] range of US$0.75 to US$0.85 per pound of copper produced; and,

• 2021 annual production guidance for the NX Gold Mine of 34,500 to 37,500 ounces of gold at C1 cash cost and AISC guidance^[1] range of US$500 to US$600 and US$875 to US$975 per ounce of gold produced, respectively.

[1] C1 Cash Costs of copper produced (per lb.), C1 Cash Costs of gold produced (per oz.), and AISC are non-IFRS measures – Please refer to the section titled "NON-IFRS MEASURES" within this MD&A for a discussion of non-IFRS measures. Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s AIF (as defined herein) and Management of Risks and Uncertainties in this MD&A for complete risk factors.

2021 Production Outlook

MCSA Mining Complex	2020 Guidance[1]			2020 Result			2021 Guidance[2]
Tonnes Processed		2,150,000			2,271,625			2,700,000
Copper Grade (% Cu)		2.15	%		2.08	%		1.75	%
Copper Recovery (%)		91.0	%		90.5	%		93.0	%
Cu Production (000 tonnes)		41.0 – 43.0			42.8			42.0 – 45.0

NX Gold Mine	2020 Guidance[1]		2020 Result		2021 Guidance[2]
Tonnes Processed	165,000		162,642		167,000
Gold Grade (gpt)	7.70		7.72		7.20
Gold Recovery (%)	90.0	%	91.3	%	92.0	%
Au Production (000 ounces)	36.0 – 37.0		36.8		34.5 – 37.5
Ag Production (000 ounces)	n/a		22.7		n/a

[1] 2020 production guidance for the MCSA Mining Complex as outlined in the Company’s press release dated January 15, 2020. 2020 production guidance for the NX Gold Mine as outlined in the Company’s press release dated November 5, 2020.

[2] Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s SEDAR filings for complete risk factors, including the AIF (as defined herein) and Management of Risks and Uncertainties in this MD&A for complete risk factors.

ERO COPPER | 2020 ANNUAL REVIEW | 18

2021 Cash Cost Guidance

The Company’s guidance for 2021 assumes a USD:BRL foreign exchange rate of 5.00, gold price of $1,750 per ounce and silver price of $20.00 per ounce.

	2020 Guidance[1]		2020 Result		2021 Guidance
MCSA Mining Complex C1 Cash Cost Guidance (US$/lb)[2]		$0.70 - $0.85	$	0.67		$0.75 - $0.85
NX Gold Mine C1 Cash Cost Guidance (US$/oz)[2]		$425 - $525	$	457		$500 - $600
NX  Gold  Mine  All-in  Sustaining  Cost  (AISC) Guidance (US$/oz)[2]		n/a	$	628		$875 - $975

[1] 2020 cash cost guidance represents revised guidance as outlined in the Company’s press release dated May 7, 2020.

[2] C1 Cash Costs of copper produced (per lb.), C1 Cash Costs of gold produced (per oz.), and AISC are non-IFRS measures – Please refer to the section titled "NON-IFRS MEASURES" within this MD&A for a discussion of non-IFRS measures. Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s AIF (as defined herein) and Management of Risks and Uncertainties in this MD&A for complete risk factors.

2021 Capital Expenditure Guidance

The Company’s capital expenditure guidance for 2021 assumes a USD:BRL foreign exchange rate of 5.00 and has been presented below in USD millions.

MCSA Operations	2020 Guidance[1]		2020 Result		2021 Guidance
Pilar Mine and Caraíba Mill Complex (excluding Deepening Extension Project)		$ 45.0 – 55.0		54.5		$ 45.0 - 50.0
Deepening Extension Project		-		-		12.5 – 15.0
Vermelhos Mine & District[2]		11.0 – 13.0		14.0		14.0 – 16.0
Surubim Open Pit Mine		-		-		10.0 – 12.0
Boa Esperanҫa Project		0.2 – 0.2		0.2		1.0 – 1.5
Capital Expenditure Guidance		$ 56.2 – 68.2		68.7		$ 82.5 - 94.5
Curaçá Valley Exploration		$ 25.0 – 30.0		31.9		$ 30.0 – 35.0

NX Gold Mine	2020 Revised Guidance[1]	2020 Result	2021 Guidance
Capital Expenditure Guidance	$  9.0 – 11.0	13.0	$ 13.0 – 15.0
Exploration	3.0 – 5.0	4.3	8.0 – 10.0
Total, NX Gold Mine	$ 12.0 – 16.0	17.3	$ 21.0 – 25.0

[1] 2020 capital cost guidance and revised guidance (NX Gold Mine) as outlined in the Company’s press releases dated May 7, 2020 and November 5, 2020.

[2] Vermelhos District includes open pit mining infrastructure expenditures of approximately US$6.0 million in 2021.

Mineração Caraíba S.A.

Copper production from the MCSA Mining Complex for 2021 is expected to come from ore mined from the Pilar and Vermelhos underground mines as well as the Surubim open pit mine, which is expected to restart operations later in 2021. Production from the Pilar Mine is expected to contribute a total of approximately 1.5 million tonnes grading 1.40% copper, production from the Vermelhos Mine is expected to contribute a total of approximately 0.8 million tonnes grading 2.40% copper and production from the Surubim Mine is expected to contribute a total of 0.2 million tonnes grading 0.60% copper as it is a partial year of operation. The blended mill head grade incorporating these sources is expected to be approximately 1.75% copper for the full year.

ERO COPPER | 2020 ANNUAL REVIEW | 19

NX Gold S.A.

Gold production from NX Gold for 2021 is expected to come from ore mined from the Santo Antônio vein. Mining operations during the year are expected to total approximately 167,000 tonnes of ore grading 7.20 grams per tonne gold.

Boa Esperança

A full review of the Boa Esperança Feasibility Study^[1] remains ongoing with the goal of extending the potential mine life and increasing copper production among other desktop optimization initiatives. As a result of an ongoing internal technical review, several potential opportunities were identified to optimize and further realize the potential of the Boa Esperança project, including, but not limited to:

• Separating high-grade and low-grade copper domains within the mineral resource estimate to better optimize mining sequence, mineral reserve conversion and improve overall project economics;

• Increasing the overall size of the open pit, targeting an increase in in-pit mineral reserves, extension of mine life and an increase in life-of-mine copper production;

• Implementing bulk ore-sorting with the goal of enhancing mine selectivity; and,

• Re-designing processing plant reflecting optimization initiatives around selective mining and the implementation of ore-sorting.

The Company’s technical team continues to actively review these opportunities and is making headway in advancing them into actionable deliverables. Should this work continue to yield favorable results, the Company will commission an Optimized Feasibility Study (“OFS”), incorporating these initiatives. The Company expects to provide additional guidance on these developments mid-year 2021.

[1] As defined herein under “NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION”.

ERO COPPER | 2020 ANNUAL REVIEW | 20

REVIEW OF FINANCIAL RESULTS

The following table provides a summary of the financial results of the Company for Q4 2020 and Q4 2019. Tabular amounts are in thousands of US dollars, except share and per share amounts.

			Three months ended			Three months ended
	Notes		December 31, 2020			December 31, 2019
Revenue		1	$	91,243		$	75,688
Cost of product sold		2		(31,323	)		(43,017	)
Sales expenses				(1,572	)		(1,595	)
Gross profit				58,348			31,076
Expenses
General and administrative		3		(8,165	)		(12,707	)
Share-based compensation				(2,549	)		(1,304	)
Income before the undernoted				47,634			17,065
Other income (expenses)
Finance income				145			358
Finance expense		4		(2,556	)		(2,014	)
Foreign exchange gain		5		27,142			4,423
Recovery of value added taxes		6		8,886			-
Other income (expense)				(1,675	)		368
Income before income taxes				79,576			20,200
Income tax recovery (expense)
Current				(4,044	)		(2,232	)
Deferred				(9,190	)		27,441
		7		(13,234	)		25,209
Net income for the period				66,342			45,409
Other comprehensive income
Foreign currency translation gain		8		19,679			6,528
Comprehensive income			$	86,021		$	51,937
Net income attributable to:
Owners of the Company			$	65,786		$	45,169
Non-controlling interests				556			240
			$	66,342		$	45,409
Comprehensive income attributable to:
Owners of the Company			$	85,386		$	51,671
Non-controlling interests				635			266
			$	86,021		$	51,937
Net income per share attributable to owners of the Company
Net income per share
Basic			$	0.75		$	0.53
Diluted			$	0.71		$	0.49
Weighted average number of common shares outstanding
Basic				87,321,832			85,620,168
Diluted				92,642,103			91,670,989
Cash and cash equivalents			$	62,508		$	21,485
Total assets			$	497,099		$	462,674
Non-current liabilities			$	191,304		$	183,135

ERO COPPER | 2020 ANNUAL REVIEW | 21

Notes:

1. Revenues for Q4 2020 from copper sales was $72.6 million (Q4 2019 - $67.7 million), which included the sale of 10,265 copper tonnes in concentrate as compared to 11,595 copper tonnes for Q4 2019. The increase in revenues is primarily attributed to higher realized prices, partially offset by lower sales volume. Revenues for Q4 2020 from gold sales was $18.6 million (Q4 2019 - $8.0 million), which included the sale of 10,100 ounces of gold, compared to 5,810 ounces of gold for Q4 2019, at a significantly higher average gold price than in the comparative quarter.

2. Cost of product sold for Q4 2020 from copper sales was $25.8 million (Q4 2019 - $35.6 million) which consisted of $8.0 million (Q4 2019 - $11.1 million) in depreciation and depletion, $6.2 million (Q4 2019 - $9.4 million) in salaries and benefits, $3.8 million (Q4 2019 - $4.6 million) in materials and consumables, $3.1 million (Q4 2019 - $3.9 million) in maintenance costs, $2.9 million (Q4 2019 - $4.3 million) in contracted services, $1.7 million (Q4 2019 - $2.2 million) in utilities, and $0.1 million (Q4 2019 - $0.2 million) in other costs.

Cost of product sold for Q4 2020 from gold sales was $5.5 million (Q4 2019 - $7.4 million) which primarily comprised of $1.4 million (Q4 2019 - $2.2 million) in salaries and benefits, $1.2 million (Q4 2019 - $0.9 million) in depreciation and depletion, $1.1 million (Q4 2019 - $1.2 million) in contracted services, $0.9 million (Q4 2019 - $1.1 million) in materials and consumables, $0.5 million (Q4 2019 - $0.7 million) in utilities, and $0.4 million (Q4 2019 - $1.2 million) in maintenance costs.

The overall decrease in cost of product sold in Q4 2020 as compared to Q4 2019 is primarily attributable to the weakened BRL, in which cost is incurred, against the USD, in which cost is reported.

3. General and administrative expenses for Q4 2020 include $5.0 million (Q4 2019 - $10.3 million) with respect to MCSA for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, $0.6 million (Q4 2019 - $0.5 million) with respect to NX Gold for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, and $2.6 million (Q4 2019 - $1.9 million) with respect to the corporate head office in Vancouver. Corporate head office costs are primarily comprised of $2.2 million (Q4 2019 - $1.4 million) in salaries, incentive payments, and consulting fees, $0.2 million (Q4 2019 - $0.2 million) in accounting and legal costs, and $0.2 million (Q4 2019 - nominal) in office and sundry costs. General and administrative expenses in Q4 2020 decreased from that in Q4 2019, primarily attributable to a decrease in incentive payments, and a weakened BRL, in which costs from MCSA and NX Gold are incurred, against the USD, in which cost is reported.

4. Finance expense for Q4 2020 was $2.6 million (Q4 2019 - $2.0 million) and is primarily comprised of interest on loans at the corporate head office of $1.6 million (Q4 2019 - $2.0 million), interest on loans and borrowings at MCSA and NX Gold of $0.5 million (Q4 2019 - $0.7 million), loss on interest rate swap derivatives of $0.7 million (Q4 2019 - $0.2 million gain), accretion of the asset retirement obligations of $0.2 million (Q4 2019 - $0.2 million recovery), and nominal commitment fees (Q4 2019 - $0.5 million), partially offset by other finance income of $0.6 million (Q4 2019 - $1.0 million).

5. Foreign exchange gain for Q4 2020 was $27.1 million (Q4 2019 - $4.4 million). This amount is primarily comprised of foreign exchange gain on unrealized derivative contracts of $27.7 million (Q4 2019 - $1.4 million) and a foreign exchange gain on USD denominated debt of $7.7 million (Q4 2019 - $3.8 million) in MCSA for which the functional currency is the BRL, partially offset by a realized foreign exchange loss on derivative contracts of $7.8 million (Q4 2019 - $0.5 million) and other foreign losses of $0.4 million (Q4 2019 - $0.2 million gain). The foreign exchange gains were primarily a result of a strengthening of BRL against USD in Q4 2020 as compared to the prior quarter. The foreign exchange gains on unrealized derivative contracts are a result of mark-to-market calculations at period end and may not represent the amount that will ultimately be realized, which will depend on future changes to the USD/BRL foreign exchange rates.

6. In Q4 2020, the Company recognized a recovery of $8.9 million (Q4 2019 - $nil) in net income related to value added taxes. The recovery was recognized as a result of a study conducted to revisit certain tax positions which concluded that it is probable that additional tax credits are available to be used to offset a variety of taxes.

7. In Q4 2020, the Company recognized $13.2 million in income tax expense (Q4 2019 - $25.2 million recovery). Income taxes from operations are partially offset by the recognition of temporary deductible differences associated with MCSA’s unrealized foreign exchange losses on derivatives and loans and borrowings denominated in USD. In Q4 2019 the Company recognized a $25.2 million income tax recovery, primarily resulting from the recognition of previously unrecognized available tax losses and tax credits in MCSA, partially offset by current tax expense in the period. At December 31, 2019 the Company considered taxable income generated since acquisition of MCSA and forecasted future taxable income and determined that it was probable that the benefit of these losses and tax credits in MCSA would be realized.

8. The foreign currency translation gain is a result of a strengthening of the BRL against the USD during Q4 2020 when translating the net assets of the Company’s Brazilian subsidiaries to USD for presentation in the Company’s consolidated financial statements.

ERO COPPER | 2020 ANNUAL REVIEW | 22

The following table provides a summary of the financial results of the Company for Fiscal 2020, Fiscal 2019, and Fiscal 2018. Tabular amounts are in thousands of US dollars, except share and per share amounts.

			Year ended			Year ended			Year ended
	Notes		December 31, 2020			December 31, 2019			December 31, 2018
Revenue		1	$	324,076		$	284,843		$	233,105
Cost of product sold		2		(130,585	)		(162,817	)		(147,611	)
Sales expenses				(5,354	)		(4,962	)		(3,268	)
Gross profit				188,137			117,064			82,226
Expenses
General and administrative		3		(27,927	)		(32,817	)		(29,000	)
Share-based compensation				(9,064	)		(5,792	)		(3,225	)
Income before the undernoted				151,146			78,455			50,001
Other income (expenses)
Finance income				1,346			701			1,303
Finance expense		4		(15,449	)		(20,428	)		(22,562	)
Foreign exchange loss		5		(79,805	)		(5,148	)		(20,713	)
Loss on debt settlement		6		-			(1,783	)		(5,476	)
Recovery of value added taxes		7		8,886			21,584			-
Other income (expense)				(4,701	)		1,448			108
Income before income taxes				61,423			74,829			2,661
Income tax recovery (expense)
Current				(9,675	)		(10,645	)		(2,899	)
Deferred				750			28,271			(2,753	)
		8		(8,925	)		17,626			(5,652	)
Net income (loss) for the year				52,498			92,455			(2,991	)
Other comprehensive loss
Foreign currency translation loss		9		(49,553	)		(4,941	)		(27,801	)
Comprehensive income (loss)			$	2,945		$	87,514		$	(30,792	)
Net income (loss) attributable to:
Owners of the Company			$	51,622		$	91,883		$	(3,155	)
Non-controlling interests				876			572			164
			$	52,498		$	92,455		$	(2,991	)
Comprehensive income (loss) attributable to:
Owners of the Company			$	2,267		$	86,962		$	(30,845	)
Non-controlling interests				678			552			53
			$	2,945		$	87,514		$	(30,792	)
Net income (loss) per share attributable to owners of the Company
Net income (loss) per share
Basic			$	0.60		$	1.08		$	(0.04	)
Diluted			$	0.56		$	1.01		$	(0.04	)
Weighted average number of common shares outstanding
Basic				86,368,535			85,244,277			83,927,977
Diluted				92,213,628			91,390,425			83,927,977

ERO COPPER | 2020 ANNUAL REVIEW | 23

Notes:

1. Revenues for Fiscal 2020 from copper sales was $260.9 million (Fiscal 2019 - $246.2 million), which included the sale of 42,813 copper tonnes in concentrate as compared to 42,759 copper tonnes for Fiscal 2019. Revenues for Fiscal 2020 from gold sales was $63.2 million (Fiscal 2019 - $38.6 million), which included the sale of 35,855 ounces of gold, compared to 29,755 ounces of gold for Fiscal 2019, at a significantly higher average gold price than the comparative period. The increase in revenues is primarily attributed to higher realized prices from copper and gold sales.

2. Cost of product sold for Fiscal 2020 from copper sales was $109.6 million (Fiscal 2019 - $135.6 million) which consisted of $35.7 million (Fiscal 2019 - $40.1 million) in depreciation and depletion, $24.6 million (Fiscal 2019 - $33.7 million) in salaries and benefits, $15.1 million (Fiscal 2019 - $17.9 million) in materials and consumables, $14.8 million (Fiscal 2019 - $20.5 million) in contracted services, $12.5 million (Fiscal 2019 - $14.1 million) in maintenance costs, $6.5 million (Fiscal 2019 - $8.7 million) in utilities, and $0.4 million (Fiscal 2019 - $0.7 million) in other costs.

Cost of product sold for Fiscal 2020 from gold sales was $21.0 million (Fiscal 2019 - $27.2 million) which primarily comprised of $5.5 million (Fiscal 2019 - $7.1 million) in salaries and benefits, $3.8 million (Fiscal 2019 - $3.9 million) in materials and consumables, $3.7 million (Fiscal 2019 - $3.2 million) in contracted services, $3.5 million (Fiscal 2019 - $5.9 million) in depreciation and depletion, $2.2 million (Fiscal 2019 - $2.5 million) in utilities, $2.1 million (Fiscal 2019 - $4.3 million) in maintenance costs, and $0.2 million (Fiscal 2019 - $0.3 million) in other costs.

The overall decrease in cost of product sold for Fiscal 2020 as compared to Fiscal 2019 is primarily attributable to the weakened BRL, in which cost of products sold are incurred, against the USD, in which cost is reported.

3. General and administrative expenses for Fiscal 2020 include $16.5 million (Fiscal 2019 - $21.0 million) with respect to MCSA for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, $1.7 million (Fiscal 2019 - $2.3 million) with respect to NX Gold for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, and $9.7 million (Fiscal 2019 - $9.5 million) with respect to the corporate head office in Vancouver. Corporate head office costs are primarily comprised of $7.3 million (Fiscal 2019 - $6.7 million) in salaries, incentive payments, and consulting fees, $0.9 million (Fiscal 2019 - $0.7 million) in office and sundry costs, $0.5 million (Fiscal 2019 - $1.2 million) in travel-related costs, $0.5 million (Fiscal 2019 - $0.5 million) in professional fees, and $0.3 million (Fiscal 2019 - $0.2 million) in transfer agent and filing fees.

General and administrative expenses in Fiscal 2020 decreased compared to that in Fiscal 2019, reflecting slightly lower general and administrative expenses at the corporate head office from reduced consulting fees and travel-related costs during a period of pandemic-imposed travel restrictions, and the weakening of the BRL, in which costs from MCSA and NX Gold are incurred, against the USD, in which cost is reported.

4. Finance expense for Fiscal 2020 was $15.4 million (Fiscal 2019 - $20.4 million) and was primarily comprised of interest on loans at the corporate head office of $6.7 million (Fiscal 2019 - $8.3 million), interest on loans and borrowings at MCSA and NX Gold of $3.2 million (Fiscal 2019 - $3.0 million), loss on interest rate swap derivatives of $2.7 million (Fiscal 2019 - $1.8 million), other finance expenses of $1.2 million (Fiscal 2019 - $1.8 million), and accretion of asset retirement obligations of $0.9 million (Fiscal 2019 - $3.5 million).

5. Foreign exchange loss for Fiscal 2020 was $79.8 million (Fiscal 2019 - $5.1 million). This amount was primarily comprised of a foreign exchange loss on unrealized derivative contracts of $34.5 million (Fiscal 2019 - $0.3 million), a foreign exchange loss on USD denominated debt of $24.2 million (Fiscal 2019 - $4.4 million) in MCSA for which the functional currency is the BRL, and a realized foreign exchange loss on derivative contracts of $20.8 million (Fiscal 2019 - $1.0 million). The foreign exchange losses were primarily a result of a strengthening of the USD against the BRL during a time of worldwide instability as a result of the COVID-19 pandemic. The foreign exchange loss on unrealized derivative contracts are a result of mark-to-market calculations at period end and may not represent the amount that will ultimately be realized, which will depend on future changes to the USD/BRL foreign exchange rates.

6. In Fiscal 2019, the Company recognized a loss on debt settlement of $1.8 million, which represented the difference between the accounting fair value made to legally extinguish a bank loan held by MCSA and the carrying value of the loan at the time.

7. In Fiscal 2020, the Company recognized a recovery of $8.9 million in net income related to value added taxes. The recovery was recognized as a result of a study conducted to revisit certain tax positions which concluded that it is probable that additional tax credits are available to be used to offset a variety of taxes.

In Fiscal 2019, the Company recognized a recovery of $21.6 million in net income related to value added taxes previously paid on sales in Brazil. The recovery was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant tax authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim, which approval was received in July 2019. These credits can be used to offset a variety of other taxes, including taxes on future sales.

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8. In Fiscal 2020, the Company recognized a $8.9 million income tax expense (Fiscal 2019 - income tax recovery of $17.6 million), primarily comprised of current tax arising from taxable income in mining operations. In Fiscal 2019, the Company recognized a significant deferred income tax recovery primarily resulting from the recognition of previously unrecognized available tax losses and tax credits in MCSA, partially offset by current tax expense in the period. At December 31, 2019 the Company considered the taxable income generated since the acquisition of MCSA, forecasted future taxable income, and determined that it was considered probable that the benefit of those losses and tax credits in MCSA would be realized. Accordingly, a tax recovery of $25.2 million was recognized related to these losses in 2019.

9. The foreign currency translation loss is a result of a strengthening of the USD against the BRL during a time of worldwide instability as a result of the COVID-19 pandemic when translating the net assets of the Company’s Brazilian subsidiaries to USD for presentation in the Company’s consolidated financial statements.

SUMMARY OF QUARTERLY RESULTS

The following table presents selected financial information for each of the most recent eight quarters. Tabular amounts are in millions of US Dollars, except share and per share amounts.

	2020												2019
Selected Financial Information	Dec 31(1)			Sept 30			June 30(2)			Mar 31(3)			Dec 31(4)			Sept 30(5)			June 30			March 31
Revenue	$	91.2		$	94.3		$	70.8		$	67.7		$	75.7		$	60.6		$	76.5		$	72.0
Cost of product sold	$	(31.3	)	$	(33.3	)	$	(30.1	)	$	(35.8	)	$	(43.0	)	$	(38.4	)	$	(43.3	)	$	(38.1	)
Gross profit	$	58.3		$	59.6		$	39.5		$	30.7		$	31.1		$	21.3		$	32.1		$	32.6
Net income (loss) for period	$	66.3		$	31.4		$	7.7		$	(53.0	)	$	45.4		$	16.3		$	15.3		$	15.5
Income (loss) per share attributable to owners of the Company
- Basic	$	0.75		$	0.36		$	0.09		$	(0.62	)	$	0.53		$	0.19		$	0.18		$	0.18
- Diluted	$	0.71		$	0.34		$	0.08		$	(0.62	)	$	0.49		$	0.18		$	0.17		$	0.17
Weighted average number of common shares outstanding
- Basic		87,321,832			86,448,318			85,933,443			85,759,194			85,620,168			85,505,675			85,032,841			84,804,389
- Diluted		92,642,103			91,961,897			91,428,969			85,759,194			91,670,988			91,320,363			90,696,926			89,917,828

Notes:

1. During Q4 2020, the Company recognized $27.1 million in foreign exchange gains. The foreign exchange gains were primarily comprised of foreign exchange gain on unrealized derivative contracts of $27.7 million and a foreign exchange gain on USD denominated debt of $7.7 million in MCSA for which the functional currency is the BRL, partially offset by a realized foreign exchange loss on derivative contracts of $7.8 million and other foreign losses of $0.4 million. The foreign exchange gains were primarily a result of a strengthening of BRL against USD in Q4 2020. The foreign exchange gains on unrealized derivative contracts are a result of mark-to-market calculations at period end and may not represent the amount that will ultimately be realized, which will depend on future changes to the USD/BRL foreign exchange rates.

During Q4 2020, the Company recognized a recovery of $8.9 million in net income related to value added taxes. The recovery was recognized as a result of a study conducted to revisit certain tax positions which concluded that it is probable that additional tax credits are available to be used to offset a variety of taxes.

2. During the quarter ended June 30, 2020, the Company had an overall net income of $7.7 million, despite $16.3 million in foreign exchange losses. The foreign exchange losses were comprised of a foreign exchange loss on unrealized derivative contracts of $8.5 million, a foreign exchange loss on realized derivative contracts of $4.4 million, and a foreign exchange loss on USD denominated debt of $3.0 million in MCSA for which the functional currency is the BRL. As with the preceding quarter, the foreign exchange losses were unusually high this quarter due to volatility in the foreign exchange rates between the USD and BRL resulting from the worldwide instability in currency rates as a result of the COVID-19 pandemic.

3. During the quarter ended March 31, 2020, the Company recognized a $81.9 million in foreign exchange losses. The foreign exchange losses were mainly comprised of a $26.9 million loss associated with USD denominated debt held by MCSA, whose functional currency is the BRL, and $52.7 million losses associated with unrealized losses on foreign exchange currency collar contracts. These foreign exchange losses were unusually high this quarter due to volatility in the foreign exchange rates between the USD and the BRL resulting from the worldwide instability in currency rates as a result of the COVID-19 pandemic.

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4. During Q4 2019, the Company recognized a $25.2 million income tax recovery primarily resulting from the recognition of available tax losses and tax credits in MCSA. At December 31, 2019, the Company considered the taxable income generated since acquisition of MCSA and forecasted future taxable income and determined that it was now considered probable that the benefit of these losses and tax credits in MCSA would be realized.

5. During the quarter ended September 30, 2019, the Company recognized a recovery of $21.6 million in net income related to value added taxes previously paid on sales in Brazil. The recovery was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant taxing authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim, for which approval was received in July 2019. These credits can be used to offset a variety of other taxes, including income taxes and taxes on future sales.

LIQUIDITY, CAPITAL RESOURCES, AND CONTRACTUAL OBLIGATIONS

Liquidity

As at December 31, 2020, the Company held cash and cash equivalents of $62.5 million. Cash and cash equivalents are primarily comprised of cash held with reputable financial institutions and are invested in highly liquid short-term investments with maturities of three months or less. The funds are not exposed to liquidity risk and there are no restrictions on the ability of the Company to use these funds to meet its obligations.

Cash and cash equivalents have increased by $41.0 million since December 31, 2019. The Company’s cash flows from operating, investing, and financing activities during Fiscal 2020 are summarized as follows:

• Cash from operating activities of $162.8 million

• Cash from financing activities of $0.3 million, including:

° $69.0 million proceeds from new loans and borrowings;

° $4.4 million proceeds from exercise of stock options and warrants; $1.5 million released from restricted cash

° $1.5 million released from restricted cash

net of: 

° $57.4 million of repayment on loans and borrowings;

° $9.7 million of payment of interest on loans and borrowings; o $4.3 million of lease payments;

° $4.3 million of lease payments;

° $3.2 million of other finance expenses

Partially offset by:

• Cash used in investing activities of $116.6 million, including:

° $117.6 million of additions to mineral property, plant and equipment; $0.2 million of additions to exploration and evaluation assets

° $0.2 million of additions to exploration and evaluation assets

net of: 

° $1.3 million from other investments

As at December 31, 2020, the Company had working capital of $35.8 million, primarily as a result of a record cash flow from operations.

Capital Resources

The Company’s primary sources of capital are comprised of cash from operations, and cash and cash equivalents on hand. The Company will continuously monitor its capital structure and, based on changes in operations and economic conditions, may adjust such structure by issuing new common shares or new debt as necessary. While the Company has been successful in securing financing to date, there are no guarantees that it will be able to secure such financing in the future on terms acceptable to the Company, if at all. Taking into consideration cash flow from existing operations, management believes that the Company has sufficient working capital and financial resources to maintain its planned operations and activities for the foreseeable future.

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At December 31, 2020, we had unrestricted cash and cash equivalents of $ 62.5 million compared to $21.5 million at December 31, 2019. The increase is primarily due to an increase in cash from operations.

The Company’s $150 million Facilities are fully drawn at December 31, 2020. The Company is required to comply with certain financial covenants. As of the date of the consolidated financial statements, the Company is in compliance with these covenants. Subsequent to December 31, 2020, the Company amended terms of the Facilities. Refer to sub-section titled “Q4 2020 Financial Report” within the “Highlights” section in this MD&A.

Contractual Obligations and Commitments

Certain loan agreements contain operating and financial covenants that could restrict the ability of the Company and its subsidiaries, MCSA, Ero Gold, and NX Gold S.A., to, among other things, incur additional indebtedness needed to fund its respective operations, pay dividends or make other distributions, make investments, create liens, sell or transfer assets or enter into transactions with affiliates. There are no other restrictions or externally imposed capital requirements of the Company.

MANAGEMENT OF RISKS AND UNCERTAINTIES

The Company thoroughly examines the various financial instruments and risks to which it is exposed and assesses the impact and likelihood of those risks. These risks may include credit risk, liquidity risk, currency risk, commodity price risk and interest rate risk. Where material, these risks are reviewed and monitored by the Board.

COVID-19 Pandemic Risk

The outbreak of COVID-19 has had a significant impact on the volatility of commodity prices and USD/BRL exchange rates, and governmental actions to contain the outbreak may impact our ability to transport or market our concentrate or cause disruptions in our supply chains or interruption of production. A material spread of COVID-19 in jurisdictions where we operate could impact our ability to staff operations. A reduction in production or other COVID-19 related impacts, including but not limited to, low copper prices could cause a significant reduction in profitability of ongoing operations.

The global pandemic could cause temporary closure of businesses in regions that are significantly impacted by the health crises, or cause governments to take or continue to take preventative measures such as the closure of points of entry, including ports and borders.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers. The carrying amount of the financial assets below represents the maximum credit risk exposure as at December 31, 2020 and December 31, 2019:

	December 31, 2020		December 31, 2019
Cash and cash equivalents	$	62,508	$	21,485
Restricted cash		-		1,500
Accounts receivable		20,353		7,680
Deposits and other non-current assets		595		2,396
	$	83,456	$	33,061

The Company invests cash and cash equivalents with financial institutions that are financially sound based on their credit rating. The Company’s exposure to credit risk associated with accounts receivable is influenced mainly by the individual characteristics of each customer. The Company currently has only three significant customers, all of which have no history of credit default with the Company. The Company has not incurred credit losses during the year ended December 31, 2020 nor recognized a provision for credit losses.

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Liquidity risk

Liquidity risk is the risk associated with the difficulties that the Company may have meeting the obligations associated with financial liabilities that are settled with cash payments or with another financial asset. The Company's approach to liquidity management is to ensure as much as possible that sufficient liquidity exists to meet their maturity obligations on the expiration dates, under normal and stressful conditions, without causing unacceptable losses or with risk of undermining the normal operation of the Company.

The table below shows the Company's maturity of non-derivative financial liabilities on December 31, 2020:

	Carrying		Contractual		Up to 12						More than 5
Non-derivative Financial Liabilities	value		cash flows		months		1-2 years		3-5 years		years
Loans and borrowings	$	168,102	$	169,889	$	12,223	$	36,998	$	119,976	$	692
Interest on loans and borrowings		-		15,025		5,859		4,863		4,296		7
Accounts payable and accrued liabilities		37,878		37,878		37,878		-		-		-
Value added, payroll and other taxes		14,829		16,332		13,361		1,484		1,487		-
	$	220,809	$	239,124	$	69,321	$	43,345	$	125,759	$	699

The Company also has derivative financial liabilities for foreign exchange and interest rate derivatives whose notional amounts and maturity information is disclosed below under foreign exchange currency risk and interest rate risk.

Foreign exchange currency risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage market risks. At December 31, 2020, the Company has entered into foreign exchange collar contracts at zero cost for notional amounts of $285.7 million with an average floor rate of 4.05 BRL to US Dollar and an average cap rate of 4.76 BRL to US Dollar (December 31, 2019 - notional amount of $336.6 million in foreign exchange forward collar contracts). The maturity dates of these contracts are from January 27, 2021 to July 27, 2022 and are financially settled on a net basis. The fair value of these contracts at December 31, 2020 was a liability of $34.5 million, (December 31, 2019 - $nil) which is included in Derivatives in the statement of financial position. The fair value of these forward contracts as at December 31, 2020 was determined using an option pricing mode with the following assumptions: discount rate of 5.015%, foreign exchange rate of approximately 5.20, and volatility of 7.46% - 21.20%. The change in fair value of foreign exchange collar contracts was a loss of $34.5 million for the year ended December 31, 2020 (a loss of $0.3 million for the year ended December 31, 2019) and has been recognized in foreign exchange loss. In addition, during the year ended December 31, 2020, the Company recognized a realized loss of $20.8 million ($1.0 million for the year ended December 31, 2019) related to the settlement of foreign currency forward collar contracts.

Interest rate risk

The Company is principally exposed to the variation in interest rates on loans and borrowings with variable rates of interest. Management reduces interest rate risk exposure by entering into loans and borrowings with fixed rates of interest or by entering into derivative instruments that fix the ultimate interest rate paid.

The Company is principally exposed to interest rate risk through its Term Facilities of $150.0 million, Brazilian Real denominated bank loans of $4.5 million, Brazilian Real denominated lines of credit of $1.4 million, and Brazilian Real denominated equipment finance loans of $1.1 million. Based on the Company’s net exposure at December 31, 2020, a 1% change in the variable rates would have an impact of $1.6 million on pre-tax annual net income, without consideration of the effects of the interest rate swap contract below.

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In order to mitigate the above volatility due to variable rates on loans, as at December 31, 2020, the Company has entered into an interest rate swap contract to manage interest rate risk. At December 31, 2020, the floating interest on a notional amount of $60.0 million was swapped for a fixed interest rate of 2.69%. This interest rate swap transaction is in effect for the majority of the term of the Company’s term facility, with the notional amount reduced over time. The fair value of this contract at December 31, 2020 was a liability of $2.5 million (December 31, 2019 - $1.7 million) and was included in Derivatives in the statement of financial position. The fair value of this swap contracts as at December 31, 2020 was determined using a discounted cash flow model with the following assumptions: discount rates of 0.017% – 0.298% and forward foreign exchange rates of 0.421% - 0.164%. The realized loss on the interest rate swap contract was $1.2 million for the year ended December 31, 2020 (realized loss of $0.1 million for the year ended December 31, 2019) and was included in finance expense. In addition, the Company recognized an unrealized loss of $0.8 million on the interest rate swap contract for the year ended December 31, 2020 (unrealized loss of $1.6 million for the year ended December 31, 2019), which was included in finance expense.

In addition, as at December 31, 2020, MCSA has entered into an interest rate and currency swap contract on the Plural Loan. At December 31, 2020, the floating interest on a notional amount of BRL $12 million was swapped for a fixed interest rate of 9.9% and the BRL currency on the loan was swapped for USD at a rate of 3.95. The fair value of this contract at December 31, 2020 was a liability of $0.3 million (December 31, 2019 - nil) and is included in Derivatives in the statement of financial position. The realized loss on this swap contract was $ 0.4 million for the year ended December 31, 2020 and was included in finance expense. In addition, the Company recognized an unrealized loss of $0.3 million on the swap contract for the year ended December 31, 2020, which was also included in finance expense.

Price risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage commodity price risks. At December 31, 2020, the Company has not entered into any commodity derivative contracts. The Company recognized a realized loss of $1.4 million for the year ended December 31, 2019 related to the settlement of commodity forward contracts.

For a discussion of additional risks applicable to the Company and its business and operations, including risks related to the Company’s foreign operations, the environment and legal proceedings, see “Risk Factors” in the Company’s Annual Information Form for the year ended December 31, 2020 and dated March 16, 2021 (the “AIF”).

OTHER FINANCIAL INFORMATION

Off-Balance Sheet Arrangements

As at December 31, 2020, the Company had no material off-balance sheet arrangements.

Contingencies

MCSA is subject to a number of claims (including claims related to tax, labour and social security matters and civil action) in the course of its business which individually are not material and have not been accrued for in the Company’s financial statements as it is not probable that a material cash outflow will occur. While the Company believes that these claims are unlikely to be successful, if all such existing claims were decided against it, the Company could be exposed to a liability of up to approximately $21.8 million as at December 31, 2020 (December 31, 2019 - $31.1 million), which could have an adverse impact on the Company’s business, financial condition, results of operations, cash flows or prospects.

Outstanding Share Data

At March 16, 2021, the Company had 88,101,909 common shares, 4,485,781 stock options, 1,533,330 warrants, and 727,761 performance share units issued and outstanding.

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Related Party Disclosures

For the three months and year ended December 31, 2020, amounts paid to related parties were incurred in the normal course of business and measured at the exchange amount, which is the amount agreed upon by the transacting parties and on terms and conditions similar to non-related parties.

The aggregate value of compensation paid to key management personnel for the year ended December 31, 2020 was $7.4 million ($7.5 million for the year ended December 31, 2019). In addition, 287,281 options, 197,269 share units and 79,230 DSUs were issued to key management personnel and non-executive directors during the year ended December 31, 2020 (444,265 options and 171,754 share units for the year ended December 31, 2019). For key management personnel, $5.1 million was recognized in share-based compensation expense for the year ended December 31, 2020 for options, share units, and DSUs issued ($4.1 million for the year ended December 31, 2019).

During the year ended December 31, 2020, key management personnel exercised 408,555 options and 1,266,666 warrants for total cash proceeds to the Company of $2.7 million (286,666 options and 300,000 warrants for total cash proceeds of $1.0 million for the year ended December 31, 2019).

As at December 31, 2020, $3.7 million was payable to key management as incentive compensation and is included in accounts payable and accrued liabilities in the statement of financial position (December 31, 2019 - $3.9 million). Such amounts are unsecured, non-interest bearing and will be paid under normal trade terms.

ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

Critical Accounting Judgments and Estimates

The preparation of consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions about future events that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, events or actions, actual results may differ from these estimates.

The Company’s significant accounting policies and accounting estimates are contained in the Company’s December 31, 2020 consolidated financial statements. Certain of these policies, such as, capitalization and depreciation of property, plant and equipment and mining interests, derivative instruments, and decommissioning liabilities provisions involve critical accounting estimates because they require management of the Company to make subjective or complex judgments about matters that are inherently uncertain, and because of the likelihood that materially different amounts could be reported under different conditions or using different assumptions.

In preparing its financial statements, management has made judgments, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of the assets, liabilities, revenues, and expenses. Actual results may differ from these estimates.

The estimates and assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

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Critical Judgments

Functional currency

The functional currency of the Company and each of its subsidiaries is the currency of the primary economic environment in which the entities operate. The Company has determined that the functional currency for the Company is the US dollar while the functional currency for MCSA and NX Gold is the Brazilian Real. Assessment of functional currency involves certain judgements to determine the primary economic environment and the Company reconsiders the functional currency of its entities if there is a change in events and conditions which determined the primary economic environment.

Legal claims and contingent liabilities

The recognition of legal provisions and contingent liabilities involves the assessment of claims made against the Company and each of its subsidiaries. The recognition of a legal provision, or disclosure of a contingent liability, involves certain judgements to determine the probability of whether a cash outflow will occur. In making this judgment, management has assessed various criteria and also relies on the opinions of its legal advisers to assist in making this assessment.

Key Sources of Estimation Uncertainty

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates and such differences could be significant. Significant estimates made by management affecting the consolidated financial statements include:

Derivative instruments

The fair value of derivative instruments is determined using either present value techniques or option pricing models that utilize a variety of inputs that are a combination of quoted prices and market-corroborated inputs, including assumptions for forward interest and foreign exchange rates, volatilities and discount rates. The fair value of the Company’s derivative contracts includes an adjustment for credit risk for either the Company or the counter party as applicable. Changes in the assumptions for inputs into the models affect the fair value of the derivatives recognized in the statement of financial position as well as the unrealized gains or losses recognized in net income.

Mineral reserve and resource estimates including life of mine plan

The Company estimates its mineral reserves and mineral resources based on information compiled by competent individuals. Mineral reserves are used in the calculation of depreciation, impairment assessments and for forecasting the timing of payment of mine closure and rehabilitation costs.

There are numerous uncertainties inherent in estimating mineral reserves, and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the estimation methodology, forecasted prices of commodities, exchange rates, production costs or recovery rates may change the economic status of mineral reserves and may, ultimately, result in changes in the mineral reserves.

The carrying amounts of the Company’s mineral properties, plant and equipment are depleted in part based on recoverable mineral reserve tonnes processed, depending on the use of the asset. Changes to estimates of recoverable quantities of metals, mineral reserve tonnes and depletable costs, including changes resulting from revisions to the Company’s mine plans and changes in metals prices forecasts, can result in a change to future depreciation and depletion rates and may result in impairment charges.

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Mine closure and rehabilitation costs

Significant estimates and assumptions are made in determining the provision for mine closure and rehabilitation as there are numerous factors that will affect the ultimate liability payable. These factors include estimation of the extent and cost of rehabilitation activities, timing of future cash flows, discount rates, inflation rate, and regulatory requirements.

Changes in the above factors can result in a change to the provision recognized by the Company. Changes to mine closure and rehabilitation costs are recorded with a corresponding change to the carrying amounts of related mineral properties, plant and equipment. Adjustments to the carrying amounts of related mineral properties, plant and equipment can result in a change to future depreciation and depletion expense.

Significant assumptions used to determine mine closure and rehabilitation costs are included in Note 11(a) to the consolidated financial statements.

Income taxes

The determination of the Company’s tax expense for the period and deferred tax assets and liabilities involves significant estimation and judgement by management. In determining these amounts, management interprets tax legislation in a variety of jurisdictions and makes estimates of the expected timing of the reversal of deferred tax assets and liabilities. Management also makes estimates of future earnings, which affect the extent to which potential future tax benefits may be used. The Company is subject to assessments by various taxation authorities, which may interpret legislation differently. These differences may affect the final amount or the timing of the payment of taxes. The Company provides for such differences where known based on management’s best estimate of the probable outcome of these matters.

The Company operates in Brazil where tax authorities may audit income tax treatments and the resolution of such audits may span multiple years. Tax law in Brazil is complex and often subject to changes and to varied interpretations; accordingly, the ultimate outcome with respect to income tax treatments may differ from the amounts recognized. The Company’s assessment of whether it is probable that uncertain income tax treatments will be accepted by tax authorities in Brazil is a significant management judgment.

New Accounting Standards and Interpretations Adopted in the Year

The following new and amended IFRS pronouncements were adopted effective January 1, 2020 and had no impact to the Company’s financial statements:

• Amendments to References to the Conceptual Framework in IFRS Standards

• In September 2019, the IASB issued first phase amendments IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Hedging, and IFRS 7 Financial Instrument Disclosures to address the financial reporting impact of the reform on interest rate benchmarks, such as the discontinuance of the interbank offered rates. The first phase amendment is focused on the impact to hedge accounting requirements. The Company adopted the first phase amendment and there was no material impact on its consolidated financial statements. The Company will continue to assess the effect of amendments related to the interest rate benchmark reform on its consolidated financial statements.

The following amendment to accounting standards has been issued but not yet adopted in the financial statements:

• On May 14, 2020, the IASB published a narrow scope amendment to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use. The amendment prohibits deducting from the cost of property, plant and equipment amounts received from selling items produced while preparing the asset for its intended use.

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Instead, amounts received will be recognized as sales proceeds and related cost in profit or loss. The effective date is for annual periods beginning on or after January 1, 2022. The Company does not expect to adopt this amendment until the effective date, and does not anticipate a material impact on its consolidated financial statements.

Local Currency Operating Metrics – Presented in Brazilian Real

	2020 - Q4			2020 - Q3			2020			2019 - Q4			2019
Costs (MCSA Operations)
Mining[1] - UG (Pilar)	R$	40,532			35,661			140,335			36,237			152,994
- UG (Vermelhos)		28,149			32,421			121,950			25,360			96,100
- OP		-			-			-			29			8,521
Processing		21,657			22,703			82,905			22,250			83,041
Indirect		18,897			15,774			60,756			12,822			46,607
Production costs[1]		109,235			106,559			405,946			96,698			387,263
By-product credits		(24,246	)		(27,128	)		(88,328	)		(16,876	)		(50,823	)
Treatment, refining and other		(2,854	)		2,367			6,637			3,895			7,358
C1 cash costs	R$	82,135			81,798			324,255			83,717			343,798
Breakdown Mined and Processed (tonnes)
UG Mined		588,792			647,281			2,521,263			675,258			2,527,386
OP Mined		-			-			-			-			727,578
Total Mined (t):		588,792			647,281			2,521,263			675,258			3,254,964
Total Processed (t)		483,447			553,148			2,271,625			589,065			2,424,592
Cu Production (t)		10,018			10,961			42,814			11,526			42,318
UG Mining Total - R$/tonne mined		116.65			105.18			104.03			91.22			98.56
Pilar - R$/tonne mined		103.55			87.16			89.60			78.56			91.26
Vermelhos - R$/tonne mined		142.63			136.14			127.70			118.52			112.93
OP Mining - R$/tonne mined[2]		n/a			n/a			n/a			n/a			11.71
Processing - R$/tonne processed		44.80			41.04			36.50			37.77			34.25
Indirect - R$/tonne processed		39.09			28.52			26.75			21.77			19.22

Footnotes

General - Above only includes amounts from MCSA. NX Gold operations are excluded.

[1] - Beginning in Q3 2020, production costs are presented net of capex development. Comparative figures have been adjusted to conform with the revised presentation.

[2] - There was no OP production in Fiscal 2020.

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Capital Expenditures

The following table presents capital expenditures at the Company’s operations.

	2020 - Q4		2020 - Q3		2020		2019 - Q4		2019
MCSA Operations
Pilar Mine and Caraíba Mill Complex		12,464		14,283		54,487		14,876		43,933
Vermelhos Mine		3,579		3,804		14,022		4,063		19,751
Boa Esperanҫa Project		61		58		178		53		1,139
Capital Expenditure		16,104		18,145		68,687		18,992		64,823
Capex Development (included in above)		7,111		8,156		31,929		10,936		31,705
Exploration		7,702		9,446		31,880		8,742		33,738
NX Gold Operations
Capital Expenditure		3,843		3,028		12,981		2,280		7,606
Capex Development (included in above)		1,407		1,698		6,675		540		1,147
Exploration		1,454		965		4,257		859		3,600

NON-IFRS MEASURES

Financial results of the Company are prepared in accordance with IFRS. The Company utilizes certain non-IFRS measures, including C1 cash cost of copper produced (per lb), C1 cash cost of gold produced (per ounce), AISC of gold produced (per ounce), EBITDA, Adjusted EBITDA, Adjusted net income attributable to owners of the Company, Adjusted net income per share, net debt, working capital (deficit) and available liquidity, which are not measures recognized under IFRS. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The tables below provide a reconciliation of these non-IFRS measures to the most directly comparable IFRS measures as contained in the Company’s financial statements.

Unless otherwise noted, the non-IFRS measures presented below have been calculated on a consistent basis for the periods presented.

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C1 Cash Cost of Copper Produced (per lb)

C1 cash cost of copper produced (per lb) is the sum of production costs, net of capital expenditure development costs and by-product credits, divided by the copper pounds produced. C1 cash costs reported by the Company include treatment, refining charges, offsite costs, and certain tax credits relating to sales invoiced to the Company’s Brazilian customer on sales. By-product credits are calculated based on actual precious metal sales (net of treatment costs) during the period divided by the total pounds of copper produced during the period. C1 cash cost of copper produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

The following table provides a reconciliation of C1 cash cost of copper produced per pound to cost of goods sold, its most directly comparable IFRS measure.

	2020 - Q4			2020 - Q3			2020			2019 - Q4			2019
Reconciliation:
Cost of Product Sold	$	25,800		$	28,168		$	109,567		$	35,620		$	135,607
Add (less):
Depreciation/amortization/depletion		(7,950	)		(9,593	)		(35,674	)		(11,128	)		(40,107	)
Incentive payments		(761	)		(714	)		(2,741	)		(2,870	)		(2,870	)
Net change in inventory		888			891			2,271			322			1,062
Transportation costs & other		1,040			1,043			3,947			1,479			4,598
By-product credits		(4,493	)		(5,042	)		(17,005	)		(4,101	)		(12,822	)
Treatment, refining, and other		(554	)		469			1,192			935			1,814
Foreign exchange translation adjustments		1,225			11			1,525			74			(70	)
C1 cash costs	$	15,195		$	15,233		$	63,082		$	20,330		$	87,212

	2020 - Q4			2020 - Q3			2020			2019 - Q4			2019
Costs
Mining[1]	$	12,727		$	12,654		$	51,007		$	14,974		$	65,603
Processing		4,013			4,220			16,124			5,406			21,035
Indirect		3,502			2,932			11,764			3,116			11,581
Production costs[1]		20,242			19,806			78,895			23,496			98,219
By-product credits		(4,493	)		(5,042	)		(17,005	)		(4,101	)		(12,822	)
Treatment, refining and other		(554	)		469			1,192			935			1,814
C1 cash costs	$	15,195		$	15,233		$	63,082		$	20,330		$	87,212
Costs per pound
Payable copper produced (lb)		22,086			24,164			94,388			25,411			93,295
Mining[1]	$	0.58		$	0.52		$	0.54		$	0.59		$	0.70
Processing	$	0.18		$	0.17		$	0.17		$	0.21		$	0.23
Indirect	$	0.16		$	0.12		$	0.12		$	0.12		$	0.12
By-product credits	$	(0.20	)	$	(0.21	)	$	(0.18	)	$	(0.16	)	$	(0.14	)
Treatment, refining and other	$	(0.03	)	$	0.02		$	0.01		$	0.04		$	0.02
C1 cash cost of copper produced (per lb)	$	0.69		$	0.63		$	0.67		$	0.80		$	0.93

[1] - Beginning in Q3 2020, production costs are presented net of capex development. Comparative figures have been adjusted to conform with the revised presentation.

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C1 Cash Cost of Gold produced (per ounce) and AISC of Gold produced (per ounce)

C1 cash cost of gold produced (per ounce) is the sum of production costs, net of capital expenditure development costs and silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. C1 cash cost of gold produced per ounce is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

AISC of gold produced (per ounce) is the sum of production costs, site general and administrative costs, accretion of mine closure and rehabilitation provision, sustaining capital expenditures, sustaining leases, and royalties and production taxes, net of silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. All-in sustaining cost of gold produced per ounce is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

The following table provides a reconciliation of C1 cash cost of gold produced per ounce and AISC of gold produced per ounce to cost of goods sold, its most directly comparable IFRS measure.

	2020 - Q4			2020 - Q3			2020			2019 - Q4			2019
Reconciliation:
Cost of Product Sold	$	5,523		$	5,169		$	21,018		$	7,397		$	27,210
Add (less):
Depreciation/amortization/depletion		(1,174	)		(818	)		(3,538	)		(881	)		(5,907	)
Incentive payments		(120	)		(116	)		(511	)		-			-
Net change in inventory		255			(134	)		140			120			710
By-product credits		(141	)		(134	)		(424	)		(67	)		(281	)
Foreign exchange translation adjustments		26			3			140			(18	)		(46	)
C1 cash costs	$	4,369		$	3,970		$	16,825		$	5,917		$	21,052
Site general and administrative		721			641			2,420			716			2,216
Accretion of mine closure and rehabilitation provision		88			49			268			194			1,018
Sustaining capital expenditure		600			179			1,033			218			773
Sustaining leases		502			345			1,613			399			1,423
Royalties and production taxes		281			281			952			125			589
AISC	$	6,561		$	5,465		$	23,111		$	7,569		$	27,071

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	2020 - Q4			2020 - Q3			2020			2019 - Q4			2019
Costs
Mining[1]	$	2,280		$	1,980		$	8,194		$	2,715		$	10,266
Processing		1,624			1,544			6,462			2,274			7,588
Indirect		606			580			2,593			995			3,479
Production costs[1]		4,510			4,104			17,249			5,984			21,333
By-product credits		(141	)		(134	)		(424	)		(67	)		(281	)
C1 cash costs	$	4,369		$	3,970		$	16,825		$	5,917		$	21,052
Site general and administrative		721			641			2,420			716			2,216
Accretion of mine closure and rehabilitation provision		88			49			268			194			1,018
Sustaining capital expenditure		600			179			1,033			218			773
Sustaining leases		502			345			1,613			399			1,423
Royalties and production taxes		281			281			952			125			589
AISC	$	6,561		$	5,465		$	23,111		$	7,569		$	27,071
Costs per ounce
Payable gold produced (ounces)		10,789			9,436			36,830			6,043			30,434
Mining[1]	$	211		$	210		$	222		$	449		$	337
Processing	$	151		$	164		$	175		$	376		$	249
Indirect	$	56		$	61		$	70		$	165		$	114
By-product credits	$	(13	)	$	(14	)	$	(12	)	$	(11	)	$	(9	)
C1 cash cost of gold produced (per ounce)	$	405		$	421		$	457		$	980		$	691
AISC of gold produced (per ounce)	$	608		$	579		$	628		$	1,253		$	889

[1] - Beginning in Q3 2020, production costs are presented net of capex development. Comparative figures have been adjusted to conform with the revised presentation.

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Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and Adjusted EBITDA

EBITDA represents earnings before interest expense, income taxes, depreciation, and amortization. Adjusted EBITDA includes further adjustments for non -recurring items and/or items not indicative to the future operating performance of the Company. The Company believes EBITDA and adjusted EBITDA are appropriate supplemental measures of debt service capacity and performance of its operations.

Adjusted EBITDA is calculated by removing the following income statement items:

- Recovery of valued added taxes

- Foreign exchange loss (gain)

- Loss on gold hedge contracts

- Share based compensation

- Incremental costs in response to COVID-19 pandemic

- Loss on debt settlement

	2020 - Q4			2020 - Q3		2020		2019 - Q4			2019
Reconciliation:
Net income	$	66,342		$	31,443	$	52,498	$	45,409		$	92,455
Adjustments:
Finance expenses		2,556			3,397		15,449		2,014			20,428
Tax expense (recovery)		13,234			6,806		8,925		(25,209	)		(17,626	)
Depreciation/amortization/depletion		9,161			10,445		39,348		12,042			46,171
EBITDA		91,293			52,091		116,220		34,256			141,428
Recovery of value added taxes		-			-		-		-			(21,584	)
Foreign exchange loss (gain)		(27,142	)		8,703		79,805		(4,423	)		5,148
Loss on gold hedge contracts		-			-		-		15			1,505
Share based compensation		2,549			1,743		9,064		1,304			5,792
Incremental costs in response to COVID-19 pandemic		481			-		1,968		-			-
Loss on debt settlement		-			-		-		-			1,783
Adjusted EBITDA	$	67,181		$	62,537	$	207,057	$	31,152		$	134,072

Note: In Q4 2020 and Fiscal 2020, incremental costs in response to COVID-19 pandemic is included as an adjustment to the calculation of Adjusted EBITDA. In Q4 2020 and Fiscal 2020, recovery of value added taxes was not included as an adjustment to the calculation of Adjusted EBITDA.

Adjusted net income attributable to owners of the Company and Adjusted net income per share attributable to owners of the Company

The Company uses the financial measure “Adjusted net income attributable to owners of the Company” and “Adjusted net income per share attributable to owners of the Company” (“Adjusted EPS”) to supplement information in its consolidated financial statements. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, the Company and certain investor and analysts use this information to evaluate the Company’s performance. The Company excludes the following items from net income to provide a measure which allows the Company and investors to evaluate the operating results of the underlying core operations: i) net recovery of value added taxes, ii) share based compensation, iii) unrealized foreign exchange loss (gain) on USD denominated debt in MCSA, iv) unrealized loss (gain) on foreign exchange derivative contracts, net of tax, v) incremental costs in response to COVID-19 pandemic, vi) unrealized loss (gain) on interest rate derivative contracts, vii) loss on debt settlement, and viii) unrealized loss on gold hedge contracts. The presentation of Adjusted EPS is not meant to substitute the net income (loss) per share attributable to owners of the Company (“EPS”) presented in accordance with IFRS, but rather it should be evaluated in conjunction with such IFRS measures.

The following table provides a detailed reconciliation of net income (loss) attributable to owners of the Company as reported in the Company’s consolidated financial statements to adjusted net income attributable to owners of the Company and Adjusted EPS.

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	2020 - Q4			2020 - Q3			2020		2019 - Q4			2019
Reconciliation:
Net income as reported attributable to the owners of the Company	$	65,786		$	31,063		$	51,622	$	45,169		$	91,883
Adjustments for:
Net recovery of value added taxes		-			-			-		-			(17,783	)
Share based compensation		2,549			1,743			9,064		1,304			5,792
Unrealized foreign exchange loss (gain) on USD denominated debt in MCSA		(7,682	)		2,026			24,093		(3,738	)		4,388
Unrealized loss (gain) on foreign exchange derivative contracts, net of tax		(23,077	)		2,256			29,411		(1,404	)		249
Incremental costs in response to COVID-19 pandemic		481			-			1,968		-			-
Unrealized loss (gain) on interest rate derivative contracts		(640	)		(386	)		1,137		-			-
Loss on debt settlement		-			-			-		-			1,776
Unrealized gain on gold hedge contracts		-			-			-		(677	)		-
Adjusted net income attributed to owners of the Company	$	37,417		$	36,702		$	117,295	$	40,654		$	86,305
Weighted average number of common shares - basic		87,321,832			86,448,318			86,368,535		85,620,168			85,244,277
Weighted average number of common shares - diluted		92,642,103			91,961,897			92,213,628		91,670,988			91,390,425
Adjusted EPS - basic	$	0.43		$	0.42		$	1.36	$	0.47		$	1.01
Adjusted EPS - diluted	$	0.40		$	0.40		$	1.27	$	0.44		$	0.94

Note: In Q4 2020 and Fiscal 2020, incremental costs in response to COVID-19 pandemic is included as an adjustment to the calculation of Adjusted EPS. In Q4 2020 and Fiscal 2020, net recovery of value added taxes was not included as an adjustment to the calculation of Adjusted EPS.

Net Debt

Net debt is determined based on cash and cash equivalents, restricted cash and loans and borrowings as reported in the Company’s consolidated financial statements. The Company uses net debt as a measure of the Company’s ability to pay down its debt. The following table provides a calculation of net debt based on amounts presented in the Company’s consolidated financial statements as at December 31, 2020, September 30, 2020, and December 31, 2019.

	December 31,			September 30,			December 31,
	2020			2020			2019
Current portion of loans and borrowings	$	12,539		$	17,325		$	18,984
Long-term portion of loans and borrowings		155,563			155,403			140,386
Less: Cash and cash equivalents		(62,508	)		(54,341	)		(21,485	)
Restricted cash		-			-			(1,500	)
Net Debt	$	105,594		$	118,387		$	136,385

Working Capital (Deficit) and Available Liquidity

Working capital is determined based on current assets and current liabilities as reported in the Company’s consolidated financial statements. The Company uses working capital as a measure of the Company’s short-term financial health and operating efficiency. Available liquidity includes the Company’s working capital and undrawn revolving credit facilities in place. The following table provides a calculation for these based on amounts presented in the Company’s consolidated financial statements as at December 31, 2020 and December 31, 2019.

	December 31,			December 31,
	2020			2019
Current Assets	$	127,541		$	75,565
Less: Current Liabilities		(91,720	)		(80,481	)
Working Capital (Deficit)	$	35,821		$	(4,916	)
Available undrawn revolving credit facilities		11,621			30,000
Available Liquidity	$	47,442		$	25,084

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Disclosure Controls and Procedures and Internal Control over Financial Reporting

The Company’s management, with the participation of the CEO and CFO, is responsible for establishing and maintaining adequate disclosure controls and procedures (“DC&P”) and internal control over financial reporting (“ICFR”).

The Company’s DC&P are designed to provide reasonable assurance that material information related to the Company is identified and communicated on a timely basis.

The Company’s ICFR is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Any system of ICFR, no matter how well designed, has inherent limitations and cannot provide absolute assurance that all misstatements and instances of fraud, if any, within the Company have been prevented or detected. The Company’s ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

The Company uses the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The Company’s management, under the supervision of the CEO and CFO, has evaluated the design and operating effectiveness of the Company’s DC&P and ICFR and concluded that the Company’s DC&P and ICFR were effective as of December 31, 2020.

There were no changes in the Company’s DC&P and ICFR that materially affected, or are reasonably likely to materially affect, ICFR during Q4 2020.

NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION

Unless otherwise indicated, scientific and technical information in this MD&A relating to Ero’s properties (“Technical Information”) is based on information contained in the following reports:

The report prepared in accordance with National Instrument 43-101, Standards of Disclosure for Mineral Projects (“NI 43-101”) and entitled “2020 Updated Mineral Resources and Mineral Reserves Statements of Mineração Caraíba’s Vale do Curaçá Mineral Assets, Curaçá Valley”, dated January 14, 2021 with an effective date of October 1, 2020, prepared by Porfirio Cabaleiro Rodrigues, MAIG, Bernardo Horta de Cerqueira Viana, MAIG, Paulo Roberto Bergmann, FAusIMM, Fábio Valério Câmara Xavier, MAIG, Dr. Augusto Ferreira Mendonça, RM SME, all of GE21 Consultoria Mineral Ltda. (“GE21”), and Dr. Beck (Alizeibek) Nader, FAIG, of BNA Mining Solutions, and each a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “MCSA Mining Complex Technical Report”).

The report prepared in accordance with NI 43-101 and entitled “Mineral Resource and Mineral Reserve Estimate of the NX Gold Mine, Nova Xavantina”, dated January 8, 2021 with an effective date of September 30, 2020, prepared by Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, Bernardo Horta de Cerqueira Viana, MAIG, and Paulo Roberto Bergmann, FAusIMM, each of GE21 and a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “NX Gold Technical Report”).

The report prepared in accordance with NI 43-101 and entitled “Feasibility Study, Technical Report for the Boa Esperança Copper Project, Pará State Brazil”, dated September 7, 2017 with an effective date of June 1, 2017, prepared by Rubens Mendonça, MAusIMM of SRK Consultores do Brasil Ltda. (“SRK” or “SRK Brazil”) as at the date of the report and Carlos Barbosa, MAIG and Girogio di Tomi, MAusIMM, both of SRK Brazil, and each a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “Boa Esperança Feasibility Study”).

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Reference should be made to the full text of the MCSA Mining Complex Technical Report, the NX Gold Technical Report and the Boa Esperança Technical Report, each of which is available for review under the Company’s profile on SEDAR at www.sedar.com.

The disclosure of Technical Information in this MD&A was reviewed and approved by Emerson Ricardo Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

Cautionary Note Regarding Forward-Looking Statements

This MD&A contains “forward-looking information” within the meaning of applicable Canadian securities laws. Forward-looking information includes statements that use forward-looking terminology such as “may”, “could”, “would”, “will”, “should”, “intend”, “target”, “plan”, “expect”, “budget”, “estimate”, “forecast”, “schedule”, “anticipate”, “believe”, “continue”, “potential”, “view” or the negative or grammatical variation thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, statements with respect to mineral reserve and mineral resource estimates as well as LOM plans; targeting additional mineral resources and expansion of deposits; the Company’s expectations, strategies and plans for the MCSA Mining Complex, the NX Gold Property and the Boa Esperança Property, including the Company’s planned exploration, development and production activities; the significance of any particular exploration program or result and the Company’s expectations for current and future exploration plans including, but not limited to, planned areas of additional exploration, the significance of any drill results or new discoveries and targets, including without limitation, extensions of defined mineralized zones, possibilities for mine life extensions or continuity of high-grade mineralization, the recoverable value of any metals other than copper, further extensions and expansion of mineralization near the Company’s existing operations and throughout the Curaçá Valley or the NX Gold Mine, the timing and advancement of ongoing projects including the Deepening Extension Project and the re-start of the Surubim open pit mine; estimated completion dates for certain milestones; successfully adding or upgrading mineral resources and successfully developing new deposits; the costs and timing of future exploration and development including but not limited to the Deepening Extension Project at the MCSA Mining Complex; the significance of any potential optimization initiatives in connection with the Boa Esperança Property and the potential issuance, and timing of, an OFS; the impact of the COVID-19 pandemic on the Company’s planned drill programs; the timing and amount of future production at the MCSA Mining Complex and the NX Gold Property; the representativeness of the material tested in the Company’s ore sorting trial campaign to actual results of each of the mines tested during the campaign and the potential benefits of ore sorting in the LOM plans at any of the Company's operations including the Vermelhos District as well as any potential savings on transport costs, any potential reduction in water, diesel and electricity use, as well as any proposed reductions in flotation tailings as a result of ore sorting implementation, which may or may not occur in any capacity at the Company's operations or life- of-mine plans now or in the future, the Company's ability to service its ongoing obligations, the Company's future production outlook, cash costs, capital resources, expenditures, the impact of new accounting standards and amendments on the Company's financial statements, and current global macroeconomic uncertainty stemming from the COVID-19 pandemic and its impact on the Company’s business, financial condition, results of operations, cash flows and prospects.

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this MD&A including, without limitation, assumptions about: continued effectiveness of the measures taken by the Company to mitigate the possible impact of COVID-19 on its workforce and operations; favourable equity and debt capital markets; the ability to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Company’s properties and assets; future prices of copper and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any mineral reserve and mineral resource estimates; the geology of the MCSA Mining Complex, NX Gold Property and the Boa Esperanҫa Property being as described in the technical reports for these properties; production costs; the accuracy of budgeted exploration and development costs and expenditures; the price of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to operate in a safe, efficient and effective manner; work force conditions to remain healthy in the face of prevailing epidemics, pandemics or other health risks (including COVID-19), political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favourable terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour stability; stability in financial and capital goods markets; availability of equipment and critical supplies, spare parts and consumables; positive relations with local groups and the Company’s ability to meet its obligations under its agreements with such groups; and satisfying the terms and conditions of the Company’s current loan arrangements. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive, global health, and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.

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Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. Such risks include, without limitation the risk factors listed under the heading “Risk Factors” in the AIF.

Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking information, there may be other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended.

The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained herein. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.

Forward-looking information contained herein is made as of the date of this MD&A and the Company disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.

Cautionary Notes Regarding Mineral Resource and Reserve Estimates

In accordance with applicable Canadian securities regulatory requirements, all mineral reserve and mineral resource estimates of the Company disclosed or incorporated by reference in this MD&A have been prepared in accordance with NI 43-101 and are classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards for Mineral Resources and Mineral Reserves, adopted by the CIM Council on May 10, 2014 (the “CIM Standards”).

Mineral resources which are not mineral reserves do not have demonstrated economic viability. Pursuant to the CIM Standards, mineral resources have a higher degree of uncertainty than mineral reserves as to their existence as well as their economic and legal feasibility. Inferred mineral resources, when compared with Measured or Indicated mineral resources, have the least certainty as to their existence, and it cannot be assumed that all or any part of an Inferred mineral resource will be upgraded to an Indicated or Measured mineral resource as a result of continued exploration. Pursuant to NI 43-101, Inferred mineral resources may not form the basis of any economic analysis. Accordingly, readers are cautioned not to assume that all or any part of a mineral resource exists, will ever be converted into a mineral reserve, or is or will ever be economically or legally mineable or recovered.

ADDITIONAL INFORMATION

Additional information about Ero and its business activities, including the AIF, is available under the Company’s profile at www.sedar.com.

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CONSOLIDATED FINANCIAL

STATEMENTS

DECEMBER 31, 2020 AND 2019

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KPMG LLP

PO Box 10426 777 Dunsmuir Street

Vancouver BC V7Y 1K3

Canada

Telephone (604) 691-3000

Fax (604) 691-3031

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of Ero Copper Corp.

Opinion

We have audited the consolidated financial statements of Ero Copper Corp. (“the Entity”), which comprise:

– the consolidated statements of financial position as at December 31, 2020 and December 31, 2019;

– the consolidated statements of operations and comprehensive income, changes in shareholders’ equity and cash flows for the years then ended; and

– notes to the consolidated statements, including a summary of significant accounting policies

(Hereinafter referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at December 31, 2020 and December 31, 2019, and its consolidated financial performance and consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “Auditors’ Responsibilities for the Audit of the Financial Statements” section of our auditors’ report.

We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.  

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Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2020. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We have determined the matter described below to be the key audit matter to be communicated in our auditors’ report.

Assessment of recognition of uncertainties over income tax treatments in Brazil

Description of the matter

We draw your attention to Notes 2(d), 3(e) and 11(c)(ii) to the financial statements.

Uncertainties over income tax treatments are evaluated on the basis of whether it is probable that they will be accepted upon examination by the relevant taxing authorities. These uncertainties impact the amount of income taxes recognized.

The Entity operates in Brazil where tax authorities may audit income tax treatments and the resolution of such audits may span multiple years. Tax law in Brazil is complex and often subject to changes and to varied interpretations; accordingly, the ultimate outcome with respect to income tax treatments may differ from the amounts recognized. The Entity’s assessment of whether it is probable that uncertain income tax treatments will be accepted by tax authorities in Brazil is a significant management judgment.

Why the matter is a key audit matter

We identified the assessment of recognition of uncertainties over income tax treatments in Brazil as a key audit matter. This matter represented an area of significant risk of misstatement given the high degree of subjectivity and judgment required in evaluating management’s significant judgement. As a result, specialized skills and knowledge were required in evaluating management’s significant judgement.

How the matter was addressed in the audit

The primary procedures we performed to address this key audit matter included the following:

We involved income tax and legal professionals in Brazil with specialized skills and knowledge who assisted in assessing whether it was probable that uncertain income tax treatments would be accepted by:

– Developing an independent assessment based on our understanding and interpretation of tax laws in Brazil

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– Inspecting correspondence documents with Brazilian tax authorities and evaluating the implications of the matters raised by such authorities

– Inspecting opinions provided by the Entity’s tax and legal advisors.

We also assessed whether it was probable that uncertain income tax treatments would be accepted by obtaining legal enquiry letter responses from law firms related to identified tax claims and contingencies.

Other Information

Management is responsible for the other information. Other information comprises:

– the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions; and

– information, other than the financial statements and the auditors’ report thereon, included in a document likely to be entitled “Annual Report”.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated.

We obtained the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions as at the date of this auditors’ report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditors’ report. We have nothing to report in this regard.

The information, other than the financial statements and the auditors’ report thereon, included in a document likely to be entitled “Annual Report” is expected to be made available to us after the date of this auditors’ report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.

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Those charged with governance are responsible for overseeing the Entity‘s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

–     Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

–     Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control.

–     Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

–     Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Entity to cease to continue as a going concern.

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– Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represents the underlying transactions and events in a manner that achieves fair presentation.

– Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

– Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

– Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group Entity to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

/s/ KPMG LLP

Chartered Professional Accountants

The engagement partner on the audit resulting in this auditors’ report is Robert Ryan Owsnett.

Vancouver, Canada

March 16, 2021

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Ero Copper Corp.

Consolidated Statements of Financial Position

(Amounts in thousands of US Dollars)

			As at			As at
	Notes		December 31, 2020			December 31, 2019
ASSETS
Current
Cash and cash equivalents			$	62,508		$	21,485
Restricted cash		9(b)		-			1,500
Accounts receivable				20,353			7,680
Inventories		4		25,496			19,377
Other current assets		5		19,184			25,523
				127,541			75,565
Non-Current
Mineral, property, plant and equipment		6		333,702			339,516
Exploration and evaluation assets		7		21,024			25,878
Deposits				513			1,200
Deferred income tax assets		19		14,223			13,099
Other non-current assets				96			7,416
				369,558			387,109
Total Assets			$	497,099		$	462,674
LIABILITIES
Current
Accounts payable and accrued liabilities		8	$	37,878		$	43,694
Current portion of loans and borrowings		9		12,539			18,984
Current portion of value added, payroll and other taxes payable		10		13,361			13,994
Current portion of derivatives		21		26,540			650
Current portion of lease liabilities				1,402			3,159
				91,720			80,481
Non-Current
Loans and borrowings		9		155,563			140,386
Provisions		11		21,450			33,581
Value added, payroll and other taxes		10		1,468			5,694
Derivatives		21		10,811			1,059
Lease liabilities				346			487
Other non-current liabilities				1,666			1,928
				191,304			183,135
Total Liabilities				283,024			263,616
SHAREHOLDERS’ EQUITY
Share capital		12		126,152			120,492
Equity reserves				(67,291	)		(24,489	)
Retained earnings				153,842			102,220
Equity attributable to owners of the Company				212,703			198,223
Non-controlling interests				1,372			835
				214,075			199,058
Total Liabilities and Equity			$	497,099		$	462,674

Nature of operations (Note 1); Contingencies (Note 11); Subsequent events (Note 9(a), 12(a) and (d))

APPROVED ON BEHALF OF THE BOARD:

“David Strang” , CEO & Director ”Matthew Wubs” , Director

The accompanying notes are an integral part of these consolidated financial statements

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Ero Copper Corp.

Consolidated Statements of Operations and Comprehensive Income

(Amounts in thousands of US Dollars, except share and per share amounts)

			Year ended			Year ended
	Notes		December 31, 2020			December 31, 2019
Revenue		13	$	324,076		$	284,843
Cost of product sold		14		(130,585	)		(162,817	)
Sales expenses				(5,354	)		(4,962	)
Gross profit				188,137			117,064
Expenses
General and administrative		15		(27,927	)		(32,817	)
Share-based compensation		12(a) to (c)		(9,064	)		(5,792	)
Income before the undernoted				151,146			78,455
Other income (expenses)
Finance income				1,346			701
Finance expense		16		(15,449	)		(20,428	)
Foreign exchange loss		17		(79,805	)		(5,148	)
Loss on debt settlement				-			(1,783	)
Recovery of value added taxes		18		8,886			21,584
Other income (expenses)				(4,701	)		1,448
Income before income taxes				61,423			74,829
Income tax recovery (expense)
Current		19		(9,675	)		(10,645	)
Deferred		19		750			28,271
				(8,925	)		17,626
Net income for the year				52,498			92,455
Other comprehensive income (loss)
Foreign currency translation loss				(49,553	)		(4,941	)
Comprehensive income			$	2,945		$	87,514
Net income attributable to:
Owners of the Company				51,622			91,883
Non-controlling interests				876			572
			$	52,498		$	92,455
Comprehensive income attributable to:
Owners of the Company				2,267			86,962
Non-controlling interests				678			552
			$	2,945		$	87,514
Net income per share attributable to owners of the Company		12(e)
Net income per share
Basic			$	0.60		$	1.08
Diluted			$	0.56		$	1.01
Weighted average number of common shares outstanding
Basic				86,368,535			85,244,277
Diluted				92,213,628			91,390,425

The accompanying notes are an integral part of these consolidated financial statements

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Ero Copper Corp.

Consolidated Statement of Changes in Shareholders’ Equity

(Amounts in thousands of US Dollars, except share and per share amounts)

			Share Capital				Equity Reserves
			Number of				Contributed			Foreign			Retained					Non-controlling
	Notes		shares		Amount		surplus			exchange			earnings		Total			interest			Total equity
Balance, December 31, 2018				84,738,650	$	117,944	$	3,897		$	(28,652	)	$	10,337	$	103,526		$	296		$	103,822
Income for the year				-		-		-			-			91,883		91,883			572			92,455
Other comprehensive loss for the year				-		-		-			(4,921	)		-		(4,921	)		(20	)		(4,941	)
Total comprehensive income (loss) for the year				-		-		-			(4,921	)		91,883		86,962			552			87,514
Shares issued for:
Exercise of options and warrants				964,996		2,548		(605	)		-			-		1,943			-			1,943
Share-based compensation		12(a) to (c)		-		-		5,792			-			-		5,792			-			5,792
Dividends to non-controlling interest																			(13	)		(13	)
Balance, December 31, 2019				85,703,646	$	120,492	$	9,084		$	(33,573	)	$	102,220	$	198,223		$	835		$	199,058
Income for the year				-		-		-			-			51,622		51,622			876			52,498
Other comprehensive loss for the year				-		-		-			(49,355	)		-		(49,355	)		(198	)		(49,553	)
Total comprehensive income (loss) for the year				-		-		-			(49,355	)		51,622		2,267			678			2,945
Shares issued for:
Exercise of options and warrants				2,175,615		5,660		(1,258	)		-			-		4,402			-			4,402
Share-based compensation		12(a) to (c)		-		-		7,811			-			-		7,811			-			7,811
Dividends to non-controlling interest				-		-		-			-			-		-			(141	)		(141	)
Balance, December 31, 2020				87,879,261	$	126,152	$	15,637		$	(82,928	)	$	153,842	$	212,703		$	1,372		$	214,075

The accompanying notes are an integral part of these consolidated financial statements

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Ero Copper Corp.

Consolidated Statements of Cash Flows

(Amounts in thousands of US Dollars)

	Year ended			Year ended
	December 31, 2020			December 31, 2019
Cash Flows from / (used in) Operating Activities
Net income for the year	$	52,498		$	92,455
Adjustments for:
Amortization and depreciation		39,348			46,171
Income tax expense (recovery)		8,925			(17,626	)
Loss on debt settlement		-			1,783
Recovery of value added taxes		(8,886	)		(21,584	)
Write-off of plant and equipment		1,842			3,475
Unrealized derivative contracts		-			1,427
Provisions		(145	)		(625	)
Share-based compensation		9,064			5,792
Finance income		(1,346	)		(701	)
Finance expenses		15,449			20,428
Foreign exchange loss		79,805			5,148
Changes in:
Accounts receivable		(13,266	)		(756	)
Inventories		(6,360	)		(5,946	)
Other assets		6,858			(4,636	)
Accounts payable and accrued liabilities		(3,885	)		11,604
Deferred revenue		-			(1,882	)
Value added, payroll and other taxes		7,121			43
		187,022			134,570
Derivative contract settlements		(20,804	)		(1,011	)
Provision settlements		(1,585	)		(1,786	)
Income taxes paid		(1,796	)		(3,943	)
		162,837			127,830
Cash Flows from / (used in) Investing Activities
Additions to mineral property, plant and equipment		(117,607	)		(105,382	)
Additions to exploration and evaluation assets		(199	)		(892	)
Other investments		1,250			(467	)
		(116,556	)		(106,741	)
Cash Flows from / (used in) Financing Activities
Restricted cash		1,500			1,500
Lease liability payments		(4,337	)		(4,082	)
New loans and borrowings, net of finance costs		68,997			37,867
Loans and borrowings paid		(57,425	)		(41,305	)
Interest paid on loans and borrowings		(9,693	)		(10,276	)
Other finance expenses		(3,156	)		(3,668	)
Issuance of share capital, net of issuance costs		4,402			1,943
		288			(18,021	)
Effect of exchange rate changes on cash and cash equivalents		(5,546	)		(524	)
Net increase in cash and cash equivalents		41,023			2,544
Cash and cash equivalents - beginning of year		21,485			18,941
Cash and cash equivalents - end of year	$	62,508		$	21,485

The accompanying notes are an integral part of these consolidated financial statements

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

1.	Nature of Operations
	Ero Copper Corp. (“Ero" or the "Company") was incorporated on May 16, 2016 under the Business Corporations Act (British Columbia) and maintains its head office at Suite 1050, 625 Howe Street, Vancouver, BC, V6C 2T6. The Company’s shares are publicly traded on the Toronto Stock Exchange under the symbol “ERO”.
	The Company’s principal asset is its 99.6% ownership interest in Mineração Caraíba S.A. (“MCSA”). The Company also currently owns a 97.6% ownership interest in NX Gold S.A. (“NX Gold”) indirectly through its wholly-owned subsidiary, Ero Gold Corp. (“Ero Gold”).
	MCSA is a Brazilian company which holds a 100% interest in the MCSA Mining Complex and the Boa Esperança Property (Note 7). MCSA’s predominant activity is the production and sale of copper concentrate from the MCSA Mining Complex, located in Bahia, Brazil, with gold and silver produced and sold as by-products. The Company currently mines copper ore from the Pilar underground mine (“Pilar UG Mine”) and the Vermelhos underground mine (“Vermelhos UG Mine”). The Boa Esperança Property is located within the municipality of Tucumã in the southeastern part of the state of Pará, Brazil, and consists of a single mineral concession covering an area of 4,034 hectares (“ha”).
	NX Gold is a Brazilian gold mining company focused on the exploration and commercialization of gold as its main product and silver as its by-product. NX Gold wholly owns a 31,096 ha property, located approximately 18 kilometers west of the town of Nova Xavantina, in southeastern Mato Grosso State, Brazil, consisting of a single mining concession covering an area of 620 ha, where all gold mining and processing activities occur.
	On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. Although COVID-19 has not materially impacted the Company’s operations during the year ended December 31, 2020, the situation is dynamic and the ultimate duration and magnitude of the impact on the economy and our business are not known at this time. These impacts could include an impact on the Company’s ability to obtain debt and equity financing, impairment of investments, impairments in the value of long-lived assets, continued fluctuation in the value of the Brazilian Real or potential future decreases in revenue or the profitability of ongoing operations.

2. Basis of Preparation

a)	Statement of Compliance
	These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee.
	These consolidated financial statements were authorized for issue by the Board of Directors of the Company (the “Board”) on March 16, 2021.
b)	Basis of Presentation and Principles of Consolidation
	These consolidated financial statements have been prepared on a historical cost basis except for fair-value through-profit-or-loss and derivative financial instruments, which are measured at fair value.
	These consolidated financial statements include the accounts of the Company and its subsidiaries. Subsidiaries are entities controlled by the Company. Control over a subsidiary is defined to exist when the Company is exposed to variable returns from involvement with an investee and has the ability to affect the returns through power over the investee. All intercompany balances and transactions are eliminated upon consolidation.

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The Company applies the acquisition method to account for business combinations. The consideration transferred by the Company to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities assumed and the equity interests issued by the Company, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred.

The Company recognizes identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognized in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values.

Goodwill arising from acquisitions is the excess of the sum of a) fair value of consideration transferred, b) the recognized amount of any non-controlling interest in the acquiree and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount would be recognized in profit or loss immediately.

Since the Company does not own 100% of its interests in MCSA and NX Gold, the interest attributable to non-controlling shareholders is reflected in non-controlling interests. Adjustments to non-controlling interests that do not involve the loss of control are accounted for as equity transactions and adjustments are based on a proportionate amount of the net assets of the subsidiary.

c) Foreign Currency Translation

The functional currency and presentation currency of the Company is the US dollar. The monetary assets and liabilities of the Company that are denominated in foreign currencies are translated at the rate of exchange at the statement of financial position date while non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at the exchange rates approximating those in effect on the date of the transactions. Exchange gains and losses arising on translation are included in profit or loss.

The functional currency of MCSA and NX Gold is the Brazilian Real (“BRL”). The assets and liabilities of MCSA and NX Gold are translated into the US dollar presentation currency using the rate of exchange at the statement of financial position date while revenues and expenses are translated at the exchange rates approximating those in effect on the date of the transactions. Exchange gains and losses arising on translation are included in a separate component of shareholders’ equity.

d) Use of Estimates and Judgments

In preparing these financial statements, management has made judgments, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of the assets, liabilities, revenues and expenses. Actual results may differ from these estimates.

The estimates and assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

Critical Judgments

Functional currency

The functional currency of the Company and each of its subsidiaries is the currency of the primary economic environment in which the entities operate. The Company has determined that the functional currency for the Company is the US dollar while the functional currency for MCSA and NX Gold is the Brazilian Real.

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Assessment of functional currency involves certain judgements to determine the primary economic environment and the Company reconsiders the functional currency of its entities if there is a change in events and conditions which determined the primary economic environment.

Legal claims and contingent liabilities

The recognition of legal provisions and contingent liabilities involves the assessment of claims made against the Company and each of its subsidiaries. The recognition of a legal provision, or disclosure of a contingent liability, involves certain judgements to determine the probability of whether a cash outflow will occur. In making this judgment, management has assessed various criteria and also relies on the opinions of its legal advisers to assist in making this assessment.

Key Sources of Estimation Uncertainty

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates and such differences could be significant. Significant estimates made by management affecting the consolidated financial statements include:

Derivative instruments

The fair value of derivative instruments is determined using either present value techniques or option pricing models that utilize a variety of inputs that are a combination of quoted prices and market-corroborated inputs, including assumptions for forward interest and foreign exchange rates, volatilities and discount rates. The fair value of the Company’s derivative contracts includes an adjustment for credit risk for either the Company or the counter party as applicable. Changes in the assumptions for inputs into the models affect the fair value of the derivatives recognized in the statement of financial position as well as the unrealized gains or losses recognized in net income.

Mineral reserve and resource estimates including life of mine plan

The Company estimates its mineral reserves and mineral resources based on information compiled by competent individuals. Mineral reserves are used in the calculation of depreciation, impairment assessments and for forecasting the timing of payment of mine closure and rehabilitation costs.

There are numerous uncertainties inherent in estimating mineral reserves, and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the estimation methodology, forecasted prices of commodities, exchange rates, production costs or recovery rates may change the economic status of mineral reserves and may, ultimately, result in changes in the mineral reserves.

The carrying amounts of the Company’s mineral, property, plant and equipment are depleted in part based on recoverable mineral reserve tonnes processed, depending on the use of the asset. Changes to estimates of recoverable quantities of metals, mineral reserve tonnes and depletable costs, including changes resulting from revisions to the Company’s mine plans and changes in metals prices forecasts, can result in a change to future depreciation and depletion rates and may result in impairment charges.

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Mine closure and rehabilitation costs

Significant estimates and assumptions are made in determining the provision for mine closure and rehabilitation as there are numerous factors that will affect the ultimate liability payable. These factors include estimation of the extent and cost of rehabilitation activities, timing of future cash flows, discount rates, inflation rate, and regulatory requirements.

Changes in the above factors can result in a change to the provision recognized by the Company. Changes to mine closure and rehabilitation costs are recorded with a corresponding change to the carrying amounts of related mineral, property, plant and equipment. Adjustments to the carrying amounts of related mineral, property, plant and equipment can result in a change to future depreciation and depletion expense.

Significant assumptions used to determine mine closure and rehabilitation costs are included in Note 11(a).

Income taxes

The determination of the Company’s tax expense for the period and deferred tax assets and liabilities involves significant estimation and judgement by management. In determining these amounts, management interprets tax legislation in a variety of jurisdictions and makes estimates of the expected timing of the reversal of deferred tax assets and liabilities. Management also makes estimates of future earnings, which affect the extent to which potential future tax benefits may be used. The Company is subject to assessments by various taxation authorities, which may interpret legislation differently. These differences may affect the final amount or the timing of the payment of taxes. The Company provides for such differences where known based on management’s best estimate of the probable outcome of these matters.

The Company operates in Brazil where tax authorities may audit income tax treatments and the resolution of such audits may span multiple years. Tax law in Brazil is complex and often subject to changes and to varied interpretations; accordingly, the ultimate outcome with respect to income tax treatments may differ from the amounts recognized. The Company’s assessment of whether it is probable that uncertain income tax treatments will be accepted by tax authorities in Brazil is a significant management judgment.

e) New Accounting Standards and Interpretations Adopted in the Year

The following new and amended IFRS pronouncements were adopted effective January 1, 2020 and had no impact to the Company’s financial statements:

• Amendments to References to the Conceptual Framework in IFRS Standards

• In September 2019, the IASB issued first phase amendments IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Hedging and IFRS 7 Financial Instrument Disclosures to address the financial reporting impact of the reform on interest rate benchmarks, such as the discontinuance of the interbank offered rates. The first phase amendment is focused on the impact to hedge accounting requirements. The Company adopted the first phase amendment and there was no material impact on its consolidated financial statements. The Company will continue to assess the effect of amendments related to the interest rate benchmark reform on its consolidated financial statements.

The following amendment to accounting standards has been issued but not yet adopted in the financial statements:

• On May 14, 2020, the IASB published a narrow scope amendment to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use. The amendment prohibits deducting from the cost of property, plant and equipment amounts received from selling items produced while preparing the asset for its intended use. Instead, amounts received will be recognized as sales proceeds and related cost in profit or loss. The effective date is for annual periods beginning on or after January 1, 2022. The Company does not expect to adopt this amendment until the effective date, and does not anticipate a material impact on its consolidated financial statements.

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

3. Significant Accounting Policies

a) Revenue

Revenue is generated from the sale of sale of metals in concentrate and gold doré. The Company’s performance obligations relate primarily to the delivery of the concentrate or gold doré to customers, with each shipment representing a separate performance obligation.

Revenue from the sale of metals in concentrate and gold doré is recognized at the point the customer obtains control of the product. Control is transferred when title has passed to the purchaser, the product is physically delivered to the customer, the customer controls the risks and rewards of ownership and the Company has a present right to payment for the product which is generally when the concentrate or ore is delivered to a location designated by the customer.

The sales amount is typically based on quoted market and contractual prices which are fixed at the time the shipment is received at the customers’ premises. In certain circumstances the sales price of metals in concentrate may be determined in a period subsequent to the date of sale (provisionally priced sales) based on the terms of specific copper concentrate contracts. Provisionally priced sales are recognized based on an estimate of metal contained using forward market prices corresponding with the expected date that final sales prices will be fixed. The period between provisional pricing and final settlement can be up to one month. The settlement receivable is recorded at fair value each reporting period by reference to forward market prices until the date of final pricing, with the changes in fair value recorded as an adjustment to revenue.

b) Tax Incentives

The Company receives certain tax incentives in Brazil. These tax incentives are recognized in profit or loss in the period the incentives are received or receivable and recorded against the expenditure that they are intended to compensate.

c) Finance Income and Finance Expense

Finance income includes interest on cash and cash equivalents, restricted cash and financial investments, and gains related to changes in the fair value of financial assets measured at fair value through profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest method.

Finance expense comprise interest expense on loans and borrowings, unwinding of the discount on provisions and leases, commitment fees and losses related to changes in the fair value of financial assets measured at fair value through profit or loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognized in profit or loss using the effective interest method.

d) Employee Benefits

Short-term employee benefit obligations are recognized as personnel expenses as the corresponding service is provided. Liabilities are recognized at the amount that is expected to be paid if the Company has a present legal or constructive obligation to pay that amount based on past services rendered by the employee, and the obligation can be estimated reliably. There are no long-term employee benefit plans.

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

e) Taxation

Income tax expense comprises current and deferred tax. Current income tax is the expected tax payable or receivable on the taxable income or loss for the year using tax rates enacted or substantively enacted at the reporting date.

Deferred income tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred income tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the tax laws that have been enacted or substantively enacted at the reporting date. Deferred income tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity. Deferred income tax is not recognized for the initial recognition of assets or liabilities in a transaction that is not a business combination and that effects neither accounting nor taxable income or loss, differences related to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future and taxable differences arising from the initial recognition of goodwill.

A deferred income tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred income tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Uncertainties over income tax treatments are evaluated on the basis of whether it is probable that they will be accepted upon examination by the relevant taxing authorities in Brazil. These uncertainties impact the amount of income taxes recognized. If it is determined that an uncertain income tax treatment is not probable of being accepted, the effect of the uncertain income tax treatment is reflected in the determination of income taxes based the most likely amount or, if there are a wide range of possible outcomes, the expected value.

f) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of consumable inventory is determined on a weighted average acquisition cost basis. Cost of stockpile inventory, products in progress and finished goods is determined based on a weighted average production cost basis and includes the cost of mining and processing ore including direct labour and materials; depreciation and amortization; and an appropriate share of production overheads based on normal operating capacity.

Net realizable value of stockpile inventory, products in progress and finished goods is the estimated selling price in the ordinary course of business, less estimated completion costs and selling expenses.

Provisions for low turnover or obsolete supplies and consumables inventory are established by management as deemed necessary.

g) Mineral, Property, Plant and Equipment

Mineral, property, plant and equipment is measured at acquisition or construction cost, including capitalized borrowing costs, less accumulated depreciation and accumulated impairment losses.

i) Acquisition and disposal

The cost of mineral, property, plant and equipment include expenditures directly attributable to an asset’s acquisition. The cost of assets constructed by Company includes the cost of materials and direct labor, any other costs to bring the asset in the place and conditions required to be operated in the manner intended by management, costs of disassembly and restoration of the site and borrowing costs on qualifying assets.

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

When parts of mineral, property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of mineral, property, plant and equipment.

Gains and losses on disposal of mineral, property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of equipment and are recognized net within other income.

ii) Subsequent costs

The cost of replacing plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the item will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced item is derecognized. The costs of the day-to-day servicing of equipment are included in profit or loss.

iii) Development and construction-in-progress

When economically viable mineral reserves have been determined and the decision to proceed with development has been approved, exploration and evaluation assets are first assessed for impairment, then reclassified to construction-in-progress or mineral properties. The expenditures related to development and construction are capitalized as construction-in-progress and are included within mineral, property, plant and equipment. Costs associated with the commissioning of new assets incurred before they are operating in the way intended by management, including directly attributable costs of testing, are capitalized. Construction-in-progress includes the purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for its intended use including advances on long-lead items. Construction-in-progress is not depreciated.

Once the asset is operating in the way intended by management, construction-in-progress costs are reclassified to mineral properties or plant and equipment.

Pre-production costs of removing overburden to access ore in the open pit mines and developing access headings in the underground mines are capitalized as pre-production stripping or development costs respectively and are included within mineral, property, plant and equipment. Revenues earned during pre-production periods are also capitalized.

iv) Mineral properties

Mineral properties consist of the cost of acquiring and developing mineral properties. Once in production, mineral properties are amortized on a units-of-production basis over the component of the ore body to which they relate.

v) Stripping costs and development in the production phase

Where open pit production stripping or underground development activities do not result in inventory produced, but does provide improved access to the ore body, the costs are classified as mineral properties when these activities meet all of the following criteria: (1) it is probable that the future economic benefit associated with the activity will flow to the Company; (2) the Company can estimate the mineral reserve of the ore body for which access has been improved; and (3) the costs relating to the activity associated with that mineral reserve can be measured reliably.

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

For underground mines, costs incurred to access a mineral reserve of the ore body are capitalized to mineral properties or construction-in-progress and are depreciated on a units-of-production basis over the expected useful life of the identified mineral reserve of the ore body to which access has been improved as a result of the development activity. For open pit mines, stripping costs are capitalized to mineral properties or construction-in-progress until an average stripping ratio is achieved (waste/ore) for the mine. After the stripping ratio is achieved, all stripping costs are classified as production costs. The capitalized stripping costs are depreciated over the related mineral reserves accessed by the stripping activity.

vi) Mine closure and rehabilitation costs

The Company’s provision for mine closure and rehabilitation liabilities represents management’s best estimate of the present value of the future cash outflows required to settle estimated reclamation and closure costs at the end of a mine’s life. The provision reflects estimates of future costs, inflation, movements in foreign exchange rates and assumptions of risks associated with the future cash outflows, and the applicable risk-free interest rates for discounting the future cash outflows. Changes in the above factors can result in a change to the provision recognized by the Company.

vii) Depreciation

Items of mineral, property, plant and equipment are depreciated on a straight-line method based on the estimated economic useful life of each component as follows:

Buildings	Up to 25 years
Mining equipment	4 years
Mobile equipment & other assets	5 years
Mineral properties	Units of production
Mine closure and rehabilitation costs	Units of production or
	period until remediation
Right of use assets	Shorter of the term of
	lease and life of asset

The depletion of mineral, properties and mine closure and rehabilitation costs is determined based on the ratio of tons of copper/kg of gold contained in the ore mined and total proven and probable mineral reserve tonnes of contained copper/kg of contained gold.

Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate.

h) Exploration and Evaluation Assets

Exploration and evaluation costs relate to the initial search for a mineral deposit, the cost of acquisition of a mineral property interest or exploration rights and the subsequent evaluation to determine the economic potential of the mineral deposit. The exploration and evaluation stage commences when the Company obtains the legal right or license to begin exploration. Once the legal rights or license is obtained, exploration and evaluation expenses are capitalized as exploration and evaluation assets. Costs incurred prior to the Company obtaining the legal rights are expensed.

When the exploration and evaluation of a mineral property indicates that development of the mineral property is technically and commercially feasible, the future economic benefits are probable, and the Company has the intention and sufficient resources to complete the development and use or sell the asset, the related costs are transferred from exploration and evaluation assets to mineral property, plant and equipment.

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Management reviews the carrying value of capitalized exploration costs for indicators that the carrying value is impaired at least annually and when facts and circumstances suggest that the carrying amount may exceed the recoverable amount. The review is based on the Company’s intentions for further exploration and development of the undeveloped property, results of drilling, commodity prices and other economic and geological factors. Subsequent recovery of the resulting carrying value depends on successful development or sale of the undeveloped project. If a property does not prove viable, all non-recoverable costs associated with the project, net of any previous impairment provisions, are written off.

i) Financial Instruments

Non-derivative financial assets

The Company classifies its financial assets in the following categories: at fair value through profit or loss (“FVTPL”), at fair value through other comprehensive income (“FVTOCI”) or at amortized cost. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Measurement and classification of financial assets is dependent on the Company’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. Financial assets are derecognized when they mature or are sold, and substantially all the risks and rewards of ownership have been transferred.

Fair values

A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

When measuring the fair value of an asset or liability, the Company uses observable market data, as much as possible. Fair values are classified into different levels in a hierarchy based on the inputs used in the valuation techniques, as follows:

• Level 1: quoted prices (without adjustments) in active markets for identical assets or liabilities.

• Level 2: inputs other than Level 1 quoted prices, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3: inputs, for assets or liabilities, that are not based on observable market information (non-observable inputs).

The Company recognizes transfers between levels of the hierarchy of fair value at the end of the reporting period during which the change occurred.

When applicable, additional information on the assumptions used in the fair value calculations are disclosed in the specific notes of the corresponding asset or liability.

Financial assets at FVTPL

Financial assets carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the income statement. Realized and unrealized gains and losses arising from changes in the fair value of the financial asset held at FVTPL are included in profit or loss in the period in which they arise. Derivatives are also categorized as FVTPL unless they are designated as hedges.

Financial assets at FVTOCI

Investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses arising from changes in fair value recognized in other comprehensive income. Gains or losses on financial assets classified as FVTOCI remain within accumulated other comprehensive income following the derecognition of the investment.

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Ero Copper Corp.

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Financial assets at amortized cost

Financial assets at amortized cost are initially recognized at fair value and subsequently carried at amortized cost less any impairment. They are classified as current assets or non-current assets based on their maturity date. Gains and losses on derecognition of financial assets classified amortized cost are recognized in profit or loss.

Financial liabilities

Financial liabilities are recognized initially at fair value, net of transaction costs incurred, and are subsequently measured at amortized cost. Any difference between the amounts originally received, net of transaction costs, and the redemption value is recognized in profit and loss over the period to maturity using the effective interest method.

Derivative instruments

Derivative instruments, including embedded derivatives in executory contracts or financial liability contracts, are classified as at FVTPL and, accordingly, are recorded in the statement of financial position at fair value. Unrealized gains and losses on derivatives not designated in a hedging relationship are recorded as part of the revenue or expense item to which the derivative relates, depending on the nature of the derivative. Fair values for derivative instruments are determined using inputs based on market conditions existing at the balance sheet date or settlement date of the derivative. Derivatives embedded in non-derivative contracts are recognized separately unless they are closely related to the host contract.

Trade receivables related to provisionally priced sales are measured at fair value with changes recognized in profit or loss.

Compound instruments

Equity components of compound instruments, such as convertible debt, are separated from the debt host contract using the residual method. The Company determines the fair value of the debt component by discounting the expected principal and interest payments using an appropriate discount rate reflective of debt instruments with similar risks but without the equity component. The difference between the proceeds received and the amount assigned to the debt component is allocated to the equity component.

Share capital

Common shares are classified as equity. Incremental costs directly attributable to the issuance of common shares and share options are recognized as a deduction from equity, net of any tax effects. The Company includes the value of share purchase warrants included in the issuance of equity units, which consist of common shares and warrants, in share capital.

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Classification and measurement

The Company has assessed the classification and measurement of its financial assets and financial liabilities under IFRS 9 in the following table:

	Measurement Category
Financial Assets:
Cash, cash equivalents and restricted cash	Amortized cost
Trade receivables	Amortized cost
Deposits	Amortized cost
Financial Liabilities:
Trade payables	Amortized cost
Loans and borrowings	Amortized cost
Derivatives	Fair value through profit or loss

Cash and cash equivalents, restricted cash and deposits

Cash is comprised of cash on hand and demand deposits. Cash equivalents, restricted cash and deposits are short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in fair value.

Trade receivables

Trade receivables relate to amounts receivable from sales with fixed or determinable payments that are not quoted in an active market. These receivables are non-interest bearing and are recognized at face amount, except when fair value is materially different, and are subsequently measured at amortized cost. Trade receivables recorded are net of lifetime expected credit losses.

j) Impairment

i) Financial assets

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the loss allowance for the financial asset is measured at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the loss allowance is measured for the financial asset at an amount equal to twelve months’ expected credit losses. For trade receivables the Company applies the simplified approach to providing for expected credit losses, which allows the use of a lifetime expected loss provision. Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease can be objectively related to an event occurring after the impairment was recognized. The expected lifetime credit loss provision for trade receivables is based on historical counterparty default rates and adjusted for relevant forward-looking information, when required. As the Company’s three primary significant customers are considered to have a low default rate and historical default rates are low, the lifetime expected credit loss allowance for trade receivables is nominal as at December 31, 2020. Accordingly, the Company did not record a provision for expected credit losses for trade receivables.

ii) Non-Financial assets

At each reporting date the carrying amounts of the Company’s mineral, property, plant and equipment and exploration and evaluation assets are reviewed to determine whether there is any indication that those assets are impaired. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use, which is the present value of future cash flows expected to be derived from the asset or its related cash generating unit. For purposes of impairment testing, assets are grouped at the lowest levels that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the associated assets are reduced to their recoverable amount and the impairment loss is recognized in the profit or loss for the period.

Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment charge is reversed through profit or loss only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of any applicable depreciation, if no impairment loss had been recognized.

k) Provisions

i) Mine closure and rehabilitation provision

The Company records the present value of estimated costs of legal and constructive obligations related to mine closure and rehabilitation in the period in which the obligation occurs. Mine closure and rehabilitation activities include facility decommissioning and dismantling; removal and treatment of waste materials; site and land rehabilitation, including compliance with and monitoring of environmental regulations; and related costs required to perform this work and/or operate equipment designed to reduce or eliminate environmental effects. The provision is adjusted each period for new disturbances, and changes in regulatory requirements, the estimated amount of future cash flows required to discharge the obligation, the timing of such cash flows and the pre-tax discount rate specific to the liability. The unwinding of the discount is recognized in profit or loss as a finance expense.

When the provision is initially recognized, the corresponding cost is capitalized by increasing the carrying amount of the related asset and is amortized to profit or loss on a unit-of-production basis.

ii) Other provisions

Other provisions are recognized, based on a past event, when the Company has a legal or constructive obligation that can be estimated reliably, and it is probable that an economic mineral resource will be required to settle the obligation. Provisions are measured by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and specific risks for the liability. The discount is unwound over the period over which the cash flows are expected to be incurred with the related expense included in finance expense.

l) Share-Based Compensation

The grant date fair value of equity settled share-based payment awards granted to employees and consultants, including directors and officers, is recognized as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be performed or satisfied such that the amount ultimately recognized as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. Deferred share units are liability awards settled in cash and measured at the quoted market price at the grant date with the corresponding expense recognized over the period that the employees unconditionally become entitled to the awards. The corresponding liability is adjusted for changes in fair value at each subsequent reporting date until the awards are settled.

m) Leases

A contract is or contains a lease when the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses, and adjusted for certain re-measurements of the lease liability. The cost of the right-of-use asset includes the amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date, less any lease incentives received, any initial direct costs; and if applicable, an estimate of costs to be incurred by the Company in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. The incremental borrowing rate reflects the rate of interest that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. Generally, the Company uses its incremental borrowing rate as the discount rate.

The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.

The Company does not recognize right-of-use assets and lease liabilities for leases of low-value assets and leases with lease terms that are less than 12 months. Lease payments associated with these leases are instead recognized as an expense over the lease term on either a straight-line basis, or another systematic basis if more representative of the pattern of benefit.

The Company has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The assessment of whether the Company is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognized.

n) Income (Loss) per Share

Basic income (loss) per share is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted income (loss) per common share is calculated by adjusting the weighted average number of common shares outstanding for the effect of conversion of all potentially dilutive share equivalents, such as stock options, share units and warrants. The dilutive effect of share options and warrants assumes that the receipt of proceeds upon exercise of the options are used to repurchase common shares at the average market price during the period. The net effect of the shares issued less the shares assumed to be repurchased is added to the basic weighted average shares outstanding. For convertible instruments, the common shares to be included in the diluted per share calculation assumes that the instrument is converted at the beginning of the period (or the issue date if later). For Share Units (as defined herein, see note 12(b)), the common shares to be included in the diluted per share calculation is based on the number of shares that would be issuable if the reporting date were the end of the vesting period. The profit or loss attributable to common shareholders is adjusted to eliminate related interest costs of dilutive securities recognized in profit or loss for the period.

ERO COPPER | 2020 ANNUAL REVIEW | 66

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

4. Inventories

	December 31, 2020		December 31, 2019
Supplies and consumables	$	15,619	$	13,878
Stockpile		3,569		2,556
Work in progress		5,234		2,164
Finished goods		1,074		779
	$	25,496	$	19,377

5. Other Current Assets
	December 31, 2020		December 31, 2019
Advances to suppliers	$	500	$	1,046
Prepaid expenses		2,635		4,779
Advances to employees (a)		2,091		2,829
Value added federal taxes recoverable (b)		13,958		16,869
	$	19,184	$	25,523

(a) Advances to employees include short term advances of salary, vacation and other benefits granted to employees of the Company’s subsidiaries MCSA and NX Gold.

(b) At December 31, 2020, $8.0 million of this balance relates to a study conducted to revisit certain tax positions, while $4.0 million of this balance relates to a 2019 favourable legal decision that recognizes MCSA’s right to a tax credit as a result of historical over-payment (December 31, 2019 - $12.2 million). See note 18 for details. MCSA is able to use these tax credits against a variety of taxes, including taxes on future sales.

ERO COPPER | 2020 ANNUAL REVIEW | 67

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

6. Mineral, Property, Plant and Equipment

													Mobile
				Mining			Mineral			Projects in			Equipment &			Mine Closure			Right-of-Use
	Buildings			Equipment			Properties			Progress			Other Assets			Costs			Assets			Total
Cost:
Balance at December 31, 2018	$	15,739		$	74,847		$	209,899		$	42,147		$	9,836		$	12,341		$	4,708		$	369,517
Additions		-			15,429			5,255			91,392			1,348			2,266			3,220			118,910
Disposals		-			(1,819	)		-			(2,267	)		(1,414	)		-			(463	)		(5,963	)
Transfers		2,532			18,313			55,754			(76,672	)		73			-			-			-
Foreign exchange		(662	)		(3,595	)		(9,516	)		(1,895	)		(362	)		(500	)		(234	)		(16,764	)
Balance at December 31, 2019		17,609			103,175			261,392			52,705			9,481			14,107			7,231			465,700
Additions		54			10,515			6,747			81,332			18,942			197			2,982			120,769
Disposals and other adjustments		-			(16,671	)		-			(80	)		(522	)		(3,803	)		(291	)		(21,367	)
Transfers		1,546			19,940			56,346			(64,888	)		(12,958	)		-			14			-
Foreign exchange		(4,327	)		(24,257	)		(59,173	)		(12,297	)		(2,139	)		(2,965	)		(1,614	)		(106,772	)
Balance at December 31, 2020	$	14,882		$	92,702		$	265,312		$	56,772		$	12,804		$	7,536		$	8,322		$	458,330
Accumulated depreciation:
Balance at December 31, 2018	$	(3,269	)	$	(16,980	)	$	(58,598	)	$	-		$	(3,138	)	$	(2,020	)	$	-		$	(84,005	)
Depreciation expense		(922	)		(11,032	)		(29,286	)		-			(1,582	)		(1,033	)		(3,869	)		(47,724	)
Disposals		-			1,196			-			-			3			-			14			1,213
Foreign exchange		144			1,217			2,591			-			145			95			140			4,332
Balance at December 31, 2019		(4,047	)		(25,599	)		(85,293	)		-			(4,572	)		(2,958	)		(3,715	)		(126,184	)
Depreciation expense		(785	)		(10,882	)		(24,597	)		-			(1,317	)		(1,029	)		(3,865	)		(42,475	)
Disposals		-			14,999			-			-			446			-			168			15,613
Foreign exchange		916			5,827			19,351			-			860			672			792			28,418
Balance at December 31, 2020	$	(3,916	)	$	(15,655	)	$	(90,539	)	$	-		$	(4,583	)	$	(3,315	)	$	(6,620	)	$	(124,628	)
Net book value December 31, 2019	$	13,562		$	77,576		$	176,099		$	52,705		$	4,909		$	11,149		$	3,516		$	339,516
Net book value December 31, 2020	$	10,966		$	77,047		$	174,773		$	56,772		$	8,221		$	4,221		$	1,702		$	333,702

ERO COPPER | 2020 ANNUAL REVIEW | 68

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

6. Mineral, Property, Plant and Equipment (continued)

Of the additions to mineral, property, plant and equipment, $0.7 million (year ended December 31, 2019 – $8.6 million) was obtained through financing arrangements with equipment suppliers.

Certain equipment has been provided as security for the equipment finance loans (note 9).

During the year ended December 31, 2020, $7.3 million (year ended December 31, 2019 - $3.1 million) was transferred from mineral resources to amortizable mineral reserves as a result of an update to MCSA’s proven and probable reserves during the year. As such, there is no balance included in mineral, property, plant and equipment related to the value of mineral resources beyond proven and probable reserves not currently being amortized. In addition, $ 56.8 million (December 31, 2019 - $52.7 million) related to projects in progress are not currently being amortized.

7. Exploration and Evaluation Assets

Exploration and evaluation assets relate to the Boa Esperança Property located in the Municipality of Tucumã, in the state of Pará, Brazil which consists of a single mineral concession. This prospective copper/gold property is in advanced stages of exploration with various geological mineral resource studies and is the subject of a completed feasibility study.

8. Accounts Payable and Accrued Liabilities

	December 31, 2020		December 31, 2019
Trade suppliers	$	14,480	$	21,811
Payroll and related charges		17,914		20,058
Other accrued liabilities		5,484		1,825
	$	37,878	$	43,694

9. Loans and Borrowings

										Carrying value, including
										accrued interest
								Principal to		December 31,		December 31,
Description	Denomination	Security	Time to Maturity		Coupon rate			be repaid		2020		2019
Bank loan (at acquisition)	BRL R$	Unsecured		71 months		CDI + 0.5%			4,469		3,980		5,941
Bank loan (MCSA)	USD	Unsecured		-		4.43	%		-		-		1,503
Bank loan (MCSA)	BRL R$	Unsecured		-		CDI + 3.7%			-		-		204
Line of credit (MCSA)	BRL R$	Unsecured		3 months		CDI + 9.0%			1,443		1,447		-
Lines of credit (MCSA)	BRL R$	Unsecured		2 - 3 months		9.60%-13.20%			4,165		4,221		-
Lines of credit (NX Gold)	BRL R$	Unsecured		-		14.34%-14.98%			-		-		670
Equipment finance loan (Plural)	BRL R$	Secured		11 months		CDI + 7.0%			1,058		1,065		2,892
Equipment finance loans	BRL R$	Secured		5 - 42 months		11.88%-16.49%			1,445		1,607		5,585
Equipment finance loans	EURO	Secured		18 - 24 months		5.5%-7.0%			1,773		1,791		3,996
Equipment finance loans	USD	Secured		16-32 months		6.50%-7.95%			5,536		5,605		4,125
Senior non-revolving credit facility	USD	Secured		39 months		LIBOR + 2.50%-4.25%			75,000		74,193		79,091
Senior revolving credit facility	USD	Secured		39 months		LIBOR + 2.50%-4.25%			75,000		74,193		55,363
Total								$	169,889	$	168,102	$	159,370
Current portion:										$	12,539	$	18,984
Non-current portion:										$	155,563	$	140,386

ERO COPPER | 2020 ANNUAL REVIEW | 69

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

	December 31, 2020			December 31, 2019
Balance, beginning of year	$	159,370		$	152,234
New senior revolving credit facility, net		13,652			10,565
New equipment finance loans		19,278			24,890
New lines of credit		36,726			10,976
Principal and interest payments		(67,118	)		(51,581	)
Interest accretion		9,921			11,236
Loss on debt modification		-			1,783
Effect of foreign exchange rate changes		(3,727	)		(733	)
Balance, end of period	$	168,102		$	159,370

(a)  Senior credit facility

The Company has a $150 million facility from a syndicate of Canadian financial institutions. The facility is comprised of a $75 million (December 31, 2019 - $80 million) senior secured amortizing non-revolving credit facility (“Term Facility”) and a $75 million (December 31, 2019 - $70 million) senior secured revolving term credit facility (“Revolving Credit Facility”) (collectively the “Facilities”).

During the second quarter of 2019, the Company refinanced a loan held by the Company’s subsidiary, MCSA, by extending the Revolving Credit Facility. The credit limit of the Revolving Credit Facility was increased by $20.0 million to $70.0 million. All other terms of the Facilities remained unchanged. Upon completion of the amendment, the Company drew $11.0 million to repay certain of its bank loans held by MCSA.

On March 31, 2020, the Company amended the Facilities to reduce its cost of borrowing by 25 to 50 basis points, depending on the consolidated leverage ratio, and to defer the scheduled principal payments for two years.

The Term Facility matures on March 31, 2024 and requires principal repayments on a quarterly basis commencing on March 31, 2022, while the Revolving Credit Facility is payable in full at maturity on March 31, 2024. The Facilities bear interest on a sliding scale at a rate of LIBOR plus 2.50% to 4.25% depending on the Company’s consolidated leverage ratio at the time. Commitment fees for any undrawn portion of the Revolving Credit Facility are also on a sliding scale between 0.63% to 1.06%. The Company determined that the amendments were a non-substantial modification. In March 2020, the Company drew down the remainder of the amount available under the Facilities totaling $14.0 million ($13.7 million net of transaction costs). The Term Facility previously had a five-year term with equal quarterly principal payments beginning on December 13, 2020, while the Revolving Credit Facility was payable at maturity on December 13, 2022. The Facilities previously bore interest on a sliding scale at a rate of LIBOR plus 2.75% to 4.75% depending on the Company’s consolidated leverage ratio at the time.

The Facilities include standard and customary terms and conditions with respect to fees, representations, warranties, and financial covenants that remain unchanged from prior amendments.

The Facilities are secured by pledges of shares of MCSA, NX Gold and Ero Gold Corp., a wholly owned subsidiary which holds the Company’s interest in NX Gold. The Company is required to comply with certain financial covenants. As of the date of these consolidated financial statements, the Company is in compliance with these covenants.

In January 2019, the Company entered into an interest rate swap transaction with a Canadian financial institution whereby the floating interest on a notional amount of $65.0 million of the Term Facility was swapped for a fixed interest rate of 2.69%. This interest rate swap transaction is in effect for the majority of the term of the Term Facility, with the notional amount reduced over time. As at December 31, 2020, the notional amount of the interest rate swap transaction was $60.0 million. Interest swap settlements are being made on a quarterly basis.

ERO COPPER | 2020 ANNUAL REVIEW | 70

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Subsequent to the year ended December 31, 2020, the Facilities were amended with a $150.0 million senior secured revolving credit facility (“New Revolving Credit Facility”) payable entirely on March 31, 2025. The New Revolving Credit Facility will bear interest on a sliding scale at a rate of LIBOR plus 2.25 to 4.25% depending on the Company’s consolidated leverage ratio at the time. Commitment fees for any undrawn portion of the Revolving Credit Facility will also be on a sliding scale between 0.56% to 1.06%.

(b) Bank loan and equipment finance loans

The bank loan (at acquisition) relates to the Company’s subsidiary, MCSA, and was recognized at the date of acquisition at fair value and has subsequently been recognized at amortized cost, net of settlements. Interest is being recognized using the effective interest rate method at an interest rate of 11.29%.

In June 2019, the Company repaid one of MCSA’s bank loans (at acquisition) in full using funds from the Company’s Revolving Credit Facility and recognized a loss on settlement of $1.8 million.

As per the terms of one of MCSA’s bank loans, the Company was required to maintain a separate debt service bank account with sufficient funds to guarantee scheduled principal payments by MCSA. At December 31, 2020, this loan has been repaid and the separate debt service bank account has been closed. At December 31, 2019, $1.5 million was deposited in the designated debt service account and was presented as restricted cash in the statement of financial position.

MCSA is required to comply with certain financial covenants which MCSA is in compliance with at December 31, 2020. The equipment finance loans are secured by the corresponding equipment relating to them and a guarantee by the Company.

(c)  MCSA and NX Gold lines of credit

At December 31, 2020, the Company’s subsidiaries, MCSA and NX Gold, have the following credit facilities available:

MCSA entered into a credit agreement in 2019 for a non-revolving line of credit of up to BRL $30.0 million at an interest rate of CDI (“Brazilian Interbank Deposit Rate”) + 9% per annum, which was available for draw down until November 30, 2020. At December 31, 2020, BRL $ 7.5 million ($1.4 million) (December 31, 2019 - $nil) had been drawn from this credit facility and the draw down period has now expired. The Company and NX Gold provide unsecured guarantees for this credit agreement and the amount drawn is due in March 2021.

During the three months ended June 30, 2020, MCSA entered into a credit agreement for a line of credit of up to BRL $14.9 million at an interest rate of 14.30% per annum and MCSA drew down on the full amount of this line of credit. The Company and NX Gold provide unsecured guarantees for this credit agreement. During the three months ended December 31, 2020, the full amount of this line of credit was repaid, but the full amount of BRL $14.9 million remains available to be drawn at any time until May 24, 2021.

During the year ended December 31, 2020, MCSA entered into various credit agreements for lines of credit of up to a total of BRL $131.6 million, all of which were drawn down during the year ended December 31, 2020. The interest rates on these credit agreements ranges from 9.60% to 24.34%. The Company repaid a total of BRL $109.8 million in lines of credit during the year ended December 31, 2020 and as at December 31, 2020, BRL $21.8 million ($4.2 million) remains outstanding on these credit facilities, which represents the maximum remaining amount available under these credit facilities. This amount is repayable by March 2021.

During the three months ended September 30, 2020, MCSA repaid and terminated a previous line of credit entered into in 2019 in the amount of BRL $30.0 million with an interest rate of 14.98%. MCSA replaced this line of credit during the three months ended September 30, 2020 by entering into a new credit agreement for a line of credit of up to BRL $30.0 million at an interest rate of CDI + 8.858%. MCSA may drawdown on this line of credit at any time until September 20, 2021. At December 31, 2020, no amount has been drawn from this credit facility.

ERO COPPER | 2020 ANNUAL REVIEW | 71

Ero Copper Corp 

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

NX Gold entered into an agreement in 2019 for a line of credit of up to BRL $7.5 million at an interest rate of 14.98% per annum, which was available for drawdown until August 27, 2020. A total of BRL $7.5 million ($1.4 million) had been drawn from this line of credit, of which BRL $4.8 million was drawn during the year ended December 31, 2020. This line of credit was fully repaid and terminated as at December 31, 2020.

During the year ended December 31, 2020, NX Gold entered into a credit agreement for a line of credit of up to BRL $7.5 million at an interest rate of 14.30% per annum. NX Gold may drawdown on this line of credit at any time until February 22, 2022. The Company and MCSA provide unsecured guarantees for this credit agreement. At December 31, 2020, no amounts had been drawn from this line of credit.

During the year ended December 31, 2020, NX Gold entered into a credit agreement for a line of credit of up to BRL $8.0 million at an interest rate of CDI + 8.858%. NX Gold may drawdown on this line of credit at any time until September 20, 2021. At December 31, 2020, no amount has been drawn from this credit facility.

(d) Plural loan

During the year ended December 31, 2019, MCSA secured an equipment finance loan with Plural Bank for BRL $12.0 million for a term of 24 months and at an interest rate of 7% + CDI per annum. Concurrently, MCSA entered into an interest rate swap transaction and a foreign exchange swap transaction with Plural Bank whereby the floating interest of 7% + CDI on a notional amount of BRL $12.0 million was swapped for a fixed interest rate of 9.90%, and a notional principal amount of BRL $12.0 million was swapped for the USD currency at a foreign exchange rate of 3.9500. This interest rate and foreign exchange swap transactions are in effect for the term of the loan.

(e)            Debt repayments

Repayments of the principal portion of loans and borrowings is as follows:

2021	$	12,223
2022		36,998
2023		35,109
2024		84,112
2025		755
2026 and beyond		692
	$	169,889

10. Value Added, Payroll and Other Taxes

	December 31, 2020		December 31, 2019
Value-added taxes payable	$	3,420	$	2,865
Tax based on net sales of copper and gold		4,675		5,287
Federal sales tax		1,211		-
Social security installments (a)		2,841		9,519
Income taxes		1,280		1,108
Other taxes		1,402		909
Total value added, payroll and other taxes		14,829		19,688
Less: current portion of value added, payroll and other taxes		13,361		13,994
Non-current value added, payroll and other taxes	$	1,468	$	5,694

(a) The Company’s subsidiary, MCSA, has an agreement with the National Institute of Social Security in Brazil to pay outstanding social security contributions in installments over a period to 2024.

ERO COPPER | 2020 ANNUAL REVIEW | 72

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

11. Provisions and Contingent Liabilities

	Mine Closure
	and			Legal
	Rehabilitation			Claims			Total
Balance at December 31, 2018	$	27,354		$	4,155		$	31,509
Additions (reductions) due to change in estimated cash flows		2,266			(625	)		1,641
Unwinding of the discount		3,508			-			3,508
Settled		(1,786	)		-			(1,786	)
Foreign exchange		(1,145	)		(146	)		(1,291	)
Balance at December 31, 2019		30,197			3,384			33,581
Reductions due to change in estimates, including timing of cash flows		(3,803	)		(145	)		(3,948	)
Unwinding of the discount		902			-			902
Settled		(1,585	)		-			(1,585	)
Foreign exchange		(6,741	)		(759	)		(7,500	)
Balance at December 31, 2020	$	18,970		$	2,480		$	21,450

(a)  Mine closure and rehabilitation

The Company’s provision for mine closure and rehabilitation consists of costs accrued based on the current best estimate of mine closure and reclamation activities that will be required upon completion of mining. The Company’s provision for future site closure and reclamation costs is based on the level of known disturbance at the reporting date, known legal requirements and cost estimates prepared by a third-party specialist.

Management used a pre-tax discount rates in the range of 5.75% – 7.37% (2019 – 4.34% - 6.5%) and an inflation factor in the range of 3.25% - 3.50% (2019 – 3.5% - 3.75%) in preparing the Company’s provision for mine closure and rehabilitation. Although the ultimate amount to be incurred is uncertain, based on development, legal requirements and estimated costs as at December 31, 2020, the undiscounted inflation-adjusted liability for provision for mine closure and rehabilitation is estimated to be approximately $37.0 million (2019 - $45.7 million), of which $31.4 million (2019 - $36.8 million) relates to MCSA and $5.6 million (2019 - $8.9 million) relates to NX Gold. The cash expenditures are expected to occur over a period of time extending several years after the projected closure, which for MCSA is in a range from 2026 to 2034 and for NX Gold is 2027.

(b) Legal claims

There are various legal actions that are in process against the Company’s Brazilian subsidiaries related to labor, civil and tax matters. Based on an analysis of individual judicial and administrative legal claims, the following provision has been made for probable losses associated with these claims:

	December 31, 2020		December 31, 2019
Labour claims (i)	$	2,416	$	3,311
Tax claims (ii)		-		73
Other claims		64		-
	$	2,480	$	3,384

(i)  Labor claims

The labor claims related primarily to claims made by existing and former employees for alleged travel time reimbursements, overtime and severance payments. Of the claims made, the Company has assessed, with the assistance of its legal counsel, that the probable loss on such claims is $2.4 million and such amount has been accrued.

ERO COPPER | 2020 ANNUAL REVIEW | 73

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(ii)  Tax claims

The provisions for tax claims relate to tax assessments, interest and penalties resulting from unpaid income and social contribution taxes by MCSA.

In relation to the above-mentioned claims and those discussed in Note 11(c) below, MCSA and NX Gold were required to place a total of $0.5 million in trust as of December 31, 2020 (December 31, 2019 - $1.2 million), which is included in Deposits on the statement of financial position.

(c)  Contingent liabilities

As of December 31, 2020, based on the opinion of its legal advisers, the Company has not recognized a provision for the following claims of MCSA and NX Gold as it is not probable that a cash outflow will occur.

	December 31, 2020		December 31, 2019
Social security tax (i)	$	2,879	$	3,681
Taxes (ii)		11,633		14,990
Labour (refer to note 11(b)(i))		968		6,303
Mining and other (iii)		6,346		6,080
	$	21,826	$	31,054

(i)  Social security tax

Social security claims relate to potential social security tax payments related to past payments to employees, including profit sharing, and payments made to external contractors. The Company strongly believes, based on precedent court case rulings, that part of the claim will be cancelled after administrative and judicial discussions. The estimated portion of the claim expected to be cancelled of $2.9 million is included in the table above.

(ii)  Tax

There are 121 tax claims (2019 – 129 tax claims) against MCSA which were evaluated as possible, but not probable, losses by external legal counsel. The main subjects under discussion for the tax claims involve the validity of tax credits used to offset federal taxes.

(iii) Mining

In June 2019, MCSA was notified of five administrative claims filed by the Nacional Mining Agency regarding alleged differences in the calculation of certain sales taxes on mining revenue by MCSA. The Company, based on the opinion of its legal advisors, does not believe such claims will result in a probable cash outflow.

12. Share Capital

As at December 31, 2020, the Company’s authorized share capital consists of an unlimited number of common shares without par value. As at December 31, 2020, 87,879,261 common shares were outstanding.

(a)  Options

On January 2, 2019, the Company granted 125,000 options to directors of the Company at an exercise price of CAD$9.80 per share with a term to expiry of five years. These options vested immediately, and their total fair value on the grant date was $0.5 million.

ERO COPPER | 2020 ANNUAL REVIEW | 74

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

On August 15, 2019, the Company granted 40,000 options to directors of the Company at an exercise price of CAD$21.09 per share with a term to expiry of five years. 23,828 of these options vested immediately, while 16,172 will vest upon shareholder approval. Their total fair value on the grant date was $0.3 million.

On December 12, 2019, the Company granted 470,228 options to certain officers, directors, consultants and employees of the Company at an exercise price of CAD$20.52 per share with a term to expiry of five years. These stock options vest in three equal installments on each annual anniversary date from the date of grant. The total fair value of these options on the grant date was $2.7 million, which is recognized over the vesting period.

On January 2, 2020, the Company granted 73,456 options to directors and certain employees of the Company at an exercise price of CAD$23.42 per share with a term to expiry of five years. The 43,456 options to directors vested immediately, while the 30,000 options to employees vest in three equal installments on each annual anniversary date from the date of grant. The total fair value of these options on the grant date was $0.5 million, which is recognized over the vesting period.

On December 17, 2020, the Company granted 415,839 options to certain officers, directors, consultants and employees of the Company at an exercise price of CAD$18.90 per share with a term to expiry of five years. 25,207 options to directors vested immediately, while the remaining 390,632 stock options vest in three equal installments on each annual anniversary date from the date of grant. The total fair value of these options on the grant date was $2.4 million, which is recognized over the vesting period.

	Number of			Weighted Average
	Stock Options			Exercise Price
Outstanding stock options, December 31, 2018		4,924,519			4.64
Issued		635,228			14.20
Exercised		(498,330	)		2.75
Outstanding stock options, December 31, 2019		5,061,417		$	6.23
Issued		489,295			15.38
Exercised		(908,949	)		3.13
Outstanding stock options, December 31, 2020		4,641,763		$	7.91

The weighted average share price on the date of exercise for options exercised during the year ended December 31, 2020 was $13.74 (year ended December 31, 2019 - $14.60).

As at December 31, 2020, the following stock options were outstanding:

						Vested and		Weighted
						Exercisable		Average
	Number of		Weighted Average			Number of		Remaining
Expiry Date	Stock Options		Exercise Price			Stock Options		Life in Years
May 15, 2022		415,334		1.50	USD		415,334	1.37
July 10, 2022		60,000		1.50	USD		60,000	1.52
November 24, 2022		318,000		6.48	CAD		318,000	1.90
December 7, 2022		1,300,001		6.74	CAD		1,300,001	1.93
January 18, 2023		60,000		7.95	CAD		40,000	2.05
January 23, 2023		41,667		7.76	CAD		41,667	2.06
June 19, 2023		144,000		10.25	CAD		94,000	2.47
July 16, 2023		100,000		9.01	CAD		33,332	2.54
December 31, 2023		1,078,238		9.76	CAD		693,065	3.00
January 2, 2024		125,000		9.80	CAD		125,000	3.01
August 15, 2024		40,000		21.09	CAD		40,000	3.62
December 12, 2024		470,228		20.52	CAD		156,734	3.95
January 2, 2025		73,456		23.42	CAD		43,456	4.01
December 17, 2025		415,839		18.90	CAD		25,207	4.96
		4,641,763		7.91 USD	USD		3,385,796	2.71

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

In determining the weighted average exercise price of all outstanding options in the tables above and below, the CAD prices were converted to USD at the December 31, 2020 exchange rate of 1.2732.

The fair value of options granted in the years ended December 31, 2020 and 2019 was determined using the Black-Scholes option pricing model. The weighted average inputs used in the measurement of fair values at grant date of the options are the following:

	2020			2019
Expected term (years)		3.0			3.0
Forfeiture rate		0	%		0	%
Volatility		53	%		53	%
Dividend yield		0	%		0	%
Risk-free interest rate		0.58	%		1.68	%
Weighted-average fair value per option	$	6.00		$	5.42

For the year ended December 31, 2020, the Company recorded share-based compensation of $3.9 million (year ended December 31, 2019 - $4.7 million) with respect to its outstanding stock options.

Subsequent to December 31, 2020, 155,982 options were exercised for total proceeds of $1.0 million.

(b) Share Unit Plan

The Company has a share unit plan (the “Share Unit Plan”) pursuant to which the Compensation Committee may grant share units to any director, officer, employee, or consultant of the Company or its subsidiaries. At the time of grant of a share unit, the Compensation Committee, may establish performance conditions for the vesting of the share units. The performance conditions may be graduated such that different percentages (which may be greater or lower than 100%) of the share units in a grant become vested depending on the satisfaction of one or more performance conditions. Performance conditions may include terms or conditions relating to: (i) the market price of the common shares; (ii) the return to holders of common shares, with or without reference to other comparable companies; (iii) the financial performance or results of the Company or its subsidiaries; (iv) the achievement of performance conditions or other performance criteria relating to the Company or its subsidiaries; (v) any other terms and conditions the Compensation Committee may in its sole discretion determine with respect to vesting or the acceleration of vesting; and (vi) the vesting date of the share units. The Compensation Committee may, in its discretion, subsequent to the grant of a share unit, waive any such performance condition or determine that it has been satisfied subject to applicable law. Each share unit entitles the holder thereof to receive one common share, without payment of additional consideration, on the redemption date selected by the Compensation Committee following the date of vesting of such share unit, which will be within 30 days of the date of vesting, or at a later deferred date, subject to certain exception and restrictions.

During the year ended December 31, 2020, 290,298 share units (year ended December 31, 2019 – 225,659 share units) were issued to certain officers, consultants and employees of the Company and as at December 31, 2020, 727,761 share units (December 31, 2019 - 437,463 share units) are outstanding. These share units will vest three years from the date of grant by the Compensation Committee and the number of share units that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain market and non-market performance conditions. Each vested share unit entitles the holder thereof to receive on or about the applicable date of vesting of such share unit (i) one common share; (ii) a cash amount equal to the fair market value of one common share as at the applicable date of vesting; or (iii) a combination of (i) and (ii), as determined by the Compensation Committee in its sole discretion. The Company currently intends to settle these share units using common shares. Accordingly, they are classified as equity settled instruments.

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

For the share units with non-market performance conditions, the fair value of the share units granted was determined using the share price at the date of grant. For the share units with market performance conditions, thefair value of the share units granted was determined using a Geometric Brownian Motion model. The weighted average inputs used in the measurement of fair values at grant date of the share units issued are as follows:

	2020			2019
Expected term (years)		3.0			3.0
Forfeiture rate		0	%		0	%
Volatility		44	%		45	%

During the year ended December 31, 2020, the Company recorded share-based compensation of $3.9 million (year ended December 31, 2019 - $1.0 million) with respect to the share units.

(c)  Deferred Share Unit Plan

On December 12, 2019, a Deferred Share Unit Plan (“DSU Plan”) was established by the Board as a component of our compensation for independent directors. Only independent directors are eligible to participate and to receive deferred share units (“DSUs”) under the DSU Plan. DSUs may be awarded by the Board from time to time to provide independent directors with appropriate equity-based compensation for the services they render to the Company and may be subject to terms and conditions with respect to vesting of such DSUs. In addition, independent directors may elect to receive a portion or all of their respective annual cash remuneration in the form of DSUs, which will be fully vested upon such grant. The number of DSUs to be awarded to a participant under the DSU Plan is determined by dividing the portion of that participant’s annual cash remuneration by the fair market value of a common share on the last day of the quarter in which such portion of the annual cash remuneration was earned. Pursuant to the DSU Plan, DSUs may only be settled by way of cash payment. A participant is not entitled to payment in respect of the DSUs until his or her death, retirement or removal from the Board. The settlement amount of each DSU is based on the fair market value of a common share on the DSU redemption date multiplied by the number of DSUs being redeemed.

During the year ended December 31, 2020, 79,230 DSUs (year ended December 31, 2019 - nil) were issued to independent directors.

As at December 31, 2020, the fair value of the DSU liability was $1.3 million (December 31, 2019 - $nil) which has been recognized in accounts payable and accrued liabilities with a corresponding $1.3 million recognized in share-based compensation expense for the year ended December 31, 2020.

(d) Warrants

As at December 31, 2020, 1,599,996 (December 31, 2019 - 2,866,662) common share purchase warrants were outstanding with a weighted average exercise price of $1.20 and a weighted average remaining contractual life of 0.95 years. 1,266,666 warrants were exercised during the year ended December 31, 2020 for gross proceeds of $1.5 million (year ended December 31, 2019 – 466,666 warrants for gross proceeds of $0.6 million).

Subsequent to December 31, 2020, 66,666 warrants were exercised for gross proceeds of $0.1 million.

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(e)  Net Income per Share

	Year ended		Year ended
	December 31, 2020		December 31, 2019
Weighted average number of common shares outstanding		86,368,535		85,244,277
Dilutive effect of warrants		2,397,518		2,788,885
Dilutive effect of stock options		2,355,933		2,919,799
Dilutive effect of Share Units		1,091,642		437,464
Weighted average number of diluted common shares outstanding		92,213,628		91,390,425
Net income attributable to owners of the Company	$	51,622	$	91,883
Basic net income per share attributable to owners of the Company		0.60		1.08
Diluted net income per share attributable to owners of the Company		0.56		1.01

13. Revenue

	Year ended		Year ended
	December 31, 2020		December 31, 2019
Copper concentrate
- sales within Brazil	$	161,803	$	176,885
- export sales		96,852		69,499
- price adjustments on provisionally priced sales		2,233		(187	)
Gold
- export sales		63,188		38,646
	$	324,076	$	284,843

Under the terms of the Company’s contract with its primary customer, sales are provisionally priced on the date of sale based on the previous month’s average copper price. The final sales price for all shipments in a month is determined at the end of the month in which the sale is recognized. As at December 31, 2020, there were no sales subject to provisional pricing. During the year ended December 31, 2020, the Company recognized $2.2 million (year ended December 31, 2019 - $0.2 million) in price adjustments related to provisionally priced sales.

14. Cost of Product Sold

	Year ended		Year ended
	December 31, 2020		December 31, 2019
Materials	$	18,912	$	21,788
Salaries and benefits		30,044		40,787
Depreciation and depletion		39,212		46,014
Contracted services		18,463		23,691
Maintenance costs		14,672		18,383
Utilities		8,728		11,154
Other costs		554		1,000
	$	130,585	$	162,817

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

15. General and Administrative Expenses

	Year ended			Year ended
	December 31, 2020			December 31, 2019
Accounting and legal	$	1,079		$	1,507
Amortization and depreciation		136			157
Office and sundry		7,066			7,192
Provisions		(145	)		(625	)
Salaries and consulting fees		12,206			13,427
Incentive payments		6,116			8,684
Transfer agent and filing fees		295			206
Travel and conference		1,174			2,269
	$	27,927		$	32,817

16. Finance Expense

	Year ended		Year ended
	December 31, 2020		December 31, 2019
Interest on loans and borrowings	$	9,921	$	11,236
Loss on interest rate swap derivatives		2,720		1,799
Accretion of mine closure and rehabilitation provision		902		3,508
Commitment fees		484		1,681
Interest on lease liabilities		229		366
Other finance expenses		1,193		1,838
	$	15,449	$	20,428

17. Foreign Exchange Loss

The following foreign exchange gains (losses) arise as a result of balances and transactions in the Company’s Brazilian subsidiaries that are denominated in currencies other than the Brazilian Reais (BRL$), which is their functional currency.

	Year ended			Year ended
	December 31, 2020			December 31, 2019
Foreign exchange on USD denominated debt in Brazil	$	(24,190	)	$	(4,406	)
Realized foreign exchange on derivative contracts (note 21)		(20,804	)		(1,011	)
Unrealized foreign exchange on derivative contracts (note 21)		(34,548	)		(250	)
Other		(263	)		519
	$	(79,805	)	$	(5,148	)

18. Recovery of Value Added Taxes

During the year ended December 31, 2020, the Company recognized a recovery of $8.9 million in net income related to value added taxes based on the tax treatment applicable to depletion charges. This recovery during 2020 was recognized as a result of a study conducted to revisit certain tax positions, which concluded that it is probable that additional tax credits are available to be used to offset a variety of taxes. During the year ended December 31, 2019, the Company recognized a recovery of $21.6 million in net income related to value added taxes previously paid on sales in Brazil. The recovery during 2019 was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant taxing authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim and were not recorded until such amounts were considered probable of being confirmed. These credits can be used to offset the payment of a variety of other taxes, including income taxes and taxes on future sales.

ERO COPPER | 2020 ANNUAL REVIEW | 79

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Of the recoveries recognized in 2019 and 2020, $15.3 million has been applied to taxes during the 2020 year (year ended December 31, 2019 - $3.2 million) and $12.0 million has been included in other current assets (December 31, 2019 - $12.2 million) based on the expected timing of their use, with no amounts (December 31, 2019 - $6.2 million) recognized in other non-current assets in the statement of financial position.

19. Income Taxes

(a)  Reconciliation of income taxes

A reconciliation of the income tax expense to the amount calculated using the Company’s combined Canadian federal and provincial statutory income tax rate of 27% (2019 – 27%) is as follows:

	Year Ended December31, 2020			Year Ended December31, 2019
Net income in the year before tax	$	61,423		$	74,829
Tax rate		27	%		27	%
Income tax expense at statutory rate	$	16,584		$	20,204
Tax effect of:
Difference in tax rate of foreign jurisdictions		(6,227	)		(7,557	)
Non-deductible (taxable) items		(1,792	)		(6,334	)
Change in temporary differences not previously recognized		(113	)		(24,570	)
Other		473			631
Income tax expense (recovery)	$	8,925		$	(17,626	)

	Year Ended December31, 2020			Year Ended December31, 2019
Current income tax:
Relating to current income tax charge	$	9,675		$	10,645
Deferred income tax:
Relating to recognition of previously unrecognized temporary differences		-			(33,836	)
Relating to origination and reversal of temporary differences		(750	)		5,565
Income tax expense (recovery) recognized in net income	$	8,925		$	(17,626	)
Income tax recovery recognized in other comprehensive income		(3,073	)		-
Total income tax expense (recovery)		5,852			(17,626	)

ERO COPPER | 2020 ANNUAL REVIEW | 80

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(b) Deferred income tax assets (liabilities)

The general movement in the deferred income tax asset (liability) is as follows:

	Year Ended December 31,2020			Year Ended December 31,2019
At the beginning of the year	$	13,099		$	(15,811	)
Deferred income tax recovery (expense)		750			28,271
Income tax expense (recovery) recognized in OCI		3,073			-
Foreign exchange		(2,699	)		639
At the end of the year	$	14,223		$	13,099

Recognized deferred tax and assets and liabilities consist of the following:

	December 31, 2020			December 31, 2019
Deferred tax assets:
Non-capital losses - Brazil	$	15,688		$	28,793
Foreign exchange - Brazil	$	9,412		$	1,066
Other - Brazil		2,167			2,126
Mine closure and rehabilitation provision - Brazil		3,110			4,605
Non-capital losses - Canada		737			317
Financing fees and other - Canada		823			1,349
		31,937			38,256
Deferred tax liabilities
Mineral property, plant and equipment - Brazil		(6,179	)		(9,612	)
Loans and borrowings - Brazil		(9,431	)		(12,192	)
Other - Brazil		(544	)		(1,687	)
Loans and borrowings - Canada		(1,560	)		(1,666	)
		(17,714	)		(25,157	)
Net deferred income tax assets (liabilities)	$	14,223		$	13,099

Deferred tax assets of $13.5 million (December 31, 2019 - $11.7 million) have not been recognized for the following deductible temporary differences as it is not probable that the benefits of these temporary differences will be realized:

	Year Ended December 31, 2020				Year Ended December 31, 2019
	Brazil		Canada		Brazil		Canada
Exploration and evaluation assets	$	37,213	$	-	$	47,986	$	-
Mineral property, plant and equipment		-		90		-		72
Non-capital losses		-		22,194		-		14,196
Other		-		7,238		-		4,251
	$	37,213	$	29,522	$	47,986	$	18,519

The Company has loss carry forwards in Brazil totalling $46.7 million (December 31, 2019 - $83.0 million) which may be carried forward indefinitely to offset future taxable income in Brazil. Use of these losses is limited to 30% of taxable income annually. The Company also has loss carry forwards in Canada totalling $24.9 million (December 31, 2019 - $15.4 million) which may be carried forward for 20 years to offset future taxable income, which expire between 2036 and 2040.

ERO COPPER | 2020 ANNUAL REVIEW | 81

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

20. Related Party Transactions

Key management personnel consist of the Company’s directors and officers and their compensation includes director retainer fees and management salaries paid to these individuals, as well as share-based compensation. The aggregate value of compensation paid to key management personnel for the year ended December 31, 2020 was $7.4 million ($7.5 million for the year ended December 31, 2019). In addition, 287,281 options, 197,269 share units and 79,230 DSUs were issued to key management personnel and non-executive directors during the year ended December 31, 2020 (444,265 options and 171,754 share units for the year ended December 31, 2019). For key management personnel, $5.1 million was recognized in share-based compensation expense for the year ended December 31, 2020 for options, share units, and DSUs issued ($4.1 million for the year ended December 31, 2019).

During the year ended December 31, 2020, key management personnel exercised 408,555 options and 1,266,666 warrants for total cash proceeds to the Company of $2.7 million (286,666 options and 300,000 warrants for total cash proceeds of $1.0 million for the year ended December 31, 2019).

As at December 31, 2020, $3.7 million was payable to key management as incentive compensation and is included in accounts payable and accrued liabilities in the statement of financial position (December 31, 2019 - $3.9 million). Such amounts are unsecured, non-interest bearing and will be paid under normal trade terms.

21. Financial Instruments

Fair value

Fair values of financial assets and liabilities are determined based on available market information and valuation methodologies appropriate to each situation. However, some judgments are required in the interpretation of the market data to produce the most appropriate fair value estimates. The use of different market information and/or evaluation methodologies may have a material effect on the fair value amounts.

As at December 31, 2020, derivatives were measured at fair value based on Level 2 inputs.

The carrying values of cash and cash equivalents, accounts receivable, deposits, and accounts payable and accrued liabilities approximate their fair values due to their short terms to maturity or market rates of interest used to discount amounts. The carrying value of value added, payroll and other taxes approximate fair value based on the discount rate applied. At December 31, 2020, the carrying value of loans and borrowings is $168.1 million while the fair value is approximately $169.9 million. The stated interest rates are a close approximation of market rates of interest at December 31, 2020 (Level 2 of the fair value hierarchy).

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers. The carrying amount of the financial assets below represents the maximum credit risk exposure as at December 31, 2020 and December 31, 2019:

	December 31, 2020		December 31, 2019
Cash and cash equivalents	$	62,508	$	21,485
Restricted cash		-		1,500
Accounts receivable		20,353		7,680
Deposits and other non-current assets		595		2,396
	$	83,456	$	33,061

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The Company invests cash and cash equivalents with financial institutions that are financially sound based on their credit rating. The Company’s exposure to credit risk associated with accounts receivable is influenced mainly by the individual characteristics of each customer. The Company currently has only three significant customers, all of which have no history of credit default with the Company. The Company has not incurred credit losses during the years ended December 31, 2020 and 2019 nor recognized a provision for credit losses.

Liquidity risk

Liquidity risk is the risk associated with the difficulties that the Company may have meeting the obligations associated with financial liabilities that are settled with cash payments or with another financial asset. The Company's approach to liquidity management is to ensure as much as possible that sufficient liquidity exists to meet their maturity obligations on the expiration dates, under normal and stressful conditions, without causing unacceptable losses or with risk of undermining the normal operation of the Company.

The table below shows the Company's maturity of non-derivative financial liabilities on December 31, 2020:

	Carrying		Contractual		Up to 12						More than 5
Non-derivative Financial Liabilities	value		cash flows		months		1-2 years		3-5 years		years
Loans and borrowings	$	168,102	$	169,889	$	12,223	$	36,998	$	119,976	$	692
Interest on loans and borrowings		-		15,025		5,859		4,863		4,296		7
Accounts payable and accrued liabilities		37,878		37,878		37,878		-		-		-
Value added, payroll and other taxes		14,829		16,332		13,361		1,484		1,487		-
	$	220,809	$	239,124	$	69,321	$	43,345	$	125,759	$	699

The Company also has derivative financial liabilities for foreign exchange and interest rate derivatives whose notional amounts and maturity information is disclosed below under foreign exchange currency risk and interest rate risk.

Market risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity prices. The purpose of market risk management is to manage and control exposures to market risks, within acceptable parameters, while optimizing return.

The Company may use derivatives, including forward contracts and swap contracts, to manage market risks.

(i) Foreign exchange currency risk

The Company’s subsidiaries in Brazil are exposed to exchange risks related to the US dollars and Euros. In order to minimize currency mismatches, the Company monitors its cash flow projections considering future sales expectations indexed to US dollar variation in relation to the cash requirement to settle the existing financings.

The Company's exposure to foreign exchange currency risk at December 31, 2020 relates to $7.4 million (December 31, 2019 – $9.6 million) in loans and borrowings of MCSA denominated in US dollars and Euros. In addition, the Company is also exposed to foreign exchange currency risk at December 31, 2020 on $83.1 million due to an intercompany loan balance (December 31, 2019 - $97.8 million) which has contractual repayment terms. Strengthening (weakening) in the Brazilian Real against the US dollar at December 1, 2020 by 10% and 20%, would have increased (decreased) pre-tax net income by $8.9 million and $17.7 million, respectively (2019 – $10.3 million and $20.7 million). Strengthening (weakening) in the Brazilian Real against the Euro at December 31, 2020 by 10% and 20%, would have increased (decreased) pre-tax net income by $0.2 million and $0.4 million, respectively (2019 – $0.4 million and $0.8 million). This analysis is based on the foreign currency exchange variation rate that the Company considered to be reasonably possible at the end of the year. The analysis assumes that all other variables, especially interest rates, are held constant.

ERO COPPER | 2020 ANNUAL REVIEW | 83

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage market risks. At December 31, 2020, the Company has entered into foreign exchange collar contracts at zero cost for notional amounts of $285.7 million with an average floor rate of 4.05 BRL to US Dollar and an average cap rate of 4.76 BRL to US Dollar (December 31, 2019 - notional amount of $336.6 million in foreign exchange forward collar contracts). The maturity dates of these contracts are from January 27, 2021 to July 27, 2022 and are financially settled on a net basis. The fair value of these contracts at December 31, 2020 was a liability of $34.5 million, (December 31, 2019 - $nil) which is included in Derivatives in the statement of financial position. The fair value of these forward contracts as at December 31, 2020 was determined using an option pricing mode with the following assumptions: discount rate of 5.015%, foreign exchange rate of approximately 5.20, and volatility of 7.46% - 21.20%. The change in fair value of foreign exchange collar contracts was a loss of $34.5 million for the year ended December 31, 2020 (a loss of $0.3 million for the year ended December 31, 2019) and has been recognized in foreign exchange loss. In addition, during the year ended December 31, 2020, the Company recognized a realized loss of $20.8 million ($1.0 million for the year ended December 31, 2019) related to the settlement of foreign currency forward collar contracts.

(ii) Interest rate risk

The Company is principally exposed to the variation in interest rates on loans and borrowings with variable rates of interest. Management reduces interest rate risk exposure by entering into loans and borrowings with fixed rates of interest or by entering into derivative instruments that fix the ultimate interest rate paid.

The Company is principally exposed to interest rate risk through its Term Facilities of $150.0 million, Brazilian Real denominated bank loans of $4.5 million, Brazilian Real denominated lines of credit of $1.4 million, and Brazilian Real denominated equipment finance loans of $1.1 million. Based on the Company’s net exposure at December 31, 2020, a 1% change in the variable rates would have an impact of $1.6 million on pre-tax annual net income, without consideration of the effects of the interest rate swap contract below.

In order to mitigate the above volatility due to variable rates on loans, as at December 31, 2020, the Company has entered into an interest rate swap contract to manage interest rate risk (see note 9(a)). At December 31, 2020, the floating interest on a notional amount of $60.0 million was swapped for a fixed interest rate of 2.69%. This interest rate swap transaction is in effect for the majority of the term of the Term Facility (note 9), with the notional amount reduced over time. The fair value of this contract at December 31, 2020 was a liability of $2.5 million (December 31, 2019 - $1.7 million) and was included in Derivatives in the statement of financial position. The fair value of this swap contracts as at December 31, 2020 was determined using a discounted cash flow model with the following assumptions: discount rates of 0.017% – 0.298% and forward foreign exchange rates of 0.421% - 0.164%. The realized loss on the interest rate swap contract was $1.2 million for the year ended December 31, 2020 (realized loss of $0.1 million for the year ended December 31, 2019) and was included in finance expense. In addition, the Company recognized an unrealized loss of $0.8 million on the interest rate swap contract for the year ended December 31, 2020 (unrealized loss of $1.6 million for the year ended December 31, 2019), which was included in finance expense.

In addition, as at December 31, 2020, MCSA has entered into an interest rate and currency swap contract on the Plural Loan (see note 9). At December 31, 2020, the floating interest on a notional amount of BRL$12 million was swapped for a fixed interest rate of 9.9% and the BRL currency on the loan was swapped for USD at a rate of 3.95. The fair value of this contract at December 31, 2020 was a liability of $0.3 million (December 31, 2019 - nil) and is included in Derivatives in the statement of financial position. The realized loss on this swap contract was $0.4 million for the year ended December 31, 2020 and was included in finance expense. In addition, the Company recognized an unrealized loss of $0.3 million on the swap contract for the year ended December 31, 2020, which was also included in finance expense.

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(iii) Price risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage commodity price risks. At December 31, 2020, the Company has not entered into any commodity derivative contracts. The Company recognized a realized loss of $1.4 million for the year ended December 31, 2019 related to the settlement of commodity forward contracts.

22. Capital Management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue the development and production of its mine properties and to maintain a flexible capital structure for its projects for the benefit of its stakeholders.

In the management of capital, the Company includes the components of shareholders’ equity and debt facilities.

The Company manages the capital structure and makes adjustments to it considering changes in the economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new loans and borrowings, common shares, or acquire or dispose of assets.

Management reviews the capital structure on a regular basis to ensure that the above-noted objectives are met.

Certain loan agreements contain operating and financial covenants that could restrict the ability of the Company and its subsidiary, MCSA, to, among other things, incur additional indebtedness needed to fund its respective operations, pay dividends or make other distributions, make investments, create liens, sell or transfer assets or enter into transactions with affiliates. There are no other restrictions or externally imposed capital requirements of the Company.

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

23. Segment Disclosure

The Company’s operations are segmented by entity between MCSA, NX Gold and corporate head office, which is consistent with internal reporting purposes. The Company monitors the operating results of its operating segments separately for the purpose of making decisions about resource allocation and performance assessment.

Total revenue from MCSA is from two customers while total revenue from NX Gold is from one customer.

Segmented information is as follows:

Year ended December 31, 2020	MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	260,888		$	63,188		$	-		$	324,076
Depreciation and depletion		(35,674	)		(3,538	)		-			(39,212	)
Other cost of product sold expenses		(73,893	)		(17,480	)		-			(91,373	)
Cost of product sold		(109,567	)		(21,018	)		-			(130,585	)
Sales expenses		(4,937	)		(417	)		-			(5,354	)
Gross profit		146,384			41,753			-			188,137
Expenses
General and administrative		(16,471	)		(1,712	)		(9,744	)		(27,927	)
Share-based compensation		-			-			(9,064	)		(9,064	)
Finance income		430			143			773			1,346
Finance expenses		(5,789	)		(805	)		(8,855	)		(15,449	)
Foreign exchange loss		(77,235	)		(2,563	)		(7	)		(79,805	)
Recovery of value added taxes		7,564			1,322			-			8,886
Other income		(3,825	)		(876	)		-			(4,701	)
Income (loss) before taxes		51,058			37,262			(26,897	)		61,423
Current tax expense		(5,117	)		(4,558	)		-			(9,675	)
Deferred tax recovery		418			332			-			750
Net Income (Loss)	$	46,359		$	33,036		$	(26,897	)	$	52,498
Assets
Current	$	72,080		$	31,516		$	23,945		$	127,541
Non-current		340,487			26,364			2,707			369,558
Total Assets	$	412,567		$	57,880		$	26,652		$	497,099
Total Liabilities	$	102,789		$	19,467		$	106,768		$	283,024

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Year ended December 31, 2019	MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	246,197		$	38,646		$	-		$	284,843
Depreciation and depletion		(40,107	)		(5,907	)		-			(46,014	)
Other cost of product sold expenses		(95,500	)		(21,303	)		-			(116,803	)
Cost of product sold		(135,607	)		(27,210	)		-			(162,817	)
Sales expenses		(4,962	)		-			-			(4,962	)
Gross profit		105,628			11,436			-			117,064
Expenses
General and administrative		(20,993	)		(2,308	)		(9,516	)		(32,817	)
Share-based compensation		-			-			(5,792	)		(5,792	)
Finance income		520			143			38			701
Finance expenses		(8,877	)		(1,366	)		(10,185	)		(20,428	)
Foreign exchange gain (loss)		(5,039	)		(76	)		(33	)		(5,148	)
Loss on debt settlement		(1,783	)		-			-			(1,783	)
Recovery of value added taxes		21,584			-			-			21,584
Other income		242			1,206			-			1,448
Income (loss) before taxes		91,282			9,035			(25,488	)		74,829
Current tax expense		(8,764	)		(1,881	)		-			(10,645	)
Deferred tax recovery		27,267			1,004			-			28,271
Net Income (Loss)	$	109,785		$	8,158		$	(25,488	)	$	92,455
Assets
Current	$	62,413		$	9,166		$	3,986		$	75,565
Non-current		364,117			20,180			2,812			387,109
Total Assets	$	426,530		$	29,346		$	6,798		$	462,674
Total Liabilities	$	107,045		$	15,934		$	140,637		$	263,616

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Disclaimer

Cautionary Note Regarding Forward-Looking Statements

This Annual Report contains “forward-looking information” within the meaning of applicable Canadian securities laws. Forward-looking information includes statements that use forward-looking terminology such as “may”, “could”, “would”, “will”, “should”, “intend”, “target”, “plan”, “expect”, “budget”, “estimate”, “forecast”, “schedule”, “anticipate”, “believe”, “continue”, “potential”, “view” or the negative or grammatical variation thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, statements with respect to mineral reserve and mineral resource estimates as well as LOM plans; targeting additional mineral resources and expansion of deposits; the Company’s expectations, strategies and plans for the MCSA Mining Complex, the NX Gold Property and the Boa Esperança Property, including the Company’s planned exploration, development and production activities; the significance of any particular exploration program or result and the Company’s expectations for current and future exploration plans including, but not limited to, planned areas of additional exploration, the significance of any drill results or new discoveries and targets, including without limitation, extensions of defined mineralized zones, possibilities for mine life extensions or continuity of high-grade mineralization, the recoverable value of any metals other than copper, further extensions and expansion of mineralization near the Company’s existing operations and throughout the Curaçá Valley or the NX Gold Mine, the timing and advancement of ongoing projects including the Deepening Extension Project and the re-start of the Surubim open pit mine; estimated completion dates for certain milestones; successfully adding or upgrading mineral resources and successfully developing new deposits; the costs and timing of future exploration and development including but not limited to the Deepening Extension Project at the MCSA Mining Complex; the significance of any potential optimization initiatives in connection with the Boa Esperança Property and the potential issuance, and timing of, an OFS; the impact of the COVID-19 pandemic on the Company’s planned drill programs; the timing and amount of future production at the MCSA Mining Complex and the NX Gold Property; ; the representativeness of the material tested in the Company’s ore sorting trial campaign to actual results of each of the mines tested during the campaign and the potential benefits of ore sorting in the LOM plans at any of the Company's operations including the Vermelhos District as well as any potential savings on transport costs, any potential reduction in water, diesel and electricity use, as well as any proposed reductions in flotation tailings as a result of ore sorting implementation, which may or may not occur in any capacity at the Company's operations or life-of-mine plans now or in the future, the Company's ability to service its ongoing obligations, the Company's future production outlook, cash costs, capital resources, expenditures, the impact of new accounting standards and amendments on the Company's financial statements, and current global macroeconomic uncertainty stemming from the COVID-19 pandemic and its impact on the Company’s business, financial condition, results of operations, cash flows and prospects.

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this Annual Report including, without limitation, assumptions about: continued effectiveness of the measures taken by the Company to mitigate the possible impact of COVID-19 on its workforce and operations; favourable equity and debt capital markets; the ability to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Company’s properties and assets; future prices of copper and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any mineral reserve and mineral resource estimates; the geology of the MCSA Mining Complex, NX Gold Property and the Boa Esperanҫa Property being as described in the technical reports for these properties; production costs; the accuracy of budgeted exploration and development costs and expenditures; the price of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to operate in a safe, efficient and effective manner; work force conditions to remain healthy in the face of prevailing epidemics, pandemics or other health risks (including COVID-19), political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favourable terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour stability; stability in financial and capital goods markets; availability of equipment and critical supplies, spare parts and consumables; positive relations with local groups and the Company’s ability to meet its obligations under its agreements with such groups; and satisfying the terms and conditions of the Company’s current loan arrangements. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive, global health, and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.

Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. Such risks include, without limitation the risk factors listed under the heading “Risk Factors” in the Annual Information Form for the year ended December 31, 2020 and dated March 16, 2021.

Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking information, there may be other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended.

The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained herein. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.

Forward-looking information contained herein is made as of the date of this Annual Report and the Company disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.

NOTES

C1 cash cost of copper produced (per lb) is the sum of production costs, net of capital expenditure development costs and by-product credits, divided by the copper pounds produced. C1 cash costs reported by the Company include treatment, refining charges, offsite costs, and certain tax credits relating to sales invoiced to the Company’s Brazilian customer on sales. By-product credits are calculated based on actual precious metal sales (net of treatment costs) during the period divided by the total pounds of copper produced during the period. C1 cash cost of copper produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit, and is widely reported in the mining industry as benchmarks for performance, but does not have a standardized meaning and is disclosed in addition to IFRS measures.

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EX-99.5

Exhibit 99.5

 

Table of Contents

2 About Ero Copper

3 About This Report

5 2020 Highlights

6 Message From the CEO

8 Sustainability Governance & Strategy

9 2021 Sustainability Goals

11 Business Ethics, Human Rights & Diversity

13 Occupational Health & Safety

15 Community Relations & Investments

18 Water

20 Energy & Greenhouse Gas (GHG) Emissions

22 Climate Change

23 Waste & Tailings Management

25 Biodiversity & Mine Closure

26 Global Reporting Initiative (GRI) Tables

32 GRI Index

36 Sustainability Accounting Standards Board (SASB) Data Tables

38 Disclaimer

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About This Report

Ero Copper is committed to responsible mining. Sustainability and economic opportunity are fundamental to the way we do business, ensuring the communities in which we operate, and local stakeholders, continue to thrive well beyond the lifespans of our mining operations.

We are pleased to release our 2nd annual sustainability report. The aim of this report is to provide clear and transparent disclosure on Environmental, Social and Governance (“ESG”) topics, building upon our inaugural 2019 sustainability report released in March 2020.

Throughout this report we refer to Ero Copper Corp. and its subsidiaries as “Ero Copper”, the “Company”, “we”, “us” and “our”.

 

Additional Details

Reporting Period	January 1 to December 31, 2020
Report Date	April 13, 2021
Effective Date	December 31, 2020
Date of Last Report	March 31, 2020
Reporting Framework	This report contains standard disclosures from the Global Report Initiative (GRI) Sustainability Reporting Standards, prepared largely in accordance with the Core option.
	This report contains select disclosures in alignment with the Sustainability Accounting Standards Board (“SASB”).
Changes in Reporting	Improved disclosure related to material topics and our overall approach to ESG materiality as compared to our inaugural 2019 Sustainability Report.
Data and Assurance	Data herein has been collected and reviewed internally by operating site management and corporate management.
	Certain economic and performance data has been extracted from our 2020 audited annual financial statements and management, discussion and analysis for the year ended December 31, 2020.
	Data is reported using the metric system and US dollars unless otherwise noted.
Additional Information
	In addition to annual sustainability reporting, operating and financial results are provided on a quarterly and annual basis, along with further details of exploration and growth-oriented projects intended to sustain our future business. Our financial statements and technical reports are available on our website and SEDAR.
Contact Information	Please direct any sustainability-related comments or questions to  info@erocopper.com, Attention: ESG Team

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ESG Materiality

Our approach to determining materiality as it relates to ESG matters has been anchored through regular engagement with key stakeholders, including, but not limited to, employees, investors, federal and state regulatory agencies, ESG rating agencies and through frequent consultation with members of our local communities. This engagement informs our overall ESG strategy and ensures our efforts are appropriately focused on areas that are most relevant to key stakeholders. It also allows us to better communicate our ESG performance, sustainability goals and to offer transparency as much as possible on key issues.

The table below provides a summary of our engagement approach with key stakeholder groups and the focus areas of each group. This report aims to provide clear and transparent information on our ESG performance, including achievements, goals, risks, opportunities and track record.

We are committed to fostering open communication and mutual trust with our stakeholder group and will continue to enhance ESG disclosure focusing on areas determined to be material. The reporting boundary for each material topic is limited to local operations and local communities.

Stake holder Group	Engagement Approach	Focus Areas
Local Communities	Active engagement with communities in and around current, planned and historic mining operations through both formal and informal mechanisms. See the Community Relations section of this report for more information	§	Local job opportunities
		§	Sustainable development and continuing education programs
		§	COVID-19 mitigation and management
		§	Water Supply
Employees & Contractors	Formal and informal engagement with employees and contractors, including: regular management meetings, health and safety meetings, annual union engagement and employee engagement and satisfaction surveys.	§	Health and safety, including COVID-19 mitigation and management
		§	Job security
		§	Salary and benefits
Federal, State and Local Government Agencies	Regular engagement with all levels of governmental agencies to foster economic development, community health and environmental stewardship within our regions.	§	Tax revenue / transparency
		§	Environment and permitting
		§	Jobs / Procurement
Investors	Frequent engagement with existing shareholders and potential new shareholders through marketing, conferences and targeted outreach.	§	ESG disclosure
		§	ESG strategy and commitments
		§	Climate change
		§	Tailings management
ESG Research and Rating Agencies	Frequent engagement with relevant ESG focused-agencies to align Company reporting, improve overall disclosure and ensure accuracy of information.	§	ESG disclosure
		§	ESG relative benchmarking
		§	ESG strategy & commitments
		§	Performance & goals

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Message from the CEO

 

David Strang 

CEO

“…in September 2020, our MCSA Mining Complex celebrated 1-year without a Lost Time Injury (LTI) on over 6 million hours worked – an outstanding accomplishment.”

2020 was a year of excellent over all performance and growth forthe Company. Despite head winds associated with the COVID - 19 pandemic, we made significant strides, in continuing to create sustainable long-term growth for our operations and, more broadly, for the regions in which we operate.

In late 2016, we acquired a high-quality Brazilian mining company with an operating history of over forty years. From 2017 to 2020 our primary goal as a Company was to develop our operations into world-class, long-lived operating assets. By focusing on significant mineral resource and reserve growth across our portfolio, we have created a roadmap for sustainable production and economic opportunity for our local stakeholders. I am pleased to report that, as evidenced in our most recent updated technical reports for the MCSA Mining Complex and the NX Gold Mine, our operations have gone from strength-to-strength and now feature stable long-term futures. Our assets will continue to be important economic drivers in each of their respective regions. Importantly, these mines will continue to provide quality direct and indirect jobs for many years to come.

2020 marked our third full year of operations since re-starting the MCSA Mining Complex in 2017. As a result, we now have quality baseline ESG data, including key metrics for water consumption, energy consumption, green-house gas emissions, and health and safety, among others. This data will serve as a starting point for setting future sustainability targets and goals, some of which we are pleased to share in this report.

In 2020, the COVID-19 pandemic presented significant challenges globally, and Brazil was no exception. Since the beginning of the pandemic, we have taken aggressive action to protect the safety and well-being of our employees, contractors, their families and local communities. We started providing food assistance to local communities to help mitigate the devastating toll this pandemic has taken on the people of Brazil. I am incredibly proud of our entire organization for the efforts and care taken in serving all of our stakeholders during this difficult time.

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The Company’s safety performance in 2020 represents a step-change improvement in Lost Time Injury Frequency (“LTIF”) relative to our 2019 results. Contributing to this performance, in September 2020, our MCSA Mining Complex celebrated 1-year without a Lost Time Injury (“LTI”) on over 6 million hours worked – an outstanding accomplishment.

Ero Copper recognizes the importance of clear and transparent ESG disclosure. Our second annual sustainability report highlights both our approach to determining materiality and areas of focus, as well as performance and goals in these areas. We are committed to continuous engagement with all of the Company’s stakeholders to ensure we continue to address the topics that matter most.

As a Company, we recognize the importance of managing climate-related risks and opportunities to ensure the long-term success of our business. In early 2021, we formed a Climate Change Committee, comprised of members of our senior management team and in-country leadership at each of our operations.

We support the recommendations of the Task Force on Climate-related Financial Disclosures (“TCFD”) and are committed to incorporating climate-related risks and opportunities into our business plan. We are in the early stages of incorporating TCFD throughout our organization and look forward to continuing to provide updates on our progress in the months and years ahead.

I am extremely proud of our ESG progress in 2020 and the content of this report. As a Company, we understand the risks and challenges facing the mining industry, and I believe this report provides a thorough assessment of relevant risks to our business and demonstrates our approach to managing them.

In closing, our ESG efforts are not static – we are firm believers in continuous improvement. I look forward to continuing our sustainability-related work programs throughout 2021 and our organization remains committed to ensuring these efforts, and the disclosure thereof, continues to meet the needs and expectations of our stakeholders.

David Strang

Chief Executive Officer

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Sustainability Governance & Strategy

Sustainability Governance

Our Board of Directors (the “Board”) provides oversight of the Company’s corporate performance and goals, including its sustainability commitments and performance. The Board’s Environmental, Health, Safety and Sustainability (“EHSS”) Committee convenes quarterly to review the Company’s sustainability performance and reports to the full Board.

Please refer to our website and Management Information Circular dated March 16, 2021 for additional information on our Board’s mandate, members, committees, processes and corporate policies.

Corporate Management Team

§ Senior leadership provides oversight of site specific sustainability strategies, local commitments and ongoing initiatives, as well as reports sustainability performance to the EHSS Committee and the Board.

Board of Directors and its Committees

§ EHSS Committee oversees the Company’s environmental, health, safety and sustainability matters.

§ The Audit Committee oversees accounting and financial reporting practices.

§ The Nominating and Corporate Governance Committee oversees the functioning of the Board and implementation of governance best practices.

§ The Compensation Committee oversees compensation practices.

Site Managers

§ Management on site implement sustain-ability programs and best practices, monitor sustainability performance and actively engage with local stakeholders, through formal and informal mechanisms.

 

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2021 Sustainability Goals

2021 Goals – Social

Business Ethics & Human Rights

Join the United Nations Global Compact

Formally adopt a recognized public convention in our Global Human Rights Policy in advance of the 2021 Sustainability Report

Health & Safety

Zero fatalities

Achieve lost time injury frequency rate (“LTIFR”) of 1.0 or less

Community Relations

Improve access to health care in the communities near our operations

Achieve zero significant community incidents

2021 Goals – Environmental

Achieve zero reportable environmental incidents at our operations

Advance projects that can potentially reduce energy use at our operations compared to business as usual

Maintain a process water recycling rate of greater than 85%

Advance reclamation activities of historical mining areas and artisanal workings across operations

Progress recommendations of the TCFD, including completion of a climate change scenario analysis to assess physical risks of climate change on our operations

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Business Ethics, Human Rights & Diversity

Management Approach

Ero Copper adheres to all applicable human rights laws and regulations in the countries and regions where we operate. We are committed to protecting human rights and focused on hiring locally whenever possible.

Policies

§ Global Human Rights Policy

§ Supplier Code of Conduct

§ Code of Business Conduct and Ethics

§ Diversity Policy

§ Anti Corruption Policy

§ Whistleblowing Policy

§ Corporate Social Responsibility Policy

Programs and Initiatives

§ Internal campaigns to promote conduct in accordance with the Code of Business Conduct and Ethics.

§ More than 99% of our employees in Brazil are covered by collective bargaining agreements.

§ Regular internal organizational online surveys to measure employee satisfaction and foster engagement.

Accountability

§ Internal Whistleblower and Ethics Committee oversees HR incidents and formal/informal grievances.

§ The Board’s Nominating and Corporate Governance Committee is notified of any significant matters.

Monitoring and evaluation

§ Dedicated HR teams in Brazil responsible for monitoring, compliance, investigation and reporting.

§ Third-party phone lines and email addresses monitor complaints, including any allegations of human rights violations. The third-party reviews and reports this information to an internal Whistleblower and Ethics Committee in order to conduct investigations and provide recommend-ations to the broader leadership team, as necessary.

§ Reporting to the Ministry of Labor and Employment or State/Federal police depending on type of incident.

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Company Performance

Policies

Ero Copper recently developed a Supplier Code of Conduct which sets out the minimum standards of conduct expected to be adhered to by any individual or business that provides goods or services to the Company. We endeavor to engage with and work along-side high-quality suppliers that adhere to all applicable laws and regulations of the countries and regions where they conduct business, including laws protecting human rights, worker health and safety and the environment.

Extractive Sector Transparency Measures Act

Ero Copper is compliant with the Extractive Sector Transparency Measures Act (“ESTMA”), which is focused on reporting of payment to all levels of government. This report is generated annually and is available on our website.

Diversity

We are committed to a merit-based system for the composition of our Board of Directors and senior leadership. We aim to foster a diverse and inclusive culture that solicits multiple perspectives and views, free of bias and discrimination. As at the Effective Date of this report, at the corporate level, 22% of our Board of Directors are women, 10% of our senior management team are women and 25% of our mid-level management team are women.

In Brazil, approximately 10% of our employees are women, of which 16% of our mid-level management team are women and 11% of our supervisors are women.

Locally in Brazil, approximately 2% of our employee workforce identifies as disabled. We strive to create opportunities for people with disabilities to prosper within our organization and are committed to increasing this percentage in the future.

 

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Occupational Health & Safety

Management Approach

Our top priority is protecting the health, safety and well-being of our employees, contractors, suppliers and the broader communities in which we operate.

Policy

§ Health and Safety Policy

Programs and Initiatives

§ A minimum of 12.5 hours of health, safety and emergency response training for all employees and contractors at site.

Monitoring and evaluation

§ Internal audits – Each mine is audited three times annually by trained specialists within each site’s health and safety department.

§ External audits – Annual third-party audits are completed. In 2020, external audits were postponed to mitigate risks of the COVID-19 pandemic. It is expected that annual external audits will continue to be conducted when pandemic risks decrease.

§ All internal and external audit results are shared with the EHSS Committee.

Accountability

§ Health and safety managers at our operations oversee site-wide initiatives, execution of safety audit programs and incident investigations.

§ The Company’s management team is compensated, in part, based on the Company’s LTIFR performance.

§ The EHSS Committee reviews safety statistics, incident reports and adherence to the health and safety policy.

 

2020 Highlights

§ Our flagship operation, MCSA, celebrated 1-year with zero LTIs in September 2020

§ Achieved zero fatalities

2021 Goals

§ Zero fatalities

§ Achieve LTIFR of 1.0 or less

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Company Performance

Despite COVID-19 headwinds throughout 2020, we are proud of our safety achievements during the year. Of note, our employees and contractors at the MCSA Mining Complex achieved 1-year without an LTI on over 6 million hours worked at the end of Q3 2020 – an incredible achievement.

Safety Track Record

	LTIF(1)		Severity(2)
2018		0.32		79
2019		0.99		115
2020		0.27		66

Safety data in the table above includes employees and contractors at operating mines. Additional safety statistics, including specific data for employees, contractors and each site, can be found in the GRI Index within the appendix of this report.

(1) Lost time injury frequency is calculated as the number of lost time injuries, including fatalities, in the exposure period multiplied by 1 million hours and divided by the total number of hours worked in that period.

(2) Severity is a measurement of the seriousness of injuries and is calculated as the number of workdays lost due to lost time injuries multiplied by 1 million and divided by the total exposure hours.

COVID-19 Pandemic

In early 2020, Ero Copper implemented extraordinary measures to mitigate the possible impact of COVID-19 on its workforce and operations. These measures continue into 2021, and include:

i. restrict all non-essential travel to and from the Company’s mining operations;

ii. routine engagement with all suppliers and active stockpiling of key consumables to protect against any supply chain disruptions;

iii. reduce physical interaction throughout the organization as much as possible by closing administrative offices and moving to a work-from-home format, increase social distancing by limiting the number of employees travelling on provided buses between the Company’s mining communities and mines, limit the number of employees in the cafeteria at any given time, cancel all group meetings, implement social distancing for essential line-out meetings and encourage work-from-home and video/telephone conferencing where feasible;

iv. the establishment of COVID-19 committees with senior leadership and local health administrators for the regions in which the Company operates;

v. The purchase of thousands of COVID-19 testing kits for the Company’s operations, with the donation of a portion of these test kits, as well as other personal protective equipment, to each of the Company’s local municipalities to facilitate rapid testing throughout each community; and

vi. implement wellness education, health screenings, and self-isolation protocols along with enhanced sanitization throughout the Company’s operations.

The Company continues to closely monitor the COVID-19 pandemic and is engaged in active operational and financial contingency planning to prudently manage the potential impact of the pandemic on its operations.

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Community Relations & Investment

Management Approach

Maintaining and strengthening trust and the mutual relationships with our host communities is core to the Company’s social license to operate. We actively and regularly engage with our local communities, both formally and informally, to ensure we are listening, meeting needs, and giving back.

 

Policy

§ Corporate Social Responsibility Policy

Programs and Initiatives

§ Socio-economic development programs – We create and support local programs focused on education, sustainable food production, entrepreneurship, local culture and female empowerment.

§ Local infrastructure and services – We maintain and invest in local infrastructure including water, recreational facilities and health facilities.

§ Employment – We hire and procure locally wherever possible and provide training for roles related to our operations.

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Company Performance

Infrastructure & Services

MCSA owns and maintains an 86 kilometer water pipeline from the São Francisco River. In addition to its use of providing water to its mining and milling operations, MCSA provides water to neighboring communities. From 2018 to 2020, approximately 22 million cubic meters of water has been supplied to local communities.

In 2020, we purchased thousands of COVID-19 testing kits for our operations, with a portion of these donated to local municipalities to facilitate rapid testing. Additionally, we donated a variety of other personal protective equipment to our host communities during the pandemic. We are actively engaged in opportunities to support local healthcare availability including expanding clinic capabilities at MCSA. We expect to execute on these actions throughout 2021 and early 2022.

Local Employment & Procurement

Our operations provide long-term and stable employment, particularly in relatively remote regions in Brazil. We take pride in hiring local where possible. In 2020, more than 99% of our employees were Brazilian nationals.

In addition to local employment, our procurement practices also represent a core tenet of our community relations strategy. We prioritize local and regional suppliers wherever possible to generate long-term economic development for the regions in which we operate.

Social Programs

Our investments in socio-economic development programs seek to ensure our local communities continue to thrive well beyond our mining operations. In 2020, we invested approximately R$6 million in local socio-economic programs. A select set of our socio-economic efforts and ongoing investments are detailed below:

Rural Sustainability in the Semi - Arid

§ Sheep and goat production chain

§ Leather workshop

§ Entrepreneurship – a matter of attitude

§ Women in action

§ Community vegetable gardens

§ Community nursery

Education and Vocational Training

§ Young entrepreneurship

§ Young apprenticeship

§ Support of the Pilar Student Association

§ Local Sports incentives

Cultural Identity & Socio - Environmental Communication

§ Support for local culture revival

§ Participatory management plan

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Water

Management Approach

We believe access to clean water is a basic human right. Water is also a critical input for our mining operations. As such, our operations focus on conserving water and maximizing our recycling rate for re-use. We aim to protect and manage water resources in the areas that we operate as well as respect the rights of other water users within our neighboring communities.

Programs and Initiatives

• MCSA is the owner of an 86 kilometer pipeline from the São Francisco River that provides water to many of the region’s municipalities as well as local farmers located along the pipeline.

Monitoring and evaluation

§ Data – Water usage and recycling rates are reported regularly to the Board’s EHSS Committee.

§ MCSA – Environmental studies for the MCSA Mining Complex have determined that the potential impacts of MCSA’s operations in the Curaçá Valley on water resources, local populations and native vegetation are limited. The mining operations are located distal to any natural bodies of water, within a sparsely occupied region and have a relatively limited operational footprint.

§ NX Gold – Frequent environmental monitoring, including water and air quality control, is conducted.

 

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Company Performance

Water Withdrawal

Surface water and mine dewatering represent our largest sources of water withdrawal at the MCSA Mining Complex. At the NX Gold Mine, surface water and groundwater represent the largest sources of water withdrawal.

At the NX Gold Mine, recent efforts to improve our surface water and in-mine water collection resulted in our recycled process water percentage increasing from 74% to 94% from 2018 to 2020.

At the MCSA Mining Complex, total water withdrawal is expected to increase in the near to medium term as we increase mill throughputs per the life-of-mine plan.

In addition to water withdrawal related to our mining operations, we provide water to a number of local communities near the MCSA Mining Complex. From 2018 to 2020 we have provided more than 22 million cubic meters of water to communities within the region.

Water Recycling

We strive to recycle and reuse water in our processing operations whenever possible. From 2018 to 2020 we have consistently achieved process water recycling rates in excess of 85% and will continue to look for ways to improve this moving forward.

Process Water Recycling Rate

(%)

 

Water Withdrawal

(million cubic meters) ⁽¹⁾

Surface Water

Groundwater

Mine Dewatering

(1) Excludes water withdrawn to be provided to the local communities.

Water Provided to Communities

(million cubic meters)⁽²⁾  

(2) Excludes any water lost in the process of distributing water to the communities.

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Energy & Greenhouse Gas ( GHG ) Emissions

Management Approach

2020 was a pivotal year for the Company as it was our third consecutive full year of operations at our flagship MCSA Mining Complex and the NX Gold Mine following the acquisition of these operations in late 2016. We now have three years of baseline data that will be used to form our strategy for energy and GHG emissions management and reduction across our operations.

 

Programs and Initiatives

§ Integrated ore sorting technology into our updated life-of-mine plan for the MCSA Mining Complex, released in November 2020. Implementation of ore sorting technology is expected to reduce consumption of fresh water, diesel and electricity per tonne of ore milled (and per tonne of copper produced) relative to the status quo.

§ Announced the intention to construct a new shaft at the Pilar Mine to access the Deepening Extension Project – expected to reduce non-renewable energy consumption and GHG emissions relative to the status quo.

§ Replaced multiple gas-powered ovens with electric ovens at our laboratory at the NX Gold Mine, reducing GHG emissions.

Monitoring and evaluation

§ Energy and fuel monitoring – Our mine sites monitor energy and fuel consumption from a variety of sources which is used to estimate annual GHG emissions.

§ Performance – Electricity consumption and estimates of GHG emissions are reported regularly to the EHSS Committee.

 

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Company Performance

Energy Use

The two largest energy uses at our sites are fuel and electricity. Fuel is primarily used in transporting both ore and waste throughout our operations. We are fortunate that electricity at our sites is primarily supplied by the national and regional grids of Brazil which are approximately 90% renewable, consisting of hydro, wind and solar generation. The primary uses for electricity at our operations include ore processing, underground cooling and ventilation and power for the mine offices, common areas and laboratories.

The increase in energy use and GHG emissions from 2018 to 2020 is primarily related to the commencement of mining at the Vermelhos Underground Mine in late 2018. Ore from the Vermelhos Underground Mine is transported to the Caraíba Mill complex via a haul road covering a distance of approximately 80 kilometers, requiring higher fuel consumption relative to previous years. Despite this, GHG emission intensity has declined from 2018.

Mining activities in 2020 consisted solely of underground mining across our portfolio. In late 2021, open pit mining activities are scheduled to re-commence within the MCSA Mining Complex which is expected to cause a modest increase the Company’s GHG emissions relative to prior years. The implementation of ore sorting technology within the Vermelhos District, currently scheduled for 2024, is expected to reduce the Company’s GHG emission intensity at the MCSA Mining Complex as a result of reduced tonnages hauled and processed relative to the status quo.

GHG Emissions

(kt - CO2e)

GHG Emissions Intensity

(t -CO2 e / t - CuEq . production)⁽¹⁾

(1) Copper equivalent production calculated based on 3-year average commodity prices from 2018-2020 as derived from Factset (Cu: $6,211/t, Au: $1,478/oz, Ag: $17.48/oz).

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Climate Change

Management Approach

We recognize that climate change is a significant challenge facing society. Although mining is energy-intensive, our operations are largely focused on the production of copper, a critical metal for building a de-carbonized and more sustainable world.

Members of our senior management team recently formed a Climate Change Committee (the “Climate Committee”) focused on assessing and managing climate-related risks and opportunities on our business. The Committee is also focused on implementing recommendations of the TCFD to provide transparent climate-related information to our key stakeholders.

Program sand Initiatives

§ In early 2021, the Climate Committee engaged third party consultants to assess the physical risks of climate change on our operations, particularly related to extreme weather events, changes in rainfall and temperature patterns and potential impacts on water availability. This study will include a range of climate change scenarios including a 2-degree Celsius scenario.

§ The Climate Committee intends to conduct a transition risk analysis in line with TCFD recommendations following completion of the physical risks assessment.

Monitoring and evaluation

§ The Climate Committee reports directly to the Company’s CEO and Executive Chairman, whom are both sponsors of the Climate Committee, and will periodically provide the EHSS Committee with results and progress updates.

Copper’s Role in a ‘Green Economy’

§ Copper is an essential metal in transitioning away from fossil fuels.

§ Copper is one of the most electrically and thermally conductive metals. As such, significant quantities of copper cable are required to connect wind turbines, solar cells and energy systems over large areas as renewable energy assets are developed.⁽¹⁾

§ Specifically, renewable energy assets require 3-15 times as much copper as conventional power generation per unit of installed capacity.⁽¹⁾

§ Copper is key component of batteries for electric vehicles. It is also present in motors and internal charging equipment.⁽¹⁾

Climate Goals

§ Management is committed to building and advancing our climate strategy over time to contribute towards the goals of the Paris Agreement, net zero emissions and creating a sustainable low carbon economy .

(1) Bernstein, 2020 report entitled: “Global Metals & Mining: King Copper once and future”.

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Waste & Tailings Management

Management Approach

Tailings management is one of the most material issues in the mining sector. Our leadership team is focused on minimizing risks associated with tailings management for our communities and the environment. We regularly discuss our approach to tailings management with regulatory agencies, insurers and investors.

Industry Initiatives

§ MCSA is a member of Instituto Brasileiro de Mineração (“IBRAM”), the national mining association in Brazil. In 2019, IBRAM adopted the Towards Sustainable Mining (“TSM”) initiative, a corporate social responsibility program developed by the Mining Association of Canada (“MAC”) to improve environmental and social practices in the mining industry.

§ Global Tailings Review – Ero Copper supports the Global Tailings Review, an initiative of the International Council on Mining and Metals (“ICMM”), the United Nations Environment Programme (“UNEP”) and the Principles for Responsible Investment (“PRI”).

Legislative Changes

§ In response to the Brumadinho disaster, new regulations and laws regarding the design, operation and monitoring of tailings dams in Brazil were passed. Specifically, on October 1, 2020. Law No 14,066/2020, which amended the National Dam Safety Policy and Mining Code, was enacted.

Programs and Initiatives

§ Routine independent tailings storage facilities safety reviews are performed in-line with federal and state regulations.

§ As part of the Global Tailings Review, we are currently developing an implementation timeline to ensure alignment with the Global Industry Standard on Tailings Management.

Monitoring and evaluation

§ Third party audits of tailings storage facilities.

§ Senior management reviews and approves corrective action plans as required.

§ Internal monitoring of tailings pipeline including pipeline pressure.

§ Senior management provides the EHSS Committee with tailings management updates as required.

§ Executive compensation is, in part, based on the Company’s performance related to environmental incidents, with a goal of zero.

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Company Performance

Tailings Storage Facilities

In 2020, we had zero reportable environmental incidents at our operations, including our tailing storage facilities, consistent with our track record since acquiring the operations in late 2016.

In 2019, in response to the Church of England’s request to more than 600 mining companies, the Company created a document summarizing key facts relating to each of its tailings storage facilities. This information is updated periodically and is available on our website.

At the MCSA Mining Complex, we utilize co-disposal for our tailings, which entails utilizing the inherent void space within the waste rock stockpiles, allowing tailings to permeate the piles. This methodology increases water recovery, creates a substrate for revegetation of the waste rock stockpiles, and most importantly, has eliminated the need for conventional tailings dam storage. An overview of the co-disposal method is available in the MCSA Mining Complex Technical Report (as defined herein) available on SEDAR and our website.

Waste Management

The mining industry generates quantities of hazardous and non-hazardous waste through various unit processes – our mines are no exception. At our operations, we strive to recycle and reuse waste whenever possible. When reuse is not possible, we follow federal, state and local regulations for storing and disposal of these materials on site or in secure external facilities through licensed third-parties.

 

Waste and Disposal Methods by
Type – 2020

(tonnes)

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Biodiversity & Mine Closure

Management Approach

Our management team’s focus on sustainable mining includes implementation of biodiversity management practices focused on protecting and restoring native plant species in the regions we operate.

Programs and Initiatives

§ At MCSA, our biodiversity program includes revegetating fully-completed waste rock piles with the native Caatinga plant species.

§ At the NX Gold Mine, we are actively reclaiming historical artisanal workings whereby thickened inert tailings are deposited into historic open pit workings, which are subsequently revegetated after application of top-soil.

§ Closure plans – 100% of our operating mines have closure plan that are routinely updated for changes in operational footprint.

Company Performance

Environmental teams at our operations have strict protocols focused on reducing the amount of, and reclamation of, land disturbed during mining and exploration activities.

In 2020, our nursery programs continued growing native plants for ongoing revegetation and remediation efforts. During the year, we rehabilitated a total of 57 hectares across our operations. At the end of 2020, total disturbed land yet to be reclaimed was 928 hectares, including both the MCSA Mining Complex and the NX Gold Mine.

Monitoring and evaluation

§ We monitor the amount of land disturbed and reclaimed by our operations.

§ Reclamation and revegetation work is regularly reported to the EHSS Committee.

Reclamation and Mine Closure

§ Our goal is to return the land disturbed by our mining activities, and by historical artisanal miners, to its natural state so that local flora, fauna and wildlife continue to thrive well beyond the life of our operations.

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GRI Data Tables (as at Dec. 31, 2020)

102-8 Information on employees and other workers

	Employees																		Contractors
Total # of employees	Administration				Geology				Engineering				Labor				Total		Fixed				Temporary				Total		Total
and contractors	Male		Female		Male		Female		Male		Female		Male		Female		Employees		Male		Female		Male		Female		Contractors		Workforce
Corporate Office(1)		10		3		4		0		1		1		0		0		19		6		1		0		0		7		26
Brazil(2)		203		124		41		14		72		12		1,874		98		2,438		0		0		1188		129		1,317		3,755
Total		213		127		45		14		73		13		1,874		98		2,457		6		1		1,188		129		1,324		3,781

(1) Corporate Office data includes employees and contractors of Ero Copper Corp. and Ero Copper (US) Ltd.

(2) Brazil data includes mines, offices, exploration and project sites.

102-13 Memberships of associations

At an organizational level we are members of the following organizations:

§	O Instituto Brasileiro de Mineração (IBRAM)
§	Prospectors and Developers Association of Canada (PDAC)

This list does not include professional associations such as the Canadian Bar Association or Engineers and Geoscientists BC, etc.

102-41 Collective bargaining agreements

	MCSA Mining Complex			NX Gold			Total
Workers covered by collective agreements		2033			400		2433
Total % of employees		99.8	%		100.0	%	99.8	%

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302-1 Energy consumption within the organization ⁽¹⁾

	MCSA Mining Complex		NX Gold	Total
Diesel (m3)		7,922	1,052	8,974
Gasoline (m3)		79	5	84
Carbon (tonnes)		-	-	-
Liquified Petroleum Gas, LPG (m3)		9,323	9,806	19,130
Ammonium Nitrate, ANFO (tonnes)		-	-	-
Emulsion (tonnes)		2,785	260	3,045
Electricity (MWh)		164,782	26,355	191,138

(GJ)	MCSA Mining Complex		NX Gold	Total
Diesel		306,435	40,692	347,128
Gasoline		2,734	181	2,915
Carbon		0	0	0
Liquified Petroleum Gas, LPG		238,028	250,356	488,384
Ammonium Nitrate, ANFO		0	0	0
Emulsion		6,405	599	7,004
Electricity		593,217	94,879	688,095
Total		1,146,819	386,707	1,533,527

(GJ)	2018		2019	2020
Diesel		232,194	321,836	347,128
Gasoline		2,718	2,921	2,915
Carbon		0	0	0
Liquified Petroleum Gas, LPG		431,120	487,536	488,384
Ammonium Nitrate, ANFO		39,675	87	0
Emulsion		4,117	5,637	7,004
Electricity		536,343	632,480	688,095
Total		1,246,167	1,450,498	1,533,527

(1) ERO used TSM – Energy Greenhouse Gas Emissions Management Guide 2014, Orica and conversion tables to transform the units to GJ.

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303-1	Water withdrawal by Source
303-3	Water recycled and reused

(m3)	MCSA Mining Complex			NX Gold		Total
Total water withdrawal
Surface Water		2,320,596		9,830		2,330,426
Groundwater		18,033		16,494		34,527
Precipitation		1		0		1
Third-party Water (ie. Municipal)		0		0		0
Mine Dewatering		1,356,091		612		1,356,703
Freshwater & Recycling for Mineral Processing
Freshwater Used for Mineral Processing		592,251		26,324		618,575
Recycled/Re-Used Process Water		3,622,407		415,436		4,037,843
% Recycled Process Water		86	%	94	%	87	%
Water for Local Communities
Water Provided/Sold to Local Communities		7,296,985		0		7,296,985

(m3)	2018			2019		2020
Recycled Process Water		4,507,574		4,936,470		4,037,843
% Recycled Process Water		87	%	88	%	87	%

MM1	Amount of land (owned or leased, and managed for productive activities of extractive use) disturbed or rehabilitated
304-3	Habitats protected of restored

(ha)	MCSA Mining Complex		NX Gold	Total
Total land disturbed and not yet rehabilitated (Opening Balance)		936	45	981
Total amount of land newly disturbed within the reporting period		2	2	4
Total amount of land newly rehabilitated within the reporting period to the agreed-upon end-use		56	1	57
Total land disturbed and not yet rehabilitated (Closing Balance)		882	47	928

(ha)	2018		2019	2020
Total land disturbed and not yet rehabilitated (Opening Balance)		1,089	1,050	981
Total amount of land newly disturbed within the reporting period		7	5	4
Total amount of land newly rehabilitated within the reporting period to the agreed-upon end-use		46	74	57
Total land disturbed and not yet rehabilitated (Closing Balance)		1,050	981	928

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305-1	Direct Greenhouse Gas (Scope 1) GHG emissions
305-2	Energy Indirect (Scope 2) GHG emissions

(tonnes of CO2-eq)		MCSA Mining Complex		NX Gold		Total
	Diesel		21,461		2,850		24,311
	Gasoline		196		13		209
Direct (Scope 1)	Carbon		0		0		0
GHG Emissions(1)	Liquified Petroleum Gas, LPG		14,431		15,178		29,609
	Ammonium Nitrate, ANFO		0		0		0
	Emulsion (tonnes)		526		49		576
Energy Indirect			16,384		2,620		19,005
(Scope 2) GHG	MWh
Emissions(2)
	Total		52,999		20,711		73,709

 

(tonnes of CO2-eq)		2018		2019		2020
	Diesel		16,262		22,540		24,311
	Gasoline		195		210		209
Direct (Scope 1)	Carbon		0		0		0
GHG Emissions	Liquified Petroleum Gas, LPG		26,137		29,557		29,609
	Ammonium Nitrate, ANFO		3,260		7		0
	Emulsion (tonnes)		338		463		576
	Total		46,192		52,777		54,704
Energy Indirect							19,005
(Scope 2) GHG	MWh
Emissions			14,813		17,469
	Total		61,006		70,246		73,709

(1)     Based on the National Inventory Report Canada 2018 Direct (Scope 1) GHG emissions. The global warming potential (GWP) is based on the information provided by the Government of Canada. Gasses included in this calculation are CO2, CH4 and N2O.

(2)    Emissions from purchased electricity calculated according to GHG protocol using the IEA 2019 tool for all the mines. Emission factor for Timmins provided by the Independent Electricity System Operator (IESO) in Ontario. Gases included in this calculation are CO2, CH4 and N2O.

306-3 Waste generated

							Landfill (Non-
Total – All Mines (tonnes)	Reuse		Recycled		Compost		Hazardous Waste)		Secured Landfill		Total
Hazardous or dangerous waste		4		31		0		0		386		422
Non-hazardous inert waste		363		124		0		0		0		487
Domestic waste to landfill		0		0		179		172		0		351
Recyclable		0		1,473		40		0		0		1,514
Total		368		1,628		220		172		386		2,774

G4-EN24 Total number and volume of significant spills

	MCSA Mining Complex	NX Gold	Total
Number of significant spills	0	0	0
Volume of liquid or material (m3)	0	0	0

	2018	2019	2020
Number of significant spills	0	1	0
Volume of liquid or material (m3)	0	45	0

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401-1        New employee hires and employee turnover              

New Employee Hires in 2020		MCSA Mining Complex			NX Gold			Total
	Men		79			37			116
<30 years			3.2	%		1.5	%		4.8	%
	Women		20			5			25
			0.8	%		0.2	%		1.0	%
	Men		126			39			165
Between 30 and 50 years			5.2	%		1.6	%		6.8	%
	Women		14			5			19
			0.6	%		0.2	%		0.8	%
	Men		5			1			6
>50 years			0.2	%		0.0	%		0.2	%
	Women		0			0			0
			0.0	%		0.0	%		0.0	%

Employee Turnover in 2020		MCSA Mining Complex			NX Gold			Total
	Men		11			12			23
<30 years			0.5	%		0.5	%		0.9	%
	Women		1			0			1
			0.0	%		0.0	%		0.0	%
	Men		81			16			97
Between 30 and 50 years			3.3	%		0.7	%		4.0	%
	Women		7			3			10
			0.3	%		0.1	%		0.4	%
	Men		47			0			47
>50 years			1.9	%		0.0	%		1.9	%
	Women		1			2			3
			0.0	%		0.1	%		0.1	%

(1) Turnover includes retirement, voluntary or involuntary departure of permanent employees.

403-9           Work-related injuries              

2020 Safety Performance	MCSA Mining Complex		NX Gold		Total
Lost Time Injury Frequency, LTIF
Employees		0.26		0.00		0.22
Contractors		0.00		2.34		0.35
Total		0.16		0.84		0.27
Lost Time Injury Severity, LTIS
Employees		77		7		65
Contractors		0		454		68
Total		47		167		66

Safety Performance Trend	2018		2019		2020
Employees
LTIF		0.27		1.70		0.22
LTIS		31		197		65
Fatalities		0		0		0
Contractors
LTIF		0.27		0.00		0.38
LTIS		31		0		68
Fatalities		0		0		0
Total
LTIF		0.32		0.99		0.27
LTIS		79		115		66
Fatalities		0		0		0

(1) Lost time injury frequency is calculated as the number of lost time injuries, including fatalities, in the exposure period multiplied by 1 million hours and divided by the total number of hours worked in that period.

(2) Lost time injury severity is a measurement of the seriousness of injuries and is calculated as the number of workdays lost due to lost time injuries multiplied by 1 million and divided by the total exposure hours.

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405-1     Diversity of governance bodies and employees

	Employees
	Male															Female
Percentage of employees per gender and age group(1)	<30			30-50			>50			>60			Total Male			<30			30-50			>50			>60			Total Female
Corporate Office(2)		0	%		63	%		11	%		5	%		79	%		0	%		21	%		0	%		0	%		21	%
Brazil(3)		23	%		59	%		7	%		1	%		90	%		4	%		5	%		0	%		0	%		10	%

	Contractors
	Male															Female
Percentage of employees per gender and age group(1)	<30			30-50			>50			>60			Total Male			<30			30-50			>50			>60			Total Female
Corporate Office(2)		0	%		29	%		57	%		0	%		86	%		0	%		0	%		14	%		0	%		14	%
Brazil(3)		21	%		61	%		7	%		1	%		90	%		3	%		6	%		0	%		0	%		10	%

(1) Numbers may not add due to rounding.

(2) Corporate Office data includes employees and contractors of Ero Copper Corp. and Ero Copper (US) Ltd.

(3) Brazil data includes mines, offices, exploration and project sites.

	Senior Manager(1)					Manager(2)					Superintendent / Assistant Manager(3)					Supervisors(4)
Percentage of employees per gender and age group		Male		Female			Male		Female			Male		Female			Male		Female
Corporate Office(5)		90	%	10	%		75	%	25	%		0	%	0	%		0	%	0	%
Brazil		100	%	0	%		84	%	16	%		89	%	11	%		93	%	7	%

(1) Senior Manager include country managers, directors, and every employee who reports directly to a country manager. It also includes operations managers and/or general manager at the mine site.

(2) Managers include any employee who reports directly to a senior manager, but it does not include country managers.

(3) Superintendent / Assistant Manager includes head of departments (mine managers, process managers, security managers mine superintendent, etc.) who report directly to operations manager or its equivalent.

(4) Supervisors include employees who have at least one person they supervise.

(5) At the corporate level, senior management include vice presidents and C-level executives while managers include directors and managers.

ERO COPPER | 2020 SUSTAINABILITY REPORT | 31

GRI Index

General Standard Disclosures		Page Number
Organizational Profile
102-1	Name of the organization	Front cover, 2
102-2	Activities, brands, products, and services	2
102-3	Location of headquarters	2
102-4	Location of operations	2
102-5	Ownership and legal form	Annual Information Form (AIF) p. 10
102-6	Markets served	AIF p. 14
102-7	Scale of the organization	2, Management Discussion & Analysis
102-8	Information on employees and other workers	11, 12, 26
102-9	Supply chain	16
102-10	Significant changes to the organization and its supply chain	6-7, Annual Report (AR)
102-11	Precautionary Principle or approach	8
102-12	External initiatives	9
102-13	Membership of associations	26
Strategy
102-14	Statement from the most senior decision-maker	6-7
102-15	Key impacts, risks and opportunities	6-7, 9
Ethics and Integrity
102-16	Values, principles, standards, and norms of behavior	3,8, Corporate Policies
Governance
102-18	Governance Structure	8, Committee Mandates, Management Information Circular

ERO COPPER | 2020 SUSTAINABILITY REPORT | 32

General Standard Disclosures		Page Number
Stakeholder Engagement
102-40	List of stakeholder groups		4
102-41	Collective bargaining agreements		11, 27
102-42	Identifying and selecting stakeholders		4
102-43	Approach to stakeholder engagement		4
102-44	Key topics and concerns raised		4, 11, 13, 15, 18, 20, 22, 23, 25
Reporting Practice
102-45	Entities included in the consolidated financial statements		AR
102-46	Defining report content and topic Boundaries		4
102-47	List of material topics		4
102-48	Restatements of information		No restatements
102-49	Changes in reporting		3
102-50	Reporting period		3
102-51	Date of most recent report		3
102-52	Reporting cycle		3
102-53	Contact point for questions regarding the report		3
102-54	Claims of reporting in accordance with the GRI Standards		3
102-55	GRI content index		32-35
102-56	External assurance		3

ERO COPPER | 2020 SUSTAINABILITY REPORT | 33

Topic Specific GRI Standards		Page Number
Energy
302-103	Management approach disclosures	20
302-1	Energy consumption within the organization	21, 27
Water
303-103	Management approach disclosures	18
303-1	Water withdrawal by source	19, 28
303-3	Water recycled and reused	19, 28
Biodiversity
304-103	Management approach disclosures	25
304-3	Habitats protected or restored	28
MM1	Amount of land (owned or leased, and managed for production activities or extractive use) distubed or rehabilitated	28
Emissions
305-103	Management approach disclosures	20, 22
305-1	Direct (Scope 1) GHG emissions	21, 29
305-2	Energy indirect (Scope 2) GHG emissions	21, 29
305-4	GHG emissions intensity	21
Waste
306-101	Management approach disclosures	23
306-3	Waste generated	24
G4-EN24	Total number and volume of significant spills	29
Employment
401-103	Management approach disclosures	11
401-1	New employee hires and employee turnover	30

ERO COPPER | 2020 SUSTAINABILITY REPORT | 34

General Standard Disclosures		Page Number
Occupational Health & Safety
403-103	Management approach disclosures		13
403-9	Work-related injuries		14, 30
Diversity and Equal Opportunity
405-103	Management approach disclosures		11
405-1	Diversity of governance bodies and employees		12, 31
Local Communities
413-103	Management approach disclosures		15
413-1	Operations with local community engagement, impact assessments, and development programs		16
Closure Planning
G4 MM10	Number and percentage of operations with closure plans		25

ERO COPPER | 2020 SUSTAINABILITY REPORT | 35

SASB Data Tables (as at Dec. 31, 2020)

Table 1          Sustainability Disclosure Topics & Accounting Metrics      

Topic	Metric	Report	SASB Code
	Gross global Scope 1 emissions, percentage	54,704 tonnes CO2-equivalent	EM-MM-110a.1
	covered under emissions-limiting regulations
Greenhouse Gas Emissions	Discussion of long-term and short-term strategy or plan to manage Scope 1 emissions, emissions reduction targets, and an analysis of performance against those targets	Smoke opacity is measured using the Ringelmann Scale with an opacimeter in all diesel equipment and vehicles, as required by Brazilian law. Additionally preventative maintenance is performed to ensure the Company’s fleet of equipment is operating as they should.	EM-MM-110a.2
		Please refer to pages 20-21 of this Report for additional details on management of greenhouse gas emissions.
Air Quality	Air emissions of the following pollutants: (1) CO, (2) NOx (excluding N2O), (3) SOx, (4) particulate matter (PM10), (5) mercury (Hg), (6) lead (Pb), and (7) volatile organic compounds (VOCs)	Mining operations in 2020 were predominantly underground and, as a Result, have low air emissions. Air quality, including particulate emissions are not material to the Company’s environmental performance.	EM-MM-120a.1
		(1)    Direct electricity of 191,138 MWh (2)    100% (3)    Approximately 90%	EM-MM-130a.1
Energy Management	1) Total energy consumed, (2) percentage grid electricity, (3) percentage renewable
		Please refer to pages 20-21 of this Report for additional details on energy management.
	(1) Total fresh water withdrawn, (2) total fresh water consumed, percentage of each in regions with High or Extremely High Baseline Water Stress	Please refer to page 28 for details on water withdrawal and consumption. 0% is from areas with high or extremely high baseline water stress.	EM-MM-140a.1
Water Management
	Number of incidents of non-compliance associated with water quality permits, standards, and regulations	Zero.	EM-MM-140a.2
	Total weight of tailings waste, percentage recycled	Please refer to page 29 for details on waste and recycling.	EM-MM-150a.1
Waste & Hazardous Materials Management	Total weight of mineral processing waste, percentage recycled	Please refer to page 29 for details on waste and recycling.	EM-MM-150a.2
	Number of tailings impoundments, broken down by MSHA hazard potential	Please refer to pages 23-24 of this Report. Additional information on each of the tailings impoundments can be found on the Company's website under the Tailings Management page.	EM-MM-150a.3
	Description of environmental management policies and practices for active sites	Please refer to pages 18-25 for additional information on environmental management practices.	EM-MM-160a.1
Biodiversity Impacts	Percentage of mine sites where acid rock drainage is: (1) predicted to occur, (2) actively mitigated, and (3) under treatment or remediation	(1)    0% (2)    0% (3)    0%	EM-MM-160a.2
	Percentage of (1) proved and (2) probable reserves in or near sites with protected conservation status or endangered species habitat	(1)    0% (2)    0%	EM-MM-160a.3

ERO COPPER | 2020 SUSTAINABILITY REPORT | 36

Table 1          Sustainability Disclosure Topics & Accounting Metrics (cont’d)      

Topic	Metric	Report	SASB Code
	Percentage of (1) proved and (2) probable reserves in or near areas of conflict	(1)    0% (2)    0%	EM-MM-210a.1
Security, Human Rights & Rights of Indigenous Peoples	Percentage of (1) proved and (2) probable reserves in or near indigenous land	(1)    0% (2)    0%	EM-MM-210a.2
	Discussion of engagement processes and due diligence practices with respect to human rights, indigenous rights, and operation in areas of conflict	Please refer to the Global Human Rights Policy on the Company’s website.	EM-MM-210a.3
Community Relations	Discussion of process to manage risks and opportunities associated with community rights and interests	See pages 15-16 of this Report. Please refer to the Corporate Social Responsibility Policy on the Company’s website for more information.	EM-MM-210b.1
	Number and duration of non-technical delays	None.	EM-MM-210b.2
LabourRelations	Percentage of active workforce covered under collective bargaining agreements, broken down by U.S. and foreign employees	99.8% of the Company’s active workforce in Brazil is covered under collective bargaining agreements.	EM-MM-310a.1
	Number and duration of strikes and lockouts	Zero.	EM-MM-310a.2
Workforce Health & Safety	1) MSHA all incident rate, 2) fatality rate, 3) near miss frequency rate (NMFR) and 4) average hours of health, safety and emergency response training for a) full-time employees and b) contract employees	(1)    0.27 (2)    0 (3)    n/a (4)    Full-time employees and contract employees receive a minimum of 12.5 hours of annual health and safety training.	EM-MM-320a.1
Business Ethics & Transparency	Description of the management system for prevention of corruption and bribery throughout the value chain	Ero Copper has an Anti-Corruption Policy which requires that directors, officers, employees and consultants of the Company conduct business in a manner that does not contravene local and international anti-bribery and anti-corruption laws that apply to the Company, including the Criminal Code (Canada) and Corruption of Foreign Public Officials Act (Canada).	EM-MM-510a.1
	Production in countries that have the 20 lowest rankings in Transparency International’s Corruption Perception Index	100% of 2020 production came from Brazil which is ranked 94 out of 180 in the Transparency International’s Corruption Perception Index (2020).	EM-MM-5101.2

Table 2 Activity Metrics

Metric	Report	SASB Code
Production of (1) metal ores and (2) finished metal products	Please refer to page 2.	EM-MM-000.A
Total number of employees, percentage contractors	Please refer to page 26.	EM-MM-000.B

ERO COPPER | 2020 SUSTAINABILITY REPORT | 37

Disclaimer

Cautionary Note Regarding Forward-Looking Statements

This Sustainability Report contains “forward-looking information” within the meaning of applicable Canadian securities laws. Forward-looking information includes statements that use forward-looking terminology such as “may”, “could”, “would”, “will”, “should”, “intend”, “target”, “plan”, “expect”, “budget”, “estimate”, “forecast”, “schedule”, “anticipate”, “believe”, “continue”, “potential”, “view” or the negative or grammatical variation thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, statements with respect to the Company’s ongoing sustainability efforts, including but not limited to the expected benefit or effectiveness of any given program, the Company’s plans for future continuation of environmental remediation efforts and social programs and the effectiveness of any mitigation strategy employed by the Company related to COVID-19.

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this Press Release including, without limitation, assumptions about: favourable equity and debt capital markets; the ability to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Company’s properties and assets; future prices of copper and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any mineral reserve and mineral resource estimates; the geology of the MCSA Mining Complex, NX Gold Mine and the Boa Esperança Property being as described in the technical reports for these properties; production costs; the accuracy of budgeted exploration and development costs and expenditures; the price of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to operate in a safe, efficient and effective manner; work force continues to remain healthy in the face of prevailing epidemics, pandemics or other health risks, political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favourable terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour stability; stability in financial and capital goods markets; availability of equipment and critical supplies, spare parts and consumables; positive relations with local groups and the Company’s ability to meet its obligations under its agreements with such groups; and satisfying the terms and conditions of the Company’s current loan arrangements. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.

Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. Such risks include, without limitation the risk factors listed under the heading “Risk Factors” in the Annual Information Form for the year ended December 31, 2020 and dated March 16, 2021.

Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking information, there may be other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended.

The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained herein. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.

Forward-looking information contained herein is made as of the date of this Sustainability Report and the Company disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.

Technical Reports

Where applicable, scientific and technical information contained in this Sustainability Report relating to the MCSA Mining Complex is derived from and based on the assumptions, qualifications and procedures set out in, the report prepared in accordance with National Instrument 43-101, Standards of Disclosure for Mineral Projects (“NI 43-101”) and entitled “2020 Updated Mineral Resources and Mineral Reserves Statements of Mineração Caraíba’s Vale do Curaçá Mineral Assets, Curaçá Valley”, dated January 14, 2021 with an effective date of October 1, 2020, prepared by Porfirio Cabaleiro Rodrigues, FAIG, Bernardo Horta de Cerqueira Viana, MAIG, Paulo Roberto Bergmann, FAusIMM, Fábio Valério Câmara Xavier, MAIG and Dr. Augusto Ferreira Mendonça, RM SME all of GE21 Consultoria Mineral Ltda. (“GE21”) and Dr. Beck (Alizeibek) Nader, FAIG of BNA Mining Solutions (“BNA”) (the “MCSA Mining Complex Technical Report”). Each of Porfirio Cabaleiro Rodrigues, FAIG, Bernardo Horta de Cerqueira Viana, MAIG, Paulo Roberto Bergmann, FAusIMM, Fábio Valério Câmara Xavier, MAIG, Dr. Augusto Ferreira Mendonça, RM SME and Dr. Beck (Alizeibek) Nader, FAIG, is a “qualified person” and “independent” of the Company within the meanings of NI 43-101.

Where applicable, scientific and technical information contained in this Sustainability Report relating to the NX Gold Mine is derived from and based on the assumptions, qualifications and procedures set out in, the report prepared in accordance with NI 43-101 and entitled “Mineral Resource and Mineral Reserve Estimate of the NX Gold Mine, Nova Xavantina”, dated January 8, 2021 with an effective date of September 30, 2020, prepared by Porfirio Cabaleiro Rodrigues, FAIG, Paulo Roberto Bergmann, FAusIMM, Bernardo Horta de Cerqueira Viana, MAIG and Leonardo de Moraes Soares, MAIG, all of GE21 (the “NX Gold Technical Report”). Each of Porfirio Cabaleiro Rodrigues, FAIG, Paulo Roberto Bergmann, FAusIMM, Bernardo Horta de Cerqueira Viana, MAIG and Leonardo de Moraes Soares, MAIG is a “qualified person” and “independent” of the Company within the meanings of NI 43¬-101.

Where applicable, scientific and technical information contained in this Sustainability Report relating to the Boa Esperança Property is derived from and based on the assumptions, qualifications and procedures set out in, the report prepared in accordance with NI 43-101 and entitled “Feasibility Study, Technical Report for the Boa Esperança Copper Project, Pará State Brazil”, dated September 7, 2017 with an effective date of June 1, 2017, prepared by Rubens Mendonça, MAusIMM of SRK Consultores do Brasil Ltda. (“SRK Brazil”) as at the date of the report (now of Planminas – Projectos e Consultoria em Mineração Ltd.) and Carlos Barbosa, MAIG and Girogio di Tomi, MAusIMM, both of SRK Brazil (the “Boa Esperança Technical Report”, and together with the MCSA Mining Complex Technical Report and the NX Gold Technical Report, the “Technical Reports”). Each of Rubens Mendonça, MAusIMM, Carlos Barbosa, MAIG, and Girogio di Tomi, MAusIMM, is a “qualified person” and “independent” of the Company within the meanings of NI 43-101.

All documents and corporate policies of the Company referred to herein can be found on the Company's website at www.erocopper.com.

ERO COPPER | 2020 SUSTAINABILITY REPORT | 38

EX-99.6

Exhibit 99.6

 

ANNUAL INFORMATION FORM

of

ERO COPPER CORP.
Suite 1050 – 625 Howe Street
Vancouver, British Columbia
V6C 2T6

Telephone: (604) 449-9244
Facsimile: (604) 398-3767
Website: www.erocopper.com
E-mail: info@erocopper.com

For the Year Ended December 31, 2019

Dated: March 12, 2020

1

TABLE OF CONTENTS

PRELIMINARY NOTES	3
LIST OF ABBREVIATIONS	8
CORPORATE STRUCTURE	9
GENERAL DEVELOPMENT AND BUSINESS OF THE COMPANY	9
VALE DO CURAÇÁ PROPERTY	16
NX GOLD PROPERTY	30
BOA ESPERANÇA PROPERTY	42
RISK FACTORS	54
DIVIDENDS AND DISTRIBUTIONS	70
DESCRIPTION OF CAPITAL STRUCTURE	71
MARKET FOR SECURITIES	71
DIRECTORS AND EXECUTIVE OFFICERS	72
AUDIT COMMITTEE	76
LEGAL PROCEEDINGS AND REGULATORY ACTIONS	77
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS	78
AUDITORS, TRANSFER AGENT AND REGISTRAR	78
MATERIAL CONTRACTS	78
INTEREST OF EXPERTS	79
ADDITIONAL INFORMATION	80
APPENDIX “A” ERO COPPER CORP. AUDIT COMMITTEE MANDATE	A-1

2

PRELIMINARY NOTES

Date of Information

In this Annual Information Form (“AIF”), Ero Copper Corp., together with its subsidiaries, as the context requires, is referred to as “Ero”, “Ero Copper” or the “Company”. All information contained herein is presented as at December 31, 2019, unless otherwise stated.

Currency

All dollar amounts in this AIF are expressed in Canadian dollars, except as otherwise indicated. References to “$” or “dollars” are to Canadian dollars, references to “US$” are to US dollars and references to “R$” and “BRL” are to Brazilian Reais.

Cautionary Note Regarding Forward Looking Information

This AIF contains “forward-looking information” within the meaning of applicable Canadian securities laws. Forward-looking information includes statements that use forward-looking terminology such as “may”, “could”, “would”, “will”, “should”, “intend”, “target”, “plan”, “expect”, “budget”, “estimate”, “forecast”, “schedule”, “anticipate”, “believe”, “continue”, “potential”, “view” or the negative or grammatical variation thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, statements with respect to Mineral Reserve and Mineral Resource (as defined below) estimates; targeting additional Mineral Resources and expansion of deposits; the capital and operating cost estimates and the economic analyses (including cash flow projections) from the Vale do Curaçá Technical Report (as defined below), the NX Gold Technical Report (as defined below) and the Boa Esperança Technical Report (as defined below); the Company’s expectations, strategies and plans for the Vale do Curaçá Property (as defined below), the NX Gold Property (as defined below) and the Boa Esperança Property (as defined below), including the Company’s planned exploration, development and production activities; the results of future exploration and drilling, estimated completion dates for certain milestones; successfully adding or upgrading Mineral Resources and successfully developing new deposits; the costs and timing of future exploration and development; the timing and amount of future production at the Vale do Curaçá Property, the Boa Esperança Property and the NX Gold Property; the timing, receipt and maintenance of necessary approvals, licenses and permits from applicable governments, regulators or third parties; expectations regarding consumption, demand and future price of copper and gold; future financial or operating performance and condition of the Company and its business, operations and properties, including expectations regarding liquidity, capital structure, competitive position and payment of dividends; the possibility of entering judgments outside of Canada; expectations regarding future currency exchange rates; and any other statement that may predict, forecast, indicate or imply future plans, intentions, levels of activity, results, performance or achievements.

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this AIF including, without limitation, assumptions about: favourable equity and debt capital markets; the ability to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Company’s properties and assets; future prices of copper, gold and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any Mineral Reserve and Mineral Resource estimates; the geology of the Vale do Curaçá Property, the NX Gold Property and the Boa Esperança Property being as described in the Vale do Curaçá Technical Report, the NX Gold Technical Report and the Boa Esperança Technical Report, respectively; production costs; the accuracy of budgeted exploration and development costs and expenditures; the price of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to operate in a safe, efficient and effective manner; political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favourable terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour stability; stability in financial and capital goods markets; availability of equipment; positive relations with local groups and the Company’s ability to meet its obligations under its agreements with such groups; and satisfying the terms and conditions of the Company’s current loan arrangements. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.

3

Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. Such risks include, without limitation:

· copper and gold prices are volatile and may be lower than expected;

· mining operations are risky;

· mining operations require geologic, metallurgic, engineering, title, environmental, economic and financial assessments that may be materially incorrect and thus the Company may not produce as expected;

· geotechnical, hydrological and climatic events could suspend mining operations or increase costs;

· actual production, capital and operating costs may be different than those anticipated;

· currency fluctuations can result in unanticipated losses;

· the successful operation of the Vale do Curaçá Property and the NX Gold Property and the successful development and operation of the Boa Esperança Property depend on the skills of the Company’s management and teams;

· operations during mining cycle peaks are more expensive;

· title to the Vale do Curaçá Property, the NX Gold Property and/or the Boa Esperança Property may be disputed;

· the Company may fail to comply with the law or may fail to obtain or renew necessary permits and licenses;

· compliance with environmental regulations can be costly;

· social and environmental activism can negatively impact exploration, development and mining activities;

· the construction and start-up of new mines is subject to a number of factors and the Company may not be able to successfully complete new construction projects;

· land reclamation and mine closure requirements may be burdensome and costly;

· the mining industry is intensely competitive;

· inadequate infrastructure may constrain mining operations;

· operating cash flow may be insufficient for future needs;

· fluctuations in the market prices and availability of commodities and equipment affect the Company’s business;

· a failure to maintain satisfactory labour relations can adversely impact the Company;

· the Company’s insurance coverage may be inadequate to cover potential losses;

· it may be difficult to enforce judgments and effect service of process on directors, officers and experts named herein;

· the directors and officers may have conflicts of interest with the Company;

· future acquisitions may require significant expenditures and may result in inadequate returns;

· disclosure and internal control deficiencies may adversely affect the Company and failures of information systems or information security threats can be costly;

· the Company may be subject to costly legal proceedings;

· the Company may be subject to shareholder activism;

· the Boa Esperança Property is located in an underdeveloped rural area;

· product alternatives may reduce demand for the Company’s products;

· changes in climate conditions may affect the Company’s operations;

· the Company is subject to restrictive covenants that limit its ability to operate its business;

· the Company’s Brazilian operations are subject to political and other risks associated with operating in a foreign jurisdiction;

· the Company may be negatively impacted by changes to mining laws and regulations;

· a failure to maintain relationships with the communities in which the Company operates and other stakeholders may adversely affect the Company’s business;

· corruption and fraud in Brazil relating to ownership of real property may adversely affect the Company’s business;

· the Company is exposed to the possibility that applicable taxing authorities could take actions that result in increased tax or other costs that might reduce the Company’s cash flow;

· inflation in Brazil, along with Brazilian governmental measures to combat inflation, may have a significant negative effect on the Brazilian economy and also on the Company's financial condition and results of operations;

· exchange rate instability may have a material adverse effect on the Brazilian economy;

· the Company’s operations may be impaired as a result of restrictions to the acquisition or use of rural properties by foreigner investors or Brazilian companies under foreign control;

· recent disruptions in international and domestic capital markets may lead to reduced liquidity and credit availability for the Company;

· the Company may be responsible for corruption and anti-bribery law violations;

· investors may lose their entire investment;

4

· dilution from equity financing could negatively impact holders of the common shares of the Company (the “Common Shares”);

· equity securities are subject to trading and volatility risks;

· sales by existing shareholders can reduce share prices;

· the Company does not intend to pay dividends;

· public companies are subject to securities class action litigation risk;

· if securities or industry analysts do not publish research or publish inaccurate or unfavourable research about the Company’s business, the price and trading volume of the Common Shares could decline; and

· global financial conditions can reduce the price of the Common Shares.

Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking information, there may be risks, uncertainties and other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended, including, without limitation, those referred to in this AIF under the heading “Risk Factors”.

The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained herein. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.

Forward-looking information contained herein is made as of the date of this AIF and the Company disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.

Scientific and Technical Information

Except as set out below, scientific and technical information contained in this AIF relating to the Vale do Curaçá property, which is located within the Curaçá Valley, northeastern Bahia State, Brazil, and consists of 102 mineral exploration rights currently held or under application to renew, six mining concessions and one mining concessions currently under application covering a total area of 153,741.04 ha (the “Vale do Curaçá Property”), is derived from, and in some instances is a direct extract from, and based on the assumptions, qualifications and procedures set out in, the report prepared in accordance with National Instrument 43-101, Standards of Disclosure for Mineral Projects (“NI 43-101”) and entitled “2019 Updated Mineral Resources and Mineral Reserves Statements of Mineração Caraíba’s Vale do Curaçá Mineral Assets, Curaçá Valley”, dated November 25, 2019 with an effective date of September 18, 2019, prepared by Rubens Jose De Mendonça, MAusIMM, of Planminas – Projectos e Consultoria em Mineração Ltd. (“Planminas”), and Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, and Bernardo Horta de Cerqueira Viana, MAIG, all of GE21 Consultoria Mineral Ltda. (“GE21”) (the “Vale do Curaçá Technical Report”). Each of Rubens Jose De Mendonça, MAusIMM, Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, and Bernardo Horta de Cerqueira Viana, MAIG, reviewed and approved the scientific and technical information relating to the Vale do Curaçá Property contained in this AIF and is a “qualified person” (“QP”) and “independent” of the Company within the meanings of NI 43-101. In addition, information of a scientific or technical nature in respect of the Vale do Curaçá Property set out in the AIF under the heading “Vale do Curaçá Property – Update Information with respect to the Vale do Curaçá Property”, has been reviewed and approved by Ricardo Emerson Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

Scientific and technical information contained in this AIF relating to the NX Gold Property, which is located approximately 18 km west of the town of Nova Xavantina, southeastern Mato Grosso State, Brazil, and consists of a single mining concession covering an area of 620 ha, where all gold mining and processing activities occur and eight exploration licenses covering an area of 31,096.2 ha (the “NX Gold Property” or the “NX Gold Mine”), is derived from, and in some instances is a direct extract from, and based on the assumptions, qualifications and procedures set out in, the report prepared in accordance with NI 43-101 and entitled “Mineral Resource and Mineral Reserve Estimate of the NX Gold Mine, Nova Xavantina”, dated February 3, 2020 with an effective date of September 30, 2019, prepared by Porfirio Cabaleiro Rodrigues, MAIG, Paulo Roberto Bergmann, FAusIMM, and Leonardo de Moraes Soares, MAIG, all of GE21 (the “NX Gold Technical Report”). Each of Porfirio Cabaleiro Rodrigues, MAIG, Paulo Roberto Bergmann, FAusIMM, and Leonardo de Moraes Soares, MAIG, reviewed and approved the scientific and technical information relating to the NX Gold Property contained in this AIF and is a “qualified person” and “independent” of the Company within the meanings of NI 43-101. In addition, information of a scientific or technical nature in respect of the NX Gold Property set out in the AIF under the heading “NX Gold Property – Update Information with respect to the NX Gold Property”, has been reviewed and approved by Ricardo Emerson Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

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Scientific and technical information contained in this AIF relating to the Boa Esperança property, which is located within southeastern Pará State, Brazil, and consists of a single mineral concession covering an area of approximately 4,034 ha (the “Boa Esperança Property”), is derived from, and in some instances is a direct extract from, and based on the assumptions, qualifications and procedures set out in, the report prepared in accordance with NI 43-101 and entitled “Feasibility Study, Technical Report for the Boa Esperança Copper Project, Pará State Brazil”, dated September 7, 2017 with an effective date of June 1, 2017, prepared by Rubens Mendonça, MAusIMM of SRK Consultores do Brasil Ltda. (“SRK” or “SRK Brazil”) as at the date of the report (now of Planminas) and Carlos Barbosa, MAIG and Girogio di Tomi, MAusIMM, both of SRK Brazil (the “Boa Esperança Technical Report”). Each of Rubens Mendonça, MAusIMM, Carlos Barbosa, MAIG, and Girogio di Tomi, MAusIMM, reviewed and approved the scientific and technical information relating to the Boa Esperança Property contained in this AIF and is a “qualified person” and “independent” of the Company within the meanings of NI 43-101.

Reference should be made to the full text of the Vale do Curaçá Technical Report, the NX Gold Technical Report and the Boa Esperança Technical Report, each of which is available for review under the Company’s profile on SEDAR at www.sedar.com.

CIM Definition Standards

The Mineral Reserves and Mineral Resources for the Vale do Curaçá Property (including as used in the Vale do Curaçá Technical Report), the NX Gold Property (including as used in the NX Gold Technical Report) and the Boa Esperança Property (including as used in the Boa Esperança Technical Report) have been estimated in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards for Mineral Resources and Mineral Reserves adopted by the CIM Council on May 10, 2014 (the “CIM Standards” or “CIM Definition Standards”), which are incorporated by reference in NI 43-101. The following definitions are reproduced from the CIM Definition Standards:

“Feasibility Study” means a comprehensive technical and economic study of the selected development option for a mineral project that includes appropriately detailed assessments of applicable Modifying Factors together with any other relevant operational factors and detailed financial analysis that are necessary to demonstrate, at the time of reporting, that extraction is reasonably justified (economically mineable). The results of the study may reasonably serve as the basis for a final decision by a proponent or financial institution to proceed with, or finance, the development of the project. The confidence level of the study will be higher than that of a Pre-Feasibility Study.

“Indicated Mineral Resource” means that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of Modifying Factors as described below in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing and is sufficient to assume geological and grade or quality continuity between points of observation. An Indicated Mineral Resource has a lower level of confidence than that applying to a Measured Mineral Resource and may only be converted to a Probable Mineral Reserve.

“Inferred Mineral Resource” means that part of a Mineral Resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade or quality continuity. An Inferred Mineral Resource has a lower level of confidence than that applying to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration.

“Measured Mineral Resource” means that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of Modifying Factors to support detailed mine planning and final evaluation of the economic viability of the deposit. Geological evidence is derived from detailed and reliable exploration, sampling and testing and is sufficient to confirm geological and grade or quality continuity between points of observation. A Measured Mineral Resource has a higher level of confidence than that applying to either an Indicated Mineral Resource or an Inferred Mineral Resource. It may be converted to a Proven Mineral Reserve or to a Probable Mineral Reserve.

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“Mineral Reserve” means the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at pre-feasibility or feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified. The reference point at which Mineral Reserves are defined, usually the point where the ore is delivered to the processing plant, must be stated. It is important that, in all situations where the reference point is different, such as for a saleable product, a clarifying statement is included to ensure that the reader is fully informed as to what is being reported. The public disclosure of a Mineral Reserve must be demonstrated by a Pre-Feasibility Study or Feasibility Study.

“Mineral Resource” means a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling.

“Pre-Feasibility Study” means a comprehensive study of a range of options for the technical and economic viability of a mineral project that has advanced to a stage where a preferred mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, is established and an effective method of mineral processing is determined. It includes a financial analysis based on reasonable assumptions on the Modifying Factors and the evaluation of any other relevant factors which are sufficient for a qualified person, acting reasonably, to determine if all or part of the Mineral Resource may be converted to a Mineral Reserve at the time of reporting. A Pre-Feasibility Study is at a lower confidence level than a Feasibility Study.

“Probable Mineral Reserve” means the economically mineable part of an Indicated, and in some circumstances, a Measured Mineral Resource. The confidence in the Modifying Factors applying to a Probable Mineral Reserve is lower than that applying to a Proven Mineral Reserve.

“Proven Mineral Reserve” means the economically mineable part of a Measured Mineral Resource. A Proven Mineral Reserve implies a high degree of confidence in the Modifying Factors.

For the purposes of the CIM Definition Standards, “Modifying Factors” are considerations used to convert Mineral Resources to Mineral Reserves. These include, but are not restricted to, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors.

Non-IFRS Measures

Financial results of the Company are prepared in accordance with the International Financial Reporting Standards (“IFRS”). The Company utilizes certain non-IFRS measures, including C1 cash cost of copper produced (per lb), C1 cash cost of gold produced (per ounce), EBITDA and adjusted EBITDA, which are not measures recognized under IFRS. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Unless otherwise noted, the non-IFRS measures presented below have been calculated on a consistent basis for the periods presented.

C1 Cash Cost of Copper Produced (per lb)

C1 cash cost of copper produced (per lb) is the sum of production costs, net of capital expenditure development costs and by-product credits, divided by the copper pounds produced. C1 cash costs reported by the Company include treatment, refining charges, offsite costs, and certain tax credits relating to sales invoiced to the Company’s Brazilian customer on sales. By-product credits are calculated based on actual precious metal sales (net of treatment costs) during the period divided by the total pounds of copper produced during the period. C1 cash cost of copper produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

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C1 Cash Cost of Gold produced (per ounce)

C1 cash cost of gold produced (per ounce) is the sum of production costs, net of capital expenditure development costs and silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. C1 cash cost of gold produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and Adjusted EBITDA

EBITDA represents earnings before interest expense, income taxes, depreciation, and amortization. Adjusted EBITDA includes further adjustments for non-recurring items and/or items not indicative to the future operating performance of the Company. The Company believes EBITDA and adjusted EBITDA are appropriate supplemental measures of debt service capacity and performance of its operations.

Adjusted EBITDA is calculated by removing the following income statement items:

· Recovery of value added taxes;

· Foreign exchange loss (gain);

· Loss (gain) on gold hedge contracts;

· Share based compensation; and

· Loss on debt settlement.

For further details on Non-IFRS measures, please refer to the Company’s annual audited consolidated financial statements for the year ended December 31, 2019 and Management’s Discussion and Analysis relating thereto, a copy of which is available for review under the Company’s profile on SEDAR at www.sedar.com.

LIST OF ABBREVIATIONS

In this AIF, the following abbreviations have the meanings set forth below:

Cu	copper	Mt	megatonne
Ni	nickel	kt	kilotonne
Co	cobalt	t	metric tonne
Ag	silver	kg	kilogram
Au	gold	g	gram
Fe	iron	lb	pound
Mn	manganese	ml	millilitre
Zn	zinc	MW	megawatt
Cr	chromium	kW	kilowatt
Al	aluminium	MVA	megavolt amperes
Ca	calcium	kV	kilovolt
Mo	molybdenum	kWh	kilowatt hour
W	tungsten	Hz	hertz
Bi	bismuth	d	day
S	sulfur	h	hour
F	fluorine	s	second
Cl	chlorine	Ga	billion years
U	uranium	Ma	million years
As	arsenic	masl	metres above mean sea level
P	phosphorus	m3	cubic metre
Pb	lead	Mm3	cubic megametre
km	kilometre	mmWC	millimeter of water column
m	metre	Pa	pascal
cm	centimetre	mbar	atmospheric air pressure (bar)
mm	millimetre	°	degree
ft	foot	C	Celcius
ha	hectare	µm	micrometre
m3	cubic metre	oz	troy ounce
gpt or g/t	grams per tonne	tph	Tonnes per hour

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CORPORATE STRUCTURE

Ero Copper was incorporated under the Business Corporations Act (British Columbia) (“BCABC”) on May 16, 2016. Ero Copper’s head office is located at Suite 1050, 625 Howe Street, Vancouver, British Columbia, Canada, V6C 2T6 and its registered office is located at Suite 2600, 595 Burrard Street, Vancouver, British Columbia, Canada, V7X 1L3.

The Company directly holds approximately 99.6% of the voting shares of Mineração Caraíba S.A. (“MCSA” or “Mineração Caraíba”) and directly and indirectly holds approximately 97.6% of the voting shares of NX Gold S.A. (“NX” or “NX Gold”), each such company being formed under the laws of Brazil. The remaining voting shares of MCSA are held by a minority group of shareholders, including former employees of MCSA. The remaining voting shares of NX Gold are held by Tugalla B.V. (“Tugalla”), a company formed under the laws of The Netherlands, Branford RJ Participações S/A (“Branford”), a company formed under the laws of Brazil, and others, including former employees of NX Gold. The Company’s current organization chart is as follows:

 

GENERAL DEVELOPMENT AND BUSINESS OF THE COMPANY

General

Ero is a Vancouver-based mining company listed on the Toronto Stock Exchange (the “TSX”) under the ticker, “ERO” and is focused on the production, exploration and development of mining projects in Brazil.

Ero’s principal asset is its 99.6% ownership interest in MCSA. MCSA’s predominant activity is the production and sale of copper concentrate from the Vale do Curaçá Property, located within the Curaçá Valley, northeastern Bahia State, Brazil, with gold and silver produced and sold as by-products. For further details concerning the Vale do Curaçá Property, see below under the heading “Vale do Curaçá Property”. In addition, MCSA holds a 100% interest in the Boa Esperança Property, a development project located within southeastern Pará State, Brazil. For further details concerning the Boa Esperança Property, see below under the heading “Boa Esperança Property”.

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Ero also currently owns, directly and indirectly (through MCSA), a 97.6% ownership interest in NX Gold. NX Gold’s predominant activity is the production and sale of gold from the NX Gold Property, located in Mato Grosso State, Brazil, with silver produced as a by-product. For further details concerning the NX Gold Property, see below under the heading “NX Gold Property”.

The Vale do Curaçá Property, NX Gold Property and the Boa Esperança Property are the mineral projects material to Ero for the purposes of NI 43-101.

Three Year History

On December 12, 2016, the Company acquired a total of 60,678,219 common shares of MCSA, representing approximately 85% of the then total issued share capital of MCSA, for an aggregate purchase price of US$3.00, pursuant to a share purchase agreement among Tugalla, Branford and the Company, and a share purchase agreement between Zinia Participações S/A (“Zinia”), a company formed under the laws of Brazil, and the Company (the “MCSA Acquisition”). In addition, on December 12, 2016, the Company acquired a total of 18,759,720 common shares of NX Gold, representing approximately 28% of the then total issued share capital of NX Gold, for an aggregate purchase price of US$1.00, pursuant to a share purchase agreement between Zinia and the Company (the “NX Acquisition”, and together with the MCSA Acquisition, the “Acquisitions”). The cash consideration paid in connection with the Acquisitions was nominal as the Company agreed to assume all of the loans and borrowing and other obligations of MCSA and NX Gold in connection therewith.

Following the Acquisition, Ero contributed sufficient capital resources to enable MCSA to start-up and resume production of copper concentrate at the Vale do Curaçá Property in February 2017.

On January 18, 2017, the Company completed a private placement offering of an aggregate principal amount of US$2,750,000 unsecured convertible debentures bearing simple interest at an annual rate of 10%, payable on the maturity date of January 18, 2019 (the “General Debentures”). Pursuant to the subscription agreements between the Company and each subscriber of the General Debentures, the outstanding principal and accrued and unpaid interest on the General Debentures could be converted, subject to certain limitations and conditions, at the option of the holders thereof and until the maturity date of the General Debentures into units of the Company (the “General Debenture Units”) at a price of US$0.75 per General Debenture Unit (subject to adjustment pursuant to the terms of the certificates representing the General Debentures). Each General Debenture Unit was comprised of one Common Share and one-quarter of a Common Share purchase warrant (the “General Warrant”), with each one General Warrant entitling the holder thereof to acquire one Common Share at a price of US$1.20 until December 12, 2021, subject to certain acceleration rights of the Company and in accordance with the terms thereof and the terms of the Amended and Restated Warrant Indenture between the Company and Computershare Trust Company of Canada, as warrant agent, originally entered into on September 2, 2016 and amended and restated on December 12, 2016 and on September 12, 2017 (the “Warrant Indenture”). In January 2018, each holder of the General Debentures exercised their option to convert the outstanding principal and accrued and unpaid interest on their General Debentures into General Debenture Units and concurrently exercised their underlying General Warrants, such that an aggregate of 5,074,311 Common Shares were issued by the Company to the foregoing holders of General Debentures, of which, an aggregate of 1,014,861 Common Shares were issued upon exercise of the underlying General Warrants.

On June 14, 2017, the Company increased its ownership interest in MCSA to approximately 99.5% by purchasing shares issued from treasury for US$34.3 million in connection with multiple capital call transactions. Thereafter, on December 14, 2017, the Company further increased its ownership in MCSA to approximately 99.6% by purchasing shares issued from treasury for US$22.6 million.

On August 18, 2017, the Company, MCSA and NX Gold effected a capital increase transaction of NX Gold, whereby MCSA subscribed for R$19.4 million in common shares of NX Gold in exchange for the partial repayment and forgiveness of an intercompany loan provided to NX Gold by MCSA. As a result of such transaction, Ero’s direct interest in NX Gold was diluted to approximately 1.0% and its indirect interest in NX Gold, through MCSA, was increased to approximately 96.6%.

On October 19, 2017, the Company completed an initial public offering and secondary offering (together, the “Offering”) of an aggregate of 23,282,116 Common Shares at a price of $4.75 per Common Share for total gross proceeds of $110,591,051, with Ero and the Selling Shareholders (as defined below) receiving gross proceeds of $47,500,000 and $63,090,051, respectively. The Common Shares commenced trading on the TSX on October 19, 2017 under the symbol “ERO”. Pursuant to the Offering, Ero issued 10,000,000 Common Shares from treasury. In addition, 13,282,116 Common Shares were sold pursuant to a secondary offering by Brasil Plural Special Situations Fundo de Investimento em Participações Multiestratégia Investimento no Exterior, Spectra II – Fundo de Investimento em Participações, Spectra III Fundo de Investimento em Participações Multiestratégia IE, Ross Beaty, Taylor International Fund Ltd., Heritage Investments Trust, Randal Cowell, 1045373 BC Ltd., 1040350 BC Ltd., and Geoff Burns (collectively, the “Selling Securityholders”). The Offering was managed by a syndicate of underwriters, including BMO Nesbitt Burns Inc. and Scotia Capital Inc. as lead joint bookrunners and Canaccord Genuity Corp., GMP Securities L.P., Numis Securities Limited, PI Financial Corp. and Raymond James Ltd. (collectively, the “Underwriters”) pursuant to the underwriting agreement dated October 11, 2017 among the Company, the Underwriters and the Selling Securityholders (the “Underwriting Agreement”). Subsequent to the Offering, and pursuant to the Underwriting Agreement, the Underwriters purchased an additional 3,492,317 Common Shares on November 1, 2017, pursuant to their exercise in full of the over-allotment option granted by Ero, for additional aggregate gross proceeds of $16,588,505.75.

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On December 21, 2017, the Company replaced US$75.6 million in senior secured notes of MCSA held by Itau Unibanco S.A. and Banco Votorantim with a new US$50 million senior secured non-revolving credit facility (the “Scotia Credit Facility”) with The Bank of Nova Scotia (“Scotiabank”) pursuant to the credit agreement dated December 21, 2017 between the Company and Scotiabank and the participation agreement dated December 21, 2017 between the Company and Scotiabank.

In October 2018, the Company announced the issuance of the operating license for the newly constructed Vermelhos Mine at the Vale do Curaçá Property, which allowed the Company to commence full production at the Vermelhos Mine.

On December 17, 2018, the Company replaced the Scotia Credit Facility and approximately US$69 million in senior secured notes of MCSA held by Santander Bank, Banco ABC Brasil, Banco Fibra S.A. and Banco Pine S.A. with a new US$130 million debt financing with Scotiabank and Bank of Montreal, pursuant to the amended and restated credit agreement dated as of December 13, 2018 among the Company, as borrower, Scotia, as administrative agent, joint lead arranger and sole bookrunner, Bank of Montreal as joint lead arranger and syndication agent, and Scotia and Bank of Montreal, as lenders (the “Credit Agreement”) and comprised of a US$80 million senior secured amortizing non-revolving credit facility (the “Term Facility”) and a US$50 million senior secured revolving term credit facility (the “Revolving Credit Facility”) (collectively the “Credit Facilities). The Credit Agreement was subsequently amended on January 21, 2019, March 12, 2019 and June 26, 2019, with the third amendment serving to increase the Revolving Credit Facility from US$50 million to US$70 million. The Term Facility features a five-year term with principal payments beginning two years after closing and with equal quarterly installments thereafter, while the Revolving Credit Facility is payable in a bullet at maturity, four years from closing. The Credit Facilities bear interest on a sliding scale at a rate of LIBOR plus 2.75% to 4.75% depending on the Company’s consolidated leverage ratio at the time. Commitment fees for the undrawn portion of the Revolving Credit Facility are on a sliding scale between 0.69% to 1.19%.

Business of the Company

Principal Products and Operations

The Company’s principal product is copper produced and sold from the Vale do Curaçá Property, with gold and silver produced and sold as by-products from the Vale do Curaçá Property. Gold and, as a by-product, silver is also produced and sold from the NX Gold Property. During the financial year ended December 31, 2019, the operations of the Vale do Curaçá Property processed 2,424,592 tonnes of material, producing 42,318 tonnes of copper and the operations of the NX Gold Property processed 158,275 tonnes of material, producing 30,434 ounces of gold. The following tables summarize the Company’s production for the financial years ended December 31, 2019 and 2018 from the Vale do Curaçá Property and the NX Gold Property:

	Year Ended  December 31, 2019			Year Ended  December 31, 2018
Operating Information
Copper (Vale do Curaçá Property)
Ore Processed (tonnes)		2,424,592			2,257,917
Grade (% Cu)		1.93	%		1.56	%
Cu Production (tonnes)		42,318			30,426
Cu Production (lbs)		93,295,598			67,076,849
Concentrate Grade (% Cu)		34.8	%		34.5	%
Recovery (%)		90.5	%		86.3	%
Concentrate Sales (tonnes)		122,966			87,307
Cu Sold in Concentrate (tonnes)		42,759			30,107

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	Year Ended December 31, 2019			Year Ended  December 31, 2018
Operating Information
Gold (NX Gold Property)
Ore milled (tonnes)		158,275			117,857
Head grade (grams per tonne Au)		6.98			11.55
Recovery (%)		85.7	%		91.0	%
Gold ounces produced (oz)		30,434			39,808
Gold Sales (tonnes)		29,755			39,808

During the year ended December 31, 2019, the Company generated net operating revenue of US$284.8 million (based on the average annual exchange rate for Brazilian Real into US dollars of R$1.00 = US$0.2535). The following table summarizes the gross revenue of the Company for the financial years ended December 31, 2019 and 2018. Tabular amounts are in thousands of US dollars:

	Year Ended December 31, 2019(1)  (US$000s)			Year Ended  December 31, 2017(2)  (US$000s)
Gross Revenues:
Copper concentrate		270,302			197,448
Gold		39,234			49,077
		309,536			246,525
Less: Tax on Sales		(24,693	)		(13,420	)
Net Operating Revenue		284,843			233,105

Notes:

⁽¹⁾ Based on the average annual exchange rate for Brazilian Real to US dollars for 2019 of R$1.00 = US$0.2535.

⁽²⁾ Based on the average annual exchange rate for Brazilian Real to US dollars for 2018 of R$1.00 = US$0.2754.

There are global copper and gold markets into which the Company can sell its copper concentrate and gold and, as a result, the Company is not dependent on a particular purchaser with regard to the sale of the copper concentrate and gold that it produces.

MCSA currently sells all of its final copper concentrate to the Paranapanema Company and IXM S.A. The Paranapanema Company smelts this copper concentrate for sale at its smelter located in Dias D’Ávila, Bahia State, Brazil. IXM S.A. ships the final copper concentrate purchased from MCSA for sale to international markets via the Barra dos Coqueiros port located in Barra dos Coqueiros, Sergipé State, Brazil. All concentrate is transported to buyers by road using standard highway trucks, which are weighed and sampled for final assay prior to shipping.

NX Gold currently sells all of its dore bars containing gold and silver to OMEX Comércio e Exportacao de Metais Preciosos S.A., which takes delivery of dore bars at the NX Gold Property by airplane via a gravel airstrip located on the property.

Competitive Conditions

The Company’s primary business is to produce and sell copper. The Company also produces and sells gold. Prices are determined by world markets over which the Company has no influence or control. Ero’s competitive position is primarily determined by its costs compared to other producers throughout the world and its ability to maintain its financial integrity through metal price cycles. Costs are governed to a large extent by the grade, nature and location of the Company’s Mineral Reserves and Mineral Resources as well as by input costs and the level of operating and management skill employed in the production process.

The mining industry is competitive, particularly in the acquisition of additional Mineral Reserves and Mineral Resources in all phases of operation, and the Company competes with many companies possessing similar or greater financial and technical resources. The Company also competes with other mining companies and other third parties over sourcing raw materials, equipment and supplies in connection with its production, development and exploration operations, as well as for skilled and experienced personnel and transportation capacity.

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Specialized Skills and Knowledge

The nature of the Company’s business requires specialized skills, knowledge and technical expertise in the areas of geology, engineering, mine planning, mine operations, metallurgical processing, and environmental compliance. In addition to the specialized skills listed above, the Company also relies on staff members, contractors and consultants with specialized knowledge of logistics and operations in Brazil and local community relations. In order to attract and retain personnel with the specialized skills and knowledge required for the Company’s operations, the Company maintains competitive remuneration and compensation packages. To date, the Company has been able to meet its staffing requirements.

Business Cycles

The mining business is subject to global economic cycles which affect the marketability of products derived from mining.

Employees

As at December 31, 2019, Ero and its subsidiaries employed a total of 2,138 employees (consisting of 15 employees of Ero, 1,795 employees of MCSA, 322 employees of NX Gold, 3 employees of Mineração Boa Esperança S/A and 3 employees of Ero Copper (US) Ltd.) and 1,578 contractors (consisting of 5 contractor of Ero, 1,351 contractors of MCSA and 222 contractors of NX Gold).

Foreign Operations

Ero’s material properties are the Vale do Curaçá Property, the NX Gold Property and the Boa Esperança Property, each located in Brazil. Foreign operations accounted for approximately 100% of the Company’s revenue and represented approximately 97.1% of its assets as at December 31, 2019. Accordingly, the Company is entirely dependent on its foreign operations for the exploration and development of its properties and for production of copper and gold. Any changes in regulations or shifts in political attitudes in any of these jurisdictions, or other jurisdictions in which Ero has projects from time to time, are beyond the control of the Company and may adversely affect its business. Future development and operations may be affected in varying degrees by such factors as government regulations (or changes thereto) with respect to the restrictions on production, export controls, income taxes, expropriation of property, repatriation of profits, environmental legislation, land use, water use, land claims of local people, mine safety and receipt of necessary permits. The effect of these factors cannot be accurately predicted. See below under the heading “Risks Factors”.

The risks of the corporate structure of the Company and its subsidiaries are risks that are typical and inherent for companies that have material assets and property interests held indirectly through foreign subsidiaries and located in foreign jurisdictions. The Company’s business and operations in Brazil are exposed to various levels of political, economic and other risks and uncertainties associated with operating in a foreign jurisdiction such as a difference in laws, business cultures and practices, banking systems and internal control over financial reporting. See below under the heading “Risk Factors”.

The Company has implemented a system of corporate governance, internal controls over financial reporting and disclosure controls and procedures that apply at all levels of the Company and its subsidiaries. These systems are overseen by the board of directors of the Company (the “Board”) and implemented by the Company’s senior management. The relevant features of these systems are set out below.

Control over and Communication with Foreign Subsidiaries

The Company controls its foreign subsidiaries by virtue of corporate oversight and by its ownership interest in such entities (see above under “Corporate Structure”). The Company’s management has the (i) power to appoint and dismiss, at any time, any and all of the foreign subsidiaries’ officers and directors, (ii) power to instruct the foreign subsidiaries’ officers to pursue business activities in accordance with the Company’s wishes, and (iii) legal right, as a shareholder, to require the officers of each such foreign subsidiary to comply with their fiduciary obligations. As a result, management of the Company can effectively align its business objectives with those of the foreign subsidiaries and implement such objectives at the subsidiary level.

The Company maintains open communication with each of its operations in Brazil through several senior officers who are proficient in Brazilian Portuguese. In addition, all management team members in Brazil are fluent in Brazilian Portuguese and fluent (or proficient) in English. The primary language used in management and Board meetings is English and material documents relating to the Company and its operations that are provided to the Board are in English. If necessary, management of the Company and the Board have access to independent translators to overcome any language differences. The Company does not currently have a formal communication plan or policy in place and has not to date, experienced any communication-related issues.

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Board and Management Expertise

A majority of the Company’s directors and senior officers have experience in Brazil, being the jurisdiction in which the Company operates. In addition, the Board, through its corporate governance practices, regularly receives management and technical updates and progress reports in connection with the foreign subsidiaries, and in so doing, maintains effective oversight of their business and operations. Further, the Company’s directors and senior officers visit the Company’s operations in Brazil on a regular basis in order to ensure effective control and management of the Company’s foreign operations. During these visits they come into contact with local employees, business persons and, in the case of senior officers, government official; such interactions enhance the visiting directors’ and officers’ knowledge of local culture and business practices. Each of the Company’s directors, other than Dr. Sally Eyre and Ms. Chantal Gosselin who were appointed to the Board on August 12, 2019, have visited the Vale do Curaçá Property at least one time in each calendar year since 2017. Such directors also visited the NX Gold Property at least one time in 2019. Since their appointment to the Board, Dr. Eyre has visited the Vale do Curaçá Property and the NX Gold Property one time and Ms. Gosselin has visited the Vale do Curaçá Property one time. Each of the Company’s directors are scheduled to visit the Vale do Curaçá Property and the NX Gold Property during the first half of 2020. Certain senior officers of Ero visit the Company’s operations quarterly, or more frequently if circumstances require, on a rotating basis.

Internal Control Over Financial Reporting and Funds

The Company maintains internal control over financial reporting with respect to its operations in Brazil by taking various measures. Several of the Company’s senior officers have the relevant language proficiency (Brazilian Portuguese) and each senior officer has local cultural understanding and relevant work experience in Brazil which facilitates better understanding and oversight of the Company’s operations in the context of internal controls over financial reporting.

Pursuant to the requirements of National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings, the Company assesses the design of its internal controls over financial reporting on an annual basis. Furthermore, key controls for the accounts in scope are tested across the Company on an annual basis and the working papers of these tests performed at all the locations are reviewed at the head office level. Please refer to the Company’s audited consolidated financial statements for the year ended December 31, 2019, a copy of which is available for review under the Company’s profile on SEDAR at www.sedar.com.

Differences in banking systems and controls between Canada and Brazil are addressed by having stringent controls over cash; especially over access to cash, cash disbursements, appropriate authorization levels, performing and reviewing bank reconciliations and the segregation of duties.

The Company ensures the flow of funds between Canada and Brazil functions as intended by:

· appointing common officers of the Company and MCSA/NX Gold;

· involving the Company’s Chief Financial Officer, located in Vancouver, in hiring key finance personnel in Brazil; and

· closely monitoring the finance departments in Brazil, and by regular personal visits by the Chief Financial Officer, the Vice President, Finance and other key executives to Brazil.

Records

All of the minute books and corporate records and documents of the foreign subsidiaries are filed at the relevant entity’s headquarters, and with the relevant governmental or regulatory body in Brazil. The custodians of such documents report directly to the Company’s head office and senior management team to ensure continued oversight.

Environmental Protection

The Company’s exploration, development and mining activities are subject to various levels of federal, state and local laws and regulations relating to the protection of the environment, including requirements for closure and reclamation of mining properties. Specific statutory and regulatory requirements and standards must be met throughout the exploration, development and mining stage of a property with regard to air quality, water quality, fisheries, wildlife and forestry management and protection, solid and hazardous waste management and disposal, noise, land use and reclamation. Details and qualification of the Company’s mine closure and restoration obligations are set out in Note 11 of the Company’s audited consolidated financial statements for the year ended December 31, 2019, a copy of which is available for review under the Company’s profile on SEDAR at www.sedar.com.

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The financial and operating effect of environmental protection requirements on the capital expenditures and earnings of each mineral property are not significantly different than those of similar sized mines and therefore do not and will not impact the Company’s competitive position in the current or future financial years.

Social and Environmental Policies

The Company places great emphasis on providing a safe and secure working environment for all of its employees, contractors and consultants, and recognizes the importance of operating in a sustainable manner. The Board has adopted a Code of Business Conduct and Ethics of the Company (the “Code”), which sets out the standards which guide the conduct of the Company’s business and the behavior of its directors, officers, employees and consultants. All new employees must read, and acknowledge that they will abide by, the Code when hired. The Code, among other things, sets out standards in areas relating to the Company’s commitment to health and safety in its business operations and the identification, elimination or control of workplace hazards; promotion and provision of a work environment in which individuals are treated with respect, provided with equal opportunity and is free of all forms of discrimination and abusive and harassing conduct; and ethical business conduct and legal compliance.

In addition, the Board has adopted a Global Human Rights Policy, as the Company is committed to fostering a positive human rights culture within the organization and striving to prevent or mitigate any adverse impact of the Company’s activities on its employees, communities and external stakeholders. The policy applies to each director, officer, employee and consultant of Ero Copper and its subsidiaries. The policy, among other things, outlines the following commitments of Ero Copper: (i) adhering to all applicable human rights laws and regulations of the countries and regions where the Company conducts its business; (ii) providing a safe and healthy workplace that is free from violence, harassment, intimidation, and discrimination on the basis of race, colour, creed, age, gender, language, national or social origin, family or marital status, sexual orientation, disability, religious, political or other opinion, union affiliation or other basis prohibited by law; (iii) respecting workers’ rights, including freedom of peaceful assembly and association, and engagement in collective bargaining consistent with the relevant conventions on that subject; (iv) seeking to avoid or minimize causing or contributing to adverse human rights impacts through its activities, addressing such impacts if they occur, and engaging in processes to mitigate those impacts; (v) maintaining operational-level grievance mechanisms to report and address any actual or potential adverse impacts or risks on human rights; (vi) engaging in meaningful dialogue, promoting participation and fostering inclusion with potentially affected groups and other stakeholders; (vii) acting with transparency and avoiding knowingly being complicit in activities that cause, or are likely to cause, adverse impacts or risks to human rights; (viii) not engaging in the use of forced, compulsory or child labour; and (ix) respecting and not interfering with anyone who acts to promote or protect human rights through peaceful and lawful means.

The Board has also adopted a Whistleblowing Policy for individuals to report complaints and concerns regarding, among other things, accounting, internal accounting controls and auditing matters. As well, the Company has an Anti-Corruption Policy which requires that directors, officers, employees and consultants of the Company conduct business in a manner that does not contravene local and international anti-bribery and anti-corruption laws that apply to the Company, including the Criminal Code (Canada) and Corruption of Foreign Public Officials Act (Canada). The Lead Director and the Audit Committee of the Company (the “Audit Committee”), or a designated member thereof, are responsible for monitoring compliance with these policies and investigating any reported violations, although employees may approach the Company’s external legal counsel if preferred for concerns under the Anti-Corruption Policy.

The Board has also established an Environmental, Health, Safety and Sustainability Committee to assist it in fulfilling its oversight responsibilities in respect of development, implementation and monitoring of the Company’s health, safety, environment and sustainability policies. In particular, the Environmental, Health, Safety and Sustainability Committee is responsible for, among other things: developing policies and maintaining standards of performance that meet or exceed legal and regulatory requirements and industry standards in the areas of health, safety, and environmental stewardship; identifying risks related to the environment, health and safety and recommending the adoption of appropriate programs and procedures to reduce such risks; and requiring management to take steps to ensure that employees receive necessary training to meet health, safety and environmental standards. The Environmental, Health, Safety and Sustainability Committee assists the Board in its oversight of the Company’s Corporate Social Responsibility Policy, Health and Safety Policy and Environmental Policy, which apply to each director, officer, employee and consultant of Ero Copper and its subsidiaries.

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The Corporate Social Responsibility Policy outlines the Company’s commitment to fostering sustainable development by operating all of its mines and developing new projects in a manner that is respectful of local communities. The policy, among other things, outlines the following commitments of Ero Copper: (i) identifying and engaging its communities of interest in timely, inclusive, ethical, transparent and culturally respectful dialogue prior to undertaking significant activities and throughout the life of an operation or project; (ii) continuing to maintain formal grievance mechanisms as part of its overall community engagement process; (iii) monitoring, continuously improving, and reporting on the performance and effectiveness of its activities related to corporate social responsibility; (iv) implementing meaningful and effective strategies for community engagement; (v) promoting a safe environment for local communities; (vi) respecting the social, economic and cultural rights of local people; (vii) assisting local and regional development in areas where its operations and projects are located through training and employment; and (viii) adhering to all applicable laws and regulations of the countries and regions where Ero Copper conducts its business.

The Health and Safety Policy outlines the Company’s commitment to protecting the health and safety of its employees, contractors and consultants at its mining operations and development projects. The policy, among other things, outlines the following commitments of Ero Copper: (i) promoting health and safety on and off the job; (ii) providing employees with the training and tools to work safely and requiring each contractor and consultant to do the same; (iii) educating its employees to the potential hazards of their job and requiring each contractor and consultant to do the same; (iv) requiring that employees, contractors and consultants perform their duties in the safest manner possible; (v) adhering to all applicable health and safety laws and regulations of the countries and regions where Ero Copper conducts its business; (vi) striving for continuous improvement in all aspects of health and safety; (vii) providing a safe work environment by minimizing or, where possible, eliminating hazards, adhering to proven health and safety practices, implementing accident prevention programs, and ensuring that first aid and emergency response plans are in place at each operation; (viii) ensuring accident reporting is completed in a diligent manner and where necessary taking immediate steps to mitigate the potential for reoccurrence; (ix) developing and operating health and safety management programs at its operations that meet or exceed those in use by its peer companies; (x) promoting employee participation in the development of health and safety standards and management programs such that its employees take ownership of their health and safety responsibilities; (xi) conducting regular reviews of health and safety management programs and report findings to management and the Board; and (xii) conducting annual audits of all health and safety management programs and, with its capabilities, remediating all identified health and safety findings promptly.

The Environmental Policy outlines the Company’s commitment to wise environmental stewardship, including operating its mines and developing new projects in an environmentally sustainable and responsible manner. The policy, among other things, outlines the following commitments of Ero Copper: (i) adhering to all applicable environmental laws, regulations and other environmental obligations in the countries and regions in which it operates, and to follow additional environmental standards and practices that are voluntarily adopted by the Company; (ii) protecting the environment by applying proven management practices to prevent pollution and mitigate environmental impacts; (iii) communicating this commitment to excellence in environmental performance with its subsidiaries, employees, contractors, and other agents and the communities in which we operate; (iv) striving to minimize releases of pollutants to the air, land or water and ensuring appropriate treatment and disposal of waste; (v) allocating the necessary resources to meet its reclamation and environmental obligations; (vi) educating employees regarding environmental matters and promoting employee participation in minimizing environmental impacts; (vii) seeking opportunities to improve its environmental performance through adherence to these principles; (viii) regularly reviewing its environmental management system to ensure that it remains appropriate and that Ero Copper’s environmental objectives and targets are being addressed; and (ix) communicating openly and transparently with internal and external interested parties to develop a mutual understanding of environmental issues, needs and expectations.

A copy of the above-mentioned Code and polices can be found on the Company’s website at www.erocopper.com.

VALE DO CURAÇÁ PROPERTY

The scientific and technical information in this section relating to the Vale do Curaçá Property, other than the scientific and technical information under the heading “Vale do Curaçá Property – Updated Information with respect to the Vale do Curaçá Property”, is a direct extract of the Executive Summary section contained in the Vale do Curaçá Technical Report, which has been conformed to be consistent with the formatting and other defined terms within this AIF. The entire Vale do Curaçá Technical Report, a copy of which is available for review under the Company’s profile on SEDAR at www.sedar.com, is incorporated by reference into this AIF and should be consulted for details beyond those incorporated herein.

The scientific or technical information set out in this AIF under the heading “Vale do Curaçá Property - Updated Information with respect to the Vale do Curaçá Property”, has been reviewed and approved by Ricardo Emerson Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

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Executive Summary

Ero Copper is a Vancouver-based copper mining company whose primary asset is a 99.6% interest in MCSA, a Brazilian mining company operating in the Curaçá Valley, northeastern Bahia State, Brazil. The regional MCSA operations include fully integrated processing operations and, currently, two active producing mining locations within the Curaçá Valley. The active operations include the Caraíba Mine (comprised of the underground Pilar Mine (“Pilar UG Mine”), integrated Caraíba Mill and the inactive solvent extraction electrowinning plant (“SX/EW Plant”)), and the underground Vermelhos Mine (“Vermelhos UG Mine”). The past producing operations include the open pit mines of R22 (“R22 Mine”), Surubim (“Surubim OP Mine”) as well as the historic mines of Angicos (“Angicos Mine”) and Suçuarana (“Suçuarana Mine”). Collectively the active and past-producing mines comprise the “MCSA Mining Complex”. Additionally, future operations are forecast to occur later in the production plan within the northern part of the Curaçá Valley including: the adjacent Vermelhos West (N8) and Vermelhos East (N9) open pits (collectively the “N8/N9 OP Mine”), the Siriema open pit ( “Siriema OP Mine”), collectively with the active Vermelhos UG Mine comprise the mineral reserves within the “Vermelhos District”. In the central part of the Curaçá Valley, future operations include: the adjacent Surubim and C-12 underground mines,
(the “Surubim UG Mine” and “C-12 UG Mine”) and the C-12 open pit (“C-12 OP Mine”), collectively with the inactive Surubim OP Mine comprise the stated mineral reserves of the “Surubim District”. In the southern part of the Curaçá Valley, future operations include: the Suçuarana open pit (“Suçuarana OP Mine”) and the R22W open pit (“R22W OP Mine”), collectively with the active Pilar UG Mine comprise the stated mineral reserves of the “Pilar District”. The Pilar District is located approximately 385km north-northwest of Salvador and 90 km southeast of Petrolina, in the State of Bahia, Brazil. The center of the Surubim District is located approximately 33km north of the Caraíba Mine at the Surubim OP Mine, while the center of the Vermelhos District and the Vermelhos UG Mine is located another 31km north-northwest of the Surubim OP Mine. In aggregate, mining and development activities occur over approximately 100km in strike length across the Curaçá Valley.

The MCSA Mining Complex has an extensive operating history in the region. Open pit and processing operations started in 1979, while underground mining operations commenced in 1986. MCSA owns a 100% interest in the MCSA Mining Complex including the abovementioned mines, integrated processing facilities and all supporting infrastructure. The Caraíba Mine currently produces a nominal 4,000 t/d, or approximately 1.4 million tonnes per annum from underground operations that, combined with the nominal 3,000 to 5,000 t/d, or approximately 1.0 million tonnes per annum currently mined from satellite mining operations within the MCSA Mining Complex, including the Vermelhos UG Mine, serves as feed for the Caraíba Mill. The Caraíba Mill is currently producing high quality, low impurity copper concentrate grading 35% copper. The concentrate typically contains minor amounts of precious metals. Historical average grades of precious metals in concentrate are approximately 2 g/t gold and 43 g/t silver in concentrate.

The Vale do Curaçá Property Technical Report is to set out and to provide background and supporting information on the Mineral Resources and Mineral Reserves for the MCSA Mining Complex. The Vale do Curaçá Property Technical Report was prepared by Planminas with contributions from GE21, and the MCSA technical team. The Vale do Curaçá Property Technical Report and estimates herein have been prepared following the guidelines of NI 43-101 and Form 43-101F1 – Technical Report (“Form 43-101F1”).

1.1 Property Description and Ownership

The MCSA Mining Complex is located in northeastern Bahia State, Brazil, about 385 km north-northwest of the capital city of Salvador. The center of the MCSA Mining Complex is located at 9º 52’ South, 39º 52’ West. As of the “Effective Date” of this report, September 18, 2019, MCSA and its wholly owned subsidiaries hold or have applications in process for a north-trending set of 102 mineral exploration rights, 6 mining concessions and 1 additional mining concession currently under application. The property, including mining and permits under application covers a total area of 153,741.04ha. The exploration rights held or with applications in process cover an area of 149,475.16ha and consist of areas up for renewal under normal course of business. MCSA holds 100% legal and beneficial ownership of exploration rights for a period varying up to three years with three-year extensions provided annual reporting requirements are performed on the property. Within the exploration rights, MCSA’s interests include the right to access the property, to engage in exploration, development, processing, and construction activities in support of mineral exploration and development. Where applicable, compensation is provided to the holder of surface rights for occupation or loss caused by the work.

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Mining and development activities are contained within six mining concessions covering 3,299.61 ha. In addition, MCSA has one application for mining covering 966.27 ha. Within the mining concessions, MCSA holds 100% legal and beneficial ownership. There are no time constraints provisioned with the mining concessions; however, operating permits and licenses are extended and renewed in normal course of business according to the nature of each permit and requirements therein.

Infrastructure maps of the MCSA Mining Complex and the broader Curaçá Valley are shown in Appendix D of the Vale do Curaçá Property Technical Report.

1.2 Geology and Mineralization

The Curaçá Valley’s mafic-ultramafic complex is located within the Curaçá high-grade metamorphic gneissic terrain - part of the Salvador-Curaçá orogen, a northern extension of the Atlantic Coast Granulite Belt in the São Francisco Craton. The mining and development projects located within the MCSA Mining Complex lie within a Trans-Amazonian age belt bordered on the west by volcano-sedimentary rocks of the Jacobina Group and on the east by the Itiúba intrusive syenite rocks.

Known copper deposits are hosted within the Rio Curaçá and Tanque Novo sequences, differentiated by metamorphic facies. The two sequences are located across the base of the MCSA Mining Complex and include the mafic-ultramafic rocks as well as granite, granodiorite and syenite. Pyroxenite has been described within the mafic-ultramafic lenses at the Caraíba Mine, R22W Mine, Angicos Mine, Suçuarana Mine, Surubim OP Mine and the Vermelhos UG Mine.

The Cu-rich deposits are hosted by irregular-shaped intrusive bodies of pyroxenite (hypersthenite) and minor gabbro-norite that have been intruded into granulite facies gneiss and migmatite at the northern margin of the São Francisco Craton. The intrusions have been interpreted as either deformed sill-like bodies or irregular shaped intrusions into an anastomosing ductile shear zone. Mineralized textures include interstitial, net-textured, stringer and sulphide-rich matrix breccias. There is additional evidence throughout the Curaçá Valley of sulphide zonation, characterized as pyrrhotite +/- pentlandite zoning to pyrrhotite +/- pentlandite plus chalcopyrite and finally to chalcopyrite plus bornite. High-grade mineralization is often closely associated with phlogopite enrichment. Additional work is underway to evaluate recent observed occurrences of nickel and platinum group elements within the Vermelhos District, specifically within the Vermelhos UG Mine and the Siriema deposit.

1.3 Exploration Status

Once open pit operations began in 1979, limited exploration work was performed regionally outside of the main Caraíba Mine area. Where it did occur, such exploration work focused primarily on annual replacement of mined reserves. The Caraíba Mine was privatized in 1994 and further exploration work was limited until the formation of the Codelco Joint Venture, formed in 2004 (the “Codelco JV”) which existed until 2008. Under the Codelco JV, work was conducted on several prospects outside of the Caraíba Mine area including an airborne Versatile Time Domain Electromagnetic (“VTEM”) survey over the Vermelhos District. Ground Moving-loop Electromagnetic and Bore-hole Electromagnetic test surveys were also conducted.

Near-surface copper mineralization in the Curaçá Valley has historically been well-defined by geochemical sampling methods. Mineralized mafic-ultramafic intrusions show anomalous copper, nickel, cobalt, gold and silver. Several soil geochemical surveys have been conducted regionally throughout the Curaçá Valley. Leveling efforts undertaken by Ero Copper in 2018 to normalize multiple surveys into a central database have been successful and the dataset continues to be used to define areas of exploration potential.

Historic regional exploration activities also included geophysical surveys performed locally on specific targets. These include ground magnetic, gravity and induced polarization (“IP”) surveys. Regional airborne geophysical surveys consist of a historic magnetic and radiometric survey flown by the Brazil National Department of Mineral Production (“DNPM” which was replaced in 2018 by the new federal mining agency of Brazil, the Agência Nacional de Mineração (“ANM”)). Based on known deposits, mineralized mafic-ultramafic intrusions respond well to gravity, IP and EM surveys including the use of bore-hole EM.

Since the acquisition of MCSA in late 2016, Ero Copper has worked with MCSA to compile, organize, validate, analyze and interpret the various historical data sets. A list of prioritized exploration targets using district-wide dataset compilation and validation has been created for the first time for the MCSA exploration permits throughout the Curaçá Valley. Priority targets occur in three main areas or “Districts”: the Pilar District, the Vermelhos District and the Surubim District.

In 2018, Ero Copper advanced its exploration efforst and completed ~158,000m of drilling with the objective of upgrading and increasing Mineral Resources and Reserves as well as commenced testing new regional targets in the Curaçá Valley. Simultaneously, Ero Copper continued development and production from the Pilar UG Mine, Surubim OP Mine and commenced production from the Vermelhos UG Mine. In support of its regional exploration efforts, Ero Copper commissioned and completed an ~24,000 line-km airborne electromagnetic and gravity geophysical survey focused on high-grade discoveries throughout the Curaçá Valley.

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Through the end of 2018 and into 2019, Ero Copper significantly increased drilling activities, where currently a total of 27 drill rigs are on the property. A total of ~220,000 meters of drilling is planned for 2019 throughout the Curaçá Valley. Drilling continues to focus on in-mine extensions, near-mine discoveries and new regional discoveries within the three main mineralized Districts of the Curaçá Valley.

1.4 Development and Operations

Mining operations within the Curaçá Valley are currently comprised of two core operations: the Pilar UG Mine and the Vermelhos UG Mine. Production from these two mines currently serves as feed for the Caraíba Mill. Ongoing development and exploration activities include: the continued advancement of the primary ramp and associated infrastructure of the Pilar and Vermelhos underground mines in support of mine life extensions as well as associated plant and site refurbishments undertaken in the normal-course of business.

In support of the current Mineral Resource and Mineral Reserve estimate, a total of 682,250m of diamond core drilling, 22,341m of reverse circulation (“RC”) and 29,572m of rotopercussive drilling were incorporated into the geological model.

1.5 Mineral Resource and Mineral Reserve Estimates

Block model tonnage and grade estimates for the MCSA Mining Complex were classified and prepared in accordance with CIM Standards, and the CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines, adopted by CIM Council on November 23, 2003 (the “CIM Guidelines”) by Sr. Porfirio Cabaleiro Rodriguez with contributions by Leonardo de Moraes Soares and Bernardo Viana, all of GE21. All are independent Qualified Persons as such term is defined under NI 43-101.

Mineral Reserves were classified according to the CIM Standards and the CIM Guidelines by Rubens José de Mendonça of Planminas, an independent Qualified Person as such term is defined under NI 43-101.

1.5.1 Mineral Resource

Cut-off grades of 0.68% copper were used for underground Mineral Resources and 0.18% for open pit Mineral Resources. Mineral Resources were estimated using ordinary kriging within 5m by 5m by 5m block sizes. Mineral Resources are shown inclusive of Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. Mineral resource effective date varies by deposit, with an effective date of July 9, 2019, except for Vermelhos N8/N9 (July 31, 2019) and Baraúna and Siriema (September 15, 2019).

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Table 1-1: Mineral Resources

		Tonnage		Grade		Contained Cu
Mineral Resources	Category	(000 tonnes)		(Cu %)		(000 tonnes)
Pilar District, Underground	Measured		19,155		1.83		351
	Indicated		14,260		1.36		194
	Measured & Indicated		33,414		1.63		546
	Inferred		7,456		1.17		87
Vermelhos District, Underground	Measured		3,513		3.25		114
	Indicated		2,875		1.22		35
	Measured & Indicated		6,388		2.33		149
	Inferred		9,122		0.90		83
Surubim District, Underground	Measured		2,809		1.03		29
	Indicated		2,104		0.92		19
	Measured & Indicated		4,913		0.98		48
	Inferred		5,501		0.89		49
Total Resources, Underground	Measured		25,476		1.94		494
	Indicated		19,239		1.29		249
	Measured & Indicated		44,715		1.66		743
	Inferred		22,079		0.99		219
Pilar District, Open Pit	Measured		2,841		0.49		14
	Indicated		462		0.44		2
	Measured & Indicated		3,303		0.48		16
	Inferred		1,276		0.45		6
Vermelhos District, Open Pit	Measured		4,464		0.63		29
	Indicated		14,521		0.62		72
	Measured & Indicated		18,985		0.53		101
	Inferred		1,397		0.72		10
Surubim District, Open Pit	Measured		2,217		0.80		18
	Indicated		2,401		0.68		16
	Measured & Indicated		4,618		0.74		34
	Inferred		1,452		0.49		7
Total Resources, Open Pit	Measured		9,522		0.64		61
	Indicated		17,384		0.52		91
	Measured & Indicated		26,907		0.56		151
	Inferred		4,125		0.56		23

1. Mineral resource effective date varies by deposit, with an effective date of July 9, 2019, except for Vermelhos N8/N9 (July 31, 2019) and Baraúna and Siriema (September 15, 2019).

2. Presented mineral resources inclusive of mineral reserves. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding. Mineral resources which are not mineral reserves do not have demonstrated economic viability.

3. Mineral resources have been modeled within a 0.20% copper grade shell using a 0.68% copper cut-off grade for underground deposits and a 0.18% copper cut-off grade for open pit deposits. Mineral resources have been estimated using ordinary kriging inside 5m by 5m by 5m block sizes. The mineral resource estimates were prepared in accordance with the CIM Standards and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate to the deposit.

1.5.2 Mineral Reserve

The Mineral Reserves for the Pilar UG Mine, Suçuarana OP Mine, Vermelhos UG Mine, N8/N9 OP Mine, Siriema OP Mine, C12 UG Mine, C12 OP Mine and the Surubim OP Mine are derived from the Measured and Indicated Mineral Resources as defined within the resource block models following the application of economic and other modifying factors further described below. Inferred Mineral Resources, where unavoidably included within a defined mining shape have been assigned zero grade.

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Table 1-2: Mineral Reserves

		Tonnage		Grade		Contained Cu
Mineral Reserves	Category	(000 tonnes)		(Cu %)		(000 tonnes)
Pilar District, Underground	Proven		6,339		1.54		98
	Probable		7,678		1.37		105
Vermelhos District, Underground	Proven		3,787		2.57		97
	Probable		1,269		1.24		16
Surubim District, Underground	Proven		1,875		0.91		17
	Probable		269		0.93		2
	Proven		12,001		1.77		212
Total, Underground	Probable		9,126		1.35		123
	Proven & Probable		21,127		1.59		335
Pilar District, Open Pit	Proven		1,623		0.42		7
	Probable		328		0.46		2
Vermelhos District, Open Pit	Proven		3,992		0.67		27
	Probable		9,558		0.56		53
Surubim District, Open Pit	Proven		798		1.03		8
	Probable		548		0.81		4
	Proven		6,408		0.65		42
Total, Open Pit	Probable		10,434		0.57		59
	Proven & Probable		16,843		0.60		101

1. Mineral Reserve effective date of September 18, 2019.

2. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

3. Mineral Reserve estimates were prepared in accordance with the CIM Standards and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate for the deposit.

4. Mineral Reserves are based on a long-term copper price of US$2.75 per lb, and a USD:BRL foreign exchange rate of 3.70. Mineral Reserves are the economic portion of the Measured and Indicated Mineral Resources. Inferred Mineral Resources, where unavoidably included within a defined mining shape, have been included in the Mineral Reserves estimate at zero grade.

5. Mineral Reserve estimates include mining dilution at zero grade.

6. Mining dilution and recovery factors vary for specific Mineral Reserve sources and are influenced by factors such as deposit type, deposit shape, stope orientation and selected mining method.

A summary of the Mineral Reserve estimate parameters is provided below:

Table 1-3: Mineral Reserve Estimate Parameters

Mining Costs (US$/tonne ore mined)
Pilar UG mine	$	27.31
Vermelhos UG mine	$	33.21
Surubim / C12 UG mine	$	18.66
Suçuarana OP mine	$	3.06
C12 OP mine	$	3.06
Vermelhos N8/N9 OP mine	$	2.51
Siriema OP mine	$	2.51
Transportation Costs (US$/tonne to mill)
Vermelhos mine	$	11.56
Surubim mine	$	5.98
Suçuarana mine	$	3.54
Processing Costs (US$/tonne milled)	$	7.90
Metallurgical Recovery (average)		90.70	%
LME Copper Price (US$/lb)	$	2.75
Net Smelter Return		94.53	%
Foreign Exchange Rate (USD:BRL)		3.70

 21

Other modifying factors considered in the determination of the Mineral Reserve estimate include:

· Maximum bench height of 10m for open pit mines. Maximum underground stope dimensions based on geotechnical assessments from previous studies and past operating experience within each mining area, combined with evaluation of induced stresses and the Rock Mass Rating (“RMR”).

· The Vertical Retreat Mining (“VRM”) method with cemented paste fill was selected for the Pilar UG Mine, where the method is currently in use. For the Vermelhos UG Mine, Sublevel Open Stoping method (“SOS”) is the mining method currently in use on consideration of the dip, plunge and thickness of the ore-bodies, the rock quality designation (“RQD”) and overall competence of the host rock. Variations of this method are in use within the central high-grade area for the maximum possible recovery via cemented rockfill matrix filling (“CRF”).

· Within designed stopes, all contained material was assumed to be mined with no selectivity. Inferred mineral resources, where unavoidably included within a defined mining shape have been included in the mineral reserves estimate at zero grade. Mining dilution resulting from Measured and Indicated blocks was assigned the grade of those blocks captured in the dilution envelope using the current mineral resource estimate.

· Dilution and mining recovery values vary by deposit as set forth below:

- Pilar UG mine operational dilution of 12%, mining recovery of 96%.

- Vermelhos UG mine operational dilution of 10%, mining recovery of 100%.

- Vermelhos N8/N9 overall dilution of 10%, mining recovery of 100%.

- Siriema overall dilution of 10%, mining recovery of 100%.

- Suçuarana OP operational dilution of 10%, mining recovery of 100%

- Surubim/C12 UG operational dilution of 10%, mining recovery of 100%.

Additionally, Planminas presents the following accompanying comments to the Mineral Resource and Mineral Reserve estimate:

· MCSA holds the surface rights required to support the mine operations considered in the Mineral Reserve estimate. Future development beyond the stated Mineral Reserves of these areas may require additional acquisition of surface rights.

· As of the date of the Vale do Curaçá Property Technical Report, MCSA has successfully obtained the requisite permits to enable current mining and processing operations from its core assets of Pilar and Vermelhos and is in the process of obtaining mining permits for future production areas commensurate with the envisioned production timelines of those areas. Based upon the long operating history of MCSA, the well-established timelines and procedures to obtain such permits and recent precedent of the permit receipt for the Vermelhos Mine in 2018, it is the opinion of the QPs that permitting of future production areas within the envisioned timelines does not pose a material risk for the development of the stated Mineral Reserves.

· Overall, Planminas considers that the components of the Mineral Reserve estimate (including but not limited to geology, mining, processing, infrastructure, logistics, market, environmental and social considerations) have been conducted at a feasibility level of study and in accordance with NI 43-101.

It is the opinion of the QPs that there are no known mining, metallurgical, infrastructure, permitting, legal, political, environmental, title, taxation, socio-economic, marketing or other relevant factors that could materially affect the potential development of the stated Mineral Reserves.

 22

1.6       Recovery Methods

The Caraíba Mill has been designed to receive ore from both the Pilar UG Mine, via a production shaft supported by two primary underground jaw crushers as well as ore from throughout the Curaçá Valley (including within the Vermelhos and Surubim Districts) via a primary cone crusher located on surface. The concentrator is operated 24 hours per day, 7 days per week with monthly scheduled downtime for routine maintenance. In its current configuration the plant is capable of processing a nominal 3.2 million tonnes of copper ore per annum assuming 91% availability. Returning the mill to its original design capacity of 5.5 million tonnes per annum would entail a capital outlay of approximately US$54 million in equipment, excluding critical spares and engineering design. The average plant throughput from the core assets of the Pilar UG Mine and Vermelhos UG Mine including in-mine growth projects within the production plan outlined is approximately 2.5 million tonnes per annum over the next 6 years.

Through the end of 2018, the Caraíba Mill has produced over 3.0 million tonnes of concentrate containing over 1.0 million tonnes of copper. The Caraíba Mill operating results from 2011 to 2018, and from January to September of 2019 are provided below in Table 1-4 and Table 1-5, respectively.

Table 1-4: Caraíba Mill Processing Results, 2011 to 2018

	Caraíba Mill Feed				Copper Production
Year	Tonnes		Grade (% Cu)		Tonnes		Recovery (%)
2011		2,749,812		1.09		25,096		83.7
2012		2,717,980		1.07		24,827		85.4
2013		2,940,566		0.91		22,494		84.3
2014		3,014,269		1.01		25,717		84.7
2015		2,836,528		1.11		27,046		86.0
2016		826,759		0.71		4,895		83.5
2017		1,771,209		1.31		20,133		86.8
2018		2,257,917		1.56		30,426		86.3

Table 1-5: January 2019 to September 2019 Processing Results

	Caraíba Mill Feed				Copper Production
Year	Tonnes		Grade (%Cu)		Tonnes		Recovery (%)
2019 (Jan-Sep)		1,835,527		1.86		30,792		90.4

Table 1-6, below, shows the production plan for the Caraíba Mill as outlined for the current Mineral Reserve estimate. Production has been adjusted from mined totals, where appropriate, for forecast stockpiles and in-process inventories. Metallurgical recoveries are discussed in greater detail in Chapter 13 – Mineral Processing and Metallurgical Testing and Chapter 17 – Recovery Methods.

Table 1-6: Caraíba Mill Production Plan

Caraiba Mill	2019 1		2020		2021		2022		2023		2024		2025		2026		2027		2028		Total
Mill Throughout (kt)		723		2,688		3,806		4,173		4,788		5,352		5,457		3,686		4,118		3,202		37,994
Copper Grade (Cu%)		2.18		1.83		1.37		1.26		1.16		1.01		0.96		0.94		0.94		0.99		1.15
Metallurgical Recovery (%)		89.9		92.1		91.4		91.1		90.9		90.0		89.5		90.0		90.5		91.1		90.7
Copper Production (kt)		14.1		45.2		47.6		47.9		50.5		48.6		46.9		31.1		34.9		28.8		395.7
Concentrate Grade (Cu%)		34.5		35.0		35.0		35.0		35.0		35.0		35.0		35.0		35.0		35.0		35.0
Dry Concentrate Production (kt)		41.0		129.1		136.1		136.9		144.4		138.8		134.1		88.7		99.7		82.2		1,131.3

* 2019 production statistics include forecast production from September to December of 2019, corresponding to the Effective Date of September 18, 2019.

 23

1.7       Infrastructure

The MCSA Mining Complex infrastructure includes fully integrated mining and processing operations located within the Curaçá Valley. All supporting infrastructure required for mining operations are currently in place. The current mining operations include the Pilar UG Mine and Vermelhos UG Mine. Primary components of installed infrastructure comprising the MCSA Mining Complex, outside of the individual mining operations, include:

· Caraíba Mill processing plant with current installed capacity of approximately 9,600 t/d;

· access to water via an MCSA owned, operated and maintained 86km permanent steel pipeline, 80cm in diameter, from the São Francisco River;

· water treatment plant;

· metallurgical laboratory;

· main substation and transformers, each configured with 60 MVA / 230 kV / 13.8 kV;

· power lines supplied by Companhia Hidroelétrica do São Francisco (“CHESF”), a Brazilian State-owned power company;

· ancillary surface buildings including maintenance, security and administration; and

· inactive Solvent Extraction and Electrowinning (“SX/EW”) operations.

1.8         Environment

The current permitting status for the active operations of the MCSA Mining Complex can be summarized in the following table:

Table 1-7: Summary of Primary Operational Permits

Mine/Project	License Scope	Project Phase	License Phase	Permit Period		Status	Note
				Start	End
Caraíba Mine	Operation License	Operational	Renewal	April 6, 2017	April 6, 2020	Valid	In process of renewal
Caraíba Mine	Water Use Permit (São Francisco River)	Operational	Renewal	January 8, 2016	January 8, 2026	Valid
Caraíba Mine	Fuel Station	Operational	Renewal	October 7, 2016	October 7, 2018	Valid	In process of renewal
Caraíba Mine	SX/EW	Operational	Renewal	August 11, 2016	August 11, 2021	Valid
Surubim Mine (Surubim UG / C12 UG)	Alteration License	Operational	Alteration	September 6, 2017	September 6, 2019	Valid	Alteration for UG Mining
Suçuarana OP Mine	Operation License	Operational	Alteration	January 15, 2015	January 15, 2018	Valid	Alteration under application
Vermelhos UG Mine	Operation License	Operational	New	October 10, 2018	October 10, 2020	Valid
Vermelhos UG Mine	Water Use	Operational	New	October 5,2019	October 5,2023	Valid
Vermelhos UG Mine	Operation License	Operational	New	October 10, 2018	October 10, 2020	Valid

MCSA maintains an excellent relationship with the communities throughout the Curaçá Valley, having held regular meetings and consultation sessions with local stakeholders routinely over the last 40 years. In support of this relationship, MCSA undertakes several key initiatives annually focused on sustainable community development ensuring the social license to operate.

1.9       Capital and Operating Costs

Capital and operating costs are shown for the period from September 2019 to December 2028. It is expected that a combination of resource conversion and delineation of new mineralization within the Curaçá Valley will continue to augment the production profile, subject to satisfactory exploration results, technical, economic, legal and environmental conditions.

Total capital costs are estimated at R$1,818 million Brazilian Real and are summarized in Table 1-8. All costs are shown in Brazilian Reals, unless otherwise noted.

 24

Table 1-8: MCSA Mining Complex – Total Capital Expenditures

Total Capital Expenditure	Unit	2019 1		2020		2021		2022		2023		2024		2025		2026		2027		2028		Total
Development	R$M		44.5		155.2		141. 8		136.1		132.2		112.3		99.2		37.2		6.9		0.0		865.2
Equipment	R$M		1.1		19.3		39. 6		21.9		11.9		5.0		0.0		0.0		0.0		0.0		98.7
Exploration / Drilling	R$M		30.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		30.0
Infrastructure	R$M		41.6		55.5		12.8		41.9		25.7		22.4		9.1		18.7		0.0		0.0		227.7
Others	R$M		3.7		8.7		23.8		2.8		8.9		1.7		1.7		1.7		0.0		0.0		52.8
Plant Expansion	R$M		0.0		61.5		80.3		63.5		0.0		0.0		0.0		0.0		0.0		0.0		205.2
Social, Health, & Environment	R$M		3.3		16.3		6.9		10.7		8.2		7.9		4.2		4.6		4.8		5.2		71.9
Sustaining	R$M		18.3		39.4		39.4		58.9		23.7		16.8		11.0		9.3		5.1		4.8		226.8
Ventilation	R$M		1.2		5.9		10.3		4.2		10.1		2.2		2.7		2.0		1.0		0.0		39.6
Total	R$M		143.7		361.7		354.7		340.0		220.6		168.1		127.8		73.5		17.7		9.9		1,817.8

(1)         2019 based on the 4 months from the Effective Date to December 31, 2019

An operating cost forecast model was generated utilizing MCSA’s extensive historical cost data and consumption coefficients. Mine and plant activities are subdivided and adjusted selectively, reflecting the impact of producing from different areas and changes in the infrastructure going forward. A fixed and variable component was included in all estimations, allowing the costs to reflect the production rate of each year. Operating costs are summarized in Table 1-9.

Table 1-9: MCSA Mining Complex - Operating Costs per Tonne

Operating Cost Summary	Unit	2019 1		2020		2021		2022		2023		2024		2025		2026		2027		2028		Total
Pilar District UG Mining Costs	R$/t*		95.34		94.15		91.93		76.78		63.32		74.82		79.28		82.44		100.04		104.62		83.11
Pilar District OP Mining Costs	R$/t*		0.00		13.89		14.60		19.01		0.00		0.00		0.00		0.00		0.00		0.00		14.79
Surubim District UG Mining Costs	R$/t*		0.00		0.00		0.00		0.00		0.00		30.94		104.93		77.98		62.97		59.73		65.43
Surubim District OP Mining Costs	R$/t*		0.00		0.00		0.00		0.00		14.62		0.00		0.00		0.00		0.00		0.00		14.62
Vermelhos District UG Mining Costs	R$/t*		118.05		145.93		115.07		111.28		120.79		130.14		133.62		0.00		0.00		0.00		125.84
Vermlehos District OP Mining Costs	R$/t*		0.00		0.00		12.50		12.31		13.42		13.81		15.26		16.35		22.82		14.83		14.44
Plant Costs	R$/t**		35.59		32.04		27.63		26.87		25.78		24.98		24.85		28.04		27.01		29.35		27.12
Operational Support Costs	R$/t**		26.10		20.60		14.15		12.97		10.79		9.65		9.37		12.52		11.49		11.66		12.29
G&A Cost	R$/t**		25.43		22.37		13.78		12.67		10.92		9.77		9.58		14.19		12.70		12.70		12.78

* Total tonnes mined

** Tonnes processed

(1)         2019 based on the 4 months from the Effective Date to December 31, 2019

1.10       Economic Analysis

An economic analysis was prepared considering production, capital and operating expenditures for all of the assets comprising the current Mineral Reserves of the Curaçá Valley, including both core and non-core assets. For additional detail regarding core and non-core assets as well as associated production, capital and operating expenditures by asset, please refer to Section 21.4 of the Vale do Curaçá Property Technical Report. The economic analysis used the following primary assumptions:

· The economic analysis considers commencing on the month of the Effective Date and does not include actual performance achieved through August 31, 2019.

· The economic analysis of MCSA’s Vale do Curaçá mineral assets is based on solely on Mineral Reserves and does not include Measured and Indicated Mineral Resources, which are not part of the Mineral Reserve estimate.

· Total ore processed of 38.0 million tonnes at an average feed grade of 1.15% copper.

· Total sales of 395,735 tonnes of contained copper in concentrate.

· Metal prices of US$3.00 per lb copper from 2019 through 2028.

· USD:BRL exchange rate of 3.80 in years 2019 through 2028.

The Vale do Curaçá mineral assets comprising the MCSA Mining Complex produce an undiscounted after-tax cash flow of R$2.3 billion, or US$595.3 million.

The after-tax Net Present Value (“NPV”) at an 8% discount rate is US$412.7 million. Average C1 cash costs over the production forecast period are estimated to be US$1.24 per lb. of copper produced. C1 cash costs per lb. of copper produced is a non-IFRS measure. Please refer to Section 22.6 of the report for additional detail regarding non-IFRS measures.

After-tax sensitivity analyses were prepared considering changes in copper price, foreign exchange, capital costs and operating costs. The analysis shows that the MCSA Mining Complex is most sensitive to copper price and exchange rates.

 25

Table 1-10: After-tax Cash Flow Summary, MCSA Mining Complex

Assumptions		2019 1			2020			2021			2022			2023			2024			2025			2026			2027			2028			Total
Exchange Rate	R$/US$		3.80			3.80			3.80			3.80			3.80			3.80			3.80			3.80			3.80			3.80			3.80
Copper Price	US$/tonne		6,614			6,614			6,614			6,614			6,614			6,614			6,614			6,614			6,614			6,614			6,614
Copper Price	US$/b		3.00			3.00			3.00			3.00			3.00			3.00			3.00			3.00			3.00			3.00			3.00
Production
Ore Processed	tonnes		722,708			2,638,411			3,806,394			4,173,460			4,787,768			5,351,681			5,457,262			3,686,033			4,118,218			3,251,623			37,993,557
Copper Grade Processed	%		2.18			1.84			1.37			1.26			1.16			1.01			0.96			0.94			0.94			0.99			1.15
Metallurgical Recovery	%		89.9			92.1			91.4			91.1			90.9			90.0			89.5			90.0			90.5			91.1			90.7
Copper Contained	tonnes		14,144			44,643			47,548			48,049			50,377			48,785			47,022			31,045			34,885			29,236			395,735
Copper Contained	lbs		31,181,497			98,420,109			104,826,051			105,930,844			111,063,046			107,552,197			103,666,333			68,442,333			76,909,076			64,453,815			872,445,301
Capex
Capex (ex-Plant Expansion)	000 R$		143,737			298,293			256,959			261,309			214,725			163,818			122,242			68,048			13,616			5,651			1,548,399
Plant Expansion Capex	000 R$		-			63,383			97,746			78,661			5,895			4,282			5,560			5,445			4,112			4,280			269,373
Total Capex	000 R$		143,737			361,675			354,705			339,970			220,620			168,100			127,802			73,503			17,728			9,931			1,817,772
Operating Costs
Pilar Underground Mining	000 R$		94,953			241,108			243,607			245,311			228,765			228,180			212,685			128,976			118,238			105,463			1,847,287
Pilar Open Pit Mining	000 R$		-			36,129			49,650			13,308			-			-			-			-			-			-			99,088
Surubim Underground Mining	000 R$		-			-			-			-			-			31,388			54,211			51,626			68,830			61,732			267,787
Surubim Open Pit Mining	000 R$		-			-			-			-			28,520			-			-			-			-			-			28,520
Vermehos Underground Mining	000 R$		53,942			173,383			140,269			133,124			132,232			128,833			101,138			-			-			-			862,922
Vermehos Open Pit Mining	000 R$		-			-			73,816			157,524			134,810			183,979			160,022			120,873			88,100			83,112			1,002,235
General & Administrative	000 R$		18,381			59,026			52,449			52,890			52,297			52,297			52,297			52,297			52,297			41,292			485,526
Operational Support	000 R$		18,860			54,347			53,862			54,123			51,643			51,663			51,114			46,138			47,334			37,900			466,982
Processing	000 R$		25,718			84,542			105,175			112,128			123,411			133,677			135,599			103,353			111,222			95,445			1,030,271
Sub Total	000 R$		211,855			648,536			718,828			768,408			751,678			810,017			767,067			503,264			486,020			424,944			6,090,618
Depreciation/Exhaustion	000 R$		49,896			169,241			187,534			205,775			184,195			152,711			151,652			108,608			108,608			108,608			1,426,829
Total Costs	000 R$		261,751			817,777			906,362			974,183			935,874			962,728			918,719			611,872			594,629			533,552			7,517,447
Revenue
Copper Sales	tonnes		14,144			44,643			47,548			48,049			50,377			48,785			47,022			31,045			34,885			29,236			395,735
Gross Metal Revenue	000 R$		355,469			1,121,988			1,195,016			1,207,610			1,266,117			1,226,094			1,181,795			780,242			876,762			734,773			9,945,865
Total Net Metal Revenue	000 R$		381,883			1,083,564			1,157,747			1,174,167			1,226,689			1,191,903			1,148,861			759,494			850,474			715,469			9,690,252
Other Revenue2	000 R$		1,308			3,924			3,924			3,444			3,444			3,444			3,444			3,444			3,444			3,444			33,264
Total Net Revenue	000 R$		383,191			1,087,488			1,161,671			1,177,611			1,230,133			1,195,347			1,152,305			762,938			853,918			718,913			9,723,516
Cash Flow
Revenue	000 R$		357,991			1,087,488			1,161,671			1,177,611			1,230,133			1,195,347			1,152,305			762,938			853,918			718,913			9,698,316
Opex (ex-Depreciation & Exhaustion)	000 R$		(211,855	)		(648,536	)		(718,828	)		(768,408	)		(751,678	)		(810,017	)		(767,067	)		(503,264	)		(486,020	)		(424,944	)		(6,090,618	)
Less Capitalized Development3	000 R$		60,945			155,203			141,751			136,055			130,673			112,251			99,155			37,159			6,903			-			880,095
Income & Social Contribution Taxes	000 R$		(15,430	)		(22,867	)		(39,443	)		(19,660	)		(15,410	)		(18,368	)		(18,753	)		(6,538	)		(4,730	)		(1,710	)		(162,909	)
Other Taxes & Credits	000 R$		11,977			52,247			(5,052	)		(4,947	)		(4,129	)		(1,268	)		-			-			-			-			48,827
Employee Profit Sharing & Bonuses	000 R$		-			(33,758	)		(36,895	)		(36,780	)		(32,444	)		(38,644	)		(32,900	)		(31,946	)		(21,704	)		(28,557	)		(293,629	)
Operating Cash Flow	000 R$		203,628			589,777			503,204			483,870			557,144			439,302			432,740			258,349			348,367			263,701			4,080,082
CAPEX	000 R$		(143,737	)		(361,675	)		(354,705	)		(339,970	)		(220,620	)		(168,100	)		(127,802	)		(73,503	)		(17,728	)		(9,931	)		(1,817,772	)
Free Cash Flow	000 R$		59,891			228,101			148,499			143,901			336,524			271,202			304,938			184,846			330,639			253,770			2,262,311
Accumulated Free Cash Flow	000 R$		59,891			287,993			436,492			580,392			916,916			1,188,118			1,493,056			1,677,902			2,008,541			2,262,311			2,262,311
Free Cash Flow	000 US$		15,761			60,027			39,079			37,869			88,559			71,369			80,247			48,644			87,010			66,782			595,345
Accumulated Free Cash Flow	000 US$		15,761			75,788			114,866			152,735			241,294			312,663			392,910			441,553			528,563			595,345			595,345
EBITDA	000 R$		232,281			594,154			584,594			545,258			609,128			497,582			484,393			296,833			374,801			293,969			4,512,994
EBITDA	000 US$		61,127			156,356			153,841			143,489			160,297			130,943			127,472			78,114			98,632			77,360			1,187,630

Discount Rate	%pa	8%
Results
After-Tax NPVs	000 US$	412,670
IRR	%pa	n/a
Simple Payback	years	n/a

(1)            2019 based on the 4 months from the Effective Date to December 31, 2019.

(2)            Other Revenue includes recovery of water pipeline operating costs and scrap sales.

(3)            Removal of capitalized development originally included in operating costs.

EBITDA is a non-IFRS measure. Please see Section 22.6 of the report for additional detail regarding non-IFRS measures used by the Company.

1.11       Conclusions and Recommendations

Mineral Exploration and Geology

The geological descriptions, sampling procedures and density tests that were evaluated were found to be of acceptable quality and in accordance with industry best practices.

Data collection process was executed with the aim of maintaining data security. Data was stored in a standardized database, which was found to be secure and auditable.

The complexity of the mineralization controls and the quantity and phases of data in the Curaçá Valley merits the use of visualization and data integration tools which have been adopted and are well advanced within the Company as at the time of the Vale do Curaçá Property Technical Report.

While GE21 believes that the current quality assurance and quality control (“QA/QC”) program can guarantee the quality of the exploration data used in the resource estimates, while not critical to the validity of the exploration data, GE21 suggests that a chain of custody program be implemented for good measure.

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GE21 supervised the process through which density was determined and concluded that it was in conformity with industry best practices.

QA/QC

GE21 performed the evaluation of the data generated subsequent to the last validation (performed mid-2018) and concluded that the QA/QC procedures are being followed using the same standards and in accordance with the recommendations set forth at that time. GE21 considers the standard QA/QC procedures to be in accordance with mining industry best practice and appropriate for use in the Mineral Resource estimate.

It should be noted that based on the analysis of the QA/QC results that the MCSA laboratory provided good precision at lower copper grades, below 2% copper. However, it was also observed that the MCSA laboratory displayed a tendency to underestimate the higher-grade copper values above 2% copper, as observed on the last validation. It is strongly recommended that the calibration of the equipment and standards for samples of grades greater than 2% copper be evaluated by the laboratory.

Geological Model

The procedure that was adopted to produce the 3D geological model (wireframes), consisting of generating triangulations between interpreted geological cross sections, was executed properly and in accordance with the opinions of GE21 staff. Due to the plunge of the mineralized zone at the Pilar UG Mine towards the north and the east-west geological cross sections, a pattern of sub-vertical discontinuous lenses was created locally within the regions of lower drill hole density. Despite these occurrences, verification of the mineralized zone interpretation was performed within regions of denser drill spacing.

GE21 noted that, with respect to the integration and interpretation of geological data, limited lithostructural mapping (mine, surface and subsurface) had been undertaken and no supporting petrographic data was used. GE21 also notes that the field interpretation and 3D interpretation were historically focused on interpreting only copper grade, therefore, few vertical and horizontal lithostructural geological sections were developed which may provide greater understanding and control of aspects relating to the geology and other potential metals of significance in the Curaçá Valley. The authors of the Vale do Curaçá Property Technical Report note that, in 2018, Ero Copper and MCSA assembled a new fully integrated geological model using GOCAD software, which has made it possible to integrate several sources of information including: historic and recent drilling, surface mapping, geophysics, geochemistry, multi-element ICP and structural data. This work continues to drive the exploration model of the Company for both near-mine exploration targets and regional exploration programs with success.

Grade Estimation

The variograms that were used in the estimation method are satisfactory and consistent with respect to the grade estimation that was calculated via Ordinary Kriging, making use of search anisotropy determined in the variographic study.

The Kriging estimation strategy that was chosen made it possible to classify the resource in accordance with an empirically calculated search radius and the requisite data density for resource classification.

GE21 considers the resource classification model and the analysis of criteria for the classification of Mineral Resources, to be satisfactory although some items could be improved. Such recommended improvements, where applicable, did not impose limitations on the classification of Measured and Indicated Resources.

Mineral Resources Estimate

GE21 has not identified any mining, metallurgical, infrastructure, permitting, legal, political, environmental, technical, or other relevant factors that could materially affect the potential development of Mineral Resources.

Mineral Reserve Estimate

Planminas has carried out the appropriate review work to satisfy itself that the Mineral Reserve can be technically and profitably extracted through to the production and sale of copper concentrate. Consideration has been given to all technical areas of study, the associated capital and operating costs, and relevant factors including marketing, permitting, environmental and social. Planminas is satisfied that the technical and economic feasibility has been demonstrated.

The Mineral Reserve is compliant with the guidelines of NI 43-101.

27 

Regarding the Mineral Resources and Mineral Reserves estimation, the authors recommend a work program to include the following that can be completed at little or no cost. Additional recommendations and cost estimates are presented in Table 1-11.

●  Intensify the use internally of implicit modelling, emphasizing structural geology and variation in lithology for Domain definition and exploration target integration

● Implement additional empirical criteria for resource classification, based on the ‘15% Rule’, as commonly attributed to Dr. Harry Parker and since expanded upon in multiple sources of geostatistical literature.

● Expand ongoing geometallurgical studies to encompass all deposits and blends therein to study mill feed interaction. Suggest including standardized laboratory tests to evaluate the effect of ore sorting.

● In addition, the authors recommend that the QA/QC program include mass controls during sample crushing and pulverization in order to evaluate the quality of the comminution procedures and ensure no sample loss during sample preparation.

Table 1-11: Proposed Budget for Recommended Work

Program	Budget (US$)
Advance Geometallurgical Studies	$	200,000
Multi-Element Assays for the Vermelhos District (incl. Check Assays)	$	50,000
Total	$	250,000

Updated Information with respect to the Vale do Curaçá Property

The following update has been prepared under the supervision of and approved by Ricardo Emerson Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

Mineral Resource and Mineral Reserve Estimates as at December 31, 2019

The effective date of the Mineral Resource estimates contained in the Vale do Curaçá Technical Report varied by deposit, with an effective date of July 9, 2019, except for Vermelhos N8/N9 (July 31, 2019) and Baraúna and Siriema (September 15, 2019). The Mineral Reserve estimates contained in the Vale do Curaçá Technical Report were prepared as at September 18, 2019. As production at the Vale do Curaçá Property has continued since the preparation of these estimates, the Mineral Resources and Mineral Reserves at the Vale do Curaçá Property have decreased. Accordingly, set out below is an internal update of the Mineral Resource and Minerals Reserve estimates as at December 31, 2019, based on a 0.68% copper grade cut-off considered for underground resources and a 0.18% copper grade cut-off for open pit resources, and accounting for the material mined since the preparation of the Mineral Resource and Mineral Reserve estimates contained in the Vale do Curaçá Technical Report. Mineral Resources are shown inclusive of Mineral Reserves.

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Table 1-12: Vale do Curaçá Property Mineral Resource Estimate, December 31, 2019

Mineral Resources	Category	Tonnage (000 tonnes)		Grade (Cu %)		Contained Cu (000 tonnes)
Pilar District, Underground	Measured		18,749		1.80		338
	Indicated		14,260		1.36		194
	Measured & Indicated		33,008		1.61		533
	Inferred		7,456		1.17		87
Vermelhos District, Underground	Measured		3,298		3.07		101
	Indicated		2,875		1.22		35
	Measured & Indicated		6,173		2.21		136
	Inferred		9,122		0.90		83
Surubim District, Underground	Measured		2,809		1.03		29
	Indicated		2,104		0.92		19
	Measured & Indicated		4,913		0.98		48
	Inferred		5,501		0.89		49
	Measured		24,856		1.89		469
	Indicated		19,239		1.29		249
Total Resources, Underground	Measured & Indicated		44,095		1.63		717
	Inferred		22,079		0.99		219
Pilar District, Open Pit	Measured		2,841		0.49		14
	Indicated		462		0.44		2
	Measured & Indicated		3,303		0.48		16
	Inferred		1,276		0.45		6
Vermelhos District, Open Pit	Measured		4,464		0.65		29
	Indicated		14,521		0.50		72
	Measured & Indicated		18,985		0.53		101
	Inferred		1,397		0.72		10
Surubim District, Open Pit	Measured		2,217		0.80		18
	Indicated		2,401		0.68		16
	Measured & Indicated		4,618		0.74		34
	Inferred		1,452		0.49		7
	Measured		9,522		0.64		61
	Indicated		17,384		0.52		91
Total Resources, Open Pit	Measured & Indicated		26,907		0.56		151
	Inferred		4,125		0.56		23

1. Mineral resource effective date of December 31, 2019.

2. Presented mineral resources inclusive of mineral reserves. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding. Mineral resources which are not mineral reserves do not have demonstrated economic viability.

3. Mineral resources have been modeled within a 0.20% copper grade shell using a 0.68% copper cut-off grade for underground deposits and a 0.18% copper cut-off grade for open pit deposits. Mineral resources have been estimated using ordinary kriging inside 5m by 5m by 5m block sizes. The mineral resource estimates were prepared in accordance with the CIM Standards and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate to the deposit.

29 

Table 1-13: Vale do Curaca Property Mineral Reserve Estimate, December 31, 2019

Mineral Reserves	Category	Tonnage (000 tonnes)		Grade (Cu %)		Contained Cu (000 tonnes)
Pilar District, Underground	Proven		5,940		1.53		91
	Probable		7,678		1.37		105
Vermelhos District, Underground	Proven		3,602		2.52		91
	Probable		1,269		1.24		16
Surubim District, Underground	Proven		1,875		0.91		17
	Probable		180		0.93		2
	Proven		1,417		1.74		199
Total, Underground	Probable		9,126		1.35		123
	Proven & Probable		20,543		1.56		321

Pilar District, Open Pit	Proven	1,623	0.42	7
	Probable	328	0.46	2
Vermelhos District, Open Pit	Proven	3,992	0.67	27
	Probable	9,558	0.56	53
Surubim District, Open Pit	Proven	793	1.03	8
	Probable	548	0.81	4
	Proven	6,408	0.65	42
Total, Open Pit	Probable	10,434	0.57	59
	Proven & Probable	16,843	0.60	101

1. Mineral Reserve effective date of December 31, 2019.

2. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

3. Mineral Reserve estimates were prepared in accordance with the CIM Standards and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate for the deposit.

4. Mineral Reserves are based on a long-term copper price of US$2.75 per lb, and a USD:BRL foreign exchange rate of 3.70. Mineral Reserves are the economic portion of the Measured and Indicated Mineral Resources. Inferred Mineral Resources, where unavoidably included within a defined mining shape, have been included in the Mineral Reserves estimate at zero grade.

5. Mineral Reserve estimates include mining dilution at zero grade.

6. Mining dilution and recovery factors vary for specific Mineral Reserve sources and are influenced by factors such as deposit type, deposit shape, stope orientation and selected mining method.

NX GOLD PROPERTY

The scientific and technical information in this section relating to the NX Gold Property, other than the scientific and technical information under the heading “NX Gold Property – Updated Information with respect to the NX Gold Property”, is a direct extract of the Executive Summary section contained in the NX Gold Technical Report, which has been conformed to be consistent with the formatting and other defined terms within this AIF. The entire NX Gold Technical Report, a copy of which is available for review under the Company’s profile on SEDAR at www.sedar.com, is incorporated by reference into this AIF and should be consulted for details beyond those incorporated herein.

The scientific or technical information set out in this AIF under the heading “NX Gold Property – Updated Information with respect to the NX Gold Property”, has been reviewed and approved by Ricardo Emerson Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

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Executive Summary

1.1       Introduction

The purpose of NX Gold Technical Report is to set out and provide background and supporting information on the current Mineral Resources and Mineral Reserves for the NX Gold Mine, a producing underground gold mining operation located in the State of Mato Grosso Brazil and wholly-owned by NX Gold, a company formed under the laws of Brazil. The effective date of the NX Gold Technical Report is September 30, 2019 (in this section, the “Effective Date”) and the issue date of the NX Gold Technical Report is February 3, 2020. The NX Gold Technical Report has been prepared by GE21 on behalf of Ero Copper of Vancouver, Canada and existing under the BCABC.

Ero Copper is a publicly listed company that trades on the Toronto Stock Exchange under the ticker, “ERO”. Ero Copper’s principal asset is its 99.6% ownership interest in MCSA. MCSA’s predominant activity is the production and sale of copper concentrate from the Vale do Curaçá Property, which is located within the Curaçá Valley, northeastern Bahia State, Brazil, with gold and silver produced and sold as by-products. Ero Copper also currently owns, directly and indirectly (through MCSA) a 97.6% ownership interest in NX Gold.

The NX Gold Mine was constructed and commenced commercial production in 2012, with the first full year of production occurring in 2013. As of the end of September 2019, approximately 211,000 ounces of gold had been produced from the NX Gold Mine. Subsequent to the Effective Date of the NX Gold Technical Report, full year 2019 production totaled 30,434 ounces of gold and 19,641 ounces of silver produced as a by-product. As of the date of the NX Gold Technical Report, there are currently 3 drill rigs operating on the property. Exploration activities are underway on the central Santo Antônio orebody as well as testing for possible extensions of the Brás and Buracão orebodies to depth and along strike. In addition, the first regional exploration program on the property is underway.

Doré bars containing gold and silver, as well as lesser amounts of lead, are shipped from the mine weekly by airplane via a gravel airstrip located on the property. Ore is currently produced from the Santo Antonio vein– an east-west striking, shear-zone hosted, quartz vein, accessed from a single mine portal and decline and from the Buracão vein. During the second half of 2019, the mine successfully transitioned the majority of mining activities from the Brás and Buracão veins, into the centrally located Santo Anton vein.

The NX Gold Technical Report and estimates herein have been prepared following the guidelines of NI 43-101.

The NX Gold Technical Report provides a summary of the work completed by NX Gold and its independent consultants as of the Effective Date. All dollar amounts presented in the NX Gold Technical Report are stated in US dollars unless otherwise specified.

1.2       Property Description and Location

NX Gold owns a 100% interest in the NX Gold Mine, located in the eastern portion of the State of Mato Grosso, Brazil. The mine is located 18km west of the town of Nova Xavantina, with a population of approximately 20,000 people, and approximately 670 km east of Cuiabá, the capital city of Mato Grosso. The total NX Gold Mine property, including exploration licences, measures 31,716.2ha. The property is comprised of one mining concession, where all current mining and processing activities occur (registration number 866269/1990), that totals 620 ha and eight exploration licenses covering an area of 31,096.2 ha. Within the mining concession, NX Gold holds 100% legal and beneficial ownership, including surface rights. There are no time constraints provisioned with the mining concession; however, operating permits and licenses are extended and renewed in normal course of business according to the nature of each permit and requirements therein. All relevant licenses and operational permits in support of the mine’s operation are in good standing.

Within the exploration licences, NX Gold’s interests include the right to access the property and to engage in exploration, development, processing, and construction activities in support of mineral exploration and development. Where applicable, compensation is provided to the holder of surface rights for occupation or loss caused by the work. All exploration licenses are currently valid and, for those concessions where expiration dates are approaching, applications have been, or are expected to be submitted for renewal at the time of expiry.

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1.3       Geology and Mineralization

Gold and silver mineralization at the NX Gold Mine can be characterized as a shear-zone hosted, sulphide-rich, laminated quartz vein. Economic mineralization on the property, to date, has been hosted within the northeast trending Araés shear zone that cross-cuts the deformed and metamorphosed volcano-sedimentary sequence of the Proterozoic Cuiabá Group and is generally associated with felsic dikes.

Economic gold and silver mineralization at the NX Gold Mine is structurally controlled within the Araés shear zone. Gold and silver is currently mined from a major sulphide-rich, laminated quartz vein dipping approximately 40 degrees to the north-northwest and striking to the west-southwest – the Santo Antonio vein. Prior to the second half of 2019, mining activities occurred in the Brás and Buracão veins, located to the east and west of Santo Antonio, respectively. Vein dimensions are variable throughout the deposit, with an average thickness of 4 meters. Local occurrences of up to 10 meters in vein thickness are common, particularly within the Brás vein. Where gold and silver grades are found in economic concentrations, the veins typically contain approximately 2 to 15 percent total sulphide represented mostly by pyrite and galena, as well as minor chalcopyrite, bornite, pyrrhotite, and sphalerite. Higher gold and silver grades are generally associated with galena, chalcopyrite, bornite, and sphalerite.

Historic and the current known extent of gold mineralization at the NX Gold mine are structurally controlled and hosted in four major sulphide-rich quartz veins/bodies: Buracão, Brás, Santo Antonio and Matinha. The veins are hosted in strongly deformed metamorphosed sedimentary rock units and diorite that trend generally to the northeast. The veins exhibit a typical laminated pattern parallel with the vein contacts. The laminations are characterized by alternating quartz bands and foliated host rocks indicative of multiple pulses of mineralized fluids during formation.

The Buracão vein is located on the western portion of the mining concession and includes a primary laminated vein measuring 100 meters in length and dipping 45 degrees to the northwest in the upper portion of the mine and 70 meters in length dipping 40 degrees to the northwest in the lower portion of the mine. The Brás vein is located to the east of the Buracão vein and includes a primary laminated vein measuring 220 meters in strike length in the upper part of the mine and 50 meters in strike length in the lower levels of the mine. The Santo Antonio vein is located between the Brás and Buracão veins and currently extends over 300 meters in strike length. The Santo Antonio vein, discovered during the 2018/2019 drill program, remains open to depth. Drill-testing extensions of the vein are planned for 2020. The mineralogical characterization of all of the known veins on the NX Gold property known to is the same.

1.4       Exploration

The occurrence of gold in the Araés shear zone has been known for over 80 years. Although limited information exists, extensive artisanal mining activity has occurred in open pit and in underground operations prior to the formalization of the mine concessions in 1990. Between 1985 and 2004 two companies, Mineração Araés and Mineração Nova Xavantina, conducted geological and metallurgical studies, geological mapping and a total of 2,306 meters of drilling in 8 diamond drill holes. In 2004, MCSA acquired the mineral and surface rights for the property. Between 2006 and 2012, MCSA drilled a total of 41,135 meters in 204 surface diamond drill holes. In 2013, the property was transferred to NX Gold, a subsidiary of MSCA. Between 2013 and 2015, NX Gold drilled a total of 27,822 meters in 104 surface diamond drill holes and a total of 9,427 meters in 107 underground diamond drill holes. In December of 2016, MCSA (and its interest in NX Gold) was acquired by Ero Copper.

Other exploration activities undertaken from 2013 to 2015 included regional geological mapping, soil sampling and a 1,969 line-kilometer airborne magnetic survey completed in 2013.

In 2018 and 2019, NX Gold conducted the largest drill program undertaken on the property to date, completing a total of 45,055 meters of drilling in 96 surface diamond drill holes and 1,315 meters in 8 underground drill holes, resulting in the discovery of and delineation of the Santo Antonio vein. The drilling followed standard industry procedures including measuring core recovery, rock quality design (RQD), taking photos of the core boxes, geological logging of the core, sampling, and assaying. NX Gold inserts a series of certified reference material, blanks, and laboratory duplicates in the stream of samples to verify the assay results as part of its QA/QC procedures.

32 

1.5       Drilling, Sample Preparation, Analysis and Security

Several drill programs have been conducted at the NX Gold Mine. Prior to the 2018/2019 drill program, the bulk of the drilling occurred during the period from 2006 to 2012 when the property was held by MCSA. During the period from 2006 to 2012, approximately 43,000 meters of drilling in 236 drill holes was performed in support of moving the mine into commercial production. The global drill hole database at the NX Gold Mine includes 412 drill holes totaling 116,318 meters of surface drilling, and 147 drill holes totaling 12,637 meters of underground drilling.

Drilling and assaying undertaken in support of the current Mineral Resource and reserve estimate has been carried out using sampling, security and QA/QC procedures that are in line with industry best practices.

Beginning in 2015, a full QA/QC program meeting generally recognized industry best practices has been in use. Standardized procedures are used in all aspects of the exploration data acquisition and management including surveying, drilling, sampling, sample security, assaying, and database management.

QA/QC measures, as part of the routine core sampling procedures, use blank, standard and duplicate samples to allow verification of the fire assay results produced by the NX Gold laboratory. For the 2014 to 2019 drilling programs, control samples were inserted at the frequency of 1 gold certified reference, 1 blank sample and 1 duplicate pulp sample every 20 samples.

The authors of the NX Gold Technical Report performed an evaluation of the data used in the determination of NX Gold’s mineral resource estimate and found the results to be in accordance with industry best practice and appropriate for use in the current mineral resource estimate.

1.6       Mineral Resource and Mineral Reserve Estimate

Mineral Resources

Block model tonnage and grade estimates for the NX Gold Mine were classified according to the CIM Standards. A gold cut-off grade of 1.90 gpt was considered for Mineral Resources using cost parameters for similar sized underground mines operating in Brazil based on the experience of the Qualified Persons and peak gold price over the last 10 years. Mineral resources have been estimated using ordinary kriging inside block sizes of 2.5 meters (x), by 2.5 meters (y), by 0.5 meters in height (z) and a minimum mining stope dimension of 1.25 meters (x), by 1.25 meters (y), by 1.5 meters in height (z).

The NX Gold resource estimate was sub-divided in four mineralized veins: Brás, Buracão, Santo Antônio and Matinha. The 3D model for the mineralization of the NX Gold Mine (grade shell) was generated based on drilling and underground channel samples.

Table 1 - Mineral Resource Estimate

Deposit			Classification		Tonnes (kt)		Au (g/t)		Au (koz)
		Zone 1		Indicated		26.3		8.32		7.0
				Inferred		-		-		-
	Brás	Zone 2		Indicated		6.9		3.36		0.7
				Inferred		149.3		4.81		23.1
		Total		Indicated		33.2		7.29		7.8
				Inferred		149.3		4.81		23.1
		Zone 1		Indicated		5.8		23.08		4.3
				Inferred		-		-		-
	Buracão	Zone 2		Indicated		-		-		-
				Inferred		7.7		2.77		0.7
		Total		Indicated		5.8		23.08		4.3
				Inferred		7.7		2.77		0.7

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Deposit	Classification		Tonnes (kt)		Au (g/t)		Au (koz)
		Indicated		403.7		12.53		162.6
Santo Antônio		Inferred		164.2		11.31		59.7
		Indicated		-		-		-
Matinha		Inferred		149.0		12.15		58.2
		Indicated		442.6		12.28		174.7
Total		Inferred		470.2		9.37		141.7

1. Mineral Resource effective date of August 31, 2019.

2. Presented Mineral Resources inclusive of Mineral Reserves. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

3. Mineral resource gold cut-off grade of 1.90 gpt gold. Mineral resources have been estimated using ordinary kriging inside 2.5m x 2.5m x 0.5m block sizes and minimum stope dimensions of 1.25m x 1.25m x 1.50m. The Mineral Resource estimates were prepared in accordance with the CIM Standards, and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate to the deposit.

Mineral Reserves

The Mineral Reserve estimates for the NX Gold Mine were prepared in accordance with the guidelines of NI 43-101 and the CIM Standards by NX Gold Mine engineering personnel under the direct supervision of GE21.

It is the opinion of GE21 that the current Mineral Reserves for the underground operation have been estimated in a manner consistent with industry best practices, CIM Standards and NI 43-101 guidelines.

Table 2 - Mineral Reserve Estimate

Deposit		Reserve Class	Tonnes (kt)		Au (g/t)		Au (koz)
		Proven	-		-		-
Brás	Zone 1	Probable		3.0		3.83		0.4
		Proven		-		-		-
Buracão	Zone 1	Probable		2.7		5.42		0.5
		Proven		-		-		-
Santo Antônio		Probable		373.2		11.45		137.4
		Proven		-		-		-
Total		Probable		378.9		11.35		138.2

1. Mineral Reserve effective date of September 30, 2019.

2. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

3. Mineral reserve estimates were prepared in accordance with the CIM Standards and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate for the deposit. Mineral reserves are based on a long-term gold price of US$1,350 per ounce, and a USD:BRL foreign exchange rate of 3.80. Mineral reserves are the economic portion of the Indicated Mineral Resources. Mineral reserve estimates include operational dilution of 10% plus planned dilution of approximately 10% within each stope. Assumes mining recovery of 90% and pillar recovery of 60%. Practical mining shapes (wireframes) were designed using geological wireframes / Mineral Resource block models as a guide.

The Mineral Reserves for the NX Gold Mine are derived from the Indicated Mineral Resource as defined within the resource block model following the application of economic and other modifying factors further described below. Inferred Mineral Resources, where unavoidably mined within a defined mining shape have been assigned zero grade. Dilution occurring from Indicated resource blocks was assigned grade based upon the current Mineral Resource grade of the blocks included in the dilution envelope. Mineral reserves were classified according to the CIM Standards and the CIM Guidelines by Sr. Porfirio Cabaleiro Rodriguez of GE21, an independent qualified person as such term is defined under NI 43-101.

Mineral reserve cost assumptions are based on actual operating cost data during the 8-month period from January 1, 2019 to August 30, 2019. The USD:BRL foreign exchange rate of 3.80 was used.

Mineral reserve cut-off grades and parameters applied to the Mineral Reserve estimate are summarized below:

 ● 2.92 gpt applied to mining stopes incorporating mining and development, processing, general and administrative (“G&A”) and indirect costs;

 ● 1.50 gpt applied to gallery development incorporating development and processing costs; and,

 ● 2.26 gpt applied to mining marginal material adjacent to planned mining stopes incorporating mining, development and processing costs.

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Mineral reserve cut-off cost parameters are expressed as per tonne of ore mined and processed (run of mine “ROM”):

Table 3 - Mineral Reserve Cut-off Parameters

Mining Costs (US$/tonne ROM)	$	33.48
Processing Costs (US$/tonne ROM)	$	44.30
G&A Costs (US$/tonne ROM)	$	24.36
Indirect Costs (US$/tonne ROM)	$	13.16
Metallurgical Recovery (average)		91.0	%

Gold Price (US$/oz)	$	1,350
Foreign Exchange Rate (USD:BRL)		3.80

Other modifying factors considered in the determination of the Mineral Reserve estimate include:

· A cut-off grade of 2.92 gpt was applied in the determination of planned mining stopes within the Mineral Resource blocks based on actual operating cost data and past operating performance of the mine.

· The mining method employed for the Brás and Buracão veins is overhand cut and fill, with backfill requirements generated from waste development. The mining method employed for the Santo Antônio vein is inclined room and pillar.

· Maximum stope spans between sill pillars of 17 meters by 17 meters for the Buracão vein, 39 meters by 10 meters for the Brás vein, 40m by 18m for the east portion of the Santo Antonio vein and 40 meters by 15 meters for the west portion of the Santo Antonio vein based on geotechnical mapping, modeled rock quality and uniaxial compression test results.

· Within designed stopes, all contained material was assumed to be mined with no selectivity. Inferred Mineral Resources, where unavoidably included within a defined mining shape have been included in the Mineral Reserves estimate at zero grade. Mining dilution resulting from Indicated blocks was assigned the grade of those blocks captured in the dilution envelope using the current Mineral Resource estimate.

· Operational dilution of 10%, mining recovery of 90% within planned stopes, 60% pillar recovery.

1.7       Mining Methods

The mining method employed for the Brás and Buracão veins is overhand cut and fill, with backfill requirements generated from waste development except for the lower levels of Buracão mined in 2019. The application of overhand cut and fill has been in use since the start of the NX Gold Mine and is based on desired selectivity, geometry of the orebodies (both planned and previously mined) as well as the rock mechanic characteristics of the footwall and hanging wall. The distance between permanent excavations and the mining area is 30 meters. The Brás mine is divided into vertical panels of 64 meters with interlevel spacing of 15 meters, while the Buracão mine is divided into vertical panels of 35 meters with interlevel spacing of 14 meters.

The mining method of the Santo Antonio vein is inclined room and pillar, primarily due to the geometry of the orebody, divided into 2 panels on levels -65 and -170. Each room, spanning 8 meters, is separated by pillars 5 meters by 4 meters. This method was successfully employed in the lower levels of the Buracão vein mined in 2019.

Based on operating experience from portions of the the Buracão vein, the mine plan of Santo Antonio assumes a mining rate of 500 tonnes per month per room in operation. The main constraint in this mining method is the number of jackleg operators per shift and developed rooms from which to conduct mining operations. The mine production plan for the NX Gold Mine was generated using EPS Datamine software taking into account these practical constraints.

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1.8       Recovery Methods

The metallurgical process currently in place has been engineered and optimized to leach gold ores containing preg-robbing units capable of adsorbing gold from cyanide solutions, such as the carbonaceous phyllite unit that exists throughout the NX Gold Mine orebodies.

Metallurgical recoveries at the NX Gold Mine have been sequentially optimized since commissioning to recover gold and silver from the quartz vein orebodies containing carbonaceous phyllite (a preg-robbing unit found in the orebodies at the NX Gold Mine). This optimization work has resulted in recoveries increasing from approximately 40% in 2012 when the plant was commissioned, to current metallurgical recoveries of over 90%. Prior to the Effective Date, average feed grade to the plant was approximately 7.23 gpt gold. 2019 production from the NX Gold Mine to the Effective Date is shown below in Table 4.

Table 4 - Nova Xavantina Plant Performance to Effective Date

	Jan 1st – Sep 30th, 2019
Mill Feed (000 tonnes)		115,068
Gold Grade (gpt Au)		7.23
Metallurgical Recovery (%)		91.2
Au Production (oz)		24,931
Ag Production (oz)		15,326

Subsequent to the Effective Date of the NX Gold Technical Report, full year 2019 production totaled 30,434 ounces of gold and 19,641 ounces of silver produced as a by-product. The full-year 2019 results totaled 158,275 tonnes of ore grading 6.98 grams per tonne gold processed, resulting in the production of 30,434 ounces of gold after metallurgical recoveries that averaged 85.7% during the period.

Processing takes place at the Nova Xavantina Plant. Unit operations include a conventional 3 stage crush, milling and a combination of gravity concentration with intensive leaching and flotation followed by carbon in leach (“CIL”) and a desorption circuit. Gold and silver are produced from solution via electrolysis followed by smelting of doré bars containing both gold and silver. The installed crushing and grinding capacity is approximately 80 tph and 44.5 tph, respectively, resulting in an installed annual plant capacity in excess of 300,000 tonnes per annum. The plant is currently operating at less than one-third of its installed capacity.

In 2018 and 2019, NX Gold conducted gravity concentration tests to assess recovery of the Santo Antonio orebody in advance of mining operations. A composite sample was taken from 9 drill holes and processed in the NX Gold’s laboratory Falcon concentrator. The results obtained exhibited similar characteristics as previously tested samples from within existing and historic operations of the Buracão and Brás veins.

Based on the geologic structure, lithology and mineralogy of the Santo Antonio vein as compared to the other previously mined ore bodies (Brás and Buracão), and as reflected in operational tests conducted in 2018 / 2019, the authors of the NX Gold Technical Report have assumed ore processed from the Santo Antonio vein would be similar to the current recovery rates, derived from processing the Brás and Buracão ores.

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Based on the current Mineral Reserve estimate, the production plan for the Nova Xavantina Plant is set forth below:

Table 5 - NX Gold Production Plan

	2019*		2020e		2021e		2022e
Ore Mined & Processed (tonnes)	21,214		138,873		106,013		112,782
Au Grade (gpt)	6.65		9.95		16.36		9.24
Recovery (%)	87.0	%	91.0	%	91.0	%	91.0	%
Bullion Mass (kg)	350		3,594		4,507		2,707
Gold Production (oz)	3,936		40,438		50,720		30,472
Silver Production (oz)	2,249		23,107		28,983		17,413

(*) 2019 production outlines the Mineral Reserve schedule for the three months from the effective date of September 30, 2019 to December 31, 2019.

Throughout the life of the mine, the plant has successfully processed ores with different grades and varying carbon content, obtaining key information to improve recovery, under different operational conditions. The metallurgical recoveries of the NX Gold Mine have increased from 40% in 2012 to up to 94% in 2019 (with an average of 91% prior to the Effective Date), as summarized in the following table.

Table 6 - Historic Production of the NX Gold Mine

Year	Tonnes (t)		Au (oz)		Recovery
2012		137,980		6,654		40	%
2013		261,726		26,216		67	%
2014		208,259		23,730		83	%
2015		226,608		35,115		87	%
2016		213,776		29,098		84	%
2017		135,013		25,173		88	%
2018		117,857		39,808		91	%
Jan to Sep. 30th, 2019		115,068		24,931		91	%
Total		1,424,985		210,725		84	%

1.9       Project Infrastructure

The facilities at the NX Gold Mine include the mine portal, the Nova Xavantina Plant, tailings storage facility mechanical workshop, administrative offices, metallurgical laboratory, security gate and guard facilities, medical clinic, cafeteria and gravel airstrip used to fly out doré bars after production.

National electrical service is available on site from the town of Nova Xavantina, located approximately 18 km from the NX Gold Mine. Water in sufficient quantities to support mining and processing operations is sourced from surface run-off and a fully permitted water supply system comprised of a water intake from the neighboring Mortes River, with capacity of 150 cubic meters per hour, and a water main connecting the sumps of the underground mine. The mine is supplied through a 34.5 kV power transmission line (600 kVA), owned by the state public utility, ENERGISA S/A.

Process tailings are disposed into two ponds in a closed loop with water loss only occurring through evaporation and in the residual moisture content of the tailings. The first pond receives inert-tailings from flotation, and the second pond receives non-inert tailings from the CIL circuit. The latter is coated with a double layer of HDPE for natural degradation of residual cyanide, complemented by a cyanide detoxification circuit.

1.10       Permitting, Environmental and Social Considerations

The NX Gold Mine is a fully permitted gold mine currently in operation. An environmental action program was developed for the Company prior to the mine reaching commercial production. NX Gold follows the guidelines set forth in the program to reduce its impact and recover impacted areas within the vicinity of the mine. NX Gold adheres to a program of frequent environmental monitoring including water quality control, as well as re-vegetation of historic artisanal mining areas that pre-date the commissioning of the mine by NX Gold.

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The mine’s closure plan, adapted to the current social and environmental context within the area of the NX Gold Mine, has been designed to maximize the physical, chemical, biological, and socio-economic stability of the area after mining activities have concluded. The current estimated reclamation liabilities are approximately R$21.8 million.

NX Gold maintains an excellent relationship with the neighboring community of Nova Xavantina, as well as smaller neighboring land-owners, providing among others, community outreach, children’s educational programs and sponsorship of local sporting events and teams. NX Gold has provided technical and financial support towards the environmental rehabilitation of areas previously impacted by historic artisanal mining activities and has remained an important economic contributor to the region through both direct and indirect jobs, royalties and tax revenue. The NX Gold Mine has all required environmental licenses to conduct its operations, issued by the Environment Secretary of Mato Grosso (SEMA) in 2007. The authors of the NX Gold Technical Report are not aware of any material environmental or permitting risks to the current operations nor to the envisioned production plan associated with this Mineral Reserves estimate.

1.11       Capital and Operating Costs

Capital and operating costs are shown for 2019 through 2022 reflecting the period of operation from the day immediately following the Effective Date (commencing October 1, 2019) to December 31, 2022. For the purposes of the NX Gold Technical Report, mine reclamation and closure are assumed to commence on the conclusion of mining of the Mineral Reserves; however, NX Gold is actively undertaking exploration activities to increase the mine’s life. It is anticipated that a combination of Mineral Resource conversion, extension of the Santo Antonio ore body, and delineation of target areas will serve to augment the production profile and increase mine life subject to satisfactory exploration results, technical, economic, legal and environmental conditions.

Total capital costs are estimated at R$66.3 million, of which R$21.8 million is related to mine closure in 2022. Details of these capital expenditures are shown below in Table 7.

Table 7- Forecast Capital Expenditures

Total Capital Expenditure	Unit		2019 1		2020		2021		2022		Total
Development		R$M		7.7		8.4		2.8		0.0		18.8
Equipment		R$M		0.9		0.5		0.0		0.0		1.4
Exploration / Drilling		R$M		1.9		0.0		0.0		0.0		1.9
Infrastructure		R$M		1.5		4.7		0.7		0.7		7.7
Others		R$M		0.5		4.7		2.1		1.6		8.9
Saftey, Health & Environment		R$M		0.3		2.7		1.6		23.2		27.7
Total		R$M		12.7		21.0		7.2		25.4		66.3

[1] 2019 based on the 3 months from October 1, 2019 to December 31, 2019

An operating cost forecast was prepared using the mine’s operating history and current consumption coefficients. The expected C1 Cash Cost of the NX Gold Mine averages US$495 per ounce of gold produced. The all-in sustaining cost of the NX Gold Mine, including G&A costs, capitalized development and plant sustaining capital, averages US$617 per ounce of gold produced over the life of mine. C1 cash cost is a non-IFRS measure, please refer to Section 22.1 for additional information on non-IFRS measures, including C1 cash costs.

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Table 8 - Operating Cost Summary

		2019 1			2020			2021			2022			Total
Exchange Rate	R$/US$		3.80			3.80			3.80			3.80			3.80
Ore Treated	( tonnes )		21,214			138,873			106,013			112,782			378,882
Gold Contained	( oz )		3,936			40,438			50,720			30,472			125,567
Operational Support	000 R$		3,655			16,265			16,350			16,389			52,659
Underground Mining	000 R$		12,140			37,069			32,931			32,932			115,072
Processing	000 R$		6,891			29,451			27,423			27,837			91,602
Sub Total	000 R$		22,686			82,785			76,704			77,158			259,333
Less Silver Income	000 R$		(141	)		(1,444	)		(1,811	)		(1,088	)		(4,484	)
Less Capitalized Development	000 R$		(7,659	)		(8,366	)		(2,756	)		-			(18,782	)
Total	000 R$		14,886			72,974			72,137			76,070			236,067
C1 Cash Cost	R$/oz		3,782			1,805			1,422			2,496			1,880
C1 Cash Cost	US$/oz		995			475			374			657			495
Add G&A	000 R$		3,034			9,646			9,646			9,646			31,973
Add Capitilzed Development	000 R$		7,659			8,366			2,756			-			18,782
Add Plant Sustaining Capital	000 R$		-			3,045			2,300			2,100			7,445
Total	000 R$		25,579			94,032			86,839			87,816			294,267
AISC	R$/oz		6,498			2,325			1,712			2,882			2,344
AISC	US$/oz		1,710			612			451			758			617

^[1] 2019 based on the 3 months from October 1, 2019 to December 31, 2019

1.12       Economic Analysis

An economic analysis was prepared for the NX Gold Mine using the following primary assumptions:

· Considers commencing on the Effective Date and does not include actual performance achieved prior to October 1, 2019;

· Total ore processed of 378.9 thousand tonnes at an average head grade of 11.35 g/t gold;

· Gold sales are assumed to equal production, with total sales of 125,567 ounces of gold;

· Metal prices of US$1,400 per ounce of gold and US$17.00 per ounce of silver;

· USD:BRL foreign exchange rate of 3.80; and

· CFEM royalty based on 1% of gross revenue.

The NX Gold Mine produces an undiscounted after-tax cash flow of approximately R$224 million (approximately US$59 million)

The after-tax NPV at a 5% discount rate is US$54.5 million and the internal rate of return (“IRR”) is 2,106% and payback is approximately 4 months. The high IRR and fast pay-back period generated by the NX Gold Mine is as a result of the mine currently being in operation, and minimal capital expenditure outlay required for the development of the Santo Antonio vein during the fourth quarter of 2019. The results of the economic analysis are shown below in Table 9.

An after-tax sensitivity analysis was performed considering changes in gold price, foreign exchange rates, and capital and operating costs. The analysis shows that the NX Gold Mine is most sensitive to gold prices and foreign exchange rates.

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Table 9 - Economic Analysis of the NX Gold Mine

Assumptions		2019 1			2020			2021			2022			Total
Exchange Rate	R$/US$		3.80			3.80			3.80			3.80			3.80
Gold Price	US$/oz		1,400			1,400			1,400			1,400			1,400
Production
Ore Mined	tonnes		21,214			138,873			106,013			112,782			378,882
Gold Grade Mined	g/t		6.65			9.95			16.36			9.24			11.35
Ore Processed	tonnes		21,214			138,873			106,013			112,782			378,882
Gold Grade Processed	g/t		6.65			9.95			16.36			9.24			11.35
Global Recovery	%		86.7			91.0			91.0			91.0			90.8
Gold Contained	oz		3,936			40,438			50,720			30,472			125,567
Capex
Total	000 R$		12,721			21,019			7,167			25,440			66,346
Operating Costs
General & Administrative	000 R$		3,034			9,646			9,646			9,646			31,973
Operational Support	000 R$		3,655			16,265			16,350			16,389			52,659
Underground Mining	000 R$		12,140			37,069			32,931			32,932			115,072
Processing	000 R$		6,891			29,451			27,423			27,837			91,602
Sub Total	000 R$		25,720			92,431			86,351			86,805			291,306
Depreciation/Exhaustion	000 R$		6,163			16,256			20,489			18,227			61,135
Total Costs	000 R$		31,883			108,687			106,840			105,032			352,441
Revenue
Gold Sales	tonnes		3,936			40,438			50,720			30,472			125,567
Gross Metal Revenue	000 R$		20,942			215,128			269,833			162,111			668,014
Total Net Metal Revenue	000 R$		20,196			207,469			260,227			156,340			644,232
Total Net Revenue	000 R$		20,196			207,469			260,227			156,340			644,232
Cash Flow
Revenue	000 R$		20,196			207,469			260,227			156,340			644,232
Opex (ex-Depreciation & Exhaustion)	000 R$		(25,720	)		(92,431	)		(86,351	)		(86,805	)		(291,306	)
Less Capitalized Development 2	000 R$		7,659			8,366			2,756			-			18,782
Income & Social Contribution Taxes	000 R$		(1,162	)		(24,232	)		(35,858	)		(12,373	)		(73,626	)
Employee Bonuses	000 R$		-			(2,266	)		(2,585	)		(2,563	)		(7,413	)
Operating Cash Flow	000 R$		973			96,906			138,189			54,599			290,668
CAPEX	000 R$		(12,721	)		(21,019	)		(7,167	)		(25,440	)		(66,346	)
Free Cash Flow	000 R$		(11,748	)		75,888			131,022			29,160			224,322
Accumulated Free Cash Flow	000 R$		(11,748	)		64,140			195,162			224,322			224,322
Free Cash Flow	000 US$		(3,092	)		19,970			34,480			7,674			59,032
Accumulated Free Cash Flow	000 US$		(3,092	)		16,879			51,358			59,032			59,032
Results
After-Tax NPV5	000 US$		54,537
IRR	%pa		2106	%
Simple Payback	years		0.3

[1] 2019 based on the 3 months from October 1, 2019 to December 31, 2019.

1.13       Conclusion and Recommendations

The authors of the NX Gold Technical Report have carried out a review and assessment of the material technical issues that could influence the future performance of the NX Gold and classified the Mineral Resource and Mineral Reserve estimates. The authors found that the procedures and processes adopted by NX Gold personnel to produce the geological models were executed according proper industry standards. Sampling, QA/QC, security and data control were similarly in line with industry best practices and support the current Mineral Resource and reserve estimate. The authors note the following:

a. NX Gold holds the surface rights and permits required to conduct the mining operation as outlined in the Mineral Reserve estimate. Future development beyond the stated Mineral Reserves may require the acquisition of additional surface rights.

b. The authors have carried out the appropriate review to satisfy that the Mineral Reserve can be technically and profitably extracted. Consideration has been given to all technical areas of the operations, the associated capital and operating costs, and relevant factors including marketing, permitting, environmental, land use and social factors. The authors are satisfied that technical and economic feasibility has been demonstrated.

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c. The authors have not identified any known mining, metallurgical, infrastructure, permitting, legal, political, environmental or other relevant factors that could materially affect the development or extraction of the stated Mineral Reserves.

Regarding the Mineral Resource and Mineral Reserve estimation process, and to continue to ensure the continuity of mining operations, the authors recommend a work program that includes the following:

• Advance the exploration program in regions of exploration potential to further define and classify these zones into incremental Mineral Resources for future development;

• Undertake additional infill drilling campaigns to increase the geological confidence of the current estimate by promoting the classification of Indicated Mineral Resource into Measured Mineral Resource;

• The hanging wall of the deposit, in the opinion of the authors of the NX Gold Technical Report, is competent enough for the current mining method with appropriate mining support. The authors recommend that NX Gold undertake a third-party geotechnical study to further evaluate the potential to reduce sill pillar thickness with the aim of increasing mine recovery; and,

• Conduct a comprehensive metallurgical program to evaluate the Santo Antonio ore characteristics, analogous to the program developed for the Brás and Buracão veins.

Table 10 - GE21 Recommended Work Program

Program	Budget (US$)
Exploration drill program in the regions identified as having exploration potential	$	1,800,000
Infill drill campaign to promote the classification of measured Mineral Resources	$	1,200,000
Geomechanics study for mining stope support dimensioning	$	300,000
Complementary metallurgical test work – Santo Antonio orebody	$	25,000
Total	$	3,325,000

Updated Information with respect to the NX Gold Property

The following update has been prepared under the supervision of and approved by Ricardo Emerson Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

Mineral Resource and Mineral Reserve Estimates as at December 31, 2019

The Mineral Resource and Mineral Reserve estimates contained in the NX Gold Technical Report were prepared as at August 31, 2019 and September 31, 2019, respectively. As production at the NX Gold Property has continued since the preparation of these estimates, the Mineral Resources and Mineral Reserves at the NX Gold Property have decreased. Accordingly, set out below is an internal update of the Mineral Resource and Minerals Reserve estimates as at December 31, 2019, based on a 1.90 g/t cut-off gold grade for Mineral Resources, cut-off grades for Mineral Reserves (a 2.92 g/t cut-off gold grade for mining stopes; a 1.50 g/t cut-off gold grade for gallery development; and, a 2.26g/t cut-off gold grade for marginal material adjacent to planned mining stopes), and accounting for the material mined since the preparation of the Mineral Resource and Mineral Reserve estimates contained in the NX Gold Technical Report. Mineral Resources are shown inclusive of Mineral Reserves.

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Table 11: NX Gold Mineral Resource Estimate, December 31, 2019

Deposit		Classification	Tonnes (kt)		Au (g/t)		Au (koz)
Brás	Zone 1	Indicated		25.3		8.48		6.9
		Inferred		-		-		-
	Zone 2	Indicated		6.9		3.36		0.75
		Inferred		149.3		4.81		23.1
	Total	Indicated		33.2		7.29		7.8
		Inferred		149.3		4.81		23.1
Buracão	Zone 1	Indicated		3.5		23.08		2.6
		Inferred		-		-		-
	Zone 2	Indicated		-		-		-
		Inferred		7.7		2.77		0.7
	Total	Indicated		5.8		23.08		4.3
		Inferred		7.7		2.77		0.7
Santo Antônio		Indicated		394.7		12.68		160.9
		Inferred		156.5		11.48		57.8
Matinha		Indicated		-		-		-
		Inferred		149.0		12.15		58.2
Total		Indicated		430.4		12.46		172.4
		Inferred		462.5		9.40		139.8

1. Mineral Resource effective date of December 31, 2019.

2. Presented Mineral Resources inclusive of Mineral Reserves. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

3. Mineral resource gold cut-off grade of 1.90 gpt gold. Mineral resources have been estimated using ordinary kriging inside 2.5m x 2.5m x 0.5m block sizes and minimum stope dimensions of 1.25m x 1.25m x 1.50m. The Mineral Resource estimates were prepared in accordance with the CIM Standards, and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate to the deposit.

Table 12: NX Gold Mineral Reserve Estimate, December 31, 2019

Deposit		Reserve Class	Tonnes (kt)		Au (g/t)		Au (koz)
Brás	Zone 1	Proven	-		-		-
		Probable		1.9		4.16		0.3
Buracão	Zone 1	Proven		-		-		-
		Probable		-		-		-
Santo Antônio		Proven		-		-		-
		Probable		362.4		11.65		135.7
Total		Proven		-		-		-
		Probable		364.3		11.61		135.9

1. Mineral Reserve effective date of December 31, 2019.

2. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

3. Mineral reserve estimates were prepared in accordance with the CIM Standards and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate for the deposit. Mineral reserves are based on a long-term gold price of US$1,350 per ounce, and a USD:BRL foreign exchange rate of 3.80. Mineral reserves are the economic portion of the Indicated Mineral Resources. Mineral reserve estimates include operational dilution of 10% plus planned dilution of approximately 10% within each stope. Assumes mining recovery of 90% and pillar recovery of 60%. Practical mining shapes (wireframes) were designed using geological wireframes / Mineral Resource block models as a guide.

BOA ESPERANÇA PROPERTY

The scientific and technical information in this section relating to the Boa Esperança Property is a direct extract of the Executive Summary section contained in the Boa Esperança Technical Report, which has been conformed to be consistent with other defined terms and formatting within this AIF. The entire Boa Esperança Technical Report, a copy of which is available for review under the Company’s profile on SEDAR at www.sedar.com, is incorporated by reference into this AIF and should be consulted for details beyond those incorporated herein.

Executive Summary

SRK was commissioned by Ero to prepare a NI 43-101 compliant Feasibility Study (“FS”) for the Boa Esperança Deposit (“Boa Esperança” or the “Project”) as part of the Boa Esperança Property located in Pará, Brazil. The Project was acquired by MCSA from Corporacion Nacional Del Cobre (Codelco) in 2007 and is now 100% owned by MCSA. In December 2016, Ero acquired approximately 85.0% interest in MCSA. In June 2017, Ero acquired an additional 14.5% by subscribing for shares from treasury for a total interest in MCSA of approximately 99.5%.

This Technical Report is an update of a prior 2015 report prepared by SRK. The original 2015 report has been updated based on work performed throughout various studies developed for the Project by third-party technical and engineering firms throughout the course of the Project’s ownership under MCSA. SRK has reviewed the contents and, where relevant, has accepted and/or modified the conclusions therein based on the judgment of the authors and the recommendations therein. There has been no new material scientific or technical information about the property since the publication of these reports. It is the opinion of the authors of this Technical Report that the information contained in such reports has been appropriately reviewed and are current for the purposes of NI 43-101. A full list of references relevant to the Project is listed in Chapter 27 – References.

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1.1 Property Description and Location

The Boa Esperança copper deposit is located in the municipality of Tucumã, Pará State, Brazil. The site is located approximately 40 km to the southwest of the town. Tucumã can be accessed by state highway PA-279, which connects the town of Xinguara to the town of São Felix do Xingu, a stretch of road that runs for approximately 160 km. The junction of PA-279 with federal highway BR-155 is in Xinguara. The latter is the main highway leading to the city of Marabá, situated around 220 km north of Xinguara.

1.2 Ownership

MCSA acquired the Boa Esperança copper deposit concession from Corporación Nacional del Cobre (Codelco) in 2007 and became the legal owner of the mineral rights to the Boa Esperança copper deposit. In December 2016, Ero acquired approximately 85.0% interest in MCSA. In June 2017, Ero acquired an additional 14.5% by subscribing for shares from treasury for a total interest in MCSA of approximately 99.5%.

The legal status of MCSA’s mining rights is as follows:

· The Final Exploration Report was presented to the DNPM on April 10, 2008 and was approved by the DNPM on July 30, 2009;

· MCSA filed for the Mining Concession through the presentation of an Economic Exploitation Plan (Plano de Aproveitamento Econômico or PAE), which was filed with the DNPM on May 5, 2010; and

· The Preliminary License was filed with the DNPM on March 22, 2012.

All criteria to obtain the mining rights have been fulfilled and the Ero is awaiting final approval of the change status to a full Mining Concession after issuance of the Installation License, currently under review by the Pará State environmental agency.

The Mineral Resources and Mineral Reserves disclosed in this report are completely contained within the Exploration Licence held by MCSA. MCSA is either the beneficial owner or has the right to the required surface rights for the envisioned operations.

1.3 Geology and Mineralization

The Carajás Mineral Province, where the Boa Esperança copper deposit is located, is on the east side of the Amazon Craton and is considered one of the most important mineral provinces in Brazil. It is a region of high economic importance, as it hosts the world’s largest known high-grade Fe deposits, as well as world-class Cu-Au deposits, such as Salobo, Sossego, 118, Cristalino and Igarapé Bahia-Alemão. Deposits of Mn, Ni, Cr, Al and Zn have also been identified in the province. The existence of high-grade significant deposits elsewhere in the region provides no assurance regarding the size, extent, grade, or value of any deposits or prospective deposits at the Boa Esperanҫa.

The Carajás Mineral Province encompasses two distinct tectonic domains, both of these Archean in age. The South Block, which is the older of the two (3.0 to 2.86 Ga) and is where the Boa Esperança deposit is located, is called the Rio Maria Block and contains a typical granite-greenstone belt terrain. The North Block, which is the younger domain (2.8 to 2.5 Ga), is called Carajás and is composed of volcano-sedimentary rocks and granitoids, which host the large Fe, Cu-Au, Mn, Ni and Zn deposits in the province. These two blocks are considered to be products of the juxtaposition of volcanic island arcs and plutonic-like Andes environments, associated with an intra-continental mantle plume.

The Boa Esperança copper deposit occurs within an isolated hill, which is elongated in a NNE direction and located 38 km SW following a straight line from the town of Tucumã. The topographic high is supported mainly by breccias composed of quartz and magnetite, which cut the Neoarchean biotite-granite (2.78 Ga), the host of the copper mineralization. The Neoarchean biotite granite intrudes into the Mesoarchean Rio Maria granodiorite (2.85 Ga).

Mineralization consists of a series of brecciated zones, which are aligned N60°-70°E and incline in a SE direction (60°-70°SE). However, another alignment of about N40°E was observed in the field and coincides with the elongation of the Boa Esperança hill.

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1.4 Exploration Status

Project exploration has consisted of ground geological mapping and sampling, geophysical surveys and exploration drilling. Ground geophysical surveys completed include magnetic and gravity surveys and induced polarization electrical surveys.

The geophysical surveys were completed by Codelco during the period from 2003 to 2006. The exploration work conducted by MCSA includes confirmation drilling conducted during the period from 2008 through 2013, and site-specific studies in support of this and prior feasibility studies.

The Project’s first drillhole campaign began in 2003 under the supervision of Codelco. Codelco completed four drillhole campaigns in 2003-2004, 2005 and 2006. Codelco completed 62 core drillholes, totaling 21,956.12 m on a 200 m x 200 m drilling grid that was infill drilled to 100 m x 100 m.

MCSA completed additional drilling between 2008 and 2013, totaling 36,016.13 m, for a project total of 57,972.25 m in 165 core holes. Infill drilling was completed to approximately 50 and 25 m centers for the core of the deposit.

The deposit has been drilled sufficiently to allow for the definition of Mineral Resources as defined under NI 43-101.

1.5 Mineral Resource Estimate

The Mineral Resource estimate was prepared by SRK Senior Geologist Rafael Russo Sposito and supervised by SRK Principal Resource Geologist Carlos César Barbosa; Mr. Barbosa is a Qualified Person and is independent of MCSA as defined by NI 43-101.

The Mineral Resource estimate was prepared using a three-dimensional percentage block model of 10 m x 10 m x 5 m. In addition, oxidation state and resource classification codes were assigned to each block. The resource estimation was conducted using Geovia GEMS™ (v6.6) software. Other graphs were created using GSLIB software.

The Mineral Resources are constrained to a pit optimization shell run with the following parameters:

· Copper price: US$4.00 per pound;

· Mining cost: US$2.25/t moved;

· Processing cost + G&A: US$8.21/t processed;

· TC/RC: US$0.32/lb copper; and

· Recovery: 91%.

The internal copper CoG (excluding mining costs) is 0.20 %.

The Measured, Indicated and Inferred Mineral Resources within the pit optimization shell are given in Table 1. The copper grades are undiluted grades within the grade shell wireframes.

Table 1: Mineral Resource statement, Boa Esperança Copper Project, Pará State,
Brazil, SRK Consultores do Brasil LTDA., June 1, 2017

Domain	Category	Quantity (Mt)		Cu %		Contained Cu (tonnes)
	Measured		41.00		0.81		332,100
	Indicated		26.17		0.62		162,254
Sulfide	Measured + Indicated		67.17		0.73		490,341
	Inferred		1.35		0.56		7,560
Secondary Sulfide	Inferred		2.05		0.69		14,145
Total	Measured		41.00		0.81		332,100
	Indicated		26.17		0.62		162,254
	Measured + Indicated		67.17		0.73		490,341
	Inferred		3.40		0.64		21,760

Source: SRK

Effective Date: June 1, 2017

(1) Tonnes and grade are rounded to reflect approximation.

(2) Mineral Resources are stated at a cut-off grade of 0.2% Cu and are fully contained within an optimized pit shell.

(3) Stated Mineral Resources are inclusive of Mineral Reserves.

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Mineral Resources are not Mineral Reserves and have not demonstrated economic viability. Mineral Resource estimates do not account for mineability, selectivity, mining loss and dilution. These Mineral Resource estimates include Inferred Mineral Resources that are normally considered too geologically speculative to allow for the application of economic considerations that would see them categorized as Mineral Reserves. There is also no certainty that these Inferred Mineral Resources will be converted to Measured and Indicated categories through further drilling or into Mineral Reserves once economic considerations have been applied.

1.6 Mineral Reserve Estimate

The conversion of Mineral Resources to Mineral Reserves requires accumulated knowledge achieved through pit optimization, pit design, economics and associated modifying parameters.

The Mineral Reserves were calculated based on a cut-off grade of 0.28% Cu and a life of mine (“LoM”) copper price of US$ 7,000/t LME Cu.

In accordance with the CIM classification guidelines, only Measured and Indicated Mineral Resource categories are converted to Proven and Probable Mineral Reserves respectively (through inclusion within the open-pit mining limits). Inferred Mineral Resources, where unavoidably mined, have been treated as waste and assigned zero grade.

Table 2 shows the Boa Esperança mine open pit ore reserve statement.

Table 2: Mineral Reserve Statement for the Boa Esperança copper deposit, State of Para,
Brazil, SRK Consultores do Brasil Ltda. as of June 1, 2017

Mineral Reserve Classification	Volume		Density		Dry Tonnes		Cu		Contained Cu
	m3 x 1,000		t/m3		t x 1,000		%		t x 1,000
Proven		5,744.50		3.225		18,528.1		0.96		178.05
Probable		315.6		3.089		975.0		0.72		7.02
Total		6,060.10		3.218		19,503.1		0.95		185.07

(1) Effective Date: June 1, 2017

(2) Open pit Mineral Reserves assume full mine recovery;

(3) Open pit Mineral Reserves are diluted along lithological boundaries and assume selective mining unit of 2.5 m x 2.5 m x 5 m;

(4) The strip ratio was calculated to be 1.93 (waste to ore);

(5) Reserves are based on a price of US$ 7,000/t LME Cu throughout the life of the mine;

(6) Reserves are based on a cut-off grade of 0.28% Cu;

(7) Mineral Resource tonnage and contained metal have been rounded to reflect the accuracy of the estimate. As a result of this rounding, the numbers may not add up;

(8) Contained copper is reported as in-situ and does not include process recovery; and

(9) The Mineral Reserve estimate was calculated by Rubens Mendonça, BSc, MBA, Chartered Professional Member of the AusIMM, Mining Manager of SRK Consultores do Brasil as at the date of the report (currently Director of Planminas), in accordance with the standards set out in CSA, NI 43-101 and generally accepted CIM “Estimation of Mineral Resource and Mineral Reserves Best Practices” guidelines.

1.7 Mining Methods

Boa Esperança is a copper deposit, averaging approximately 0.95% Cu diluted grade within the minable pit. The mineralization is close to the surface and the resource is appropriate for an open pit mining operation.

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The final pit design in this feasibility phase of the Boa Esperança project totals 19.5 Mt of Proven and Probable Mineral Reserves with an average diluted grade of 0.95% Cu. From this total, 17.5 Mt is classified as high grade material with an average Cu content of 1.02% and the remaining 2.0 Mt as low grade material, with a grade of 0.34% Cu.

Waste materials amount to 37.7 Mt, which is comprised of 19.6 Mt of saprolite, 8.9 Mt of weathered rock and 9.2 Mt of fresh rocks. The LoM strip ratio of waste to ore is 1.93.

The operation of the Boa Esperança mine will utilize conventional open pit mining techniques and small size mining equipment to mine a total of 57.2 Mt of material over the life of the mine. This comprises 19.5 Mt of ore and 37.7 Mt of waste materials. A total of 5.1 Mt of ore will be moved from the stockpiles to the plant.

The main mine equipment selected for the Boa Esperança project consists of 4.0 m³ hydraulic excavators, on-highway 35t trucks and drills.

It has been assumed that 100% of weathered and fresh rocks and 10% of saprolites will be drilled and blasted in 10-meter-high benches. Ore will be hauled to the primary crusher or to the run of mine (ROM) stockpiles close to the primary crusher. Waste materials will be hauled to different dumps and destinations. Grade control will be performed through drilling, sampling and assaying materials within the pit limits using the production drills.

The mine is scheduled to operate in three 8 hour shifts, 7 days per week, 365 days per year. Whenever mine production needs to be reduced or interrupted, the primary crusher will be fed from the regularization pile using a front-end loader.

1.7.1 Geotechnical

Three distinct layers of materials were identified: saprolite, weathered rocks and fresh rocks.

Based on the Planer Rupture models between berms performed in studies 8 and 9, steeper angles for the excavated slopes in the weathered and fresh rocks have been proposed. However, for the saprolite, a shallower angle is recommended, as this material forms a less cohesive soil and is more likely to fail at steep slope face or inter-ramp angles.

Table 3 shows the slope geometry proposed by SRK for each type of material.

Table 3: Proposed angles for each type of material

	Saprolite	Weathered Rock	Fresh Rock
Bench Heigth	10,0 m	10,0 m	10,0 m
Berm Width	7,0 m	5,0 m	5,0 m
Slope Face Angle	45º	70º	83º
Inter-Ramp Angle	31,5º	49º	58º

1.8 Mineral Processing and Metallurgical Testing

This section describes the experimental work performed with the samples of two different rock types from Boa Esperança deposit, Tucumã, PA, namely "breccia" and "granite".

In early test work, the Boa Esperança deposit was considered as a conventional disseminated copper deposit. However, it has two distinct geological features, a breccia and a granite rock type. The sulphide minerals have been concentrated in faults and open spaces within the granite body.

An experimental program was developed in two primary stages to characterize the ore and evaluate pre-concentration methods: bench scale testing performed on a trays jig, followed by continuous tests with a small-scale pilot plant.

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Their results confirmed the previous experimental conclusions:

· 30% of the crushing product is under 3mm and shows copper enrichment factors between 1.55 and 2.0 as compared to the ROM copper grade. The coarse fraction which fed the jig had a copper grade enrichment factor between 0.75 and 0.8 of the ROM grade, implying copper is mostly contained in the minus 3mm fraction.

· 50% of the mass was rejected in jigging. The copper recovery varied from 86% to 96%. Adding to this recovery the recovery of the copper contained in the finer fraction (-3 mm) of the crushed product, the total recovery of the circuit incresaed to 90% to96%.

· After the jigging continuous testing, the jig concentrate was crushed to minus 3.35 mm and recombined with the natural fines (minus 3 mm) from each rock type then ground to 106 µm. Locked cycle froth flotation locked tests were performed to concentrate the copper sulphide.

· The tailings of this initial flotation were refloated to concentrate pyrite (sequential flotation).

· The tailings of this second stage flotation were submitted to magnetic separation and yielded an iron ore concentrate and the final fine tailing.

· The conclusion of this work is that pre-concentration is an effective method for rejecting a significant mass of ROM feed, with minimum copper losses. In practice, this will reduce the size of the crushing and concentrating plant and as a result - the capital and operating costs.

· It was also demonstrated that jigging using simple equipment as the AllMineral jig (a Baum-type pneumatic jig) is effective. More sophisticated equipment, such as dense media separators, or specialized jigs with artificial beds or for special use, are unnecessary.

· The pre-concentration study was followed by blending the jig concentrate with the minus 3 mm of the ROM, grinding and performing froth flotation and magnetic separation testing.

· The main deleterious contaminants like F, Cl, U, As, P, Pb and Zn are present in the concentrate in traces such that significant smelter penalties are not anticipated.

· Bond crushability indexes varied from 14.9 to 18.1 kWh/t, averaging 16.7 kWh/t indicating difficult crushing plant feed.

· Bond ball mill work indexes ranged from 13.9 to 17.0 kWh/t with an average of 15.7 kWh/t, indicating a medium/hard plant feed.

The result used to estimate the predicted recovery, as a function of feed grade is summarized in Figure 1. The blue line shows the recovery for ROM grades greater or equal to 0.57% Cu and the red shows expected recovery for grades bellow 0.57% Cu.

 

Figure 1: Overall recovery (%) x ROM grade (% Cu)

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1.9 Recovery Methods

Open pit mining is planned for a production rate of 2.31 million tonnes (Mt) per year at an average ore grade of 1.14% Cu. Ore will be processed in a concentrator at a rate of 9,033.6 tonnes per day (t/d) (primary crushing) using conventional processes considered standard to the industry. The processing flowsheet, as well as the initial mass balance is based on work performed in 2011 by, “Consolidação do Desenvolvimento de Processo – Projeto Boa Esperança”, dated January 2011 (the “2011 Metallurgical Report”), the results of which were reviewed and verified by SRK.

Although not used specifically as the basis for process design criteria, confirmatory variability test work was undertaken by SGS-Geosol and reported in the following studies: “Final Report – Flotation Testwork on Copper Samples from the Boa Esperança Project”, dated May 10, 2012 (the “2012 Metallurgical Report”). Subsequent to that work, several additional confirmatory campaigns were conducted, producing the following reports:

· “VLC-Testes de sedimentação e filtração-15/12/14”;

· “Simulação de britagem Metso, novembro 2014”; and,

· “SGS Geosol – Testes de Wi-04/09/14”, “SGS Geosol – Final Report-Jigging, flotation and magnetic separation on a composite sample for the Boa Esperança Project – Final Report – SG0014-1403/rev02 – 10/04/2015”.

The final process design and mass balance was performed by incorporating a jigging pre-concentration stage prior to flotation, based on favorable metallurgical testwork results.

1.9.1 Final Process Flowsheet Design

The process flowsheet includes three-stage crushing, screening, jigging, ball mill grinding, copper rougher flotation, two stages of copper cleaner flotation and pyrite flotation from the copper rougher and scavenger flotation tailing. The final copper concentrate is thickened prior to pressure filtration and the flotation tailing is cycloned, dewatered, thickened and filtered prior to discharge to the tailing storage facility. The pyrite concentrate from the pyrite flotation is sent to the high sulfur pond.

1.9.2 Final Process Material Balance

Process plant material balances have been developed for the crushing circuit, screening circuits, jigging, grinding, copper flotation, regrind, pyrite flotation, concentrate / tailing thickeners and dewatering circuits.

1.9.3 Final Process Plant Water Balance

The water balance includes the water requirements for both raw water and recycled process water. A fresh water requirement of 143 m³/hr is estimated and is based on an overall process plant water requirement of 560.8 m³/hr with 552.0 m³/hr being provided as recycled process water. Water losses of 156.3 m³/hr are estimated. It is assumed that the gland seal water for pumps, water for reagents preparation, potable water and make-up water will be provided by clean raw water. The rest of the water requirements within the process plant will be from recycled process water.

1.10 Tailings

SRK reviewed and relied upon the work performed by VOGBR Recursos Hídricos & Geotecnia (Minas Gerais, Brazil) during 2014-2015 who developed the Basic Design of the B2 Dam and the Conceptual Design of the Water Pond that will be implemented at the Boa Esperança Mine. The dams will have distinct purposes as shown below.

1.10.1 Water Pond

The reservoir of the water pond will have the purpose of storing clean water to meet the supply demands of the plant, considering a flow of 150 m³/hour during uninterrupted operations for a year. In December 2014, MCSA contracted VOGBR to develop the current work. The Water Pond will be built in the Jatobá Creek, within the limits of the MCSA properties.

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1.10.2 B2 Dam

The reservoir of the B2 Dam will have the purpose of containing the hazardous tailings resulting from the copper ore beneficiation and to recover water to rationalize the use of new water, minimizing the need to collect water in the waterbodies of the region. In December 2014, MCSA contracted VOGBR to develop the current work. At that time, the construction of a waterproof dam constituted by a compacted soil embankment to meet the new tailings volumes generated in the Boa Esperança Copper Mine project was assessed. The considered operational life of the mine was 11 years.

The tailings to be deposited in the B2 Dam will be classified according to the ABNT NBR 10.004/2006 Standard as Class I tailings (hazardous). Since the tailings are Class I, the B2 Dam shall be watertight observing a minimum layer of non-saturated soil of 1.50m, measured between the bottom of the deposit and the critical water level. In addition, the design shall include the definition of the leak detection system and waterproofing system.

1.10.3 Tailings Storage

Studies for the Basic Design of saprolite and tailing dump aimed to define the geometry of its final arrangement and to size the proposed structures to internal and surface drainage systems.

The geometry proposed for the dump was adequate with regards to the geotechnical stability, showing security factors for normal and critical conditions equal to 1.5 and 1.3, respectively.

The final configuration of the dumps will consist of berms measuring 10 meters wide and benches with 10 meters’ height, with final angle of 2H:1V, after compaction of the tailing and enveloping with compacted soil of the saprolite and tailings dump. The volumetric capacity for the disposal of tailing and waste in the final configuration is 15.4 Mm³.

The bottom drain system will be used to collect the contributions from the input of incident waters in the dump, avoiding its saturation. These drains should be protected by a saprolite layer, to prevent that the traffic or surface draining damages the granular material of the section.

The materials to be disposed will be transported by conveyor belts, in the case of the waste processing plant, and dump trucks from the pit, in the case of the saprolite.

1.10.4 Hydrology

Studies conducted in the period of January to November 2011, consisted of the following steps:

· Inventory of water sources and users;

· Flow measurements in major drainages;

· Preparation of hydrogeological conceptual model;

· Evaluation of impacts to water resources;

· Assessment of water availability; and

· Projection of the monitoring network.

During the months of February and September 2011 flow measurements related to the rainy and dry periods were conducted in the Project area in conjunction with environmental permit work. In each of these periods five different points located in the main drainages were established for the implementation of flow measurements. Also in the month of September a flow measurement was held in the Branco River, located approximately 15 km south of the Project.

The hydrogeological system in the region has the typical characteristics of formations located in crystalline basement aquifers. This is an aquifer consisting of a shallow weathered mantle with metric thickness (Porous Aquifer), superimposed over the crystalline basement (Fractured Aquifer), deformed and fractured.

The results indicate that the Project area has a low water potential, as many springs and surface water bodies have intermittent flow, becoming dried during the dry season. The underground reservoirs were also evaluated as an alternative to water capturing. However, tests performed in tubular wells showed low production capacity, with pump flow rate of about 6 m³/h.

The water pond designed by VOGBR will have the purpose of storing clean water to meet the demand of the plant, estimated at a flow of 150m³/hour, working for a year without interruption. The water pond will be located in the Jatobá stream, within the area owned by MCSA.

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1.10.5 Project Infrastructure

Based on the estimated production volumes of copper concentrates, the best logistic alternatives between the Project and ports have been reviewed.

Tucumã, PA was considered as the starting point for the Project, considering:

· Domestic transportation;

· Cargo handling at the port;

· Sea transportation.

For domestic transportation, haulage by truck appears to be the only viable ground transportation. Although Para’s State is crossed by the Carajas’ Railroad and the Tocantins River, both of these alternatives present some deficiencies that hinder the utilization of the routes.

Vila do Conde has shown the best conditions for loading since Itaqui is limited to train transport options. Further, Vila do Conde is a better organized industrial port, with ample area which can be leased from the port authorities or from third companies.

The primary logistic challenges facing the Project are:

· Long distance to port;

· Limited accessibility to the railroad, owned by a private company with a track record of poor third-party service levels;

· Limited port infrastructure; and,

· Chronic congestion at ports near the Project.

1.10.6 Environmental Management and Permitting

The Pará State Environmental Agency granted a Preliminary License (PL) to MCSA on March 7, 2012 which was subsequently renewed on June 19, 2013. MCSA filed for an Installation License request on April 1, 2013 which is currently under analysis.

A grant for well drilling and evaluation of water potential (considering future groundwater collection for the installation phase) was issued. The formal request for water use will be submitted immediately after the issuance of the Installation License (IL).

The IL is prepared when the project design has advanced far enough for engineering plans to be submitted to the government for approval. The IL is accompanied by an Environmental Control Plan referred to as a PCA (Plano de Controle Ambiental) and a Degraded Area Recovery Plan or PRAD (Plano de Recuperação de Áreas Degradadas). Once the IL has been granted, the DNPM can issue a Mining Concession. It is at this licensing stage that the Legal Reserve is defined. The Legal Reserve is an area whose size depends on state rules requiring the preservation of a portion of the natural biota. It is legalized by the Rural Environmental Register (Cadastro Ambiental Rural – CAR) or at the Real Estate Notary Office as property of the enterprising party, in accordance with Federal Law # 12.651/2012. In Pará the law has established that 80% of the propriety area should remain as a Legal Reserve. This percentage may be changed depending on the specific conditions of Environmental – Economical Zone in each region. This is regulated by the Brazilian Forest Code, Law # 12.651/2012 and Pará State Decree # 2.099/2010.

The area earmarked for deforestation covers 38.65 ha at this stage of the project. The Legal Reserve is being discussed with the Environmental Agency (SEMA) and will be a condition of the IL. The environmental agency is analyzing the IL process for the granting of this license.

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The Operating License (OL) allows the project to begin operations and is issued after all of the appropriate environmental measures have been implemented and verified by the authorities. The OL must be renewed during the life of the mine. When the OL is up for renewal, a report summarizing environmental performance must be presented.

If, during the operation, there are substantial changes to the initial project plan (e.g. an additional treatment plant), this will require another specific IL, which will subsequently become an OL.

The baseline characterization studies and environmental impact assessment (EIA) for the Project were prepared and submitted to SEMA in 2008.

The EIA classifies areas of influence into three categories:

· Área Diretamente Afetada (ADA) = Directly Affected Area;

· Área de Influência Direta (AID) = Directly Influenced Area; and

· Área de Influência Indireta (AII) = Indirectly Influenced Area.

Changes to the boundary of the Project area were necessary due to a demand made by the Pará State Environmental Agency during the review of the PL application. The ADA now includes village P07 and drainage of about 200m, which were previously not included. This update added approximately 1,202.1 ha to the ADA. Additionally, the AID now includes springs which flow to the Branco River and Jatobá Creek. The main drainage affected by the project totals 7,204.4 ha.

The final Environmental Control Plan (PCA) was submitted to the environmental agency in April, 2013, and the Company is waiting for grant of the Installation License which is necessary for construction, and ultimately, mining activities, post conversion to an Operating License.

1.11 Economic Analysis

Forecast copper prices over the LOM are presented in Table 4.

Table 4: Copper Prices - US$/t-Cu

Commodity	Yr -2		Yr -1		Yr 1		Yr 2		Yr 3		Yr 4		Yr 5		Yr 6		Yr 7		Yr 8		Yr 9
Metallic Copper		6,063		6,614		6,614		6,614		6,614		6,614		6,614		6,614		6,614		6,614		6,614

The price of the copper concentrate is considered CIF at the port of Shanghai, China. Logistics costs to transport copper concentrate from Boa Esperança to China are presented in Table 5 and Table 6. The logistic cost was considered as 50% "Bulk" and 50% "Container". The economic analysis also considered losses of 0.2% in concentrate transportation for both cases.

Table 5: Logistic Costs - Container

Items	Cost (R$/t-conc)
Copper Project Conc (Truck)		175.01
Handling & Storage (Port)		124.39
Ocean Freight		132.30
Total Freight		R$431.71

Table 6: Logistic Costs - Bulk

Items	Cost (R$/t-conc)
Copper Project Conc (Truck)		175.01
Handling & Storage (Port)		67.57
Ocean Freight		236.25
Total Freight		R$478.83

All currency is in Brazilian Reais ($R) unless otherwise stated. The following exchange rates have been considered throughout the economic section of the report.

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Table 7: Exchange Rates

	Exchange Rate (R$ per US$)
Currency	Yr -2		Yr -1 – Yr 9
Reais	$	3.60	$	3.80

1.11.1 Capital Expenditures

The capital cost estimate developed for this Feasibility Study comprises the costs associated with the engineering, procurement, construction, commissioning and pre-operation required for all project facilities. SRK relied upon third-party estimation based on studies developed for the project by engineering firms according to the following scope:

· SRK Consulting - Mine Equipment Schedule, Mineral Resources, Mineral Reserves, mine equipment capital and mining operating costs, environment and mine closure;

· Tecnomin Projects e Consultoria Ltda (Minas Gerais, Brazil) - Plant basic engineering;

· Tyno Consultoria Tributária e Empresarial Ltda (Bahia, Brazil) - Fiscal;

· VOGBR Recursos Hídricos & Geotecnia (Minas Gerais, Brazil) - Basic Project of Tailings Dam and Conceptual Design of Water Pond.

The required quotations for equipment, materials and services were obtained mainly by MCSA’s Procurement Department (MCPD) and formal enquiries to well-known vendors in the mining business mainly in the 2^nd quarter 2015. Based on the deceleration in global mining activity and contraction in the Brazilian economy from the period of 2015 to 2017, no escalation was applied for the current capital cost estimates. SRK has reviewed the costing and third-party reports and is of the opinion that the the estimates are valid for the purposes of this report.

The capital estimate is shown in Table 8.

Table 8: Capital Costs Summary by Area

Area	% of Total			LoM Cost (R$000’s)			Initial (R$000’s)		Ongoing (R$000’s)
Pre-Production		14			89,306			89,306		0
Infrastructure		1			6,615			6,615		0
Mine		8			48,075			35,778		12,298
Plant		39			244,109			244,109		0
Power & Automation		12			76,709			76,709		0
Utility Systems		2			12,065			12,065		0
Administration & Support		4			23,562			23,562		0
Tailings Storage Facilities		7			45,439			45,439		0
Water Pond		1			6,398			6,398		0
Indirect Costs		10			59,740			59,740		0
Salvage		-4			(24,796	)		0		(24,796	)
Closure		6			39,898			0		39,898
Total		100	%	R$	627,120		R$	599,721	R$	27,400

1.11.2 Operating Costs

Operating costs are based on mine, process, tailings and infrastructure facilities design criteria, engineering, as well as budgetary and vendor quotes. All operating costs include supervision staff, operations labor, maintenance labor, consumables, electricity, fuels, lubricants, maintenance parts and any other operating expenditure identified by contributing engineers. The operating costs are shown on Table 9.

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Table 9: Project Operating Costs

Item	R$/t-RoM		R$/t-Conc		LoM  (R$000’s)
Mining		15.69		561.27		305,774
Processing		19.28		689.72		375,741
G&A		9.54		341.59		186,086
Total	R$	44.48	R$	1,592.58	R$	867,598

1.11.3    Economic Results

The financial analysis results, shown on Table 10, indicate an after-tax net present value (NPV) for the project at an 8% discount rate of US$195.3 million with an IRR of 32.7%. Payback from Project start is approximately 3.6 years.

Table 10: Economic Results

Item	Unit or Factor		Value
Ore Mined		kt		19,500.3
Mined Cu (contained)		kt		185.0
Recovered Cu		kt		163.4
Payable Cu		kt		156.9
Sales Volumes, Prices and Delivery Costs
Cu Price (average over production period)		$/t-Cu		6,614
Treatment Charges (TC)		US$/t conc.		78.50
Refining Charges (RC)		¢/lb		7.85
Tonnes Cu sold		kt		156.9
Revenue
Gross Revenue		R$000’s		3,943,195
Logistics & Sales Costs		R$000’s		(333,113	)
CFEM Royalty		R$000’s		(63,104	)
Gross Income		R$000’s		3,546,942
TC / RCs		R$000’s		(454,875	)
Net Revenue		R$000’s		3,488,320
Operating Costs
Mining		R$000’s		(305,774	)
Process		R$000’s		(375,741	)
G&A		R$000’s		(186,086	)
Total Operating Costs		R$000’s		(867,600	)
Project Capital (Equity)		R$000’s		(626,126	)
Financing Interest		R$000’s		-
Income & Social Contribution Taxes		R$000’s		(251,907	)
Operating Cash Flow		R$000’s		1,972,596
Initial Capital		R$000’s		599,719
Equity for funding		R$000’s		-
Share Holders Equity		R$000’s		599,719
Ongoing Capital		R$000’s		12,298
Free Cash Flow		R$000’s		1,345,477
After-tax NPV 8% (per annum)		U$000’s		195,295
IRR				32.7	%
Payback		Yrs		3.6

1.12       Conclusions and Recommendations

Conclusions

SRK concurs with the geological interpretation of the mineralization of the Boa Esperança deposit as silica- and sulfide-filled breccias containing copper and cobalt mineralization associated with magnetite, as a variant of an iron-oxide-copper-gold (IOCG) hydrothermal deposit type. SRK concludes that the mineralization has been sufficiently defined through exploration methods, including core drilling, to support the Mineral Resource and Mineral Reserve estimation for use in a Feasibility Study.

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SRK has carried out the appropriate review work to satisfy itself that the Mineral Reserve can be technically and profitably extracted through to the production and sale of copper concentrate. Consideration has been given to all technical areas of study, the associated capital and operating costs, and relevant factors including marketing, permitting, environmental and social. SRK is satisfied that the technical and economic feasibility has been demonstrated.

The Mineral Resource and Mineral Reserve Estimates are compliant within the guidelines of NI 43-101 and SRK has not identified any mining, metallurgical, infrastructure, permitting, legal, political, environmental, technical, or other relevant factors that could materially affect the potential development of estimated Mineral Reserves and Mineral Resources.

Recommendations

SRK recommends that analytical procedures be standardized, including documentation of procedures, performing check assays and duplicate sampling to provide increased confidence in the database.

SRK also recommends that the tailings filter sizing should be confirmed based on updated material characterization incorporating cyclone and dewatering screen additions to optimize the process and to support the analysis of a filter press to replace the vacuum filter belt.

In addition, it is recommended that social-environmental management practices be undertaken to ensure the success of the operation as well as a review of acid rock potential, and the potential operating costs associated with its treatment.

Finally, SRK recommends that a conceptual geomechanical model be developed to ensure final pit dimensions.

The estimated cost for the recommended work is presented below in Table 11.

Table 11: Proposed Budget for Recommended Work

Program	Budget (US$)
Check assays at secondary laboratory	$	6,000
Duplicate core samples, including cutting, shipping & analysis		12,000
Confirm tailings thickener design and filter sizing		40,000
Expand studies on acid rock drainage and treatment		32,000
Develop a conceptual geomechanical model		30,000
Total	$	120,000

RISK FACTORS

An investment in the Company is speculative and involves a high degree of risk due to the nature of the Company’s business. The following risks, as well as risks currently unknown to the Company, could adversely affect the Company’s current or future business, properties, operations, results, cash flows, financial condition and prospects and could cause future results, cash flows, financial condition, prospects, events or circumstances to differ materially from those currently expected, including the estimates and projections contained in this AIF. Investors should carefully consider the risks described below and elsewhere in this AIF. The risks described below and elsewhere in this AIF do not purport to be an exhaustive summary of the risks affecting the Company and additional risks and uncertainties not currently known to the Company or not currently perceived as being material may have an adverse effect on the Company.

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Risks Related to the Company

Copper and gold prices are volatile and may be lower than expected

The Company’s business and its ability to sustain operations are dependent on, amongst other things, the market price of copper and gold. The prices of copper and gold realized by the Company will affect future exploration and development decisions, production levels, earnings, cash flows, the financial condition and prospects of the Company. If the world market prices of copper and/or gold were to drop and the prices realized by the Company on copper and/or gold sales were to decrease significantly and remain at such level for any substantial period, the Company’s business, financial condition, results of operations, cash flows and prospects would be negatively affected.

Some factors that affect the price of copper and gold include: industrial demand; forward or short sales of copper and gold by producers and speculators; future levels of copper and gold production; and rapid short-term changes in supply and demand due to speculative or hedging activities by producers, individuals or funds. Copper and gold prices are also affected by macroeconomic factors including: confidence in the global economy; expectations of the future rate of inflation; the availability and attractiveness of alternative investment vehicles; the strength of, and confidence in, the US dollar, the currency in which the price of copper and gold is generally quoted, and other major currencies; global political or economic events; global health crises and costs of production of other copper and gold producing companies. All of the above factors can, through their interaction, affect the price of copper and gold by increasing or decreasing the demand for or supply of copper and gold.

The price of copper and gold has fluctuated widely in recent years, and future material price declines could cause commercial production from the Vale do Curaçá Property or the NX Gold Property or the development of, and commercial production from, the Boa Esperança Property to be less profitable than expected and could render such properties uneconomic. Continuing to conduct mining in a low copper and/or gold price environment would have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and prospects. Depending on the current and expected price of copper and gold, projected cash flows from planned or current mining operations may not be sufficient to warrant commencing or continuing mining, and the Company could be forced to discontinue exploration, development or commercial production. The Company may be forced to sell one or more portions of the Vale do Curaçá Property, NX Gold Property or the Boa Esperança Property to generate cash. Future production from the Vale do Curaçá Property, NX Gold Property and the Boa Esperança Property will be dependent on a price of copper or gold, as the case may be, that is adequate to make a deposit economically viable. Furthermore, future mine plans using significantly lower copper or gold prices could result in material write-downs of the Company’s investment in the Vale do Curaçá Property, NX Gold Property and the Boa Esperança Property, as the case may be, and in reductions in Mineral Reserve and Mineral Resource estimates. The occurrence of any of the foregoing could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and prospects.

A declining or sustained low price of copper could negatively impact the profitability of the Vale do Curaçá Property or gold could negatively impact the profitability of the NX Gold Property, and could affect the Company’s ability to finance the exploration and development of the Company’s current properties or other properties in the future. In addition, a declining or sustained low price of copper could require a reassessment of the feasibility of the Boa Esperança Property. Although the price of copper is only one of several factors that the Company will consider in making a development and production decision on the Boa Esperança Property, if the Company determines from a reassessment that the Boa Esperança Property is not economically viable in whole or in part, then operations may cease or be curtailed and the Boa Esperança Property may never be fully developed or developed at all. The occurrence of any of the foregoing could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and prospects.

Mining operations are risky

The Company’s current business, and any future exploration, development or mining operations, involve various types of risks and hazards typical of companies engaged in the mining industry. Such risks include, but are not limited to: (i) industrial accidents; (ii) unusual or unexpected rock formations; (iii) structural cave-ins or slides and pitfall, ground or slope failures and accidental release of water from surface storage facilities; (iv) fire, flooding and earthquakes; (v) rock bursts; (vi) metal losses in handling and transport; (vii) periodic interruptions due to inclement or hazardous weather conditions; (viii) environmental hazards; (ix) discharge of pollutants or hazardous materials; (x) failure of processing and mechanical equipment and other performance problems; (xi) geotechnical risks, including the stability of the underground hanging walls and unusual and unexpected geological conditions; (xii) unanticipated variations in grade and other geological problems, water, surface or underground conditions; (xiii) labour disputes or slowdowns; (xiv) work force health issues as a result of working conditions or epidemics, pandemics or other health risks; and (xv) force majeure events, or other unfavourable operating conditions.

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These risks, conditions and events could result in: (i) damage to, or destruction of, the value of the Vale do Curaçá Property, the NX Gold Property, the Boa Esperança Property or their facilities; (ii) personal injury or death; (iii) environmental damage to the Vale do Curaçá Property, the NX Gold Property, the Boa Esperança Property, surrounding lands and waters, or the properties of others; (iv) temporary or permanent loss of key personnel; (v) delays or prohibitions on mining or the transportation of minerals; (vi) monetary losses; and (vii) potential legal liability and any of the foregoing could have a material adverse effect on the Company’s business, financial condition, results of operation, cash flows or prospects. In particular, underground exploration, development and mining activities present inherent risks of injury to people and damage to equipment. Significant mine accidents could occur, potentially resulting in a complete shutdown of the Company’s operations at the Vale do Curaçá Property or the NX Gold Property which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

There are also risks related to the reliance on, and the reliability of, current and new or developing technology; the reliance on the work performance of outside consultants, contractors, and manufacturers; changes to project parameters over which the Company does not have complete control such as the copper, gold and silver prices or labour or material costs; unknown or unanticipated or underestimated costs or expenses; unknown or unanticipated or underestimated additions to the scope of work due to changing or adverse conditions encountered as a mine is developed; unexpected variances in the geometry or quality of ore zones; unexpected reclamation requirements or expenses; permitting time lines; unexpected or unknown ground conditions; unexpected changes to estimated parameters utilized to estimate past timelines, projections, or costs; and liquidity risks. An adverse change in any one of such factors, hazards and risks may result in a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Mining operations require geologic, metallurgic, engineering, title, environmental, economic and financial assessments that may be materially incorrect and thus the Company may not produce as expected

The operations of mining properties or mining companies are based in large part on geologic, metallurgic, engineering, title, environmental, economic and financial assessments, which involve uncertainty. Such assessments may differ materially from actual results, which may result in a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects. These assessments include a series of assumptions regarding such factors as the ore body geometries, grades, recoverability, regulatory and environmental restrictions, future prices of metals and operating costs, future capital expenditures and royalties and government levies which will be imposed over the producing life of the Mineral Reserves. There are numerous uncertainties inherent in estimating quantities of Mineral Resources and Mineral Reserves and estimates in projecting potential future rates of mineral production, including factors subject to change and beyond the Company’s control. Mineral Reserves and Mineral Resources estimates are based on limited samples and interpretations, which may not be representative of actual Mineral Reserves and Mineral Resources. In addition, title and rights of access to the Company’s properties can never be guaranteed. Although select title and environmental reviews were conducted in connection with the Acquisitions, this review cannot guarantee that any unforeseen defects in the chain of title will not arise to defeat the Company’s title to certain assets or that environmental defects, liabilities or deficiencies do not exist or are not greater than anticipated.

The Company’s calculations of Mineral Resources and Mineral Reserves are estimates and depend upon geological interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be inaccurate. Actual recoveries of copper and gold from mineralized material may be lower than those indicated by test work. Any material change in the quantity of mineralization, grade or stripping ratio, may affect the economic viability of Ero’s properties. In addition, there can be no assurance that metal recoveries in small-scale laboratory tests will be duplicated in larger scale tests under on-site conditions or during production. Notwithstanding pilot plant tests for metallurgical recovery and other factors, there remains the possibility that the mineralized material may not perform in commercial production in the same manner as it did in testing. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. Mining and metallurgy are inexact sciences and, accordingly, there always remains an element of risk that a mine may not prove to be commercially viable.

Until a deposit is actually mined and processed, the quantity of Mineral Resources and Mineral Reserves and grades must be considered as estimates only. In addition, the quantity of Mineral Resources and Mineral Reserves may vary depending on, amongst other things, metal prices, cut-off grades and operating costs. Any material change in quantity of Mineral Reserves, Mineral Resources, grade, percent extraction of those Mineral Reserves recoverable by underground mining techniques may affect the economic viability of Ero’s mining projects and could have a material adverse effect on its future revenues, cash flows, profitability, results of operations, financial condition and prospects and result in write-downs of the Company's investment in mining properties and increased amortization charges.

Inferred Mineral Resources are also considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves. Due to the uncertainty which may attach to Inferred Mineral Resources, there is no assurance that Inferred Mineral Resources will be upgraded to Proven Mineral Reserves or Probable Mineral Reserves as a result of continued exploration or as a result of economic considerations being applied to them.

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In addition, market fluctuations in the price of copper, gold and silver, as well as increased production costs, reduced recovery rates or increased operating and capital costs due to inflation or other factors, may render the exploitation of certain Mineral Reserves and Mineral Resources uneconomic and may ultimately result in a restatement of Mineral Reserves, Mineral Resources or both. Such a restatement could affect depreciation and amortization rates and have an adverse effect on the Company's financial performance.

Geotechnical, hydrological and climatic events could suspend mining operations or increase costs

All mining operations face geotechnical, hydrological and climate challenges. Unanticipated adverse geotechnical and hydrological conditions, such as landslides, subsidence and uplift, embankment failures and rock fragility may occur in the future and such events may not be detected in advance. Geotechnical instabilities and adverse climatic conditions can be difficult to predict and are often affected by risks and hazards outside of the Company’s control, such as severe weather and seismic activity.

Geotechnical failures could result in limited or restricted access to mines, suspension of operations, environmental damage, government investigations, increased monitoring costs, remediation costs, loss of ore and other impacts, which could result in loss of revenue or increased costs, and could result in a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and prospects.

Actual production, capital and operating costs may be different than those anticipated

Ero prepares estimates of future productions, capital costs and operating costs of production for operations at the Vale do Curaçá Property and the NX Gold Property. In addition, as a result of the substantial expenditures involved in the development of a mineral project such as the Boa Esperança Property, the need to project years into the future, the need to make assumptions and use models that may not adequately approximate reality, and the fluctuation of costs over time, a development project is prone to material cost overruns. The Vale do Curaçá Technical Report, the NX Gold Technical Report and the Boa Esperança Technical Report estimate capital costs and cash operating costs based upon, among other things:

· anticipated tonnage, grades and metallurgical characteristics of the ore to be mined and processed;

· anticipated recovery rates of copper, gold and other metals from the ore;

· cash operating costs of comparable facilities and equipment;

· anticipated availability of labour and equipment; and

· anticipated foreign exchange rates.

Capital costs, operating costs, production and economic returns, and other estimates may differ significantly from those anticipated by the Vale do Curaçá Technical Report, the NX Gold Technical Report and the Boa Esperança Technical Report, and there can be no assurance that the Company’s actual capital or operating costs will not be higher than currently anticipated or that returns will not be lower than anticipated. The Company’s actual costs may vary from estimates for a variety of reasons including, without limitation: limitations inherent in modelling; changes to assumed third party costs; short term operating factors; operational decisions made by the Company; revisions to mine plans; risks and hazards associated with development and mining described elsewhere in this AIF; natural phenomena, such as inclement weather conditions, water availability, floods, and earthquakes; and unexpected supply chain distributions, labour shortages or strikes. Operating costs may also be affected by a variety of factors including, without limitation: changing strip ratios, ore metallurgical grade-recovery curves, the availability of processing operations, the availability of storage capacity, the availability of supplies, equipment and facilities necessary to continue operations at the Vale do Curaçá Property or the NX Gold Property and to complete development work at the Boa Esperança Property, the cost and availability of consumables and mining and processing equipment, labour costs, the availability and productivity of skilled labour, the cost of commodities, general inflationary pressures, currency exchange rates, technological and engineering problems, accidents or acts of sabotage or terrorism, the regulation of the mining industry by various levels of government and quasi-governmental organizations and political factors. Many of these factors are beyond the Company’s control. Furthermore, significant cost overruns could make the Boa Esperança Property uneconomical. Failure to achieve estimates or material increases in costs could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and prospects.

Furthermore, unforeseen delays in the construction and commissioning of mining projects or other technical difficulties may result in even further capital expenditures being required. Any delay in the development of a project or cost overruns or operational difficulties with regards to the Vale do Curaçá Property, the NX Gold Property or the Boa Esperança Property may have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and prospects.

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Currency fluctuations can result in unanticipated losses

Currency fluctuations may affect the Company’s capital costs and the costs that the Company incurs at its operations. Copper and gold are sold throughout the world based principally on a US dollar price, but a portion of the Company’s operating and capital expenses are incurred in Brazilian Reais and Canadian dollars. The appreciation of foreign currencies, particularly the Brazilian Real against the US dollar would increase the costs of copper and gold production at such mining operations, which could materially and adversely affect the Company’s earnings and financial condition. The Company has entered into foreign exchange swap contracts to help manage the currency fluctuation risk of the Brazilian Real against the US dollar. However, there is no assurance that such hedging contracts or any other steps taken to help mitigate foreign currency fluctuations will be effective.

The successful operation of the Vale do Curaçá Property and the NX Gold Property and the successful development and operation of the Boa Esperança Property depend on the skills of the Company’s management and teams

The Company’s business is dependent on retaining the services of its key management personnel with a variety of skills and experience, including in relation to the development and operation of mineral projects. The success of the Company is, and will continue to be, dependent to a significant extent on the expertise and experience of its directors and senior management. Failure to retain, or loss of, one or more of these people could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects. The Company’s success will also depend to a significant degree upon the contributions of qualified technical personnel and the Company’s ability to attract and retain highly skilled personnel. Competition for such personnel is intense, and the Company may not be successful in attracting and retaining qualified personnel, or in obtaining the necessary work permits to hire qualified expatriates. The Company’s inability to attract and retain these people could have a material adverse effect on its business, financial condition, results of operations, cash flows or prospects.

Operations during mining cycle peaks are more expensive

During times of increased demand for metals and minerals, price increases may encourage expanded mining exploration, development and construction activities. These increased activities may result in escalating demand for and cost of contract exploration, development and construction services and equipment. Increased demand for and cost of services and equipment could cause exploration, development and construction costs to increase materially, resulting in delays if services or equipment cannot be obtained in a timely manner due to inadequate availability, and increased potential for scheduling difficulties and cost increases due to the need to coordinate the availability of services or equipment, any of which could materially increase project exploration, development or construction costs, result in project delays, or increase operating costs.

Title to the Vale do Curaçá Property, the NX Gold Property and/or the Boa Esperança Property may be disputed

Although the Company has received title opinions for the Vale do Curaçá Property, the NX Gold Property and the Boa Esperança Property there is no guarantee that title to such properties will not be challenged or impugned. The Company’s claims may be subject to prior unregistered agreements or transfers and title may be affected by unidentified or unknown defects. The Company has conducted an investigation on the title of properties that it has acquired to confirm that there are no claims or agreements that could affect its title to its mineral tenure or surface rights. There is no guarantee that such title will not be challenged or impaired. If title to the Company’s properties is disputed, it may result in the Company paying substantial costs to settle the dispute or clear title and could result in the loss of the property, which events may affect the economic viability of the Company. Title insurance generally is not available for mineral tenure or surface rights and the Company’s ability to ensure that it has obtained secure claim to title may be constrained.

The Company may fail to comply with the law or may fail to obtain or renew necessary permits and licenses

The Company’s operations are subject to extensive laws and regulations governing, among other things, such matters as environmental protection, management and use of toxic substances and explosives, health, exploration and development of mines, commercial production and sale of by-products, ongoing and post-closure reclamation, construction and operation of tailings dams, safety and labour, taxation and royalties, maintenance of mineral tenure, and expropriation of property. The activities of the Company require licenses and permits from various governmental authorities.

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The costs associated with compliance with these laws and regulations and of obtaining licenses and permits are substantial, and possible future laws and regulations, changes to existing laws and regulations and more stringent enforcement of current laws and regulations by governmental authorities, could cause additional expenses, capital expenditures, restrictions on or suspensions of the Company’s operations and delays in the development of its properties. There is no assurance that future changes in such laws and regulations, if any, will not adversely affect the Company’s operations. Moreover, these laws and regulations may allow governmental authorities and private parties to bring lawsuits based upon damages to property and injury to persons resulting from the environmental, health and safety practices of the Company’s past and current operations, or possibly even the actions of former property owners, and could lead to the imposition of substantial fines, penalties or other civil or criminal sanctions. The Company may fail to comply with current or future laws and regulations. Such non-compliance can lead to financial restatements, civil or criminal fines, penalties, and other material negative impacts on the Company.

The Company is required to obtain or renew further government permits and licenses for its current and contemplated operations, including the issuance of an installation license and operation license with respect to the Boa Esperança Property. Obtaining, amending or renewing the necessary governmental permits and licenses can be a time-consuming process potentially involving numerous regulatory agencies, involving public hearings and costly undertakings on the Company’s part. The duration and success of the Company’s efforts to obtain, amend and renew permits and licenses are contingent upon many variables not within its control, including the interpretation of applicable requirements implemented by the relevant permitting or licensing authority and staffing shortages at such permitting and licensing authorities. The Company may not be able to obtain, amend or renew permits or licenses that are necessary to its operations, or the cost to obtain, amend or renew permits or licenses may exceed what the Company believes it can ultimately recover from a given property once in production. Any unexpected delays or costs associated with the permitting and licensing process could impede the ongoing operation of the Vale do Curaçá Property and the NX Gold Property, and could delay the development or impede the operation of the Boa Esperança Property. To the extent necessary permits or licenses are not obtained, amended or renewed, or are subsequently suspended or revoked, the Company may be curtailed or prohibited from proceeding with planned development, commercialization, operation and exploration activities. Such curtailment or prohibition may result in a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Compliance with environmental regulations can be costly

The Company’s mining operations at the Vale do Curaçá Property and the NX Gold Property, the Company’s development of the Boa Esperança Property, and the exploration of these properties are all subject to environmental regulation. Regulations cover, among other things, water quality standards, land reclamation, the generation, transportation, storage and disposal of hazardous waste, the construction and operation of tailings dams, and general health and safety matters. There is no assurance that the Company has been or will at all times be in full compliance with all environmental laws and regulations or hold, and be in full compliance with, all required environmental and health and safety approvals and permits. The potential costs and delays associated with compliance with such laws, regulations, approvals and permits could prevent the Company from economically operating or proceeding with the further development and exploration of the Vale do Curaçá Property, the NX Gold Property and/or the Boa Esperança Property, and any non-compliance with such laws, regulations, approvals and permits at the Vale do Curaçá Property, the NX Gold Property and/or the Boa Esperança Property could result in a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Environmental approvals and permits are currently, and may in the future be, required in connection with the Company’s current and planned operations. To the extent such environmental approvals and permits are required and not obtained, the Company’s plans and the operation of mines may be curtailed, or it may be prohibited from proceeding with planned exploration or development of additional mineral properties. Failure to comply with applicable environmental laws, regulations and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions.

There is no assurance that any future changes in environmental regulation will not adversely affect the Company’s operations. Changes in government regulations have the potential to significantly increase compliance costs and thus reduce the profitability of current or future operations.

Environmental hazards may also exist on the properties on which the Company holds interests that are unknown to the Company at present and that have been caused by previous or existing owners or operators of the properties and for which the Company may be liable for remediation. Parties engaged in mining operations, including the Company, may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable environmental laws or regulations, regardless of whether the Company actually caused the loss or damage. The costs of such compensation, fines or penalties could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

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Social and environmental activism can negatively impact exploration, development and mining activities

There is an increasing level of public concern relating to the effects of mining on the natural landscape, on communities and on the environment. Certain non-governmental organizations, public interest groups and reporting organizations (“NGOs”) who oppose resource development can be vocal critics of the mining industry. In addition, there have been many instances in which local community groups have opposed resource extraction activities, which have resulted in disruption and delays to the relevant operation. While the Company seeks to operate in a socially responsible manner and believes it has good relationships with local communities in the regions in which it operates, NGOs or local community organizations could direct adverse publicity against and/or disrupt the operations of the Company in respect of one or more of its properties, regardless of its successful compliance with social and environmental best practices, due to political factors, activities of unrelated third parties on lands in which the Company has an interest or the Company’s operations specifically. Any such actions and the resulting media coverage could have an adverse effect on the reputation and financial condition of the Company or its relationships with the communities in which it operates, which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

The construction and start-up of new mines is subject to a number of factors and the Company may not be able to successfully complete new construction projects

The success of construction projects and the start-up of new mines by the Company is subject to a number of factors including the availability and performance of engineering and construction contractors, mining contractors, suppliers and consultants, the receipt of required governmental approvals and permits in connection with the construction of mining facilities and the conduct of mining operations (including environmental and regulatory permits), the successful completion and operation of mining stopes, processing plants and conveyors to move ore, among other operational elements. Any delay in the performance of any one or more of the contractors, suppliers, consultants or other persons on which the Company is dependent in connection with its construction activities, a delay in or failure to receive the required governmental approvals and permits in a timely manner or on reasonable terms, or a delay in or failure in connection with the completion and successful operation of the operational elements in connection with new mines could delay or prevent the construction and start-up of new mines as planned. There can be no assurance that current or future construction and start-up plans implemented by the Company will be successful, that the Company will be able to obtain sufficient funds to finance construction and start-up activities, that personnel and equipment will be available in a timely manner or on reasonable terms to successfully complete construction projects, that the Company will be able to obtain all necessary governmental approvals and permits or that the completion of the construction, the start-up costs and the ongoing operating costs associated with the development of new mines will not be significantly higher than anticipated by the Company. Any of the foregoing factors could adversely impact the Company’s business, financial condition, results of operations, cash flows and prospects.

The capital expenditures and time required to develop new mines or other projects are considerable and changes in costs or construction schedules can affect project economics. Thus, it is possible that actual costs may change significantly, and economic returns may differ materially from the Company’s estimates.

Commercial viability of a new mine or development project is predicated on many factors. Mineral Reserves and Mineral Resources projected by feasibility studies and technical assessments performed on the Company’s projects may not be realized, and the level of future metal prices needed to ensure commercial viability may not materialize. Consequently, there is a risk that startup of new mine and development projects may be subject to write-down and/or closure as they may not be commercially viable.

Any uncertainty and inability in the estimation, recalculation or replacement of Mineral Reserves and Mineral Resources could materially affect the Company's results of operations, cash flows and financial position.

To ensure the continued operation of the business and realize the Company’s growth strategy, it is essential that the Company continues to realize its existing identified Mineral Reserves, convert Mineral Resources into Mineral Reserves, increase the Company’s Mineral Resource base by adding new Mineral Resources from areas of identified mineralized potential and otherwise successfully undertaking exploration, and/or acquire new Mineral Reserves and Mineral Resources. The life of mine estimates included herein may not be correct.

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Land reclamation and mine closure requirements may be burdensome and costly.

Land reclamation and mine closure requirements are generally imposed on mining companies, which may require the Company, amongst other things, to minimize the effects of land disturbance. Such requirements may include control and treatment of any discharge of potentially dangerous effluents, including solutions that may contain cyanide and heavy metals, from the site and restoring the site’s landscape to its pre-disturbance form. The actual costs of reclamation and mine closure are uncertain and planned expenditures as outlined in the Vale do Curaçá Technical Report, the NX Gold Technical Report and the Boa Esperança Technical Report may differ materially from the actual expenditures required. Therefore, the amount that the Company will be required to spend could be materially higher than current estimates. Any additional amounts required to be spent on reclamation and mine closure may have a material adverse effect on the Company’s financial performance, financial position and results of operations and may cause the Company to alter its operations. Although liabilities for estimated reclamation and mine closure costs have been included in the Company’s financial statements, it may be necessary to spend higher amounts than what has been estimated in the financial statements to fund all required reclamation and mine closure activities.

The mining industry is intensely competitive

The mining industry is intensely competitive. The Company competes with other mining companies, many of which have greater resources and experience. Competition in the mining industry is primarily for: (i) properties which can be developed and can produce economically; (ii) the technical expertise to find, develop, and operate such properties; (iii) labour to operate such properties; and (iv) capital to fund such properties. Such competition may result in the Company being unable to acquire desired properties, to recruit or retain qualified employees and consultants or to acquire the capital necessary to fund its operations and develop its properties. The Company’s inability to compete with other mining companies for these resources could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Many competitors not only explore for and mine minerals but conduct refining and marketing operations on a worldwide basis. In the future, the Company may also compete with such mining companies in refining and marketing its products to international markets. Any inability to compete with established competitors could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Inadequate infrastructure may constrain mining operations

Continued production at the Vale do Curaçá Property and the NX Gold Property and any potential commercial production at the Boa Esperança Property, each depend on adequate infrastructure. In particular, reliable power sources, water supply, transportation and surface facilities are all necessary to develop and operate mines. Failure to adequately meet these infrastructure requirements or changes in the cost of such requirements could affect the Company’s ability to continue production at the Vale do Curaçá Property and the NX Gold Property or to develop or commence production at the Boa Esperança Property and could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Operating cash flow may be insufficient for future needs

The exploration, development and operation of the Company’s mineral properties will require the commitment of substantial financial resources that may not be available. The amount and timing of expenditures will depend on a number of factors, including the progress of ongoing exploration and development, success of the Company’s ongoing operations, the results of consultants’ analyses and recommendations, the rate at which operating losses are incurred, the execution of any joint venture agreements with strategic partners and the acquisition of additional property interests, some of which are beyond the Company’s control. The Company’s business strategies may not be successful, and it may not be profitable in any future period.

The Company had negative operating cash flow for the financial year ended December 31, 2016 and positive operating cash flow for the financial years ended December 31, 2017, 2018 and 2019. The Company’s future operating results may not follow any past trends. To the extent that the Company has negative operating cash flow in future periods, the Company may need to allocate a portion of its cash reserves to fund such negative operating cash flow. The Company may also be required to raise additional funds through the issuance of equity or debt securities. There can be no assurance that additional capital or other types of financing will be available when needed or that these financings will be on terms favourable to the Company.

Fluctuations in the market prices and availability of commodities and equipment affect the Company’s business

The cash flows and profitability of the Company’s business will also be affected by the market prices and availability of commodities and equipment that are consumed or otherwise used in connection with the Company’s operations and development projects. Prices of such commodities and resources are also subject to volatile price movements, which can be material and can occur over short periods of time due to factors beyond the Company’s control.

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If there is a significant and sustained increase in the cost of certain commodities, the Company may decide that it is not economically feasible to continue certain or all of the Company’s commercial production, development and exploration activities and this could have an adverse effect on profitability. Higher worldwide demand for critical resources like input commodities, drilling equipment, mobile mining equipment, tires and skilled labour could affect the Company’s ability to acquire them and lead to delays in delivery and unanticipated cost increases, which could have an effect on the Company’s operating costs, capital expenditures and production schedules. The occurrences of one or more of these events may result in a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

A failure to maintain satisfactory labour relations can adversely impact the Company

The Company’s operations and further development of the Vale do Curaçá Property, the NX Gold Property and the Boa Esperança Property are dependent upon the efforts of its employees and the Company’s relations with its unionized and non-unionized employees, and the Company’s operations would be adversely affected if it failed to maintain satisfactory labour relations. Some of MCSA’s and NX Gold’s employees are represented by labour unions under various collective bargaining agreements. Collective bargaining agreements of MCSA must be renewed annually, in September of each year, while NX Gold’s collective bargaining agreements were renewed in May 2018, and every two years thereafter. The Company may not be able to satisfactorily renegotiate its collective bargaining agreements when they expire and may face tougher negotiations or higher compensation demands than would be the case for non-unionized labour. In addition, the existing collective bargaining agreements may not prevent a strike or work stoppage at the Company’s facilities in the future. Further, relations between the Company and its employees may be affected by changes in the scheme of labour relations that may be introduced by the relevant governmental authorities who have jurisdiction over the various aspects of the Company’s business. Changes in such legislation or in the relationship between the Company and its employees may have a material adverse effect on the Company’s business, results of operations and financial condition.

The Company’s insurance coverage may be inadequate to cover potential losses

The Company’s business is subject to a number of risks and hazards (as further described in this AIF). Although the Company maintains insurance to protect against certain risks in such amounts as it considers to be reasonable, its insurance will not cover all the potential risks associated with its activities, including current and any future mining operations. The Company may also be unable to obtain or maintain insurance to cover its risks at economically feasible premiums, or at all. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. Moreover, insurance against risks such as environmental pollution or other hazards as a result of exploration, development or production may not be available to the Company on acceptable terms. The Company might also become subject to liability for pollution or other hazards which it is not currently insured against and/or in the future may not insure against because of premium costs or other reasons. Losses from these events may cause the Company to incur significant costs which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

It may be difficult to enforce judgments and effect service of process on directors, officers and experts named herein

Some of the directors and officers of the Company reside outside of Canada, and each of Planminus, GE21 and SRK Brazil is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction. Some or all of the assets of those persons may be located outside of Canada. Therefore, it may not be possible for investors to collect or to enforce judgments obtained in Canadian courts predicated upon the civil liability provisions of applicable Canadian securities laws against such persons. Moreover, it may not be possible for investors to effect service of process within Canada upon such persons.

The directors and officers may have conflicts of interest with the Company

Certain directors and officers of the Company are or may become associated with other mining and/or mineral exploration and development companies which may give rise to conflicts of interest. Directors who have a material interest in any person who is a party to a material contract or a proposed material contract with the Company are required, subject to certain exceptions, to disclose that interest and generally abstain from voting on any resolution to approve such a contract. In addition, directors and officers are required to act honestly and in good faith with a view to the best interests of the Company. Some of the directors and officers of the Company have either other full-time employment or other business or time restrictions placed on them and accordingly, the Company will not be the only business enterprise of these directors and officers. Further, any failure of the directors or officers of the Company to address these conflicts in an appropriate manner or to allocate opportunities that they become aware of to the Company could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

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Future acquisitions may require significant expenditures and may result in inadequate returns

The Company may seek to expand through future acquisitions; however, there can be no assurance that the Company will locate attractive acquisition candidates, or that the Company will be able to acquire such candidates on economically acceptable terms, if at all, or that the Company will not be restricted from completing acquisitions pursuant to the terms and conditions from time to time of arrangements with third parties, such as the Company’s creditors. Future acquisitions may require the Company to expend significant amounts of cash, resulting in the Company’s inability to use these funds for other business or may involve significant issuances of equity or debt. Future acquisitions may also require substantial management time commitments, and the negotiation of potential acquisitions and the integration of acquired operations could disrupt the Company’s business by diverting management and employees’ attention away from day-to-day operations. The difficulties of integration may be increased by the necessity of coordinating geographically diverse organizations, integrating personnel with different backgrounds and combining different corporate cultures.

The Acquisitions and any future acquisition involve potential risks, including, among other things: (i) mistaken assumptions and incorrect expectations about mineral properties, Mineral Resources, Mineral Reserves and costs; (ii) an inability to successfully integrate any operation the Company acquired or acquires, as applicable; (iii) an inability to recruit, hire, train or retain qualified personnel to manage and operate the operations acquired; (iv) the assumption of unknown liabilities; (v) mistaken assumptions about the overall cost of equity or debt; (vi) unforeseen difficulties operating acquired projects, which may be in geographic areas new to the Company; and (vii) the loss of key employees and/or key relationships at the acquired project. In addition, Ero’s acquisitions of MCSA and NX Gold were completed with certain of the prior shareholders thereof on an “as is where is” basis, and therefore the Company has no rights of recourse and indemnities against the sellers. Future acquisitions may be subject to similar or other limitations as to rights of recourse and indemnities against the sellers.

MCSA and NX Gold, and future acquisition candidates may have liabilities or adverse operating issues that the Company failed or fails to discover through due diligence prior to the acquisition. If the Acquisitions prove to have, or if the Company consummates any future acquisitions with, unanticipated liabilities or adverse operating issues or if acquisition-related expectations are not met, the Company’s business, results of operations, cash flows, financial condition or prospects may be materially adversely affected. The potential impairment or complete write-off of goodwill and other intangible assets related to any such acquisition may reduce the Company’s overall earnings and could negatively affect the Company’s balance sheet.

Disclosure and internal control deficiencies may adversely affect the Company

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Disclosure controls and procedures are designed to ensure that the information required to be disclosed by the Company in reports filed with securities regulatory agencies is recorded, processed, summarized and reported on a timely basis and is accumulated and communicated to the Company’s management, as appropriate, to allow timely decisions regarding required decisions. The Company has invested resources to document and analyze its system of disclosure controls and its internal control over financial reporting. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance with respect to the reliability of financial reporting and financial statement preparation. The Company’s failure to satisfy the requirements of applicable Canadian securities laws on an ongoing, timely basis could result in the loss of investor confidence in the reliability of its financial statements, which in turn could harm its business and negatively impact the trading price of the common shares. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm the Company’s operating results or cause it to fail to meet its reporting obligations.

Failures of information systems or information security threats can be costly

The Company has entered into agreements with third parties for hardware, software, telecommunications and other information technology (“IT”) services in connection with its operations. Such operations depend, in part, on how well the Company and its suppliers protect networks, equipment, IT systems and software against damage from a number of threats, including, but not limited to, cable cuts, damage to physical plants, natural disasters, terrorism, fire, power loss, hacking, computer viruses, vandalism and theft. The Company’s operations also depend on the timely maintenance, upgrade and replacement of networks, equipment, IT systems and software, as well as pre-emptive expenses to mitigate the risks of failures. Any of these and other events could result in information system failures, delays and/or increase in capital expenses. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact the Company’s reputation, results of operations, cash flows and financial condition.

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Although to date the Company has not experienced any material losses relating to cyber-attacks or other information security breaches, there can be no assurance that it will not incur such losses in the future. The Company’s risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats. As a result, cyber security and the continued development and enhancement of controls, processes and practices designed to protect systems, computers, software, data and networks from attack, damage or unauthorized access remain a priority. As cyber threats continue to evolve, the Company may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities.

Any of these factors could have a material adverse effect on the Company’s results of operations, cash flows and financial position.

The Company may be subject to costly legal proceedings

The Company may be subject to regulatory investigations, civil claims, lawsuits and other proceedings in the ordinary course of its business. The results of these legal proceedings cannot be predicted with certainty due to the uncertainty inherent in regulatory actions and litigation, the difficulty of predicting decisions of regulators, judges and juries and the possibility that decisions may be reversed on appeal. Defense and settlement costs of legal disputes can be substantial, even with claims that have no merit. Management is committed to conducting business in an ethical and responsible manner, which it believes will reduce the risk of legal disputes. However, if the Company is subject to legal disputes, there can be no assurances that these matters will not have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Moreover, pursuant to the Acquisitions, the Company acquired operations that have been ongoing for a significant period of time. The Company inherited certain liabilities as a result and has been subject to a number of claims (including claims related to tax, labour and social security matters and civil action) in the course of its business which individually are not material and have not been accrued for in its financial statements as it is not probable that a cash outflow will occur. While the Company believes that a significant number of these claims are unlikely to be successful, if all such existing claims were decided against it, the Company could be exposed to liability of up to approximately R$124 million, which could have an adverse impact on the Company’s business, financial condition, results of operations, cash flows or prospects.

Additionally, the legal system in Brazil has inherent uncertainties that could limit the legal protections available to the Company, which include: (i) inconsistencies between and within laws; (ii) limited judicial and administrative guidance on interpreting Brazilian legislation, particularly that relating to business, corporate and securities laws; (iii) substantial gaps in the regulatory structure due to a delay or absence of enabling regulations; (iv) a lack of judicial independence from political, social and commercial forces; (v) corruption; and (vi) bankruptcy procedures that are subject to abuse, any of which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects. Furthermore, it may be difficult to obtain swift and equitable enforcement of a Brazilian judgement, or to obtain enforcement of a judgement by a court of another jurisdiction, which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

The Company may be subject to shareholder activism

In recent years, publicly-traded companies have been increasingly subject to demands from activist shareholders advocating for changes to corporate governance practices, such as executive compensation practices, social issues, or for certain corporate actions or reorganizations. There can be no assurances that activist shareholders won’t publicly advocate for the Company to make certain corporate governance changes or engage in certain corporate actions. Responding to challenges from activist shareholders, such as proxy contests, media campaigns or other activities, could be costly and time consuming and could have an adverse effect on the Company reputation and divert the attention and resources of the Company management and the Company’s board of directors, which could have an adverse effect on the Company’s business and results of operations. Even if the Company does undertake such corporate governance changes or corporate actions, activist shareholders may continue to promote or attempt to effect further changes, and may attempt to acquire control of the Company to implement such changes. If shareholder activists seeking to increase short-term shareholder value are elected to the Company’s board of directors, this could adversely effect the Company’s business and future operations. Additionally, shareholder activism could create uncertainty about the Company’s future strategic direction, resulting in loss of future business opportunities, which could adversely effect the Company’s business, future operations, profitability and ability to attract and retain qualified personnel.

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The Boa Esperança Property is located in an underdeveloped rural area

The Boa Esperança Property is located in an underdeveloped rural area, resulting in technical challenges for conducting mineral exploration and development and any potential mining activities at the property. The Company benefits from modern mining transportation skills and technologies for exploring and operating in such areas. Nevertheless, the Company may sometimes be unable to overcome problems related to underdevelopment or unseasonable weather at a commercially reasonable cost, which could negatively affect the Company’s mineral exploration and development and any potential mining activities at the property and have a material adverse effect on the Company. The rural location of the Boa Esperança Property also results in increased costs associated with land access and infrastructure, including powerlines, water pipelines and transportation.

Product alternatives may reduce demand for the Company’s products

Copper and gold have a number of different applications. Alternative technologies are continually being investigated and developed with a view to reducing production costs or for other reasons, such as minimizing environmental or social impact. If competitive technologies emerge that use other materials in place of copper or gold, demand and price for copper or gold might fall, which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Changes in climate conditions may affect the Company’s operations

A number of governments have introduced or are moving to introduce climate change legislation and treaties at the international, national, state/provincial and local levels. Regulation relating to emission levels (such as carbon taxes) and energy efficiency is becoming more stringent. If the current regulatory trend continues, this may result in increased costs at the Company’s operations. In addition, the physical risks of climate change may also have an adverse effect on the Company’s operations. These risks include the following:

· changes in sea levels could affect ocean transportation and shipping facilities that are used to transport supplies, equipment and workforce and products from the Company's operations to world markets;

· extreme weather events (such as prolonged drought or rainy seasons) have the potential to disrupt operations at the Company’s mines and may require the Company to make additional expenditures to mitigate the impact of such events; and

· the Company’s facilities depend on regular supplies of consumables (diesel, tires, reagents, etc.) to operate efficiently. In the event that the effects of climate change or extreme weather events cause prolonged disruption to the delivery of essential commodities, production levels at the Company’s operations may be reduced.

There can be no assurance that efforts to mitigate the risks of climate change will be effective and that the physical risks of climate change will not have an adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

The Company is subject to restrictive covenants that limit its ability to operate its business

The Company and its subsidiaries are subject to certain affirmative and restrictive covenants contained in the Credit Agreement. The loan agreements contain operating and financial covenants that could restrict the Company’s and its subsidiaries’ ability to, among other things: incur additional indebtedness needed to fund its respective operations; pay dividends or make certain other distributions; make investments; create liens; sell or transfer assets; or enter into transactions with affiliates. In addition, the Company and its subsidiaries must maintain certain financial ratios and satisfy non-financial maintenance and other covenants. Compliance with the covenants and financial ratios may impair the Company and its subsidiaries and thereby the Company’s ability to finance future operations or capital needs or to take advantage of other favourable corporate opportunities. The restrictions on the Company’s ability to manage its business in management’s sole discretion could adversely affect the Company’s business by, among other things, limiting its ability to take advantage of business opportunities that management believes would be beneficial to shareholders and limiting their ability to adjust to changing market conditions. The Company’s and its subsidiaries’ ability to comply with such covenants and financial ratios will depend on future performance and may be affected by events beyond the control of the Company and its subsidiaries, including economic, financial and industry conditions.

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Risks Related to the Company’s Foreign Operations

The Company’s Brazilian operations are subject to political and other risks associated with operating in a foreign jurisdiction

The Vale do Curaçá Property, the NX Gold Property and the Boa Esperança Property are located in Brazil, exposing the Company to the socioeconomic conditions as well as the laws governing the mining industry in the country. Inherent risks with conducting foreign operations include, but are not limited to: high rates of inflation; extreme fluctuations in currency exchange rates, military repression; war or civil war; social and labour unrest; organized crime; hostage taking; terrorism; violent crime; expropriation and nationalization; renegotiation or nullification of existing concessions, licenses, approvals, permits and contracts; illegal mining; changes in taxation policies; restrictions on foreign exchange and repatriation; and changing political norms, currency controls and governmental regulations that favour or require the Company to award contracts in, employ citizens of, or purchase supplies from, the jurisdiction.

The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes significant changes in policies and regulations. Changes, if any, in mining or investment policies or shifts in political attitude in Brazil may adversely affect the Company’s operations or profitability. Operations may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on production, price controls, export controls, currency remittance, importation of parts and supplies, income and other taxes, royalties, the repatriation of profits, expropriation of property, foreign investment, awarding of concessions under the new land tender system in Brazil, maintenance of concessions, licenses, approvals and permits, environmental matters, land use, land claims of local people, water use and mine safety. Failure to comply strictly with applicable laws, regulations and local practices relating to mineral right applications and tenure could result in loss, reduction or expropriation of entitlements, or the imposition of additional local or foreign parties as joint venture partners with carried or other interests.

In addition, uncertainty over whether the Brazilian government will implement changes in policy or regulation may contribute to economic uncertainty in Brazil. Historically, Brazilian politics have affected the performance of the Brazilian economy. Past political crises have affected the confidence of investors and the public, generally resulting in an economic slowdown.

Global economic crises could negatively affect investor confidence in emerging markets or the economies of the principal countries in Latin America, including Brazil. Such events could materially and adversely affect the Company's business, financial condition, results of operations, cash flows or prospects.

The Company continues to monitor developments and policies in Brazil and the impact thereof to its operations; however, they cannot be accurately predicted and could have an adverse effect on the Company’s operations or profitability.

The Company may be negatively impacted by changes to mining laws and regulations

The Company’s activities are subject to various laws governing prospecting, exploration, development, production, taxes, labour standards and occupational health, mine safety, toxic substances and other matters. Mining, exploration and development activities are also subject to various laws and regulations relating to the protection of the environment. Although the Company believes that its activities are currently carried out in accordance with all applicable rules and regulations, no assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner that could limit or curtail production or development of the Company’s properties. Amendments to current laws and regulations governing the Company’s operations and activities or more stringent implementation of such laws and regulations could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

It is uncertain how the current and past operations of the Company will be affected by future legal changes or more stringent enforcement of past and current laws and regulations by governmental authorities. The Company may be subject to administrative, civil and criminal sanctions should a more conservative interpretation of past and current laws and regulations be adopted by governmental authorities.

A failure to maintain relationships with the communities in which the Company operates and other stakeholders may adversely affect the Company’s business.

The Company’s relationships with the communities in which it operates and other stakeholders are critical to ensure the future success of its existing operations and the construction and development of its projects. There is an increasing level of public concern relating to the perceived effect of mining activities on the environment and on communities impacted by such activities.

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The evolving expectations related to human rights, and environmental protection may result in opposition to the Company’s current and future operations or further development or new development of the Company’s projects and mines. Such opposition may be directed through legal or administrative proceedings or expressed in manifestations such as protests, roadblocks or other forms of public expression against the Company’s activities and may have a negative impact on the Company’s reputation and operations.

Opposition by any of the aforementioned groups to the Company’s operations may require modification of, or preclude the operation or development of, the Company’s projects and mines or may require the Company to enter into agreements with such groups or local governments with respect to the Company’s projects and mines, in some cases, causing increased cost and considerable delays to the advancement of the Company’s projects. Further, publicity adverse to the Company, its operations or extractive industries generally, could have an adverse effect on the Company and may impact relationships with the communities in which Ero operates and other stakeholders. While the Company is committed to operating in a socially responsible manner, there can be no assurance that its efforts in this respect will mitigate this potential risk.

Corruption and fraud in Brazil relating to ownership of real property may adversely affect the Company’s business

Under Brazilian law, real property ownership is normally transferred by means of a transfer deed, and subsequently registered at the appropriate real property registry office under the corresponding real property record. There are uncertainties, corruption and fraud relating to title ownership of real property in Brazil, mostly in rural areas. In certain cases, a real property registry office may register deeds with errors, including duplicate and/or fraudulent entries, and, therefore, deed challenges frequently occur, leading to judicial actions. Property disputes over title ownership are frequent in Brazil, and, as a result, there is a risk that errors, fraud or challenges could adversely affect the Company’s ability to operate, although ownership of mining rights are separate from ownership of land.

The Company is exposed to the possibility that applicable taxing authorities could take actions that result in increased tax or other costs that might reduce the Company’s cash flow

The Company pays a variety of taxes, fees and other governmental charges in connection with the operation of the Company’s business, including income taxes, mining royalties, ad valorem property taxes, sales and use taxes, inventory taxes, social security contributions and various assessments. These taxes, fees and other charges are assessed by a variety of taxing authorities pursuant to applicable laws, regulations and rules. The Brazilian tax regime is complex and subject to a variety of interpretations by government authorities. Such complexity may expose the Company to unpredicted challenges to day to day practices in bookkeeping, accounting and payment of taxes. From time to time, the Company may enter into specific agreements with such taxing authorities that provide for the reduction, abatement or deferral of such taxes, fees or charges in exchange for certain payments or undertakings on the Company’s part. If the Company enters into any such arrangements, the Company can give no assurance that any such reduction, abatement or deferral arrangements will be honored or that the applicable taxing authorities will not take actions that materially increase the amount of such taxes, fees or other governmental charges that the Company is required to pay. In addition, the Company may incur additional and unanticipated costs and expenses in connection with the Company’s efforts to resist any proposed increases in such taxes, fees or other charges or in connection with the Company’s efforts to enforce any reduction, abatement or deferral arrangements that the Company has previously put in place.

The Brazilian government may implement changes to the Brazilian tax regime that may affect the Company. These changes could include changes in prevailing tax rates and the imposition of new or temporary taxes, the proceeds of which are earmarked for designated government purposes. Some of these changes may result in increases in the Company’s tax payments, which could have an adverse effect on the Company’s operations or profitability. The Company cannot provide assurance that it will be able to be profitable following any increases in Brazilian taxes applicable to the Company and its operations.

The Company is subject to a number of ongoing proceedings in Brazil related to tax matters that have not been accounted for in its financial statements, given the Company’s assessment of the probability of adverse judgment against it. If all such tax matters were decided against it, the Company could be exposed to liability of up to approximately R$59 million, which could have an adverse impact on the Company’s business, financial condition, results of operations, cash flows or prospects.

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Inflation in Brazil, along with Brazilian governmental measures to combat inflation, may have a significant negative effect on the Brazilian economy and also on the Company’s financial condition and results of operations

In the past, high levels of inflation have adversely affected the economies and financial markets of Brazil, and the ability of its government to create conditions that stimulate or maintain economic growth. Moreover, governmental measures to curb inflation and speculation about possible future governmental measures have contributed to the negative economic impact of inflation in Brazil and have created general economic uncertainty. As part of these measures, the Brazilian government has at times maintained a restrictive monetary policy and high interest rates that have limited the availability of credit and economic growth. Brazil may experience high levels of inflation in the future. Inflationary pressures may weaken investor confidence in Brazil and lead to further government intervention in the economy, including interest rate increases, restrictions on tariff adjustments to offset inflation, intervention in foreign exchange markets and actions to adjust or fix currency values, which may trigger or exacerbate increases in inflation, and consequently have an adverse impact on the Company. In an inflationary environment, the value of uncollected accounts receivable, as well as of unpaid accounts payable, declines rapidly. If Brazil experiences high levels of inflation in the future and price controls are imposed, the Company may not be able to adjust the rates the Company charges its customers to fully offset the impact of inflation on the Company's cost structures, which could adversely affect the Company's results of operations or financial condition.

Exchange rate instability may have a material adverse effect on the Brazilian economy

The Brazilian Real has experienced frequent and substantial variations in relation to the US dollar and other foreign currencies during the last decades. Depreciation of the Brazilian Real against the US dollar could create inflationary pressures in Brazil and cause increases in interest rates, which could negatively affect the growth of the Brazilian economy as a whole and harm the Company's financial condition and results of operations. On the other hand, appreciation of the Brazilian Real relative to the US dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange current accounts, as well as dampen export-driven growth. Depending on the circumstances, either depreciation or appreciation of the Brazilian Real could have a material adverse effect on the Brazilian economy.

The Company’s operations may be impaired as a result of restrictions to the acquisition or use of rural properties by foreigner investors or Brazilian companies under foreign control

Non-resident individuals and non-domiciled foreign legal entities are subject to restrictions for the acquisition or lease for agricultural purpose or ownership or access rights in respect of rural properties in Brazil. Limitations also apply to legal entities domiciled in Brazil controlled by foreign investors, such as the Company’s subsidiaries through which the Company operates in Brazil.

Accordingly, the Company’s current and future operations may be impaired as a result of such restrictions on the acquisition or use of rural properties, and the Company’s ownership or access rights in respect of any rural properties in Brazil may be subject to legal challenges, all of which could result in a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.

Recent disruptions in international and domestic capital markets may lead to reduced liquidity and credit availability for the Company

The disruptions recently experienced in the international and domestic capital markets have led to reduced liquidity and increased credit risk premiums for certain market participants and have resulted in a reduction of available financing. Companies located in countries in the emerging markets may be particularly susceptible to these disruptions and reductions in the availability of credit or increases in financing costs, which could result in them experiencing financial difficulty. In addition, the availability of credit to entities operating within the emerging and developing markets is significantly influenced by levels of investor confidence in such markets as a whole and as such any factors that impact market confidence (for example, a decrease in credit ratings, state or central bank intervention in one market or terrorist activity and conflict) could affect the price or availability of funding for entities within any of these markets.

The Company may be responsible for corruption and anti-bribery law violations

The Company’s business is subject to the United States Foreign Corrupt Practices Act of 1977 (“FCPA”) and the Corruption of Foreign Public Officials Act (Canada) (“CFPOA”), which generally prohibit companies and company employees from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. The FCPA also requires companies to maintain accurate books and records and internal controls, including at foreign-controlled subsidiaries. Since all of the Company’s presently held interests are located in Brazil, there is a risk of potential FCPA violations. In addition, the Company is subject to the anti-bribery laws of Brazil and of any other countries in which it conducts business in the future. The Company's employees or other agents may, without its knowledge and despite its efforts, engage in prohibited conduct under the Company’s policies and procedures and the FCPA, the CFPOA or other anti-bribery laws for which the Company may be held responsible. The Code and the Anti-Corruption Policy mandate compliance with these anti-corruption and anti-bribery laws and the Company has implemented training programs, internal monitoring and controls, and reviews and audits to ensure compliance with such laws. However, there can be no assurance that the Company’s internal control policies and procedures will always protect it from recklessness, fraudulent behavior, dishonesty or other inappropriate acts committed by its affiliates, employees, contractors or agents. If the Company’s employees or other agents are found to have engaged in such practices, the Company could suffer severe penalties and other consequences that may have a material adverse effect on its business, financial condition and results of operations.

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Risks Related to the Common Shares

Investors may lose their entire investment

An investment in the Common Shares is speculative and may result in the loss of an investor’s entire investment. Only potential investors who are experienced in high risk investments and who can afford to lose their entire investment should consider an investment in the Company.

Dilution from equity financing could negatively impact holders of Common Shares

The Company may from time to time raise funds through the issuance of Common Shares or the issuance of debt instruments or other securities convertible into Common Shares. The Company cannot predict the size or price of future issuances of Common Shares or the size or terms of future issuances of debt instruments or other securities convertible into Common Shares, or the effect, if any, that future issuances and sales of the Company’s securities will have on the market price of the Common Shares. Sales or issuances of substantial numbers of Common Shares, or the perception that such sales or issuances could occur, may adversely affect prevailing market prices of the Common Shares. With any additional sale or issuance of Common Shares, or securities convertible into Common Shares, investors will suffer dilution to their voting power and the Company may experience dilution in its earnings per share.

Equity securities are subject to trading and volatility risks

The securities of publicly traded companies can experience a high level of price and volume volatility and the value of the Company’s securities can be expected to fluctuate depending on various factors, not all of which are directly related to the success of the Company and its operating performance, underlying asset values or prospects. These include the risks described elsewhere in this AIF. Factors which may influence the price of the Company’s securities, including the Common Shares, include, but are not limited to:

· worldwide economic conditions;

· changes in government policies;

· investor perceptions;

· movements in global interest rates and global stock markets;

· variations in operating costs;

· the cost of capital that the Company may require in the future;

· metals prices;

· the price of commodities necessary for the Company’s operations;

· recommendations by securities research analysts;

· issuances of equity securities or debt securities by the Company;

· operating performance and, if applicable, the share price performance of the Company’s competitors;

· the addition or departure of key management and other personnel;

· significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving the Company or its competitors;

· news reports relating to trends, concerns, technological or competitive developments, regulatory changes, global health crises and other related industry and market issues affecting the mining sector;

· litigation;

· publicity about the Company, the Company’s personnel or others operating in the industry;

· loss of a major funding source;

· all market conditions that are specific to the mining industry.

There can be no assurance that such fluctuations will not affect the price of the Company’s securities, and consequently purchasers of Common Shares may not be able to sell Common Shares at prices equal to or greater than the price or value at which they purchased the Common Shares or acquired them by way of the secondary market.

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Sales by existing shareholders can reduce share prices

Sales of a substantial number of Common Shares in the public market could occur at any time. These sales, or the market perception that the holders of a large number of Common Shares intend to sell Common Shares, could reduce the market price of the Common Shares. If this occurs and continues, it could impair the Company’s ability to raise additional capital through the sale of securities.

The Company does not intend to pay dividends

The Company has not, since the date of its incorporation, declared or paid any dividends or other distributions on its Common Shares. The Company is currently restricted from declaring or paying dividends or distributions until the secured obligations under the Credit Facilities have been satisfied pursuant to the terms and conditions set out in the Credit Agreement.

The declaration and payment of any dividends in the future is at the discretion of the Board and will depend on numerous factors, including compliance with applicable laws, financial performance, contractual restriction (as noted above), working capital requirements of the Company and its subsidiaries and such other factors as its directors consider appropriate.

Public companies are subject to securities class action litigation risk

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. If the Company faces such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could materially harm its business.

If securities or industry analysts do not publish research or publish inaccurate or unfavourable research about the Company’s business, the price and trading volume of the Common Shares could decline

The trading market for the Common Shares will depend on the research and reports that securities or industry analysts publish about the Company and its business. The Company does not have any control over these analysts. The Company cannot assure that analysts will cover it or provide accurate or favourable coverage. If one or more of the analysts who cover the Company downgrade its stock or change their opinion of the Common Shares, price of Common Shares would likely decline. If one or more of these analysts cease coverage of the Company or fail to regularly publish reports, the Company could lose visibility in the financial markets, which could cause the price and trading volume of the Common Shares to decline.

Global financial conditions can reduce the price of the Common Shares

Following the onset of the credit crisis in 2008, global financial conditions were characterized by extreme volatility and several major financial institutions either went into bankruptcy or were rescued by governmental authorities. While global financial conditions subsequently stabilized, there remains considerable risk in the system given the extraordinary measures adopted by government authorities to achieve that stability. Global financial conditions could suddenly and rapidly destabilize in response to future economic shocks, as government authorities may have limited resources to respond to future crises. Future economic shocks may be precipitated by a number of causes, including a rise in the price of oil, geopolitical instability and natural disasters. Any sudden or rapid destabilization of global economic conditions could impact the Company’s ability to obtain equity or debt financing in the future on terms favourable to the Company. Additionally, any such occurrence could cause decreases in asset values that are deemed to be other than temporary, which may result in impairment losses. Further, in such an event, the Company’s operations and financial condition could be adversely impacted.

Furthermore, general market, political and economic conditions, including, for example, inflation, interest and currency exchange rates, structural changes in the global mining industry, global supply and demand for commodities, political developments, legislative or regulatory changes, social or labour unrest and stock market trends will affect the Company’s operating environment and its operating costs, profit margins and share price. Any negative events in the global economy could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

DIVIDENDS AND DISTRIBUTIONS

The Company has not, since the date of its incorporation, declared or paid any dividends or other distributions on its Common Shares, and does not currently have a policy with respect to the payment of dividends or other distributions. The Company is currently restricted from declaring or paying dividends or distributions until the secured obligations under the Credit Facilities have been satisfied pursuant to the terms and conditions set out in the Credit Agreement.

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The declaration and payment of any dividends in the future is at the discretion of the Board and will depend on numerous factors, including compliance with applicable laws, financial performance, contractual restrictions (as noted above), working capital requirements of the Company and its subsidiaries and such other factors as the Board considers appropriate.

DESCRIPTION OF CAPITAL STRUCTURE

The Company’s authorized share capital consists of an unlimited number of Common Shares without par value. As at March 12, 2020, there are 85,756,978 Common Shares issued and outstanding, 5,081,541 Common Shares issuable pursuant to outstanding options of the Company to purchase Common Shares (“Options”) pursuant to the stock option plan of the Company adopted by the Board on May 15, 2017, 438,463 Common Shares issuable pursuant to outstanding performance share units of the Company (“PSUs”) pursuant to the share unit plan of the Company adopted by the Board on September 7, 2017 and 2,866,662 Common Shares issuable pursuant to outstanding Founder Warrants (as defined below).

In anticipation of the Acquisitions, the Company completed a private placement offering of 10,000,000 units (the “Founder Units”) of the Company on September 2, 2016, at US$0.01 per Founder Unit for aggregate gross proceeds of US$100,000. Each one Founder Unit was comprised of one Common Share and one-third of a Common Share purchase warrant

(the “Founder Warrants”), with each one Founder Warrant entitling the holder thereof to acquire one Common Share at a price of US$1.20 until December 12, 2021, in accordance with the terms thereof and the Warrant Indenture. As at the date of this AIF, a total of 2,866,662 Founder Warrants are issued and outstanding.

All of the Common Shares rank equally as to voting rights, participation in a distribution of the assets of the Company on a liquidation, dissolution or winding-up of the Company and entitlement to any dividends declared by the Company. The holders of the Common Shares are entitled to receive notice of, and to attend and vote at, all meetings of shareholders (other than meetings at which only holders of another class or series of shares are entitled to vote). Each Common Share carries the right to one vote. In the event of the liquidation, dissolution or winding-up of the Company, or any other distribution of the assets of the Company among its shareholders for the purpose of winding-up its affairs, the holders of the Common Shares will be entitled to receive, on a pro rata basis, all of the assets remaining after the payment by the Company of all of its liabilities. The holders of Common Shares are entitled to receive dividends as and when declared by the Board in respect of the Common Shares on a pro rata basis.

Any alteration of the rights, privileges, restrictions and conditions attaching to the Common Shares under the Company’s Articles of Incorporation (“Articles”) must be approved by at least two-thirds of the Common Shares voted at a meeting of the Company’s shareholders.

MARKET FOR SECURITIES

Market

The Common Shares are listed for trading on the TSX under the trading symbol “ERO”.

Trading Price and Volume

The following table sets out information relating to the monthly trading of the Common Shares on the TSX for each of the months indicated.

Period	High ($)		Low ($)		Volume
January 2019		12.89		9.45		4,310,328
February 2019		16.82		12.36		5,889,328
March 2019		17.75		14.97		8,087,344
April 2019		18.66		15.34		4,371,806
May 2019		18.36		15.87		5,298,182
June 2019		23.00		16.64		5,438,620
July 2019		25.69		21.26		3,555,652
August 2019		25.09		19.31		4,065,519
September 2019		22.21		18.88		3,008,502
October 2019		19.38		15.31		4,959,482
November 2019		21.58		16.52		3,389,617
December 2019		23.93		19.79		4,280,630

The closing price of the Common Shares as quoted by the TSX on December 31, 2019 was $23.61.

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Prior Sales

The following table summarizes the securities of the Company (each convertible into one Common Share) that are outstanding but not listed or quoted on a marketplace and that have been issued by the Company during the financial year ended December 31, 2019:

Date of Issue	Type of Securities	Aggregate Number Issued			Exercise Price ($)
January 2, 2019	Options		125,000			9.80
August 15, 2019	Options		40,000			21.09
December 12, 2019	Options		470,228			20.52
December 12, 2019	PSUs		225,659	(1)		N/A

Note:

⁽¹⁾ Assumes that 100% of the 225,659 PSUs granted on December 12, 2019 will vest. The PSUs will vest three years from the date of grant and the actual number of PSUs that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain performance conditions. Please refer to the Company’s management information circular dated March 12, 2020 (“Statement of Executive Compensation - Compensation Committee Decisions Relating to 2019 Compensation – Options and Share Based Awards”), a copy of which is available for review under the Company’s profile on SEDAR at www.sedar.com.

DIRECTORS AND EXECUTIVE OFFICERS

Director and Executive Officer Profiles

The following table sets forth the name of each director and executive officer of the Company as at December 31, 2019 and the date of this AIF, their province or state and country of residence, their position(s) and office(s) held with the Company, their principal occupation(s) during the preceding five years, the date they became a director of the Company, if applicable, and the number and percentage of Common Shares they beneficially own, or control or direct, directly or indirectly. Each director’s term will expire immediately prior to the next annual meeting of shareholders of the Company.

Name and Residence	Position(s) and Office(s) with Ero	Principal Occupation(s) During Past Five Years	Director Since	Number of Common Shares Held(1)
Christopher Noel Dunn Massachusetts, USA	Executive Chairman Director	Executive Chairman, Ero Copper Corp. since May 16, 2016; Co-Managing Partner of Ero Resource Partners LLC since February 2014 (currently inactive); Managing Director of Liberty Metals & Mining LLC from 2011 until 2013.	May 16, 2016	3,027,281(2)
David Strang British Columbia, Canada	President and Chief Executive Officer Director	President and Chief Executive Officer, Ero Copper Corp. since May 16, 2016; Co-Managing Partner of Ero Resource Partners LLC since February 2014 (currently inactive); CEO and Director, Lumina Copper Corp. from August 2008 until August 2014.	May 16, 2016	5,255,936(3)

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Name and Residence	Position(s) and Office(s) with Ero	Principal Occupation(s) During Past Five Years	Director Since	Number of Common Shares Held(1)
Wayne Drier British Columbia, Canada	Chief Financial Officer	Chief Financial Officer, Ero Copper Corp. since March 2017; Executive, Corporate Development, Asanko Gold Inc. from July 2014 until March 2017; Vice President: Strategy & Development, Coalspur Mines Ltd. from July 2011 until June 2014.	-	211,666(4)
Michel (Mike) Richard British Columbia, Canada	Chief Geological Officer	Chief Geological Officer (previously, Senior Vice President Exploration), Ero Copper Corp. since January 2017; Director New Business Development South America, Lundin Mining Corporation from April 2012 to January 2016; General Manager TEMCL, Teck Resources Limited from May 1994 until March 2012.	-	2,050,000(5)
Anthea Bath British Columbia, Canada	Vice President, Technical Services	Vice President, Technical Services, Ero Copper Corp. since July 2018; Vice President, Strategic Market Development and Commercial, Sibanye-Stillwater from September 2016 until June 2018; and Chief Executive Officer of PentaQuark Energy from August 2012 until August 2016.	-	Nil(6)
Makko DeFilippo Arizona, USA	Vice President, Corporate Development	Vice President, Corporate Development, Ero Copper Corp. since February 2017; Director Corporate Finance, Global Mining Advisory Practice from January 2016 until January 2017; Partner, Ero Resource Partners from January 2014 until January 2016; Investment Analyst, Liberty Metals & Mining, LLC from October 2011 until December 2013.	-	6,324(7)
Deepk Hundal British Columbia, Canada	Vice President, General Counsel and Corporate Secretary	Vice President, General Counsel & Corporate Secretary, Ero Copper Corp. since July 2017; General Counsel, Retirement Concepts Senior Services Ltd. & Pacific Reach Properties Ltd., from July 2014 until July 2017; Vice President, Legal, Elgin Mining Ltd. from May 2012 until July 2013; Vice President, Legal and Corporate Secretary, Aura Minerals Inc. from June 2007 until April 2012.	-	10,526(8)
Pablo Mejia British Columbia, Canada	Vice President, Exploration	Vice President, Exploration, Ero Copper Corp. since June 2018; Senior Consultant, Mira Geoscience Ltd. from January 2016 until May 2018; and Assistant Professor, Escuela de Ingenieria de Antioquia from July 2015 until December 2015.	-	Nil(9)
Michal Romanowski Arizona, USA	Vice President, Evaluations and Planning	Vice President, Evaluations and Planning, Ero Copper Corp. since January 2017; Partner, Ero Resource Partners LLC from May 2014 until December 2016; Investment Analyst, Liberty Metals & Mining LLC from January 2013 until April 2014; Principal Consultant, Romanowski & Company from January 2011 until December 2013.	-	200,000(10)

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Name and Residence	Position(s) and Office(s) with Ero	Principal Occupation(s) During Past Five Years	Director Since	Number of Common Shares Held(1)
Jonathan Singh British Columbia, Canada	Vice President, Finance	Vice President, Finance, Ero Copper Corp. since February 2017; Chief Financial Officer of: Aurora Mineral Resources Group from September 2011 until January 2016, Kaminak Gold Corporation, from October 2011 until January 2016, Kivalliq Energy Corporation, from October 2011 until January 2016, West Melville Metals Inc., from September 2011 until September 2015, and Bluestone Resources Inc., September 2011 until February 2014.	-	125,000(11)
Lyle Braaten(16)(18) British Columbia, Canada	Director (Independent)	President and Chief Executive Officer, Miedzi Copper Corp. since March 2012; Vice President, Legal, Lumina Gold Corp. since June 2014; Vice President, Legal Counsel, Luminex Resources Corp. since August 2018; Vice President, Legal, Anfield Gold Corp. from May 2016 until December 2017; Special Counsel, Innergex Renewable Energy Inc. (a successor to Alterra Power Corp.) since June 2008.	July 27, 2016	316,666(12)
Steven Busby(18)(19) British Columbia, Canada	Director (Independent)	Chief Operating Officer of Pan American Silver Corp. since 2008.	July 27, 2016	366,666(12)
Dr. Sally Eyre(17)(18) British Columbia, Canada	Director (Independent)	Corporate Director since March 2014; President and Chief Executive Officer of Copper North Mining from August 2011 until January 2014.	August 12, 2019	Nil(13)
Robert Getz(17)(18) Connecticut, USA	Director (Independent)	Managing Partner, Pecksland Capital Partners since December 2015. Partner and Co-Founder, Cornerstone Equity Investors from September 1996 until December 2016.	June 14, 2018	202,666(14)
Chantal Gosselin(16)(19) Toronto, Canada	Director (Independent)	Corporate Director since September 2013; Vice President and Portfolio Manager, Goodman Investment Counsel from September 2011 until September 2013.	August 12, 2019	625(15)
John Wright(16)(19) British Columbia, Canada	Director (Independent)	Business Development with Capstone Mining Corp. since December 2006.	July 27, 2016	866,666(12)
Matthew Wubs(16)(17) British Columbia, Canada	Director (Independent)	Director, Westland Insurance Group Ltd. since January 2020; Co-Chief Executive Officer, Westland Insurance Group Ltd. from January 2016 until  December 2019; Chief Financial Officer, Westland Insurance Group Ltd. from January 2002 until December 2015.	July 27, 2016	2,135,935(12)

Notes:

⁽¹⁾ On a non-diluted basis.

⁽²⁾ Mr. Dunn also holds 1,000,000 Founder Warrants, 525,185 Options and 73,007 PSUs, entitling him to acquire in the aggregate an additional 1,598,192 Common Shares, assuming that 100% of the PSUs vest. The PSUs will vest three years from the date of grant and the actual number of PSUs that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain performance conditions. Please refer to the Company’s management information circular dated March 12, 2020 (under “Statement of Executive Compensation - Compensation Committee Decisions Relating to 2019 Compensation – Options and Share Based Awards”), a copy of which is available for review under the Company’s profile on SEDAR at www.sedar.com.

⁽³⁾ Mr. Strang also holds 1,000,000 Founder Warrants, 525,185 Options and 73,007 PSUs, entitling him to acquire in the aggregate an additional 1,598,192 Common Shares, assuming that 100% of the PSUs vest.

⁽⁴⁾ Mr. Drier also holds 562,673 Options and 27,898 PSUs, entitling him to acquire in the aggregate an additional 590,571 Common Shares, assuming 100% of the PSUs vest.

⁽⁵⁾ Mr. Richard also holds 366,666 Founder Warrants, 273,801 Options and 30,230 PSUs, entitling him to acquire in the aggregate an additional 670,697 Common Shares, assuming 100% of the PSUs vest.

⁽⁶⁾ Ms. Bath holds 287,348 Options and 17,527 PSUs, entitling her to acquire in the aggregate 304,875 Common Shares, assuming 100% of the PSUs vest.

⁽⁷⁾ Mr. DeFilippo also holds 273,812 Options and 19,859 PSUs, entitling him to acquire in the aggregate an additional 293,671 Common Shares, assuming 100% of the PSUs vest.

⁽⁸⁾ Mr. Hundal also holds 262,348 Options and 17,527 PSUs, entitling him to acquire in the aggregate an additional 279,875 Common Shares, assuming 100% of the PSUs vest.

⁽⁹⁾ Mr. Mejia holds 187,262 Options and 13,749 PSUs, entitling him to acquire in the aggregate 201,011 Common Shares, assuming 100% of the PSUs vest.

⁽¹⁰⁾ Mr. Romanowski also holds 66,666 Founder Warrants, 162,348 Options and 17,527 PSUs, entitling him to acquire in the aggregate an additional 246,541 Common Shares, assuming 100% of the PSUs vest.

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⁽¹¹⁾ Mr. Singh also holds 208,792 Options and 12,059 PSUs, entitling him to acquire in the aggregate an additional 220,851 Common Shares, assuming 100% of the PSUs vest.

⁽¹²⁾ Each of Messrs. Braaten, Busby, Wright and Wubs also hold 66,666 Founder Warrants and 61,208 Options, entitling each of them to acquire in the aggregate an additional 127,874 Common Shares.

⁽¹³⁾ Dr. Eyre also holds 26,208 Options, entitling her to acquire an additional 26,208 Common Shares.

⁽¹⁴⁾ Mr. Getz also holds 55,208 Options, entitling him to acquire an additional 55,208 Common Shares.

⁽¹⁵⁾ Ms. Gosselin also holds 26,208 Options, entitling her to acquire an additional 26,208 Common Shares.

⁽¹⁶⁾ Member of the Audit Committee. Mr. Wubs is the Chairman of this committee.

⁽¹⁷⁾ Member of the Compensation Committee. Mr. Getz is the Chairman of this committee.

⁽¹⁸⁾ Member of the Nominating and Corporate Governance Committee. Mr. Braaten is the Chairman of this committee.

⁽¹⁹⁾ Member of the Environmental, Health, Safety and Sustainability Committee. Mr. Busby is the Chairman of this committee.

Based on the disclosure available on the System for Electronic Disclosure by Insiders (SEDI), as of the date of this AIF, the directors and executive officers of the Company, as a group, beneficially own, or control or direct, directly or indirectly, 14,775,957 Common Shares, representing approximately 17.23% of the total number of Common Shares outstanding before giving effect to the conversion of any Options, PSUs and Founder Warrants held by such directors and executive officers.

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

None of the Company’s directors or executive officers is, as at the date hereof, or was within 10 years before the date hereof, a director, chief executive officer or chief financial officer of any company (including the Company) that (a) was subject to a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days (an “Order”) that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer, or (b) was subject to an Order that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer.

Except as set out below, none of the Company’s directors or executive officers, nor, to its knowledge, any shareholder holding a sufficient number of its securities to affect materially the control of the Company (a) is, as at the date hereof, or has been within the 10 years before the date hereof, a director or executive officer of any company (including the Company) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, or (b) has, within the 10 years before the date hereof, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of such director, executive officer or shareholder. In September 2010, while Robert Getz was a director of EarthRenew Corporation (“EarthRenew”), a private company, EarthRenew appointed a receiver-manager pursuant to the Bankruptcy and Insolvency Act (Canada) in respect of its assets and undertakings. Mr. Getz is no longer a director of EarthRenew.

None of the Company’s directors or executive officers, nor, to its knowledge, any shareholder holding a sufficient number of its securities to affect materially the control of the Company, has been subject to (a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority, or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.

Conflicts of Interest

To the best of the Company’s knowledge, there are no existing or potential material conflicts of interest between the Company and any of its directors or officers as of the date hereof. However, certain of the Company’s directors and officers are, or may become, directors or officers of other companies with businesses which may conflict with its business. Accordingly, conflicts of interest may arise which could influence these individuals in evaluating possible acquisitions or in generally acting on the Company’s behalf.

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Pursuant to the BCABC, directors and officers of the Company are required to act honestly and in good faith with a view to the best interests of the Company. As required under the BCABC and the Articles:

· a director or senior officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual’s duty or interest as a director or senior officer of the Company, must promptly disclose the nature and extent of that conflict; and

· a director who holds a disclosable interest (as such term is defined under the BCABC) in a contract or transaction into which the Company has entered or proposes to enter may generally not vote on any directors’ resolution to approve such contract or transaction.

Generally, as a matter of practice, directors and officers who have disclosed a material interest in any contract or transaction that the Board is considering will not take part in any Board discussion respecting that contract or transaction. If on occasion such directors do participate in the discussions, they will refrain from voting on any matters relating to matters in which they have disclosed a material interest. In appropriate cases, the Company will establish a special committee of independent directors to review a matter in which directors or officers may have a conflict.

AUDIT COMMITTEE

The Audit Committee provides assistance to the Board in fulfilling its obligations relating to the integrity of the internal financial controls and financial reporting of the Company. The external auditors of the Company report directly to the Audit Committee. The Audit Committee’s primary duties and responsibilities include: (i) reviewing and reporting to the Board on the annual audited financial statements (including the auditor’s report thereon) and unaudited interim financial statements and any related management’s discussion and analysis, if any, and other financial disclosure related thereto that may be required to be reviewed by the Audit Committee pursuant to applicable legal and regulatory requirements; (ii) reviewing material changes in accounting policies and significant changes in accounting practices and their impact on the financial statements; (iii) overseeing the audit function, including engaging in required discussions with the Company’s external auditor and reviewing a summary of the annual audit plan at least annually, overseeing the independence of the Company’s external auditor, overseeing the Company’s internal auditor, and pre-approving any non-audit services to the Company; (iv) reviewing and discussing with management the appointment of key financial executives and recommending qualified candidates to the Board; (v) reviewing with management and the Company’s external auditors, at least annually, the integrity of the internal controls over financial reporting and disclosure; (vi) reviewing management reports related to legal or compliance matters that may have a material impact on the Company and the effectiveness of the Company’s compliance policies; and (vii) establishing whistleblowing procedures and investigating any complaints or concerns it deems necessary. The full text of the Audit Committee mandate is attached to this AIF as Appendix “A”.

Composition of the Audit Committee

The Audit Committee is composed of Messrs. Matthew Wubs (Chair), Lyle Braaten and John Wright and Ms. Chantal Gosselin, all of whom are independent directors and all of whom are financially literate, in each case within the meaning of National Instrument 52-110, Audit Committees. In addition to being independent directors as described above, each members of the Audit Committee meets an additional “independence” test under NI 52-110 in that (i) they do not accept, directly or indirectly, any consulting, advisory or other compensatory fees from the Company or any of its subsidiaries, other than as remuneration for acting in their capacity as a member of the Board or any committee of the Board; and (ii) they are not affiliated with the Company or any of its subsidiaries.

Relevant Education and Experience

Each of the members of the Audit Committee has extensive education and experience relevant to the performance of their responsibilities as members of the Audit Committee.

Matthew Wubs graduated with a B.A. from the University of British Columbia in 1992 and has been a Chartered Professional Accountant since 1996. Mr. Wubs is a director of Westland Insurance Group Ltd., one of the largest private insurance brokerage operations in Canada. Westland directly manages approximately $1.4 billion in premium volume through its brokerage, insurance company and wholesale operations. Prior to joining Westland’s board on January 1, 2020, Mr. Wubs was the Co-Chief Executive Officer of Westland from January 2016 to December 2019 and was responsible for oversight of insurance, reinsurance, risk management, finance and M&A. He joined Westland in the role of Controller in 1997, and thereafter held the position of Chief Financial Officer from January 2002 until December 2015.  Previous to Westland, he held a consulting role in Management Information Systems at International Forest Products Ltd. and obtained his Chartered Professional Accountant designation while working at Deloitte LLP. Mr. Wubs has been a member of Westland's audit committee for 12 years.

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Lyle Braaten graduated with a B.Sc. from the University of Calgary in 1986 and an LL.B. from the University of British Columbia in 1989. He has been the President and Chief Executive Officer of Miedzi Copper corp. since March 2012, the Vice President, Legal Counsel and a director of Lumina Gold Corp. since June 2014 and the Vice President, Legal Counsel and a director of Luminex Resources Corp. since August 2018. He was the General Counsel of Magma Energy Corp. from June 2008 to May 2011 when it acquired Plutonic Power Corp. and changed its name to Alterra Power Corp. Prior to joining Magma, he was involved in the management of a mid-sized law firm and served as its Managing Director from 2001 to 2008 with overall responsibility for the oversight of the firm’s financial results and reporting. He has been an audit committee member of Lumina Gold Corp. since July 2014 and has at least five years’ experience in audit committee positions.

Chantal Gosselin has over 25 years of combined experience in the mining industry and financial services. Ms. Gosselin most recently held the position of Vice President and Portfolio Manager at Goodman Investment Counsel. Prior to that, she served as a senior mining analyst at Sun Valley Gold LLP, a precious metals focused hedge fund. Between 2002 and 2008, Ms. Gosselin was the senior mining analyst and a partner of Genuity Capital Markets (now Canaccord Genuity Group) and held mining analyst positions with Haywood Securities Inc. and Dundee Securities Corporation. Prior to her financial services experience, she held various mine site management positions in Canada, Peru and Nicaragua. Ms. Gosselin received her Bachelor of Science Mine Engineering degree from Laval University and completed a Master in Business and Administration at Concordia University. She also completed the Chartered Investment Manager designation.  Ms. Gosselin serves as a director and member of the audit committee of Wheaton Precious Metals Corp. (formerly Silver Wheaton Corp.) and Lundin Gold Inc.  Ms. Gosselin formerly served as a director and a member of the audit, corporate governance and nominating (Chair) and technical committees of Capstone Mining Corp. from 2010 to November 2016.  Ms. Gosselin has at least 10 years of experience in audit committee positions.  

John Wright was a co-founder, and former Director, President and Chief Operating Officer of Pan American Silver Corp. Mr. Wright was also the co-founder of Equinox Resources. Previously, he spent 10 years with Teck Cominco where he worked at the Trail Smelter operations and later participated in the management of the feasibility studies, marketing and mine construction at the Afton, Highmont, Bull Moose and David Bell Mines. Mr. Wright is a director of SilverCrest Metals Inc. and Luminex Resources Corp. and a former director of Bitterroot Resources Ltd., Lumina Copper Corp., Northern Peru Copper Corp., Global Copper Corp. and Regalito Copper Corp. Mr. Wright has been involved in multiple asset purchases and sales and the accounting associated therewith. Mr. Wright was an audit committee member of Northern Peru Copper Corp. and Regalito Copper Corp. and has at least eight years’ experience in audit committee positions.

Pre-Approval Policies and Procedures

The Audit Committee mandate requires that the Audit Committee pre-approve any retainer of the auditor of the Company to provide any non-audit services to the Company that it deems advisable in accordance with applicable legal and regulatory requirements and policies and procedures of the Board. The Audit Committee is permitted to delegate pre-approval authority to one of its members; however, the decision of any member of the Audit Committee to whom such authority has been delegated must be presented to the full Audit Committee at its next scheduled meeting.

External Auditor Service Fees

The following table discloses the aggregate fees billed to the Company and its subsidiaries by its external auditors, KPMG LLP, Chartered Professional Accountants (“KPMG”), in the financial years ended December 31, 2019 and 2018:

Financial Year End	Audit Fees(1)		Audit Related Fees(2)		Tax Fees			All Other Fees
December 31, 2019	US$	363,403	US$	2,562	US$	5,049	(3)	Nil
December 31, 2018	US$	370,035	US$	9,698	US$	19,971	(4)	Nil

Note:

⁽¹⁾ The aggregate fees billed for the audit of the annual consolidated financial statements of the Company, quarterly interim review of the Company and of its Brazilian subsidiaries and statutory audits of the Company’s Brazilian subsidiaries.

⁽²⁾ The aggregate fees billed for professional services rendered by the external auditors in connection with general training provided with respect to the new International Financial Reporting Standards on leasing (IFRS 16) for the Company’s subsidiaries in Brazil.

⁽³⁾ The aggregate fees billed for professional services rendered by the external auditors in connection with the review of IRPJ (income tax for legal entity) / CSLL (social contribution on net profit) deferred tax calculations of the Company’s subsidiaries in Brazil.

⁽⁴⁾ The aggregate fees billed for professional services rendered by the external auditors in connection with the review of income tax of the Company’s Brazilian subsidiaries for the 2013 to 2017 fiscal years.

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LEGAL PROCEEDINGS AND REGULATORY ACTIONS

To the Company’s knowledge, there are no legal proceedings material to the Company to which it is a party, or has been a party to, or of which any of its property is the subject matter of, or was the subject matter of, since the beginning of the financial year ended December 31, 2019, and no such proceedings or actions are known by the Company to be contemplated.

There have been no penalties or sanctions imposed against the Company by a court relating to securities legislation or by a securities regulatory authority during the financial year ended December 31, 2019 or other penalties or sanctions imposed by a court or regulatory body against the Company since incorporation that would likely be considered important to a reasonable investor in making an investment decision, and the Company has not entered into any settlement agreements before a court relating to securities legislation or with a securities regulatory authority during the financial year ended December 31, 2019.

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Other than as described below or as disclosed elsewhere herein, no director or executive officer of the Company or any of its subsidiaries or any person or company that beneficially owns, or controls or directs, directly or indirectly, more than 10 percent of the outstanding Common Shares, or any of their respective associates or affiliates, has or has had any material interest, direct or indirect, in any transaction within the three most recently completed financial years or during the current financial year that has materially affected or is reasonably expected to materially affect the Company or any of its subsidiaries.

On January 18, 2017, the Company completed a private placement offering, issuing an aggregate principle amount of US$2,750,000 in General Debentures as described in this AIF under the heading “General Development and Business of the Company – Three Year History”. David Strang, the President and Chief Executive Officer of the Company and Matthew Wubs, a director of the Company, each participated in the offering by subscribing to US$500,000 of General Debentures. In January 2018, Messrs. Strang and Wubs both exercised their option to convert the outstanding principal and accrued and unpaid interest (US$53,562) on their General Debentures into General Debenture Units and concurrently exercised the underlying General Warrants. As a result, they were each issued an aggregate of 922,602 Common Shares by the Company, of which, 184,520 Common Shares were issued upon exercise of the underlying General Warrants.

AUDITORS, TRANSFER AGENT AND REGISTRAR

The Company’s auditors are KPMG LLP, Chartered Professional Accountants, having an address at Suite 1100 – 777 Dunsmuir Street, PO Box 10426 Pacific Centre, Vancouver, British Columbia, Canada V7Y 1K3.

The transfer agent and registrar for the Common Shares is Computershare Investor Services Inc., having an address at 510 Burrard Street, 3^rd Floor, Vancouver, British Columbia V6C 3B9. The warrant agent for the Founder Warrants is Computershare Trust Company of Canada, having an address at 510 Burrard Street, 2^nd Floor, Vancouver, British Columbia V6C 3B9.

78

MATERIAL CONTRACTS

Except for material contracts entered into in the ordinary course of business, set out below are material contracts to which the Company or any of its subsidiaries are a party, entered into prior to or since the date of incorporation of the Company and which still remain in effect and material to the Company. Copies of such material contracts are available for review under the Company’s profile on SEDAR at www.sedar.com.

· The investor rights agreement dated March 22, 2017 between the Company and Tembo Capital Mining Fund II LP, acting by its general partner, Tembo Capital Mining GP LP, acting by its general partner, Tembo Capital Mining GP Ltd. (“Tembo”) entered into in connection with the Company’s private placement offering of 18,423,593 Common Shares at a price of US$1.50 per Common Share on March 22, 2017 (“Tembo Investor Rights Agreement”). Pursuant to the Tembo Investor Rights Agreement, for so long as Tembo’s affiliate, Ndovu Capital IX B.V. (“Ndovu”), holds at least 5% of the issued and outstanding Common Shares, Ndovu is entitled to request from the Company, among other things, monthly reports of financial and operation performance, and meetings with management of the Company, and has a participation right to subscribe for Common Shares, securities convertible into or exchangeable for Common Shares, or any other securities of the Company, as applicable, in order to preserve its proportionate interest in the total issued and outstanding Common Shares, in connection with any equity financings and certain other non-cash transactions involving the issuance of equity securities by the Company; and

· the Credit Agreement referred to under the heading “General Development and Business of the Company  – Three Year History”.

INTEREST OF EXPERTS

The following persons and companies have prepared or certified a statement, report, valuation or opinion on behalf of the Company during the twelve months ended December 31, 2019, and to the date of this AIF:

(a)    Rubens Jose De Mendonça, MAusIMM, of Planminas, and Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, and Bernardo Horta de Cerqueira Viana, MAIG, all of GE21, who are “qualified persons” and “independent” of the Company within the meanings of NI 43-101, prepared the Vale do Curaçá Technical Report in accordance with NI 43-101 and also reviewed and approved the scientific and technical information relating to the Vale do Curaçá Property contained in this AIF other than the information of a scientific or technical nature in respect of the Vale do Curaçá Property set out under the heading “Vale do Curaçá Property – Update Information with respect to the Vale do Curaçá Property”.

(b)   Porfirio Cabaleiro Rodrigues, MAIG, Paulo Roberto Bergmann, FAusIMM, and Leonardo de Moraes Soares, MAIG, all of GE21, who are “qualified persons” and “independent” of the Company within the meanings of NI 43-101, prepared the NX Gold Technical Report in accordance with NI 43-101 and also reviewed and approved the scientific and technical information relating to the NX Gold Property contained in this AIF other than the information of a scientific or technical nature in respect of the NX Gold Property set out under the heading “NX Gold Property – Update Information with respect to the NX Gold Property”.

(c)    Ricardo Emerson Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company, who is a “qualified person” within the meaning of NI 43-101, has supervised the preparation of and approved the information of a scientific or technical nature in respect of the Vale do Curaçá Property set out in the AIF under the heading “Vale do Curaçá Property – Update Information with respect to the Vale do Curaçá Property” and in respect of the NX Gold Property set out under the heading “NX Gold Property – Update Information with respect to the NX Gold Property”.

(d)   Rubens Mendonça, MAusIMM, of SRK Brazil as at the date of the report (now of Planminas) and Carlos Barbosa, MAIG, and Girogio di Tomi, MAusIMM, both of SRK Brazil, who are “qualified persons” and “independent” of the Company within the meanings of NI 43-101, prepared the Boa Esperança Technical Report in accordance with NI 43-101 and also reviewed and approved the scientific and technical information relating to the Boa Esperança Property contained in this AIF.

79

The aforementioned companies and persons beneficially owned, or controlled or directed, directly or indirectly, either less than one percent or no securities of the Company or of any associate or affiliate of the Company when they prepared the reports and statements referred to, or following the preparation of the reports and statements, and did not receive any direct or indirect interest in any securities of the Company or of any associate or affiliate of the Company in connection with the preparation of such reports and statements other than Mr. Re, who is employed by the Company as Resource Manager and holds 6,383 Options and 1,544 PSUs as at the date of this AIF.

In addition, KPMG prepared the 2018 and 2019 audit reports as auditor of the Company for the financial years ended December 31, 2018 and 2019. KPMG has advised the Company that it is independent of the Company in accordance with the Rules of Professional Conduct of the Chartered Professional Accountants of British Columbia.

None of the aforementioned firms or persons, nor any directors, officers or employees of such firms, are currently, or are expected to be elected, appointed or employed as, a director, officer or employee of the Company or of any associate or affiliate of the Company other than Mr. Re, who is employed by the Company as Resource Manager.

ADDITIONAL INFORMATION

Additional information relating to the Company may be found under the Company’s profile on SEDAR at www.sedar.com or on the Company’s website at www.erocopper.com. Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities, and securities authorized for issuance under equity compensation plans, is contained in the Company’s information circular for its most recent annual meeting of shareholders that involves the election of directors.

Financial information is provided in the Company’s annual audited consolidated financial statements for the year ended December 31, 2019 and Management’s Discussion and Analysis relating thereto and may also be found on SEDAR or on the Company’s website.

Copies of these documents may be obtained by contacting the Company at:

Ero Copper Corp.

Suite 1050 – 625 Howe Street

Vancouver, B.C. V6C 2T6

Tel: (604) 449-9244

Fax: (604) 398-3767

Email: info@erocopper.com

80

APPENDIX “A”
ERO COPPER CORP.
AUDIT COMMITTEE MANDATE

1.       Introduction

The Audit Committee (the “Committee” or the “Audit Committee”) of Ero Copper Corp. (“Ero” or the “Company”) is a committee of the Board of Directors (the “Board”) of the Company. The Committee shall oversee the accounting and financial reporting practices of the Company and the audits of the Company’s financial statements and exercise the responsibilities and duties set out in this Mandate.

2.       Membership

Number of Members

The Committee shall be composed of three or more members of the Board.

Independence of Members

Each member of the Committee must be independent, subject to any exemptions or relief that may be granted from such requirement. “Independent” shall have the meaning, as the context requires, given to it in National Instrument 52-110 Audit Committees, as may be amended from time to time.

Chair

At the time of the annual appointment of the members of the Audit Committee, the Board shall appoint a Chair of the Audit Committee. The Chair shall be a member of the Audit Committee, preside over all Audit Committee meetings, coordinate the Audit Committee’s compliance with this Mandate, work with management to develop the Audit Committee’s annual work-plan and provide reports of the Audit Committee to the Board.

Financial Literacy of Members

At the time of his or her appointment to the Committee, each member of the Committee shall have, or shall acquire within a reasonable time following appointment to the Committee, the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements.

Term of Members

The members of the Committee shall be appointed annually by the Board. Each member of the Committee shall serve at the pleasure of the Board until the member resigns, is removed, or ceases to be a member of the Board. Unless a Chair is elected by the Board, the members of the Committee may designate a Chair by majority vote of the full Committee membership.

3.       Meetings

Number of Meetings

The Committee may meet as many times per year as necessary to carry out its responsibilities.

Quorum

No business may be transacted by the Committee at a meeting unless a quorum of the Committee is present. A majority of members of the Committee shall constitute a quorum.

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Calling of Meetings

The Chair, any member of the Audit Committee, the external auditors, the Chairman of the Board, the Chief Executive Officer or the Chief Financial Officer may call a meeting of the Audit Committee by notifying the Company’s Corporate Secretary who will notify the members of the Audit Committee. The Chair shall chair all Audit Committee meetings that he or she attends, and in the absence of the Chair, the members of the Audit Committee present may appoint a chair from their number for a meeting.

Minutes; Reporting to the Board

The Committee shall maintain minutes or other records of meetings and activities of the Committee in sufficient detail to convey the substance of all discussions held. Upon approval of the minutes by the Committee, the minutes shall be circulated to the members of the Board. However, the Chair may report orally to the Board on any matter in his or her view requiring the immediate attention of the Board.

Attendance of Non-Members

The external auditors are entitled to attend and be heard at each Audit Committee meeting. In addition, the Committee may invite to a meeting any officers or employees of the Company, legal counsel, advisors and other persons whose attendance it considers necessary or desirable in order to carry out its responsibilities. At least once per year, the Committee shall meet with the internal auditor and management in separate sessions to discuss any matters that the Committee or such individuals consider appropriate.

Meetings without Management

The Committee shall hold unscheduled or regularly scheduled meetings, or portions of meetings, at which management is not present.

Procedure

The procedures for calling, holding, conducting and adjourning meetings of the Committee shall be the same as those applicable to meetings of the Board.

Access to Management

The Committee shall have unrestricted access to the Company’s management and employees and the books and records of the Company.

4.       Duties and Responsibilities

The Committee shall have the functions and responsibilities set out below as well as any other functions that are specifically delegated to the Committee by the Board and that the Board is authorized to delegate by applicable laws and regulations. In addition to these functions and responsibilities, the Committee shall perform the duties required of an audit committee by any exchange upon which securities of the Company are traded, or any governmental or regulatory body exercising authority over the Company, as are in effect from time to time (collectively, the “Applicable Requirements”).

Financial Reports

(a)       General

The Audit Committee is responsible for overseeing the Company’s financial statements and financial disclosures. Management is responsible for the preparation, presentation and integrity of the Company’s financial statements and financial disclosures and for the appropriateness of the accounting principles and the reporting policies used by the Company. The auditors are responsible for auditing the Company’s annual consolidated financial statements and for reviewing the Company’s unaudited interim financial statements.

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(b)       Review of Annual Financial Reports

The Audit Committee shall review the annual consolidated audited financial statements of the Company, the auditors’ report thereon and the related management’s discussion and analysis of the Company’s financial condition and results of operation (“MD&A”). After completing its review, if advisable, the Audit Committee shall approve and recommend for Board approval the annual financial statements and the related MD&A.

(c)       Review of Interim Financial Reports

The Audit Committee shall review the interim consolidated financial statements of the Company, the auditors’ review report thereon and the related MD&A. After completing its review, if advisable, the Audit Committee shall approve and recommend for Board approval the interim financial statements and the related MD&A.

(d)       Review Considerations

In conducting its review of the annual financial statements or the interim financial statements, the Audit Committee shall:

(i)             meet with management and the auditors to discuss the financial statements and MD&A;

(ii)             review the disclosures in the financial statements;

(iii)            review the audit report or review report prepared by the auditors;

(iv) discuss with management, the auditors, and internal legal counsel (if any), as requested, any litigation claim or other contingency that could have a material effect on the financial statements;

(v) review the accounting policies followed and critical accounting and other significant estimates and judgements underlying the financial statements as presented by management;

(vi) review any material effects of regulatory accounting initiatives or off-balance sheet structures on the financial statements as presented by management, including requirements relating to complex or unusual transactions, significant changes to accounting principles and alternative treatments under Canadian GAAP;

(vii) review any material changes in accounting policies and any significant changes in accounting practices and their impact on the financial statements as presented by management;

(viii)        review management’s report on the effectiveness of internal controls over financial reporting;

(ix)           review the factors identified by management as factors that may affect future financial results;

(x)            review results of the Company’s audit committee whistleblower hotline program; and

(xi) review any other matters, related to the financial statements, that are brought forward by the auditors, management or which are required to be communicated to the Audit Committee under accounting policies, auditing standards or Applicable Requirements.

(e)       Approval of Other Financial Disclosures

The Audit Committee shall review and, if advisable, approve and recommend for Board approval financial disclosure in a prospectus or other securities offering document of the Company, press releases disclosing, or based upon, financial results of the Company and any other material financial disclosure, including financial guidance provided to analysts, rating agencies or otherwise publicly disseminated.

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Auditors

(a)       General

The Audit Committee shall be responsible for oversight of the work of the auditors, including the auditors’ work in preparing or issuing an audit report, performing other audit, review or attest services or any other related work.

(b)       Nomination and Compensation

The Audit Committee shall review and, if advisable, select and recommend for Board approval the external auditors to be nominated and the compensation of such external auditor. The Audit Committee shall have ultimate authority to approve all audit engagement terms and fees, including the auditors’ audit plan.

(c)       Resolution of Disagreements

The Audit Committee shall resolve any disagreements between management and the auditors as to financial reporting matters brought to its attention.

(d)       Discussions with Auditors

At least annually, the Audit Committee shall discuss with the auditors such matters as are required by applicable auditing standards to be discussed by the auditors with the Audit Committee.

(e)       Audit Plan

At least annually, the Audit Committee shall review a summary of the auditors’ annual audit plan. The Audit Committee shall consider and review with the auditors any material changes to the scope of the plan.

(f)       Quarterly Review Report

The Audit Committee shall review a report prepared by the auditors in respect of each of the interim financial statements of the Company.

(g)       Independence of Auditors

At least annually, and before the auditors issue their report on the annual financial statements, the Audit Committee shall obtain from the auditors a formal written statement describing all relationships between the auditors and the Company; discuss with the auditors any disclosed relationships or services that may affect the objectivity and independence of the auditors; and obtain written confirmation from the auditors that they are objective and independent within the meaning of the applicable Rules of Professional Conduct/Code of Ethics adopted by the provincial institute or order of chartered professional accountants to which the auditors belong and other Applicable Requirements. The Audit Committee shall take appropriate action to oversee the independence of the auditors.

(h)       Evaluation and Rotation of Lead Partner

At least annually, the Audit Committee shall review the qualifications and performance of the lead partner(s) of the auditors and determine whether it is appropriate to adopt or continue a policy of rotating lead partners of the external auditors.

(i)       Requirement for Pre-Approval of Non-Audit Services

The Audit Committee shall approve in advance any retainer of the auditors to perform any non-audit service to the Company that it deems advisable in accordance with Applicable Requirements and Board approved policies and procedures. The Audit Committee may delegate pre-approval authority to a member of the Audit Committee. The decisions of any member of the Audit Committee to whom this authority has been delegated must be presented to the full Audit Committee at its next scheduled Audit Committee meeting.

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(j)       Approval of Hiring Policies

The Audit Committee shall review and approve the Company’s hiring policies regarding partners, employees and former partners and employees of the present and former external auditors of the Company.

(k)       Communication with Internal Auditor

The internal auditor shall report regularly to the Committee. The Committee shall review with the internal auditor any problem or difficulty the internal auditor may have encountered including, without limitation, any restrictions on the scope of activities or access to required information, and any significant reports to management prepared by the internal auditing department and management’s responses thereto.

The Committee shall periodically review and approve the mandate, plan, budget and staffing of the internal audit department. The Committee shall direct management to make changes it deems advisable in respect of the internal audit function.

The Committee shall review the appointment, performance and replacement of the senior internal auditing executive and the activities, organization structure and qualifications of the persons responsible for the internal audit function.

(l)       Financial Executives

The Committee shall review and discuss with management the appointment of key financial executives and recommend qualified candidates to the Board, as appropriate.

Internal Controls

(a)       General

The Audit Committee shall review the Company’s system of internal controls.

(b)       Establishment, Review and Approval

The Audit Committee shall require management to implement and maintain appropriate systems of internal controls in accordance with Applicable Requirements, including internal controls over financial reporting and disclosure and to review, evaluate and approve these procedures. At least annually, the Audit Committee shall consider and review with management and the auditors:

(i) the effectiveness of, or weaknesses or deficiencies in: the design or operation of the Company’s internal controls (including computerized information system controls and security); the overall control environment for managing business risks; and accounting, financial and disclosure controls (including, without limitation, controls over financial reporting), non-financial controls, and legal and regulatory controls and the impact of any identified weaknesses in internal controls on management’s conclusions;

(ii) any significant changes in internal controls over financial reporting that are disclosed, or considered for disclosure, including those in the Company’s periodic regulatory filings;

(iii)          any material issues raised by any inquiry or investigation by the Company’s regulators;

(iv) the Company’s fraud prevention and detection program, including deficiencies in internal controls that may impact the integrity of financial information, or may expose the Company to other significant internal or external fraud losses and the extent of those losses and any disciplinary action in respect of fraud taken against management or other employees who have a significant role in financial reporting; and

(v) any related significant issues and recommendations of the auditors together with management’s responses thereto, including the timetable for implementation of recommendations to correct weaknesses in internal controls over financial reporting and disclosure controls.

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Compliance with Legal and Regulatory Requirements

The Audit Committee shall review reports from the Company’s management members on: legal or compliance matters that may have a material impact on the Company; the effectiveness of the Company’s compliance policies; and any material communications received from regulators. The Audit Committee shall review management’s evaluation of and representations relating to compliance with specific applicable law and guidance, and management’s plans to remediate any deficiencies identified.

Audit Committee Hotline Whistleblower Procedures

The Audit Committee shall establish procedures for (a) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and (b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters. Any such complaints or concerns that are received shall be reviewed by the Audit Committee and, if the Audit Committee determines that the matter requires further investigation, it will direct the Chair of the Audit Committee to engage outside advisors, as necessary or appropriate, to investigate the matter and will work with management and the general counsel to reach a satisfactory conclusion.

Audit Committee Disclosure

The Audit Committee shall prepare, review and approve any audit committee disclosures required by Applicable Requirements in the Company’s disclosure documents.

Delegation

The Audit Committee may, to the extent permissible by Applicable Requirements, designate a sub-committee to review any matter within this mandate as the Audit Committee deems appropriate.

5.       Independent Advisors

The Audit Committee shall have the authority to retain external legal counsel, consultants or other advisors to assist it in fulfilling its responsibilities and to set and pay the respective compensation for these advisers without consulting or obtaining the approval of the Board or any Company officer. The Company shall provide appropriate funding, as determined by the Audit Committee, for the services of these advisors.

6.       No Rights Created

This Mandate is a statement of broad policies and is intended as a component of the flexible governance framework within which the Audit Committee, functions. While it should be interpreted in the context of all applicable laws, regulations and listing requirements, as well as in the context of the Company’s Notice of Articles and Articles, it is not intended to establish any legally binding obligations.

7.       Mandate Review

The Committee shall review and update this Mandate annually and present it to the Board for approval.

Adopted: May 15, 2017

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EX-99.7

Exhibit 99.7

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED DECEMBER 31, 2019

1050 – 625 Howe Street, Vancouver, B.C., Canada V6C 2T6

Phone: 604-449-9244 | Website: www.erocopper.com | Email: info@erocopper.com

MANAGEMENT’S DISCUSSION AND ANALYSIS

This Management’s Discussion and Analysis (“MD&A”) has been prepared as at March 12, 2020 and should be read in conjunction with the audited consolidated financial statements of Ero Copper Corp. (“Ero”, the “Company”, or “we”) as at, and for the year ended December 31, 2019, and related notes thereto, which are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”). All references in this MD&A to “Q4 2019” and “Q4 2018” are to the three months ended December 31, 2019 and December 31, 2018, respectively. All references to “Fiscal 2019”, “Fiscal 2018”, and “Fiscal 2017” are to the years ended December 31, 2019, December 31, 2018, and December 31, 2017, respectively. All dollar amounts are expressed in United States (“US”) dollars and tabular amounts are expressed in thousands of US dollars, unless otherwise indicated. References to “$” or “dollars” are to US dollars, references to “C$” are to Canadian dollars, and references to “R$” are to Brazilian Reais.

This MD&A refers to various non-IFRS measures, such as C1 cash cost of copper produced (per lb), C1 cash cost of gold produced (per ounce), EBITDA, Adjusted EBITDA, Adjusted net income attributable to owners of the Company, Adjusted net income per share attributable to owners of the Company, Working Capital (Deficit), Available Liquidity, and Net Debt. Please refer to the section titled "NON-IFRS MEASURES" within this MD&A for a discussion of non-IFRS measures.

This MD&A contains “forward-looking information” that is subject to risk factors set out in a cautionary note contained at the end of this MD&A. The Company cannot assure investors that such information will prove to be accurate, and actual results and future events may differ materially from those anticipated in such information. The results for the periods presented are not necessarily indicative of the results that may be expected for any future period. Investors are cautioned not to place undue reliance on this forward-looking information.  All information contained in this MD&A is current and has been approved by the Board of Directors of the Company (the “Board”) as of March 12, 2020, unless otherwise stated.

BUSINESS OVERVIEW

Ero, headquartered in Vancouver, B.C., is focused on copper production growth from the Vale do Curaçá Property, located in Bahia, Brazil. The Company’s primary asset is a 99.6% interest in the Brazilian copper mining company, Mineraҫão Caraíba S.A. (“MCSA”), 100% owner of the Vale do Curaçá Property with over 40 years of operating history in the region. The Company currently mines copper ore from the Pilar and Vermelhos underground mines. In addition to the Vale do Curaçá Property, MCSA owns 100% of the Boa Esperanҫa development project, an IOCG-type copper project located in Pará, Brazil and the Company, directly and indirectly, owns 97.6% of the NX Gold Mine, an operating gold and silver mine located in Mato Grosso, Brazil. Additional information on the Company and its operations, including technical reports on the Vale do Curaçá, Boa Esperanҫa and NX Gold properties, can be found on the Company’s website (www.erocopper.com) and on SEDAR (www.sedar.com).

Ero Copper Corp. December 31, 2019 MD&A                                           Page 1 

HIGHLIGHTS

	2019 - Q4			2019 - Q3			2019			2018 - Q4			2018
Operating Information
Copper (MCSA Operations)
Ore Processed (tonnes)		589,065			587,915			2,424,592			777,480			2,257,917
Grade (% Cu)		2.16			1.84			1.93			1.77			1.56
Cu Production (tonnes)		11,526			9,674			42,318			12,104			30,426
Cu Production (lbs)		25,411,100			21,326,717			93,295,598			26,685,324			67,076,849
Cu Sold in Concentrate (tonnes)		11,595			10,200			42,759			12,900			30,107
Cu Sold in Concentrate (lbs)		25,562,212			22,486,742			94,267,101			28,439,667			66,374,564
C1 cash cost of copper produced (per lb)	$	0.80		$	1.01		$	0.93		$	0.99		$	1.19
Gold (NX Gold Operations)
Au Production (ounces)		6,043			4,356			30,434			10,008			39,808
C1 cash cost of gold produced (per ounce)	$	980		$	1,169		$	691		$	540		$	520
Financial information ($millions, except per share amounts)
Revenues	$	75.7		$	60.6		$	284.8		$	85.1		$	233.1
Gross profit	$	31.1		$	21.3		$	117.1		$	39.0		$	82.2
EBITDA	$	34.3		$	35.1		$	141.4		$	40.2		$	70.5
Adjusted EBITDA	$	31.2		$	27.3		$	134.1		$	39.0		$	99.9
Cash flow from operations	$	35.9		$	29.5		$	127.8		$	24.0		$	82.9
Net income (loss)	$	45.4		$	16.3		$	92.5		$	11.3		$	(3.0	)
Net income (loss) attributable to owners of
the Company	$	45.2		$	16.3		$	91.9		$	11.2		$	(3.2	)
Net income (loss) per share attributable to owners of the Company
- Basic	$	0.53		$	0.19		$	1.08		$	0.13		$	(0.04	)
- Diluted	$	0.49		$	0.18		$	1.01		$	0.13		$	(0.04	)
Adjusted net income attributable to
owners of the Company	$	40.7		$	10.2		$	86.3		$	7.9		$	10.9
Adjusted net income per share attributable
to owners of the Company
- Basic	$	0.47		$	0.12		$	1.01		$	0.09		$	0.13
- Diluted	$	0.44		$	0.11		$	0.94		$	0.09		$	0.12
Cash and Cash Equivalents	$	21.5		$	21.7		$	21.5		$	18.9		$	18.9
Working Capital (Deficit)	$	(4.9	)	$	6.4		$	(4.9	)	$	(9.3	)	$	(9.3	)
Net Debt	$	(136.4	)	$	(133.4	)	$	(136.4	)	$	(130.3	)	$	(130.3	)

Ero Copper Corp. December 31, 2019 MD&A                                           Page 2 

2019 Highlights

2019 Operational Highlights

Another record year of copper production

· Increased year-on-year copper production by 39.1%, with 42,318 tonnes of copper produced in concentrate compared to 30,426 tonnes produced in 2018.

· Exceeded the Company’s 2019 original guidance of 37,000 tonnes of copper by 14.3%.

· C1 cash cost of $0.93 per pound of copper produced for 2019, $0.07 below the low-end of the Company’s 2019 guidance range of $1.00 to $1.10 per pound of copper produced.

· Total of approximately 2.4 million tonnes of ore grading 1.93% copper processed during the year producing 42,318 tonnes of copper in concentrate after average metallurgical recoveries of 90.5%.

· Advanced several key capital programs in 2019 including completion of approximately 235,000 meters of drilling, acceleration of development at Pilar and Vermelhos Mines to enhance operational flexibility and production volumes, commencement of civil works and infrastructure installation for the Company’s high-intensity grinding mill which is expected to be commissioned during Q2 2020, and installation of a 200,000 tonne per annum ore sorting plant that was commissioned in Q1 2020.

· Total annual gold and silver production at the NX Gold operations of 30,434 ounces gold and 19,641 ounces silver at C1 cash costs of $691 per ounce of gold produced.

2019 Financial Highlights

Cash position, liquidity and available lines of credit: Total cash and cash equivalents and available liquidity at December 31, 2019 was $21.5 million and $25.1 million compared to $18.9 million and $4.7 million, respectively, at the end of 2018. Increased liquidity is due to a reduction in the Company’s working capital deficit from $9.3 million at the end of 2018 to $4.9 million at the end of 2019, as well as an increase in the Company’s credit facilities during the year. As at the end of 2019, the Company had $14.0 million undrawn on its secured, revolving credit facility in Canada, plus an additional R$64.8 million in available undrawn lines of credit in Brazil.

Revenue: The Company increased year-on-year revenues from its copper operations at MCSA by 33.3%, totalling $246.2 million in 2019 compared to $184.7 million in 2018. The increase in revenue was attributed to the increase in year-on-year copper production.

Year-on-year decline in gold revenue from the Company’s gold operations at NX Gold was a result of decreased production volumes as we transition into the Santo Antonio vein, partially offset by increased gold prices, resulting in a net decrease in gold revenue of 20.1% totalling $38.6 million in 2019 compared to $48.4 million in 2018.

Mine gross profit: The Company significantly increased year-on-year mine gross profit from its copper operations at MCSA totaling $105.6 million in 2019 compared to $66.1 million in 2018. The increase in mine gross profit was primarily driven by increased revenues from increased copper production, and a decrease in cash costs over the prior year as a result of higher grades processed and improved metallurgical recoveries. The Company also recognized mine gross profit of $11.4 million in 2019 compared to $16.1 million in 2018 from its gold operations at NX Gold as a result of lower gold production volumes.

Net income: The Company recognized net income of $92.5 million (net income per share of $1.08) in 2019 compared to a net loss of $3.0 million in 2018 (loss per share of $0.04), attributable to increased mine gross profit, a recovery related to value added taxes previously paid on sales in Brazil, and the recognition of available tax losses and tax credits in MCSA.

During the year, the Company recognized a recovery of $21.6 million in net income related to value added taxes previously paid on sales in Brazil. The recovery was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant taxing authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim, for which approval was received in July 2019. These credits can be used to offset a variety of other taxes, including income taxes and taxes on future sales.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 3 

In addition, the Company recognized a $28.3 million net deferred tax recovery primarily resulting from the recognition of available tax losses and tax credits in MCSA. At December 31, 2019, the Company considered the taxable income generated since acquisition of MCSA and forecasted future taxable income and determined that it was now considered probable that the benefit of these losses and tax credits in MCSA would be realized.

Q4 2019 Highlights

Q4 Operational Highlights

Continued Strong Performance at MCSA Operations

· 589,065 tonnes processed grading 2.16% copper producing 11,526 tonnes of copper in concentrate after metallurgical recoveries that averaged 90.7% during the period.

· C1 cash cost of $0.80 per pound of copper produced during Q4 2019, a $0.21 per pound improvement over the third quarter, resulting in full-year 2019 C1 cash costs of $0.93 per pound of copper produced.

Exploration focus turns to regional greenfield targets in 2020

· One of the most comprehensive exploration programs underway globally with 26 drill rigs operating within the Curaçá Valley plus an additional four drill rigs operating at the NX Gold Mine.

· Prior to the end of the quarter, the Company released its fourth quarter exploration results outlining continued success within the Curaçá Valley including two new regional discoveries at N1 South and Vermelhos North, the identification of the “Keel Zone” - a nickel-platinum-group metals rich zone at Siriema in the Vermelhos District, plus the most significant set of holes drilled to date in the Deepening Extension of the Pilar Mine.

· Within the Vermelhos District, where 12 drill rigs are currently operating, the identification of a brecciated massive sulphide zone within the Siriema deposit containing copper, nickel, cobalt and platinum, palladium, rhodium and gold (“3PGE+Au”) was released. Results were highlighted by hole FSI-40 that intersected 9.1 meters grading 2.66% copper, 1.74% nickel, 0.07% cobalt and 1.46 grams per tonne 3PGE+Au including 5.6 meters grading 3.37% copper, 2.59% nickel, 0.10% cobalt, and 2.08 grams per tonne 3PGE+Au. The zone remains open at depth and has been delineated over approximately 150 meters in strike length, 105 meters down plunge and over an average thickness of 10 meters. The results of the multi-element analysis at Siriema represents the first evidence in the history of the Curaçá Valley of a consistent zone of elevated nickel and platinum-group metals (“PGMs”). Work continues to test the extension of the zone to depth and to the north is planned in 2020.

· In the Pilar District, where 11 drill rigs are currently operating, drilling in the Deepening Extension zone continues to significantly extend the known extent of high-grade copper mineralization at the mine both with respect to thickness and grade. The latest results are indicative of the emergence of a new high-grade mineralized chamber, or “Superpod”, highlighted by hole FC5616 that intersected 51.8 meters grading 3.49% copper including 33.4 meters grading 4.96% copper and hole FC5615 that intersected 62.5 meters grading 1.65% copper including 26.1 meters grading 2.37% copper. These results are complemented by previously announced intercepts FC47142 that intersected 34.7 meters grading 2.29% copper including 18.6 meters grading 3.15% copper and hole FC47139 that intersected 7.1 meters grading 6.50% copper including 4.1 meters grading 9.01% copper, both located on section 47, approximately 400 meters south of the new intercepts on section 56 (as referenced in the Company’s press release dated September 12, 2019).

· Three drill rigs are currently operating on regional exploration targets within the Surubim District.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 4 

Q4 NX Gold Operational Highlights

· Q4 2019 gold and silver production at the Company’s high-grade NX Gold Mine of 6,043 ounces of gold and 4,315 ounces of silver, a 39% improvement over the third quarter as first ore from the Santo Antonio vein was mined and processed.

· 43,207 tonnes grading 6.32 grams per tonne gold processed during the period, producing 6,043 ounces of gold after metallurgical recoveries that averaged 68.9% during Q4 2019.

· Fourth quarter C1 cash cost of $980 per ounce of gold produced, resulting in full year 2019 C1 cash costs of $691 per ounce of gold produced.

· The Company expects production to stabilize throughout 2020 as production reaches planned capacity from the Santo Antonio vein.

· An updated NI 43-101 (as defined herein) compliant mineral resource and mineral reserve estimate, and associated mine plan, was announced in the fourth quarter of 2019, outlining an updated, high-grade mineral reserve demonstrating a production profile averaging 40,500 oz per year over an initial three-year mine life.

· Four drill rigs are currently operating at the NX Gold Mine and exploration efforts are focused on conversion of the inferred portions of the Santo Antonio vein discovery and extensions of the Brás vein aimed at further increasing the life-of-mine.

Q4 Financial Highlights

Revenue: Revenues from the Company’s copper operations at MCSA decreased by 6.4% from $72.3 million in Q4 2018 to $67.7 million in Q4 2019. The decrease in revenue was attributed to the decrease in copper production.

Revenues from the Company’s gold operations at NX Gold decreased 37.1% from $12.8 million in Q4 2018 to $8.0 million in Q4 2019. The decline was primarily a result of decreased production volumes, partially offset by increased gold prices.

Mine gross profit: Mine gross profit from the Company’s copper operations at MCSA totaled $30.4 million in Q4 2019 compared to $33.9 million in Q4 2018. The decrease in mine gross profit was primarily driven by decreased revenues from decreased copper production, partially offset by a decrease in cash costs over the comparative period as a result of higher grades processed and improved metallurgical recoveries. The Company also recognized mine gross profit of $0.6 million in Q4 2019 compared to $0.6 million in Q4 2018 from its gold operations at NX Gold.

Net income: The Company recognized net income of $45.4 million (net income per share of $0.53) in Q4 2019 compared to a net income of $11.3 million in Q4 2018 (net income per share of $0.13), primarily attributable the recognition of available tax losses and tax credits in MCSA.

During Q4 2019, the Company recognized a $27.4 million net deferred tax recovery primarily resulting from the recognition of available tax losses and tax credits in MCSA. At December 31, 2019, the Company considered the taxable income generated since acquisition of MCSA and forecasted future taxable income and determined that it was now considered probable that the benefit of these losses and tax credits in MCSA would be realized.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 5 

REVIEW OF OPERATIONS

Mineração Caraíba S.A. (Vale do Curaçá):

	2019 - Q4		2019 - Q3		2019		2018 - Q4		2018
Operating Information
Copper (MCSA Operations)
Ore Processed (tonnes)		589,065		587,915		2,424,592		777,480		2,257,917
Grade (% Cu)		2.16		1.84		1.93		1.77		1.56
Cu Production (tonnes)		11,526		9,674		42,318		12,104		30,426
Cu Production (lbs)		25,411,100		21,326,717		93,295,598		26,685,324		67,076,849
Concentrate Grade (% Cu)		35.0		33.7		34.8		34.5		34.5
Recovery (%)		90.7		89.2		90.5		87.8		86.3
Concentrate Sales (tonnes)		33,926		29,142		122,966		37,801		87,307
Cu Sold in Concentrate (tonnes)		11,595		10,200		42,759		12,900		30,107
Cu Sold in Concentrate (lbs)		25,562,212		22,486,742		94,267,101		28,439,667		66,374,564
C1 cash cost of copper produced (per lb)	$	0.80	$	1.01	$	0.93	$	0.99	$	1.19

MCSA operations continued to perform well during the fourth quarter, with a significant increase in both tonnes and grade mined from Pilar. During the quarter, 433,258 tonnes of ore were mined grading 1.73% copper, a 19% increase in tonnes mined, and a 15% increase in grade over the prior quarter (362,667 tonnes mined grading 1.51% copper during third quarter). At Vermelhos, production volumes were in-line with the prior quarter with 185,045 tonnes mined. Average grades mined at Vermelhos declined slightly to 3.39% copper due to normal stope sequencing. Increases in tonnage and grade mined from the Pilar mine resulted in a significant improvement in total contained copper, with a total of 618,303 tonnes mined grading 2.22% copper during the period. For the full year 2019, a total of approximately 2.46 million tonnes grading 1.98% copper was mined.

At the Company’s milling operations, 589,065 tonnes of ore grading 2.16% copper was processed during Q4 2019. Metallurgical recoveries averaged 90.7% during the period, resulting in average full-year 2019 recovery of 90.5%, an improvement over the Company’s guidance of 90.0%. During 2019, a total of 2.42 million tonnes of ore was processed grading 1.93% copper, resulting in the production of 42,318 tonnes of copper in concentrate. The benefit of several low-cost milling and flotation improvement initiatives undertaken at the end of 2018 have continued to support strong metallurgical performance in 2019. Going forward, improved metallurgical performance remains a key focus area of the Company, complimented by the high-intensity regrind mill project, currently underway.

The Company’s regrind mill project, sanctioned during the first quarter of 2019, remains on-budget and on-track for equipment delivery during the first quarter of 2020 with commissioning and ramp-up during the second quarter of 2020. A significant improvement in overall metallurgical recoveries of 3% to 4% and plant performance beyond those already realized are expected once the new mill is operational.

In addition to the regrind mill project, the Company completed delivery of a 200,000 tonne per annum ore sorting plant at the end of 2019. Construction of associated infrastructure was completed in the fourth quarter of 2019, and commissioning occurred during first quarter 2020, subsequent to the end of the year. The Company aims to test a variety of ore sources and grades from different deposits throughout the Curaçá Valley over the course of the first half of 2020 with the aim of better evaluating the potential of pre-concentration. The ore sorting project represents an investment in longer-term potential value optimization for deposits within the Company’s current portfolio.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 6 

C1 cash cost averaged $0.80 and $0.93 per pound of copper produced, respectively, during the three and twelve-month period ended December 31, 2019. C1 cash costs during the fourth quarter reflect the increase in contained copper produced driven by mill head-grades, resulting in a $0.21 decrease in C1 cash costs compared to third quarter. As a result of the Company’s increased production, and favorable prevailing foreign exchange rates, C1 cash costs for the full year came in $0.07 below the low end of the Company’s guidance of $1.00-$1.10 per pound of copper produced.

Subsequent to the end of the quarter, the Company announced its production, cash cost, and capital guidance for 2020. The Company provided annual copper production guidance of 41,000 to 43,000 tonnes of copper in concentrate at C1 cash costs between $0.85 and $0.95 per pound of copper produced. Capital cost guidance for 2020 is $74 million, with an additional $28 million to fund the 2020 exploration program through the end of Q3 2020. The program is designed to complete approximately 172,000 meters of drilling through the end of Q3 2020, an annualized run rate of approximately 230,000 meters of drilling. By year end, the Company expects that 60% of total drilling will be allocated to testing new greenfield targets identified through the Company’s airborne geophysical survey and ongoing data analysis.

In support of its strategy to drive organic growth of the Company through exploration and new project delivery, Ero will continue to run one of the most comprehensive drill programs globally throughout 2020. With 26 drill rigs currently operating, the Company remains focused on using a data driven approach to exploration. This program has already resulted in several new discoveries since 2016 including two new discoveries announced in the fourth quarter at N1 South and Vermelhos North, as well as the identification of a nickel-PGM rich zone at Siriema.

In the Vermelhos District, approximately 80 kilometers to the north of the Caraíba Mill complex, which includes the high-grade operating Vermelhos Mine, exploration continues to focus on continued testing of high-value exploration targets surrounding the Vermelhos Mine. Systematic testing of targets along the previously identified 10-kilometer trend of soil and induced polarization (“IP”) anomalies along the Paredao Antiform (known as the “Vermelhos System”) is ongoing, with the most recent discoveries of N1 South and Vermelhos North representing the current known southern and northern extent of the Vermelhos System, respectively.

In-mine exploration in the Vermelhos District also continues to deliver results as new mineralization was identified beneath the Toboggan and Sombrero orebodies with the most significant intercept returning 6.4 meters at 5.03% copper, as well as in the East Zone, where drilling in the deep portion of the East Zone returned 8.4 meters grading 4.02% copper at a depth of approximately 450 meters below surface. In-mine exploration at Vermelhos in 2020 will continue to test targets beneath the known extent of mineralization in the main orebody, as well the vertical extent of the East Zone.

In addition to in-mine exploration, drilling within the broader Vermelhos System remains focused on advancing the Siriema and N8/N9 deposits. Drilling at Siriema in the fourth quarter was focused on testing high priority areas within the “keel zone”, a high-grade zone of brecciated massive sulphide containing copper-nickel and PGMs, identified through down-hole electromagnetic (“EM”) surveys. Results were highlighted by hole FSI-40 which intersected 9.1 meters grading 2.66% copper, 1.74% nickel, 0.07% cobalt and 1.46 grams per tonne 3PGE+Au. Drilling at N8/N9 during the period was focused on testing the extent of known mineralization, as well as the high-grade zones within each orebody. The planned 2020 exploration program will continue to delineate the extent of the “keel zone” at Siriema and the extent of the N8/N9 orebodies.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 7 

During the fourth quarter, the Company re-prioritized drilling of the Deepening Extension where a new set of deep drill holes, drilled down plunge to the north have intersected thick and high-grade mineralization indicative of a newly identified mineralized chamber, or “Superpod”, in the Deepening. In addition, drilling of the Baraúna and South Extension zones continued to confirm extensions of mineralization within these zones.

Drilling in the Deepening Extension is currently targeting mineralization on the East Limb of the Pilar Mine between level -725 and level -1300 approximately 1,200 meters to 1,750 meters below surface and approximately 100 meters laterally from the current level of the primary ramp (completed to level -925). Underground drilling during the period continued work that commenced in mid-2019 to re-prioritize testing of the known extent of mineralization within the zone, including down-plunge exploration drilling beneath the deepest known extents of mineralization within the Pilar Mine. The results during the fourth quarter are among the most significant holes on a grade-meter basis drilled by the Company in the Pilar Mine since acquisition of the Vale do Curaçá Property in 2016. Results were highlighted by hole FC5616 that intersected 51.8 meters grading 3.49% copper including 33.4 meters grading 4.96% copper and hole FC5615 that intersected 62.5 meters grading 1.65% copper including 26.1 meters grading 2.37% copper. These results are complemented by the previously announced intercepts of FC47142 that intersected 34.7 meters grading 2.29% copper including 18.6 meters grading 3.15% copper and hole FC47139 that intersected 7.1 meters grading 6.50% copper including 4.1 meters grading 9.01% copper, both located on section 47, approximately 400 meters south of the new intercepts on section 56. Exploration results from the Deepening Extension continue to support the belief that the Pilar Mine is open at depth, where high-grade mineralization continues to be encountered approximately 350 meters below the deepest level of current development at the mine. Currently, five drill rigs are positioned to drill the Deepening, targeting resource conversion and testing the extent of the mineralization to the North, South, and at depth.

Elsewhere within the Pilar underground mine, drilling at Baraúna was performed from surface targeting mineralization beneath the southern portion of the open pit mine and extensions of mineralization to the south. Results were highlighted by hole FC1923 that intersected 31.8 meters grading 0.83% copper including 7.0 meters grading 1.31% copper immediately beneath the south pit wall and FC0901 that intersected 4.5 meters grading 0.44% copper from 19.6 meters down hole, approximately 200 meters south of the known limit of mineralization within the Pilar Mine. While results to date in this area are low-grade disseminated mineralization, additional geophysical work is ongoing to better refine high-grade targeting in this zone. Drilling in the South Extension continued to confirm the continuity of the orebody to the south, and current drilling is testing the extent of this zone at depth and to the South.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 8 

NX Gold S.A.

	2019 - Q4			2019 - Q3			2019			2018 - Q4			2018
Operating Information
Gold (NX Gold Operations)
Ore mined (tonnes)		40,453			33,601			154,271			37,950			119,469
Ore milled (tonnes)		43,207			34,813			158,275			38,464			117,857
Head grade (grams per tonne Au)		6.32			4.51			6.98			8.85			11.55
Recovery (%)		68.9	%		86.2	%		85.7	%		91.5	%		91.0	%
Gold ounces produced (oz)		6,043			4,356			30,434			10,008			39,808
Silver ounces produced (oz)		4,315			2,909			19,641			6,186			24,700
Gold sold (oz)		5,810			4,579			29,755			10,603			39,808
Silver sold (oz)		4,247			2,999			19,142			6,752			24,700
C1 cash cost of gold produced (per ounce)	$	980		$	1,169		$	691		$	540		$	520

The fourth quarter at the NX Gold Mine was a continuation of transitioning mining activity to the Santo Antonio vein. During the period, remaining exposed ore blocks continued to be mined from the Brás vein, while development and mining activities ramped up within Santo Antonio. As a result of first production from the Santo Antonio vein, ore production and grade were 20% and 30% improved versus the third quarter, respectively. During the fourth quarter, 43,207 tonnes of ore grading 6.32 grams per tonne of gold was processed, producing 6,043 ounces of gold and 4,315 ounces of silver as by-product after metallurgical recoveries that averaged 68.9%. Recoveries during the quarter were adversely impacted due to the transition of ore feed from Brás to Santo Antonio. Recoveries are expected to improve in the first quarter and throughout 2020. C1 cash costs averaged $980 per ounce of gold produced. For the full year, the NX Gold Mine produced 30,434 ounces of gold at C1 cash costs of $691 per ounce.

In the fourth quarter, the Company released its National Instrument 43-101, Standards of Disclosure for Mineral Projects (“NI 43-101”) compliant Mineral Resource and Mineral Reserve estimate outlining a significantly improved Mineral Reserve extending mine-life by three years and demonstrating average annual production of 40,500 ounces of gold. Subsequent to the end of the quarter, the Company released 2020 production, cash cost, and capital expenditure guidance for the NX Gold Mine. The Company expects to produce 38,000 to 40,000 ounces of gold at C1 cash costs of $475 to $575 per ounce. Capital costs are expected to be $6.0 million, plus an additional $3.5 million allocated to exploration for 2020.

Following the release of the NI 43-101 compliant Mineral Resource and Mineral Reserve estimate and mine plan in the fourth quarter, the exploration focus at NX Gold has shifted to infill drilling of the inferred portions of the Santo Antonio orebody with the focus of converting additional mineralization into measured and indicated mineral resources. The regional exploration program continues to work to identify new targets within the Company’s significant land holding in Mato Grosso. There are currently four drill rigs operating on the property.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 9 

2020 Guidance/Outlook

· Annual production guidance for the Curaçá Valley operations of 41,000 to 43,000 tonnes of copper in concentrate.

· C1 cash cost guidance of US$0.85 to US$0.95 per pound of copper produced and capital expenditure guidance of US$74.0 million^[1].

· An additional US$28 million^[1] to fund the 2020 exploration program in the Curaçá Valley.  The program is highlighted by 172,000 meters of planned exploration drilling through September 2020, an annualized rate of approximately 230,000 meters, of which approximately 60% is planned for regional exploration including drill testing of new greenfield targets identified during the Company’s airborne geophysical survey and ongoing data analysis. This compares to approximately 235,000 meters drilled during 2019 of which only 23% was allocated to regional exploration.

· Annual production guidance for the NX Gold Mine of 38,000 to 40,000 ounces of gold at C1 cash costs of US$475 to US$575 per ounce of gold produced. Annual capital expenditure guidance for the NX Gold Mine of US$5.7 million plus US$3.5 million^[1] in ongoing exploration expenditures.

^[1] Capital and operating cost guidance presented in USD assuming a R$ / $ foreign exchange rate of 4.00.

2020 Production Outlook

Curaçá Valley Operations	2019 Original Guidance			2019 Revised Guidance			2019 Result			2020 Guidance[1]
Tonnes Processed		2,050,000			2,350,000			2,424,592			2,150,000
Copper Grade (% Cu)		2.00	%		1.95	%		1.93	%		2.15	%
Copper Recovery (%)		88.0	%		90.0	%		90.5	%		91.0	%
Cu Production (000 tonnes)		36.0 - 38.0			40.0 - 42.0			42.3			41.0 - 43.0
NX Gold Operations		2019 Original Guidance			2019 Revised Guidance			2019 Result			2020 Guidance[1]
Tonnes Processed		-			-			158,275			150,000
Gold Grade (gpt)		-			-			6.98			9.00
Gold Recovery (%)		-			-			85.7	%		90.0	%
Au Production (000 ounces)		-			-			30.4			38.0 - 40.0
Ag Production (000 ounces)		-			-			19.6			n/a

⁽¹⁾ Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s AIF (as defined herein) for complete risk factors.

2020 Cash Cost Guidance

The Company’s guidance for 2020 assumes a R$ / $ foreign exchange rate of 4.00, gold price of $1,450 per ounce and silver price of $17.00 per ounce.

	2019 Revised Guidance	2019 Result		2020 Guidance
Curaçá Valley C1 Cash Cost Guidance (US$/lb)[1]	$1.00 - $1.10	$	0.93		$0.85 - $0.95
NX Gold Mine C1 Cash Cost Guidance (US$/oz)[1]	n/a	$	691		$475 - $575

⁽¹⁾ Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s SEDAR filings for complete risk factors.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 10 

2020 Capital Expenditure Guidance

The Company’s capital expenditure guidance for 2020 assumes a R$ / $ foreign exchange rate of 4.00 and has been presented below in USD millions. Capital expenditure guidance, including discretionary capital for 2020, is based on a budgeted copper price of US$2.65 per pound of copper.

Curaçá Valley / Copper Operations	2019 Revised Guidance		2020 Guidance
Pilar Mine and Caraíba Mill Complex[1]	$	45.0	$	58.0
Vermelhos Mine	$	20.0	$	16.0
Boa Esperanҫa Project	$	1.0	$	0.2
Capital Expenditure Guidance	$	66.0	$	74.2
Curaçá Valley Exploration[2]	$	30.0	$	28.0
NX Gold Operations		2019 Guidance		2020 Guidance
Capital Expenditure Guidance		n/a	$	5.7
Exploration[2]		n/a	$	3.5
Total, NX Gold		n/a	$	9.2

^[1]  Pilar Mine and Caraíba Mill Complex capital expenditure guidance for 2020 includes completion of the high-intensity grinding mill and operation of the ore-sorting pilot plant.
^[2]  Exploration capital expenditure guidance for 2020 has been forecast through September of 2020 and, as with prior guidance, is dependent, in part, on future exploration success and subject to further review and revision.

Mineração Caraíba S.A.

Copper production from the Curaçá Valley operations for 2020 is expected to be between 41,000 and 43,000 tonnes, with ore fed solely from the Pilar and Vermelhos underground mines. Production from the Pilar Mine is expected to contribute a total of approximately 1.4 million tonnes grading 1.40% copper while production from the Vermelhos Mine is expected to contribute a total of approximately 750,000 tonnes grading 3.50% copper resulting in a blended mill head grade of approximately 2.15% copper.

NX Gold S.A.

Approximately 150,000 tonnes of ore will be mined and processed from the Santo Antonio vein in 2020 at an average grade of 9.00 grams per tonne of gold. Following average metallurgical recoveries of 90.0%, Gold production from the NX Gold Mine is expected to reach 38,000 to 40,000 ounces.

Boa Esperança

A full review of the Boa Esperança Feasibility Study¹ remains ongoing with the goal of extending the potential mine life and increasing copper production among other desktop optimization initiatives. The Company expects to provide an update on these initiatives during the first half of 2020.

^1 . As defined herein under “NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION”.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 11 

REVIEW OF FINANCIAL RESULTS

The following table provides a summary of the financial results of the Company for Q4 2019 and Q4 2018. Tabular amounts are in thousands of US dollars, except share and per share amounts.

			Three months ended			Three months ended
	Notes		December 31, 2019			December 31, 2018
Revenue		1	$	75,688		$	85,084
Cost of product sold		2		(43,017	)		(44,661	)
Sales expenses				(1,595	)		(1,441	)
Gross profit				31,076			38,982
Expenses
General and administrative		3		(12,707	)		(10,456	)
Share-based compensation				(1,304	)		(723	)
Income before the undernoted				17,065			27,803
Other income (expenses)
Finance income				358			773
Finance expense		4		(2,014	)		(6,776	)
Foreign exchange gain		5		4,423			7,433
Loss on debt settlement		6		-			(5,476	)
Other income (expense)		7		368			(5,625	)
Income before income taxes				20,200			18,132
Income tax recovery (expense)
Current		8		(2,232	)		(1,853	)
Deferred		8		27,441			(4,999	)
				25,209			(6,852	)
Net income for the period				45,409			11,280
Other comprehensive income
Foreign currency translation gain				6,528			3,830
Comprehensive income			$	51,937		$	15,110
Net income attributable to:
Owners of the Company			$	45,169		$	11,210
Non-controlling interests				240			70
			$	45,409		$	11,280
Comprehensive income attributable to:
Owners of the Company			$	51,671		$	15,026
Non-controlling interests				266			84
			$	51,937		$	15,110
Net income per share attributable to owners of the Company
Net income per share
Basic			$	0.53		$	0.13
Diluted			$	0.49		$	0.13
Weighted average number of common shares outstanding
Basic				85,620,168			84,504,954
Diluted				91,670,988			88,638,656

Ero Copper Corp. December 31, 2019 MD&A                                           Page 12 

Notes:

1. Revenues for Q4 2019 from copper sales was $67.7 million (Q4 2018 - $72.3 million), which included the sale of 11,595 copper tonnes in concentrate as compared to 12,900 copper tonnes for Q4 2018. The Company processed 24% less ore at a higher ore grade during Q4 2019 compared to Q4 2018. Revenues for Q4 2019 from gold sales was $8.0 million (Q4 2018 - $12.8 million), which included the sale of 5,810 ounces of gold, compared to 10,603 ounces of gold for Q4 2018.

2. Cost of product sold for Q4 2019 from copper sales was $35.6 million (Q4 2018 - $36.9 million) which consisted of $11.1 million (Q4 2018 - $9.3 million) in depreciation and depletion, $9.4 million (Q4 2018 - $8.5 million) in salaries and benefits, $4.6 million (Q4 2018 - $5.7 million) in materials and consumables, $4.3 million (Q4 2018 - $7.3 million) in contracted services, $3.9 million (Q4 2018 - $3.4 million) in maintenance costs, $2.2 million (Q4 2018 - $2.5 million) in utilities, and $0.2 million (Q4 2018 - $0.2 million) in other costs.

Cost of product sold for Q4 2019 from gold sales was $7.4 million (Q4 2018 - $7.8 million) which primarily comprised of $2.2 million (Q4 2018 - $1.8 million) in salaries and benefits, $1.2 million (Q4 2018 - $0.8 million) in contracted services, $1.2 million (Q4 2018 - $1.4 million) in maintenance costs, $1.1 million (Q4 2018 - $1.3 million) in materials and consumables, $0.9 million (Q4 2018 - $1.8 million) in depreciation and depletion, and $0.7 million (Q4 2018 - $0.6 million) in utilities.

3. General and administrative expenses for Q4 2019 include $10.3 million (Q4 2018 - $3.8 million) with respect to MCSA for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, $0.5 million (Q4 2018 - $1.8 million) with respect to NX Gold for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, and $1.9 million (Q4 2018 - $4.8 million) with respect to the corporate head office in Vancouver. Corporate head office costs are primarily comprised of $1.4 million (Q4 2018 - $4.0 million) in salaries, incentive payments, and consulting fees, $0.3 million (Q4 2018 - $0.2 million) in travel-related costs, and $0.2 million (Q4 2018 - $0.4 million) in professional fees. Increases in general and administrative expenses in Q4 2019 as compared to Q4 2018 reflect the growth of operations, which included higher headcounts, incentive payments for exceeding board-mandated performance targets during 2019, as well as rate increases related to annual union contract negotiations at MCSA.

4. Finance expense for Q4 2019 was $2.0 million (Q4 2018 - $6.8 million) and is primarily comprised of interest on loans at the corporate head office of $2.0 million (Q4 2018 - $1.5 million), interest on loans and borrowings at MCSA and NX Gold of $0.7 million (Q4 2018 - $3.1 million), commitment fees of $0.5 million (Q4 2018 - $0.6 million), partially offset by other finance income of $1.0 million (Q4 2018 - $2.0 million), and the reduction of asset retirement obligation accretion of $0.2 million (Q4 2018 - accretion of $3.8 million). Interest on loans and borrowings at MCSA and NX Gold decreased due to the repayments of certain loans during 2018 and 2019.

5. Foreign exchange gain for Q4 2019 was $4.4 million (Q4 2018 - $7.4 million). This amount is primarily comprised of a foreign exchange gain on USD denominated debt of $3.8 million (Q4 2018 - $4.8 million) in MCSA for which the functional currency is the Brazilian Real and a foreign exchange gain on unrealized derivative contracts of $1.4 million (Q4 2018 - $4.0 million), partially offset by a foreign exchange loss on realized derivative contracts of $0.5 million (Q4 2018 - $1.0 million). The decrease in foreign exchange gains was primarily a result of the foreign exchange rate between the Brazilian Real and the US dollar fluctuating less during Q4 2019 as compared to Q4 2018 and a decrease in the outstanding USD denominated debt held in MCSA.

6. In Q4 2018, the Company recognized a loss on settlement of debt of $5.5 million, comprising of a $3.7 million loss in early repayment fees for the settlement of certain debt in MCSA and a $1.8 million loss in loan settlement fees when the Company replaced its $50 million senior secured non-revolving credit facility with a $130 million facility from a syndicate of Canadian financial institutions.

7. Other income for Q4 2019 was $0.4 million (Q4 2018 - other expense of $5.6 million). Other income for Q4 2019 was not significant. Other expense in Q4 2018 primarily consisted of the write-off of state tax credits claimed that were deemed not recoverable for MCSA and NX Gold of $2.6 million and $1.6 million, respectively.

8. In Q4 2019, the Company recognized a $25.2 million income tax recovery (Q4 2018 - income tax expense of $6.9 million), primarily resulting from the recognition of available tax losses and tax credits in MCSA and partially offset by current tax expense in the period. At December 31, 2019, the Company considered the taxable income generated since acquisition of MCSA and forecasted future taxable income and determined that it was now considered probable that the benefit of these losses and tax credits in MCSA would be realized.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 13 

The following table provides a summary of the financial results of the Company for Fiscal 2019, Fiscal 2018, and Fiscal 2017. Tabular amounts are in thousands of US dollars, except share and per share amounts.

			Year ended			Year ended			Year ended
	Notes		December 31, 2019			December 31, 2018			December 31, 2017
Revenue		1	$	284,843		$	233,105		$	148,241
Cost of product sold		2		(162,817	)		(147,611	)		(128,009	)
Sales expenses				(4,962	)		(3,268	)		(2,225	)
Gross profit				117,064			82,226			18,007
Expenses
General and administrative		3		(32,817	)		(29,000	)		(22,940	)
Share-based compensation				(5,792	)		(3,225	)		(879	)
Income before the undernoted				78,455			50,001			(5,812	)
Other income (expenses)
Finance income				701			1,303			2,276
Finance expense		4		(20,428	)		(22,562	)		(20,709	)
Foreign exchange loss		5		(5,148	)		(20,713	)		(4,296	)
Loss on debt settlement		6		(1,783	)		(5,476	)		28,727
Recovery of value added taxes		7		21,584			-			-
Other income (expense)				1,448			108			1,788
Income before income taxes				74,829			2,661			1,974
Income tax recovery (expense)
Current		8		(10,645	)		(2,899	)		(1,104	)
Deferred		8		28,271			(2,753	)		16,614
				17,626			(5,652	)		15,510
Net income (loss) for the period				92,455			(2,991	)		17,484
Other comprehensive income (loss)
Foreign currency translation loss				(4,941	)		(27,801	)		(973	)
Comprehensive income (loss)			$	87,514		$	(30,792	)	$	16,511
Net income attributable to:
Owners of the Company			$	91,883		$	(3,155	)	$	22,466
Non-controlling interests				572			164			(4,982	)
			$	92,455		$	(2,991	)	$	17,484
Comprehensive income (loss) attributable to:
Owners of the Company			$	86,962		$	(30,845	)	$	21,497
Non-controlling interests				552			53			(4,986	)
			$	87,514		$	(30,792	)	$	16,511
Net income per share attributable to owners of the Company
Net income per share
Basic			$	1.08		$	(0.04	)	$	0.40
Diluted			$	1.01		$	(0.04	)	$	0.34
Weighted average number of common shares outstanding
Basic				85,244,277			83,927,977			56,252,358
Diluted				91,390,425			83,927,977			66,003,387
Cash and cash equivalents			$	21,485		$	18,941		$	51,098
Total assets			$	462,674		$	360,439		$	381,343
Non-current liabilities			$	183,135		$	196,352		$	196,265

Ero Copper Corp. December 31, 2019 MD&A                                           Page 14 

Notes:

1. Revenues for Fiscal 2019 from copper sales was $246.2 million (Fiscal 2018 - $184.7 million) which included the sale of 42,759 copper tonnes in concentrate in Fiscal 2019 as compared to 30,107 copper tonnes in Fiscal 2018. The increase in revenue in Fiscal 2019 as compared to Fiscal 2018 includes production from the Vermelhos mine which commenced commercial production in October 2018. The Company processed 64% more ore at a higher ore grade during Fiscal 2019 as compared to Fiscal 2018. In addition, revenues for Fiscal 2019 included $38.6 million (Fiscal 2018 - $48.4 million) from the sale of 29,755 (Fiscal 2018 - 39,808) ounces of gold from NX Gold operations.

2. Cost of product sold for Fiscal 2019 from copper sales was $135.6 million (Fiscal 2018 - $115.3 million), which consisted of $40.1 million (Fiscal 2018 - $34.1 million) in depreciation and depletion, $33.7 million (Fiscal 2018 - $29.7 million) in salaries and benefits, $20.5 million (Fiscal 2018 - $17.6 million) in contracted services, $17.9 million (Fiscal 2018 - $14.9 million) in materials and consumables, $14.1 million (Fiscal 2018 - $10.8 million) in maintenance costs, $8.7 million (Fiscal 2018 - $7.5 million) in utilities, and $0.7 million (Fiscal 2018 - $0.7 million) in other costs. Cost of products sold during Fiscal 2019 increased 18% as compared to Fiscal 2018. Higher recoveries, higher ore grade, and efficiencies contributed towards cost containment relative to the increase in production volume. The increase in cost of products sold in Fiscal 2019 compared to Fiscal 2018 was primarily due to more copper being produced and sold as a result of the commencement of production at the Vermelhos underground mine in October 2018.

Cost of product sold during Fiscal 2019 from gold sales was $27.2 million (Fiscal 2018 - $32.3 million), which comprised of $5.9 million (Fiscal 2018 - $11.1 million) in depreciation and depletion, $7.1 million (Fiscal 2018 - $6.4 million) in salaries and benefits, $4.3 million (Fiscal 2018 - $5.0 million) in maintenance costs, $3.9 million (Fiscal 2018 - $4.5 million) in materials and consumables, $3.2 million (Fiscal 2018 - $3.2 million) in contracted services, $2.5 million (Fiscal 2018 - $1.8 million) in utilities, and $0.3 million (Fiscal 2018 - $0.3 million) in other costs.

3. General and administrative expenses during Fiscal 2019 include $21.0 million (Fiscal 2018 - $16.3 million) with respect to MCSA for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, $2.3 million (Fiscal 2018 - $3.4 million) with respect to NX Gold for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims and $9.5 million (Fiscal 2018 - $9.3 million) with respect to the corporate head office in Vancouver. Corporate head office costs are primarily comprised of $6.7 million (Fiscal 2018 - $6.4 million) in salaries, incentive payments, and consulting fees, $1.2 million (Fiscal 2018 - $0.9 million) in travel-related costs, $0.7 million (Fiscal 2018 - $1.0 million) in office and sundry costs, and $0.5 million (Fiscal 2018 - $0.9 million) in professional fees. Increases in general and administrative expenses in Fiscal 2019 as compared to Fiscal 2018 reflect the growth of operations, which included higher headcounts, incentive payments for exceeding board-mandated performance targets during 2019, as well as rate increases related to annual union contract negotiations at MCSA.

4. Finance expense for Fiscal 2019 was $20.4 million (Fiscal 2018 - $22.6 million) and is primarily comprised of interest on loans at the corporate head office of $8.3 million (Fiscal 2018 - $5.4 million), interest on loans and borrowings at MCSA and NX Gold of $2.9 million (Fiscal 2018 - $9.6 million), the accretion of asset retirement obligations of $3.5 million (Fiscal 2018 - $3.8 million), commitment fees of $1.7 million (Fiscal 2018 - $0.6 million), and other finance expenses of $3.1 million (Fiscal 2018 - $2.6 million). Interest on loans and borrowings at MCSA and NX Gold decreased due to the repayments of certain loans during 2018 and 2019, while interest on loans at the corporate head office increased due to the senior secured non-revolving credit facility entered into in December 2018, the proceeds of which were used to repay or settle debt at MCSA.

5. Foreign exchange loss for Fiscal 2019 was $5.1 million (Fiscal 2018 - $20.7 million), primarily comprised of a foreign exchange loss on US denominated debt of $4.4 million (Fiscal 2018 - $9.8 million) in MCSA where the functional currency is the Brazilian Real, a loss on other foreign exchange transactions of $0.7 million (Fiscal 2018 - $1.9 million), and a foreign exchange loss on unrealized derivative contracts of $0.3 million (Fiscal 2018 - $1.1 million gain), partially offset by a foreign exchange gain on realized derivative contracts of $0.2 million (Fiscal 2018 - $10.1 million loss). The decrease in foreign exchange losses in Fiscal 2019 was primarily due to the foreign exchange rate between the Brazilian Real and the US dollar not fluctuating significantly during Fiscal 2019 as compared to Fiscal 2018 and a decrease in the outstanding USD denominated debt held in MCSA.

6. Loss on debt settlement during Fiscal 2019 was $1.8 million (Fiscal 2018 - $5.5 million), representing the difference between the accounting fair value made to legally extinguish a bank loan held by MCSA during the second quarter of 2019 and the carrying value of the loan at the time. Loss on settlement of debt during Fiscal 2018 of $5.5 million was incurred in Q4 2018, comprising of a $3.7 million loss in early repayment fees for the settlement of certain debt in MCSA and a $1.8 million loss in loan settlement fees when the Company replaced its $50 million senior secured non-revolving credit facility with a $130 million facility from a syndicate of Canadian financial institutions.

7. During Fiscal 2019, the Company recognized a recovery of $21.6 million (Fiscal 2018 - $nil) in net income related to value added taxes previously paid on sales in Brazil. The recovery was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant taxing authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim, which approval was received in July 2019. These credits can be used to offset a variety of other taxes, including taxes on future sales. Of the recovery recognized, $3.2 million has been applied to taxes in the current year, $12.2 million has been included in other current assets based on the expected timing of their use, with the remaining $6.2 million recognized in other non-current assets in the statement of financial position.

8. During Fiscal 2019, the Company recognized a $17.6 million income tax recovery (Fiscal 2018 - income tax expense of $5.7 million), primarily resulting from the recognition of available tax losses and tax credits in MCSA and partially offset by current income tax expense. Current tax exposure increased as a result of higher taxable income in MCSA. At December 31, 2019, the Company considered the taxable income generated since acquisition of MCSA and forecasted future taxable income and determined that it was now considered probable that the benefit of these losses and tax credits in MCSA would be realized.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 15 

SUMMARY OF QUARTERLY RESULTS

The following table presents selected financial information for each of the most recent eight quarters. Tabular amounts are in millions of US Dollars, except share and per share amounts.

	2019													2018
Selected Financial Information		Dec 31(1)			Sept 30(2)			June 30			March 31			Dec 31(3)			Sept 30			June 30(4)			March 31
Revenue		$	75.7		$	60.6		$	76.5		$	72.0		$	85.1		$	47.3		$	61.0		$	39.7
Cost of product sold		$	(43.0	)	$	(38.4	)	$	(43.3	)	$	(38.1	)	$	(44.7	)	$	(27.9	)	$	(44.2	)	$	(30.8	)
Gross profit		$	31.1		$	21.3		$	32.1		$	32.6		$	39.0		$	18.8		$	15.9		$	8.5
Net income (loss) for period		$	45.4		$	16.3		$	15.3		$	15.5		$	11.3		$	5.2		$	(18.2	)	$	(1.3	)
Income (loss) per share attributable to owners of the Company
- Basic		$	0.53		$	0.19		$	0.18		$	0.18		$	0.13		$	0.06		$	(0.22	)	$	(0.02	)
-Diluted		$	0.49		$	0.18		$	0.17		$	0.17		$	0.13		$	0.06		$	(0.22	)	$	(0.02	)
Weighted average number of common shares outstanding
- Basic			85,620,168			85,505,675			85,032,841			84,804,389			84,736,476			84,504,954			84,458,914			81,974,876
-Diluted			91,670,988			91,320,363			90,696,926			89,917,828			89,191,707			88,638,656			84,458,914			81,974,876

Notes:

1. During Q4 2019, the Company recognized a $25.2 million income tax recovery primarily resulting from the recognition of available tax losses and tax credits in MCSA. At December 31, 2019, the Company considered the taxable income generated since acquisition of MCSA and forecasted future taxable income and determined that it was now considered probable that the benefit of these losses and tax credits in MCSA would be realized.

2. During the quarter ended September 30, 2019, the Company recognized a recovery of $21.6 million in net income related to value added taxes previously paid on sales in Brazil. The recovery was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant taxing authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim, for which approval was received in July 2019. These credits can be used to offset a variety of other taxes, including income taxes and taxes on future sales.

3. During Q4 2018, MCSA began commercial production of the Vermelhos Mine. This resulted in increased sales this quarter, generating higher net income for the period.

4. During the quarter ended June 30, 2018, the Company had an overall net loss of $18.2 million, which included $26.4 million in foreign exchange losses. The foreign exchange losses were comprised of a $12.2 million loss associated with US dollar denominated debt held by MCSA, whose functional currency is the Brazilian Real, $11.4 million loss on foreign exchange forward contracts and $2.8 million related to other operational exchange losses. The foreign exchange losses were unusually high this quarter due to volatility in the foreign exchange rates between the US dollar and the Brazilian Real.

LIQUIDITY, CAPITAL RESOURCES, AND CONTRACTUAL OBLIGATIONS

Liquidity

As at December 31, 2019, the Company held cash and cash equivalents of $21.5 million. Cash and cash equivalents are primarily comprised of cash held with reputable financial institutions and are invested in highly liquid short-term investments with maturities of three months or less. The funds are not exposed to liquidity risk and there are no restrictions on the ability of the Company to use these funds to meet its obligations.

Cash and cash equivalents increased by $2.5 million during Fiscal 2019. The Company’s cash flows from operating, investing and financing activities during Fiscal 2019 are summarized as follows:

· Cash from operating activities of $127.8 million.

Partially offset by:

· Cash used in investing activities of $106.7 million, including:

o     $105.4 million of additions to mineral property, plant and equipment;

o     $0.9 million of additions to exploration and evaluation assets;

o $0.5 million of additions to financial investments

Ero Copper Corp. December 31, 2019 MD&A                                           Page 16 

· Cash flows used in financing activities of approximately $18.0 million, including:

o     $41.3 million of repayment on loans and borrowings;

o     $10.3 million of payment of interest on loans and borrowings;

o     $4.1 million of lease payments;

o $3.7 million of other finance expenses

net of:

o $37.9 million proceeds from new loans and borrowings;

o     $1.9 million proceeds from exercise of stock options and warrants;

o $1.5 million released from restricted cash

As at December 31, 2019, the Company had working capital deficit of $4.9 million.

Capital Resources

The Company’s primary sources of capital are comprised of cash from operations, cash and cash equivalents on hand and undrawn debt facilities. The Company will continuously monitor its capital structure and, based on changes in operations and economic conditions, may adjust such structure by issuing new common shares or new debt as necessary. While the Company has been successful in securing financing to date, there are no guarantees that it will be able to secure such financing in the future on terms acceptable to the Company, if at all. Taking into consideration cash flow from existing operations, and the existing undrawn revolving credit facility of $14.0 million in Canada and undrawn lines of credit totalling R$64.8 million in MCSA as at December 31, 2019, management believes that the Company has sufficient working capital and financial resources to maintain its planned operations and activities for the foreseeable future.

Contractual Obligations and Commitments

Certain loan agreements contain operating and financial covenants that could restrict the ability of the Company and its subsidiaries, MCSA and NX Gold S.A., to, among other things, incur additional indebtedness needed to fund its respective operations, pay dividends or make other distributions, make investments, create liens, sell or transfer assets or enter into transactions with affiliates. There are no other restrictions or externally imposed capital requirements of the Company.

MANAGEMENT OF RISKS AND UNCERTAINTIES

The Company thoroughly examines the various financial instruments and risks to which it is exposed and assesses the impact and likelihood of those risks. These risks may include credit risk, liquidity risk, currency risk, commodity price risk and interest rate risk. Where material, these risks are reviewed and monitored by the Board.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 17 

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers. The carrying amount of the financial assets below represents the maximum credit risk exposure as at December 31, 2019 and December 31, 2018:

	December 31, 2019		December 31, 2018
Cash and cash equivalents	$	21,485	$	18,941
Restricted cash		1,500	$	3,000
Accounts receivable		7,680	$	7,219
Deposits		1,200	$	1,334
Derivatives		-	$	254
Other non-current assets - term deposits		1,196	$	686
	$	33,061	$	31,434

The Company invests cash and cash equivalents as well as restricted cash with financial institutions that are financially sound based on their credit rating. The Company’s exposure to credit risk associated with accounts receivable is influenced mainly by the individual characteristics of each customer. The Company currently has only three significant customers, all of which have no history of credit default with the Company. The Company has not incurred credit losses during the years ended December 31, 2019 and 2018 nor has a provision for credit losses been recognized.

Liquidity risk

Liquidity risk is the risk associated with the difficulties that the Company may have meeting the obligations associated with financial liabilities that are settled with cash payments or with another financial asset. The Company's approach to liquidity management is to ensure as much as possible that sufficient liquidity exists to meet their maturity obligations on the expiration dates, under normal and stressful conditions, without causing unacceptable losses or with risk of undermining the normal operation of the Company.

The table below shows the Company's maturity of financial liabilities on December 31, 2019:

	Carrying		Contractual		Up to 12						More than 5
Non-derivative Financial Liabilities	value		cash flows		months		1-2 years		3-5 years		years
Loans and borrowings	$	159,370	$	161,377	$	18,984	$	30,318	$	110,208	$	1,867
Interest on loans and borrowings		-		22,788		8,749		7,172		6,737		130
Accounts payable and accrued liabilities		43,694		43,694		43,694		-		-		-
Value added, payroll and other taxes		19,688		20,428		13,994		1,968		4,466		-
	$	222,752	$	248,287	$	85,421	$	39,458	$	121,411	$	1,997

Market risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity prices. The purpose of market risk management is to manage and control exposures to market risks, within acceptable parameters, while optimizing return.

The Company may use derivatives, including forward contracts and swap contracts, to manage market risks.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 18 

Foreign exchange currency risk

The Company’s subsidiaries in Brazil are exposed to exchange risks related to the US dollars and Euros. In order to minimize currency mismatches, the Company monitors its cash flow projections considering future sales expectations indexed to US dollar variation in relation to the cash requirement to settle the existing financings.

The Company's exposure to foreign exchange currency risk at December 31, 2019 relates primarily to $9.6 million (December 31, 2018 – $10.2 million) in loans and borrowings of MCSA denominated in US dollars and Euros. Strengthening (weakening) in the Brazilian Real against the US dollar by 10% and 20%, would have increased (decreased) pre-tax net income by $0.6 million and $1.1 million, respectively (2018 – $0.7 million and $1.3 million). Strengthening (weakening) in the Brazilian Real against the Euro by 10% and 20%, would have increased (decreased) pre-tax net income by $0.4 million and $0.8 million, respectively (2018 – $0.4 million and $0.7 million). This analysis is based on the foreign currency exchange variation rate that the Company considered to be reasonably possible at the end of the year. The analysis assumes that all other variables, especially interest rates, are held constant.

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage market risks. At December 31, 2019, the Company’s subsidiaries have entered into foreign exchange collar contracts at zero cost for notional amounts of $336.6 million with an average floor rate of 3.86 R$ / $ and an average cap rate of 4.41 R$ / $ (December 31, 2018 – notional amount of $21.5 million in foreign exchange forward contracts). The maturity dates of these contracts are from January 15, 2020 to July 28, 2021 and are financially settled on a net basis. The fair value of these contracts at December 31, 2019 was nil, (December 31, 2018 – an asset of $0.3 million, which was included in Derivatives in the statement of financial position.) The change in fair value of foreign exchange collar contracts was a loss of $0.3 million for the year ended December 31, 2019 and (a gain of $1.1 million for the year ended December 31, 2018) has been recognized in foreign exchange loss. In addition, in the year ended December 31, 2019, the Company recognized a realized gain of $0.2 million, (a loss of $10.1 million for the year ended December 31, 2018) related to the settlement of foreign currency forward contracts.

Interest rate risk

The Company is principally exposed to the variation in interest rates on loans and borrowings with variable rates of interest. Management reduces interest rate risk exposure by entering into loans and borrowings with fixed rates of interest or by entering into derivative instruments that fix the ultimate interest rate paid.

The Company is principally exposed to interest rate risk through its senior credit facilities of $136.0 million and Brazilian Real denominated bank loans of $9.8 million. Based on the Company’s net exposure at December 31, 2019, a 1% change in the variable rates would have an impact of $1.5 million on pre-tax annual net income, without consideration of the effects of the swap contracts below.

In order to mitigate the above volatility due to variable rates on loans, as at December 31, 2019, the Company has entered into an interest rate swap contract to manage interest rate risk associated with its Canadian credit facilities. The floating interest on a notional amount of $65 million was swapped for a fixed interest rate of 2.69%. The fair value of this contract at December 31, 2019 was a liability of $1.7 million and was included in Derivatives in the statement of financial position.

In addition, as at December 31, 2019, MCSA has entered into an interest rate and currency swap contract on the Plural Loan. The floating interest on a notional amount of R$12 million was swapped for a fixed interest rate of 9.9% and the BRL currency on the loan was swapped for USD at a rate of 3.9500. The fair value of this contract at December 31, 2019 was a liability of $0.1 million and was included in derivatives in the statement of financial position while the change in the fair value of this contract of $0.1 million was included in Finance Expenses in the statement of operations and comprehensive income.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 19 

Price risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage commodity price risks. During the year ended December 31, 2019, the Company had entered into commodity swap collar contracts. As at December 31, 2019, these commodity swap collar contracts have all matured and the balance was $nil. The Company recognized a realized loss of $1.4 million for the year ended December 31, 2019 related to the settlement of commodity forward contracts.

For a discussion of additional risks applicable to the Company and its business and operations, including risks related to the Company’s foreign operations, the environment and legal proceedings, see “Risk Factors” in the Company’s Annual Information Form for the year ended December 31, 2019 and dated March 12, 2020 (the “AIF”).

OTHER FINANCIAL INFORMATION

Off-Balance Sheet Arrangements

As at December 31, 2019, the Company had no material off-balance sheet arrangements.

Contingencies

With the acquisition of MCSA, the Company inherited certain liabilities and MCSA has been subject to a number of claims (including claims related to tax, labour and social security matters and civil action) in the course of its business which individually are not material and have not been accrued for in the Company’s financial statements as it is not probable that a cash outflow will occur. While the Company believes that these claims are unlikely to be successful, if all such existing claims were decided against it, the Company could be exposed to a liability of up to approximately $31.1 million as at December 31, 2019 (December 31, 2018 - $21.9 million), which could have an adverse impact on the Company’s business, financial condition, results of operations, cash flows or prospects.

Outstanding Share Data

At March 12, 2020, the Company had 85,756,978 common shares, 5,081,541 stock options, 2,866,662 warrants, and 438,463 performance share units issued and outstanding.

Related Party Disclosures

For the year ended December 31, 2019, amounts paid to related parties were incurred in the normal course of business and measured at the exchange amount, which is the amount agreed upon by the transacting parties and on terms and conditions similar to non-related parties.

Key management personnel consist of the Company’s directors and officers and their compensation includes director retainer fees and management salaries paid to these individuals, as well as share-based compensation. The aggregate value of compensation paid to key management personnel for the year ended December 31, 2019 was $7.5 million ($5.4 million for the year ended December 31, 2018). In addition, 444,265 options and 171,754 share units were issued to key management personnel during the year ended December 31, 2019 (1,100,155 options and 130,636 share units for the year ended December 31, 2018), with $4.1 million recognized in share-based compensation expense for the year ended December 31, 2019 ($2.3 million for the year ended December 31, 2018).

Ero Copper Corp. December 31, 2019 MD&A                                           Page 20 

During the year ended December 31, 2019, key management personnel exercised 286,666 options and 300,000 warrants for cash proceeds to the Company of $0.6 million and $0.4 million, respectively (133,000 options for $0.2 million for the year ended December 31, 2018). During the year ended December 31, 2018, key management personnel converted convertible debentures into 1,476,164 common shares and 369,040 common share purchase warrants. The warrants were subsequently exercised into 369,040 common shares.

As at December 31, 2019, $3.9 million was payable to key management as incentive compensation and is included in the accounts payable and accrued liabilities in the consolidated financial statements (December 31, 2018 - $2.7 million). Such amounts were unsecured, non-interest bearing and were repaid under normal trade terms.

Subsequent to December 31, 2019, 23,674 deferred share units were issued to directors, and 43,456 options were granted to directors.

ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

Critical Accounting Judgments and Estimates

The preparation of consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions about future events that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, events or actions, actual results may differ from these estimates.

The Company’s significant accounting policies and accounting estimates are contained in the Company’s December 31, 2019 consolidated financial statements. Certain of these policies, such as, capitalization and depreciation of property, plant and equipment and mining interests, derivative instruments, and decommissioning liabilities provisions involve critical accounting estimates because they require management of the Company to make subjective or complex judgments about matters that are inherently uncertain, and because of the likelihood that materially different amounts could be reported under different conditions or using different assumptions.

In preparing its financial statements, management has made judgments, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of the assets, liabilities, revenues and expenses. Actual results may differ from these estimates.

The estimates and assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

Critical Judgments

Functional currency

The functional currency of the Company and each of its subsidiaries is the currency of the primary economic environment in which the entities operate. The Company has determined that the functional currency for the Company is the US dollar while the functional currency for MCSA and NX Gold is the Brazilian Real. Assessment of functional currency involves certain judgements to determine the primary economic environment and the Company reconsiders the functional currency of its entities if there is a change in events and conditions which determined the primary economic environment.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 21 

Legal claims and contingent liabilities

The recognition of legal provisions and contingent liabilities involves the assessment of claims made against the Company and each of its subsidiaries. The recognition of a legal provision, or disclosure of a contingent liability, involves certain judgements to determine the probability of whether a cash outflow will occur. In making this judgment, management has assessed various criteria and also relies on the opinions of its legal advisers to assist in making this assessment.

Key Sources of Estimation Uncertainty

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates and such differences could be significant. Significant estimates made by management affecting the consolidated financial statements include:

Impairment of property, plant and equipment

The Company evaluates each asset or cash generating unit every reporting period to determine whether there are any indications of impairment. If any such indication exists, which is often judgmental, a formal estimate of recoverable amount is performed and an impairment loss is recognized to the extent that the carrying amount exceeds the recoverable amount. The recoverable amount of an asset or cash generating group of assets is measured at the higher of fair value less costs to sell and value in use. The evaluation of asset carrying values for indications of impairment includes consideration of both external and internal sources of information, including such factors as market and economic conditions, production budgets and forecasts, and life-of-mine estimates.

When required, the determination of fair value and value in use requires management to make estimates and assumptions about expected production, sales volumes, commodity prices, mineral reserves, operating costs, closure and rehabilitation costs and future capital expenditures. The estimates and assumptions are subject to risk and uncertainty; hence, there is the possibility that changes in circumstances will alter these projections, which may impact the recoverable amount of the assets. In such circumstances, some or all of the carrying value of the assets may be further impaired or the impairment charge reduced with the impact recorded in profit or loss.

Mineral reserve and resource estimates including life of mine plan

The Company estimates its mineral reserves and mineral resources based on information compiled by competent individuals. Mineral reserves are used in the calculation of depreciation, impairment assessments and for forecasting the timing of payment of mine closure and rehabilitation costs.

There are numerous uncertainties inherent in estimating mineral reserves, and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the estimation methodology, forecasted prices of commodities, exchange rates, production costs or recovery rates may change the economic status of mineral reserves and may, ultimately, result in changes in the mineral reserves.

The carrying amounts of the Company’s mineral properties, plant and equipment are depleted in part based on recoverable mineral reserve tonnes processed, depending on the use of the asset. Changes to estimates of recoverable quantities of metals, mineral reserve tonnes and depletable costs, including changes resulting from revisions to the Company’s mine plans and changes in metals prices forecasts, can result in a change to future depreciation and depletion rates and may result in impairment charges.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 22 

Mine closure and rehabilitation costs

Significant estimates and assumptions are made in determining the provision for mine closure and rehabilitation as there are numerous factors that will affect the ultimate liability payable. These factors include estimation of the extent and cost of rehabilitation activities, timing of future cash flows, discount rates, inflation rate, and regulatory requirements.

Changes in the above factors can result in a change to the provision recognized by the Company. Changes to mine closure and rehabilitation costs are recorded with a corresponding change to the carrying amounts of related mineral properties, plant and equipment. Adjustments to the carrying amounts of related mineral properties, plant and equipment can result in a change to future depreciation and depletion expense.

Significant assumptions used to determine mine closure and rehabilitation costs are included in Note 11(a) to the consolidated financial statements.

Inventory

The net recoverable value of stockpile inventory and production in work in progress inventory is based on the quantity of recoverable metal inventory which is an estimate based on the tons of ore added and removed from the process, expected grade and recovery rates. The quantity of recoverable metal in finished concentrate inventory is an estimate based on initial weights and assay results. The net recoverable value of these inventories also requires estimates of expected selling prices and, where applicable, costs to complete.

Income taxes

The determination of the Company’s tax expense for the period and deferred tax assets and liabilities involves significant estimation and judgement by management. In determining these amounts, management interprets tax legislation in a variety of jurisdictions and makes estimates of the expected timing of the reversal of deferred tax assets and liabilities. Management also makes estimates of future earnings, which affect the extent to which potential future tax benefits may be used. The Company is subject to assessments by various taxation authorities, which may interpret legislation differently. These differences may affect the final amount or the timing of the payment of taxes. The Company provides for such differences where known based on management’s best estimate of the probable outcome of these matters.

New Accounting Standards Adopted in the Current Period

The following new and amended IFRS pronouncements were adopted effective January 1, 2019:

i) IFRS 16 Leases

IFRS 16 introduces a single, on-balance sheet accounting model for lessees. As a result, the Company, as a lessee, has recognized right-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. The Company may elect to not apply IFRS 16 to leases with a term of less than 12 months, which election is made by underlying class of assets to which the right of use asset relates, or leases where the underlying asset is of low value, which election is made on an asset by asset basis. Lessor accounting remains similar to previous accounting policies.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 23 

Previously, the Company determined at contract inception whether an arrangement was or contained a lease under IFRIC 4, Determining Whether an Arrangement contains a Lease. The Company now assesses whether a contract is or contains a lease based on the new definition of a lease. Under IFRS 16, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

The Company adopted IFRS 16 using the modified retrospective approach. Accordingly, the comparative information presented for 2018 has not been restated. The impact of adoption of IFRS 16 is disclosed in note 2(e) of the consolidated financial statements.

As a result of applying IFRS 16, the Company recognized right-of-use assets of $4.7 million and lease liabilities of $4.7 million upon adoption.

ii)       IFRIC 23 – Uncertainty over Income Tax Treatments

The Company has adopted IFRIC Interpretation 23 (“Interpretation 23”) – Uncertainty over Income Tax Treatments from January 1, 2019. The Interpretation provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments.
There is no material impact on the financial statements from the adoption of Interpretation 23.

Local Currency Operating Metrics – Presented in Brazilian Real

		2019 - Q4			2019 - Q3			2019			2018 - Q4			2018
Costs (MCSA Operations)
Mining - UG (Pilar)	R$		66,743			60,294			234,887			63,863			201,948
- UG (Vermelhos)			39,864			38,952			140,124			19,288			19,288
- OP			29			761			8,521			16,894			62,867
Processing			22,250			21,309			83,041			23,058			70,583
Indirect			12,822			10,504			46,607			10,783			30,058
Production costs			141,708			131,820			513,180			133,886			384,744
Capex development			(45,009	)		(36,108	)		(125,918	)		(27,815	)		(68,705	)
By-product credits			(16,876	)		(12,720	)		(50,823	)		(11,090	)		(28,310	)
Treatment, refining and other			3,895			2,622			7,358			(2,676	)		(1,772	)
C1 cash costs	R$		83,717			85,614			343,798			92,305			285,957

Breakdown Mined and Processed (tonnes)
UG Mined	675,258	677,535	2,527,386	687,872	1,836,455
OP Mined	-	15,259	727,578	700,732	4,096,723
Total Mined (t):	675,258	692,794	3,254,964	1,388,604	5,933,178
Total Processed (t)	589,065	587,915	2,424,592	777,480	2,257,917
Cu Production (t)	11,526	9,674	42,318	12,104	30,426
UG Mining Total - R$/tonne mined	91.22	93.19	98.56	120.88	120.47
Pilar - R$/tonne mined(1)	78.56	87.91	91.26	n/a	n/a
Vermelhos - R$/tonne mined(1)	118.52	102.63	112.93	n/a	n/a
OP Mining - R$/tonne mined[2]	n/a	49.89	11.71	24.11	15.35
Processing - R$/tonne processed	37.77	36.25	34.25	29.66	31.26
Indirect - R$/tonne processed	21.77	17.87	19.22	13.87	13.31

Footnotes

General - Above only includes amounts from MCSA. NX Gold operations are excluded.

[1] Starting 2019, the Company breaks out the cost metrics for underground mining between Pilar and Vermelhos.

[2] There was no OP production in Q4 2019.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 24 

NON-IFRS MEASURES

Financial results of the Company are prepared in accordance with IFRS. The Company utilizes certain non-IFRS measures, including C1 cash cost of copper produced (per lb), C1 cash cost of gold produced (per ounce), EBITDA, Adjusted EBITDA, Adjusted net income (loss) attributable to owners of the Company, Adjusted earnings (loss) per share, net debt and working capital, which are not measures recognized under IFRS. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The tables below provide a reconciliation of these non-IFRS measures to the most directly comparable IFRS measures as contained in the Company’s financial statements.

Unless otherwise noted, the non-IFRS measures presented below have been calculated on a consistent basis for the periods presented.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 25 

C1 Cash Cost of Copper Produced (per lb)

C1 cash cost of copper produced (per lb) is the sum of production costs, net of capital expenditure development costs and by-product credits, divided by the copper pounds produced. C1 cash costs reported by the Company include treatment, refining charges, offsite costs, and certain tax credits relating to sales invoiced to the Company’s Brazilian customer on sales. By-product credits are calculated based on actual precious metal sales (net of treatment costs) during the period divided by the total pounds of copper produced during the period. C1 cash cost of copper produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

The following table provides a reconciliation of C1 cash cost of copper produced per pound to cost of goods sold, its most directly comparable IFRS measure.

	2019 - Q4			2019 - Q3			2019			2018 - Q4			2018
Reconciliation:
Cost of Product Sold	$	35,620		$	32,396		$	135,607		$	36,894		$	115,346
Add (less):
Depreciation/amortization/depletion		(11,128	)		(9,675	)		(40,107	)		(9,244	)		(34,104	)
Incentive payments		(2,870	)		-			(2,870	)		-			-
Net change in inventory		322			544			1,062			(1,204	)		1,491
Transportation costs & other		1,479			902			4,598			1,019			3,083
By-product credits		(4,101	)		(3,202	)		(12,822	)		(2,911	)		(7,607	)
Treatment, refining, and other		935			632			1,814			(263	)		(705	)
Foreign exchange translation
adjustments		74			(77	)		(70	)		2,161			2,001
C1 cash costs	$	20,330		$	21,520		$	87,212		$	26,452		$	79,505

	2019 - Q4			2019 - Q3			2019			2018 - Q4			2018
Costs
Mining	$	25,910		$	25,172		$	97,308		$	28,045		$	79,046
Processing		5,406			5,363			21,035			6,052			19,167
Indirect		3,116			2,644			11,581			2,830			8,134
Production costs		34,432			33,179			129,924			36,927			106,347
Capex development		(10,936	)		(9,089	)		(31,705	)		(7,301	)		(18,530	)
By-product credits		(4,101	)		(3,202	)		(12,822	)		(2,911	)		(7,607	)
Treatment, refining and other		935			632			1,814			(263	)		(705	)
C1 cash costs	$	20,330		$	21,520		$	87,212		$	26,452		$	79,505

Costs per pound
Payable copper produced (lb)(1)		25,411			21,327			93,295			26,685			67,077
Mining	$	1.02		$	1.18		$	1.04		$	1.05		$	1.18
Processing	$	0.21		$	0.25		$	0.23		$	0.23		$	0.29
Indirect	$	0.12		$	0.12		$	0.12		$	0.11		$	0.12
Capex development	$	(0.43	)	$	(0.42	)	$	(0.34	)	$	(0.27	)	$	(0.28	)
By-product credits	$	(0.16	)	$	(0.15	)	$	(0.14	)	$	(0.11	)	$	(0.11	)
Treatment, refining and other	$	0.04		$	0.03		$	0.02		$	(0.04	)	$	(0.01	)
C1 cash cost of copper produced (per lb)	$	0.80		$	1.01		$	0.93		$	0.99		$	1.19

Footnote

[1] Total includes amount produced from the newly constructed Vermelhos underground mine as of 2018 Q4 and pre-production ore.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 26 

C1 Cash Cost of Gold produced (per ounce)

C1 cash cost of gold produced (per ounce) is the sum of production costs, net of capital expenditure development costs and silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. C1 cash cost of gold produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

The following table provides a reconciliation of C1 cash cost of gold produced per ounce to cost of goods sold, its most directly comparable IFRS measure.

	2019 - Q4			2019 - Q3			2019			2018 - Q4			2018
Reconciliation:
Cost of Product Sold	$	7,397		$	5,982		$	27,210		$	7,768		$	32,265
Add (less):
Depreciation/amortization/depletion		(881	)		(1,051	)		(5,907	)		(1,810	)		(11,084	)
Incentive payments		(634	)		-			(634	)		-			-
Net change in inventory		120			235			710			(308	)		-
By-product credits		(67	)		(47	)		(281	)		(90	)		(354	)
Foreign exchange translation adjustments		(18	)		(21	)		(46	)		(150	)		(87	)
C1 cash costs	$	5,917		$	5,098		$	21,052		$	5,410		$	20,740

	2019 - Q4			2019 - Q3			2019			2018 - Q4			2018
Costs
Mining	$	3,255		$	2,791		$	11,413		$	3,033		$	11,958
Processing		2,274			1,821			7,588			1,944			7,290
Indirect		995			850			3,479			668			2,541
Production costs		6,524			5,462			22,480			5,645			21,789
Capex development		(540	)		(317	)		(1,147	)		(145	)		(695	)
By-product credits		(67	)		(47	)		(281	)		(90	)		(354	)
C1 cash costs	$	5,917		$	5,098		$	21,052		$	5,410		$	20,740

Costs per ounce
Payable gold produced (ounces)		6,043			4,356			30,434			10,008			39,808
Mining	$	539		$	641		$	375		$	300		$	300
Processing	$	376		$	418		$	249		$	190		$	183
Indirect	$	165		$	195		$	114		$	70		$	64
Capex development	$	(89	)	$	(73	)	$	(38	)	$	(10	)	$	(17	)
By-product credits	$	(11	)	$	(12	)	$	(9	)	$	(10	)	$	(10	)
C1 cash cost of gold produced (per ounce)	$	980		$	1,169		$	691		$	540		$	520

Ero Copper Corp. December 31, 2019 MD&A                                           Page 27 

Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and Adjusted EBITDA

EBITDA represents earnings before interest expense, income taxes, depreciation, and amortization. Adjusted EBITDA includes further adjustments for non-recurring items and/or items not indicative to the future operating performance of the Company. The Company believes EBITDA and adjusted EBITDA are appropriate supplemental measures of debt service capacity and performance of its operations.

Adjusted EBITDA is calculated by removing the following income statement items:

- Recovery of value added taxes

- Foreign exchange loss (gain)

- Loss on gold hedge contracts

- Share based compensation

- Loss on debt settlement

	2019 - Q4			2019 - Q3			2019			2018 - Q4			2018
Reconciliation:
Net income (loss)	$	45,409		$	16,307		$	92,455		$	11,280		$	(2,991	)
Adjustments:
Finance expenses		2,014			5,206			20,428			6,776			22,562
Tax expense (recovery)		(25,209	)		2,825			(17,626	)		6,852			5,652
Depreciation/amortization/depletion		12,042			10,768			46,171			15,301			45,297
EBITDA		34,256			35,106			141,428			40,209			70,520
Recovery of value added taxes		-			(21,584	)		(21,584	)		-			-
Foreign exchange loss (gain)		(4,423	)		10,866			5,148			(7,433	)		20,713
Loss on gold hedge contracts		15			1,514			1,505			-			-
Share based compensation		1,304			1,353			5,792			723			3,225
Loss on debt settlement		-			-			1,783			5,476			5,476
Adjusted EBITDA	$	31,152		$	27,255		$	134,072		$	38,975		$	99,934

Adjusted net income attributable to owners of the Company and Adjusted net income per share attributable to owners of the Company

The Company uses the financial measure “Adjusted net income attributable to owners of the Company” and “Adjusted net income per share attributable to owners of the Company” (“Adjusted EPS”) to supplement information in its consolidated financial statements. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, the Company and certain investor and analysts use this information to evaluate the Company’s performance. The Company excludes the following items from net earnings to provide a measure which allows the Company and investors to evaluate the operating results of the underlying core operations: i) net recovery of value added taxes, ii) share based compensation iii) unrealized foreign exchange loss (gain) on USD denominated debt in MCSA, iv) unrealized loss (gain) on foreign exchange derivative contracts, v) unrealized loss on gold hedge contracts, and vi) loss on debt settlement. The presentation of Adjusted EPS is not meant to substitute the net income (loss) per share attributable to owners of the Company (“EPS”) presented in accordance with IFRS, but rather it should be evaluated in conjunction with such IFRS measures.

The following table provides a detailed reconciliation of net income (loss) attributable to owners of the Company as reported in the Company’s consolidated financial statements to adjusted net income attributable to owners of the Company and Adjusted EPS.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 28 

	2019 - Q4			2019 - Q3			2019			2018 - Q4			2018
Reconciliation:
Net income (loss) as reported attributable to the owners of
the Company	$	45,169		$	16,280		$	91,883		$	11,210		$	(3,155	)
Adjustments for:
Net recovery of value added taxes		-			(17,783	)		(17,783	)		-			-
Share based compensation		1,304			-			5,792			-			-
Unrealized foreign exchange loss (gain) on USD
denominated debt in MCSA		(3,738	)		9,559			4,388			(4,816	)		9,769
Unrealized loss (gain) on foreign exchange derivative
contracts		(1,404	)		1,398			249			(3,977	)		(1,132	)
Unrealized loss (gain) on gold hedge contracts		(677	)		719			-			-			-
Loss on debt settlement		-			-			1,776			5,461			5,461
Adjusted net income attributed to owners of the Company	$	40,654		$	10,173		$	86,305		$	7,878		$	10,943
Weighted average number of common shares - basic		85,620,168			85,505,675			85,244,277			84,736,476			83,927,977
Weighted average number of common shares - diluted		91,670,988			91,320,363			91,390,425			89,191,707			83,927,977
Adjusted earnings per share - basic	$	0.47		$	0.12		$	1.01		$	0.09		$	0.13
Adjusted earnings per share - diluted	$	0.44		$	0.11		$	0.94		$	0.09		$	0.12

Net Debt

Net debt is determined based on cash and cash equivalents, restricted cash and loans and borrowings as reported in the Company’s consolidated financial statements. The Company uses net debt as a measure of the Company’s ability to pay down its debt. The following table provides a calculation of net debt based on amounts presented in the Company’s consolidated financial statements as at December 31, 2019 and December 31, 2018.

	December 31,			December 31,
	2019			2018
Cash and cash equivalents	$	21,485		$	18,941
Restricted cash		1,500			3,000
Less: Current portion of loans and borrowings		(18,984	)		(10,602	)
Long-term portion of loans and borrowings		(140,386	)		(141,632	)
Net Debt	$	(136,385	)	$	(130,293	)

Working Capital and Available Liquidity

Working capital is determined based on current assets and current liabilities as reported in the Company’s consolidated financial statements. The Company uses working capital as a measure of the Company’s short-term financial health and operating efficiency. Available liquidity includes the Company’s working capital and undrawn revolving credit facilities in place. The following table provides a calculation for these based on amounts presented in the Company’s consolidated financial statements as at December 31, 2019 and December 31, 2018.

	December 31,			December 31,
	2019			2018
Current Assets	$	75,565		$	50,954
Less: Current Liabilities		(80,481	)		(60,265	)
Working Capital (Deficit)	$	(4,916	)	$	(9,311	)
Available undrawn revolving credit facilities		30,000			14,000
Available Liquidity	$	25,084		$	4,689

Disclosure Controls and Procedures

The Company’s management, with the participation of the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), has evaluated the effectiveness of the Company’s disclosure controls and procedures (“DC&P”). Based on the results of that evaluation, the Company’s CEO and CFO have concluded that, as of December 31, 2019, the Company’s DC&P were effective to provide reasonable assurance that the information required to be disclosed by the Company in reports it files is recorded, processed, summarized, and reported within the appropriate time periods and is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 29 

Internal Control over Financial Reporting

The Company’s management, with the participation of the CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”). The Company’s ICFR is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Any system of ICFR, no matter how well designed, has inherent limitations and cannot provide absolute assurance that all misstatements and instances of fraud, if any, within the Company have been prevented or detected. The Company’s ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

The Company uses the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The Company’s management, under the supervision of the CEO and CFO, has evaluated the design and operating effectiveness of the Company’s ICFR and concluded that the Company’s ICFR were effective as of December 31, 2019.

There were no changes in the Company’s ICFR that materially affected, or are reasonably likely to materially affect, ICFR during Q4 2019.

NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION

Unless otherwise indicated, scientific and technical information in this MD&A relating to Ero’s properties (“Technical Information”) is based on information contained in the following reports:

The report prepared in accordance with NI 43-101 and entitled “2019 Updated Mineral Resources and Mineral Reserves Statements of Mineração Caraíba’s Vale do Curaçá Mineral Assets, Curaçá Valley”, dated November 25, 2019 with an effective date of September 18, 2019, prepared by Rubens Jose De Mendonça, MAusIMM, of Planminas – Projectos e Consultoria em Mineração Ltd. (“Planminas”), Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, and Bernardo Horta de Cerqueira Viana, MAIG, all of GE21 Consultoria Mineral Ltda. (“GE21”), and each a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “Vale do Curaçá Technical Report”).

The report prepared in accordance with NI 43-101 and entitled “Mineral Resource and Mineral Reserve Estimate of the NX Gold Mine, Nova Xavantina”, dated February 3, 2020 with an effective date of September 30, 2019, prepared by Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, and Paulo Roberto Bergmann, FAusIMM, each of GE21 and a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “NX Gold Technical Report”).

The report prepared in accordance with NI 43-101 and entitled “Feasibility Study, Technical Report for the Boa Esperança Copper Project, Pará State Brazil”, dated September 7, 2017 with an effective date of June 1, 2017, prepared by Rubens Mendonça, MAusIMM of SRK Consultores do Brasil Ltda. (“SRK” or “SRK Brazil”) as at the date of the report (now of Planminas) and Carlos Barbosa, MAIG and Girogio di Tomi, MAusIMM, both of SRK Brazil, and each a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “Boa Esperança Feasibility Study”).

Ero Copper Corp. December 31, 2019 MD&A                                           Page 30 

Reference should be made to the full text of the Vale do Curaçá Technical Report, the NX Gold Technical Report and the Boa Esperança Technical Report, each of which is available for review under the Company’s profile on SEDAR at www.sedar.com.

The disclosure of Technical Information in this MD&A was reviewed and approved by Ricardo Emerson Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

Cautionary Note Regarding Forward-Looking Statements

This MD&A contains “forward-looking information” within the meaning of applicable Canadian securities laws. Forward-looking information includes statements that use forward-looking terminology such as “may”, “could”, “would”, “will”, “should”, “intend”, “target”, “plan”, “expect”, “budget”, “estimate”, “forecast”, “schedule”, “anticipate”, “believe”, “continue”, “potential”, “view” or the negative or grammatical variation thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, statements with respect to the Company's expected operations at the Vermelhos and Pilar Mines as well as at the NX Gold Property, drilling plans, plans for the Company's exploration program, timing of any updated mineral resource and reserve updates and technical reports, the Company's ability to service its ongoing obligations, the Company's future production outlook, cash costs, capital resources, expenditures, the impact of new accounting standards and amendments on the Company's financial statements, and current global macroeconomic uncertainty stemming from the onset of Covid-19.

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this Press Release including, without limitation, assumptions about: favourable equity and debt capital markets; the ability to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Company’s properties and assets; future prices of copper and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any mineral reserve and mineral resource estimates; the geology of the Vale do Curaçá Property, NX Gold Property and the Boa Esperanҫa Property being as described in the technical reports for these properties; production costs; the accuracy of budgeted exploration and development costs and expenditures; the price of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to operate in a safe, efficient and effective manner; political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favourable terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour stability; stability in financial and capital goods markets; availability of equipment; positive relations with local groups and the Company’s ability to meet its obligations under its agreements with such groups; and satisfying the terms and conditions of the Company’s current loan arrangements. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive, global health, and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.

Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. Such risks include, without limitation the risk factors listed under the heading “Risk Factors” in the AIF.  

Ero Copper Corp. December 31, 2019 MD&A                                           Page 31 

Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking information, there may be other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended.

The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained herein. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.

Forward-looking information contained herein is made as of the date of this MD&A and the Company disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.

Cautionary Notes Regarding Mineral Resource and Reserve Estimates

In accordance with applicable Canadian securities regulatory requirements, all mineral reserve and mineral resource estimates of the Company disclosed or incorporated by reference in this MD&A have been prepared in accordance with NI 43-101 and are classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards for Mineral Resources and Mineral Reserves, adopted by the CIM Council on May 10, 2014 (the “CIM Standards”).

Mineral resources which are not mineral reserves do not have demonstrated economic viability. Pursuant to the CIM Standards, mineral resources have a higher degree of uncertainty than mineral reserves as to their existence as well as their economic and legal feasibility. Inferred mineral resources, when compared with Measured or Indicated mineral resources, have the least certainty as to their existence, and it cannot be assumed that all or any part of an Inferred mineral resource will be upgraded to an Indicated or Measured mineral resource as a result of continued exploration. Pursuant to NI 43-101, Inferred mineral resources may not form the basis of any economic analysis. Accordingly, readers are cautioned not to assume that all or any part of a mineral resource exists, will ever be converted into a mineral reserve, or is or will ever be economically or legally mineable or recovered.

ADDITIONAL INFORMATION

Additional information about Ero and its business activities, including the AIF, is available under the Company’s profile at www.sedar.com.

Ero Copper Corp. December 31, 2019 MD&A                                           Page 32 

EX-99.8

Exhibit 99.8

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2019 AND 2018

KPMG LLP

PO Box 10426 777 Dunsmuir Street

Vancouver BC V7Y 1K3

Canada

Telephone (604) 691-3000

Fax (604) 691-3031

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of Ero Copper Corp.

Opinion

We have audited the consolidated financial statements of Ero Copper Corp. (“the Company”), which comprise:

– the consolidated statements of financial position as at December 31, 2019 and December 31, 2018;

– the consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity and cash flows for the years then ended; and

– notes to the consolidated statements, including a summary of significant accounting policies

(Hereinafter referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2019 and December 31, 2018, and its consolidated financial performance and consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “Auditors’ Responsibilities for the Audit of the Financial Statements” section of our auditors’ report.

We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.  

Other Information

Management is responsible for the other information. Other information comprises:

– the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions; and

– information, other than the financial statements and the auditors’ report thereon, included in a document likely to be entitled “Annual Report”.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated.

We obtained the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions as at the date of this auditors’ report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditors’ report. We have nothing to report in this regard.

The information, other than the financial statements and the auditors’ report thereon, included in a document likely to be entitled “Annual Report” is expected to be made available to us after the date of this auditors’ report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company‘s financial reporting process.

2 

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

– Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

– Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

– Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

– Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.

– Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represents the underlying transactions and events in a manner that achieves fair presentation.

– Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

3 

– Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

– Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

/s/ KPMG LLP

Chartered Professional Accountants

The engagement partner on the audit resulting in this auditors’ report is Robert Ryan Owsnett, CPA, CA.

Vancouver, Canada

March 12, 2020

4 

Ero Copper Corp.

Consolidated Statements of Financial Position

(Amounts in thousands of US Dollars, except share and per share amounts)

ASSETS	Notes	As at December 31, 2019			As at December 31, 2018
Current
Cash and cash equivalents		$	21,485		$	18,941
Restricted cash	9(b)		1,500			3,000
Accounts receivable			7,680			7,219
Inventories	4		19,377			14,645
Derivatives	21		-			254
Other current assets	5		25,523			6,895
			75,565			50,954
Non-Current
Mineral, property, plant and equipment	6		339,516			280,804
Exploration and evaluation assets	7		25,878			25,563
Deposits	11(b)		1,200			1,334
Deferred income tax assets	19		13,099			-
Other non-current assets	18		7,416			1,784
			387,109			309,485
Total Assets		$	462,674		$	360,439
LIABILITIES
Current
Accounts payable and accrued liabilities	8	$	43,694		$	36,390
Deferred revenue			-			1,916
Current portion of loans and borrowings	9		18,984			10,602
Current portion of value added, payroll and other taxes payable	10		13,994			11,357
Current portion of derivatives	21		650			-
Current portion of lease liabilities			3,159			-
			80,481			60,265
Non-Current
Loans and borrowings	9		140,386			141,632
Provisions	11		33,581			31,509
Value added, payroll and other taxes	10		5,694			6,593
Derivatives	21		1,059			-
Lease liabilities			487			-
Other non-current liabilities			1,928			807
Deferred income tax liabilities	19		-			15,811
			183,135			196,352
Total Liabilities			263,616			256,617
SHAREHOLDERS’ EQUITY
Share capital	12		120,492			117,944
Equity reserves			(24,489	)		(24,755	)
Retained earnings			102,220			10,337
Equity attributable to owners of the Company			198,223			103,526
Non-controlling interests			835			296
			199,058			103,822
Total Liabilities and Equity		$	462,674		$	360,439

Nature of operations (Note 1); Contingencies (Note 11(c)); Subsequent events (Notes 9(c) and 12)

APPROVED ON BEHALF OF THE BOARD:

“David Strang” , CEO & Director ”Matthew Wubs” , Director

The accompanying notes are an integral part of these consolidated financial statements

Page 1

Ero Copper Corp.

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Amounts in thousands of US Dollars, except share and per share amounts)

	Notes	Year ended December 31, 2019			Year ended December 31, 2018
Revenue	13	$	284,843		$	233,105
Cost of product sold	14		(162,817	)		(147,611	)
Sales expenses			(4,962	)		(3,268	)
Gross profit			117,064			82,226
Expenses
General and administrative	15		(32,817	)		(29,000	)
Share-based compensation	12(a)(b)		(5,792	)		(3,225	)
Income before the undernoted			78,455			50,001
Other income (expenses)
Finance income			701			1,303
Finance expense	16		(20,428	)		(22,562	)
Foreign exchange loss	17		(5,148	)		(20,713	)
Loss on debt settlement	9(a)(b)		(1,783	)		(5,476	)
Recovery of value added taxes	18		21,584			-
Other income			1,448			108
Income before income taxes			74,829			2,661
Income tax recovery (expense)
Current	19		(10,645	)		(2,899	)
Deferred	19		28,271			(2,753	)
			17,626			(5,652	)
Net income (loss) for the year			92,455			(2,991	)
Other comprehensive income (loss)
Foreign currency translation loss			(4,941	)		(27,801	)
Comprehensive income (loss)		$	87,514		$	(30,792	)
Net income (loss) attributable to:
Owners of the Company			91,883			(3,155	)
Non-controlling interests			572			164
		$	92,455		$	(2,991	)
Comprehensive income (loss) attributable to:
Owners of the Company			86,962			(30,845	)
Non-controlling interests			552			53
		$	87,514		$	(30,792	)
Income (loss) per share attributable to owners of the Company	12(e)
Net income (loss) per share
Basic		$	1.08		$	(0.04	)
Diluted		$	1.01		$	(0.04	)
Weighted average number of common shares outstanding
Basic			85,244,277			83,927,977
Diluted			91,390,425			83,927,977

The accompanying notes are an integral part of these consolidated financial statements

Page 2

Ero Copper Corp.

Consolidated Statement of Changes in Shareholders’ Equity

(Amounts in thousands of US Dollars, except share and per share amounts)

		Share Capital				Equity Reserves
	Notes	Number of shares		Amount		Contributed surplus			Foreign exchange			Convertible debentures			Retained earnings			Total			Non-controlling interest			Total equity
Balance, December 31, 2017			79,381,339	$	113,050	$	879		$	(962	)	$	3,011		$	14,011		$	129,989		$	(243	)	$	129,746
Income (loss) for the year			-		-		-			-			-			(3,155	)		(3,155	)		164			(2,991	)
Other comprehensive loss for the year			-		-		-			(27,690	)		-			-			(27,690	)		(111	)		(27,801	)
Total comprehensive loss for the year			-		-		-			(27,690	)		-			(3,155	)		(30,845	)		53			(30,792	)
Shares issued for:
Exercise of options and warrants			1,297,861		1,850		(207	)		-			-			-			1,643			-			1,643
Convertible debentures	12		4,059,450		3,044		-			-			(3,044	)		-			-			-			-
Accrued interest on convertible debentures			-		-		-			-			33			(33	)		-			-			-
Stock-based compensation			-		-		3,225			-			-			-			3,225			-			3,225
Reclassification of non-controlling interest allocation			-		-		-			-			-			(486	)		(486	)		486			-
Balance, December 31, 2018			84,738,650	$	117,944	$	3,897		$	(28,652	)	$	-		$	10,337		$	103,526		$	296		$	103,822
Income for the year			-		-		-			-			-			91,883			91,883			572			92,455
Other comprehensive loss for the year			-		-		-			(4,921	)		-			-			(4,921	)		(20	)		(4,941	)
Total comprehensive income for the year			-		-		-			(4,921	)		-			91,883			86,962			552			87,514
Shares issued for:
Exercise of options and warrants			964,996		2,548		(605	)		-			-			-			1,943			-			1,943
Share-based compensation	12(a)(b)		-		-		5,792			-			-			-			5,792			-			5,792
Dividends to non-controlling interest			-		-		-			-			-						-			(13	)		(13	)
Balance, December 31, 2019			85,703,646	$	120,492	$	9,084		$	(33,573	)	$	-		$	102,220		$	198,223		$	835		$	199,058

The accompanying notes are an integral part of these consolidated financial statements

Page 3

Ero Copper Corp.

Consolidated Statements of Cash Flows

(Amounts in thousands of US Dollars, except share and per share amounts)

	Year ended December 31, 2019			Year ended December 31, 2018
Cash Flows from Operating Activities
Net income (loss) for the year	$	92,455		$	(2,991	)
Adjustments for:
Amortization and depreciation		46,171			45,297
Income tax expense (recovery)		(17,626	)		5,652
Loss on debt settlement		1,783			5,476
Recovery of value added taxes		(21,584	)		-
Write-off of plant and equipment		3,475			3,782
Unrealized derivative contracts		1,427			-
Provisions		(625	)		(1,464	)
Share-based compensation		5,792			3,225
Finance income		(701	)		(1,303	)
Finance expenses		20,428			22,562
Foreign exchange loss		5,148			20,713
Derivative contract settlements		(1,011	)		(10,119	)
Changes in:
Accounts receivable		(756	)		(4,616	)
Inventories		(5,946	)		(5,225	)
Other assets		(4,636	)		3,192
Accounts payable and accrued liabilities		11,604			6,855
Deferred revenue		(1,882	)		1,707
Value added, payroll and other taxes		43			(5,606	)
Provision settlements		(1,786	)		(1,967	)
		131,773			85,170
Income taxes paid		(3,943	)		(2,228	)
		127,830			82,942
Cash Flows used in Investing Activities
Additions to mineral property, plant and equipment		(105,382	)		(97,556	)
Additions to exploration and evaluation assets		(892	)		(3,616	)
Interest received		38			198
Other		(505	)		-
		(106,741	)		(100,974	)
Cash Flows used in Financing Activities
Restricted cash		1,500			(807	)
Lease liability payments		(4,082	)		-
New loans and borrowings, net of finance costs		37,867			141,488
Loans and borrowings paid		(41,305	)		(127,369	)
Interest paid on loans and borrowings		(10,276	)		(11,522	)
Other finance expenses		(3,668	)		(10,765	)
Issuance of share capital, net of issuance costs		1,943			1,643
		(18,021	)		(7,332	)
Effect of exchange rate changes on cash and cash equivalents		(524	)		(6,842	)
Net increase (decrease) in cash and cash equivalents		2,544			(32,206	)
Cash and cash equivalents - beginning of year		18,941			51,147
Cash and cash equivalents - end of year	$	21,485		$	18,941

The accompanying notes are an integral part of these consolidated financial statements

Page 4

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

1. Nature of Operations

Ero Copper Corp. (“Ero” or the “Company”) was incorporated on May 16, 2016 under the Business Corporations Act (British Columbia) and maintains its head office at Suite 1050, 625 Howe Street, Vancouver, BC, V6C 2T6. The Company’s shares are publicly traded on the Toronto Stock Exchange under the symbol “ERO”.

The Company’s principal asset is its 99.6% ownership interest in Mineração Caraíba S.A. (“MCSA”). The Company also currently owns, directly and indirectly, a 97.6% ownership interest in NX Gold S.A. (“NX Gold”).

MCSA is a Brazilian company which holds a 100% interest in the Vale do Curaçá Property and the Boa Esperança Property (Note 7). MCSA’s predominant activity is the production and sale of copper concentrate from the Vale do Curaçá Property, with gold and silver produced and sold as by-products. The Company currently mines copper ore from the Pilar underground mine (“Pilar UG Mine”) and the Vermelhos underground mine (“Vermelhos UG Mine”). The Boa Esperança Property is located within the municipality of Tucumã in the southeastern part of the state of Pará, Brazil, and consists of a single mineral concession covering an area of 4,034 hectares (“ha”).

NX Gold is a Brazilian gold mining company focused on the exploration and commercialization of gold as its main product and silver as its sub-product. NX Gold wholly owns a 31,096 ha property, located approximately 18 kilometers west of the town of Nova Xavantina, southeastern Mato Grosso State, Brazil, consisting of a single mining concession covering an area of 620 ha, where all gold mining and processing activities occur.

2. Basis of Preparation

a) Statement of Compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee.

These consolidated financial statements were authorized for issue by the Board of Directors of the Company (the “Board”) on March 12, 2020.

b) Basis of Presentation and Principles of Consolidation

These consolidated financial statements have been prepared on a historical cost basis except for fair-value through-profit-or-loss and derivative financial instruments, which are measured at fair value.

These consolidated financial statements include the accounts of the Company and its subsidiaries. Subsidiaries are entities controlled by the Company. Control over a subsidiary is defined to exist when the Company is exposed to variable returns from involvement with an investee and has the ability to affect the returns through power over the investee. All intercompany balances and transactions are eliminated upon consolidation.

The Company applies the acquisition method to account for business combinations. The consideration transferred by the Company to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities assumed and the equity interests issued by the Company, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred.

The Company recognizes identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognized in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values.

Page 5

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Goodwill arising from acquisitions is the excess of the sum of a) fair value of consideration transferred, b) the recognized amount of any non-controlling interest in the acquiree and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount would be recognized in profit or loss immediately.

Since the Company does not own 100% of its interests in MCSA and NX Gold, the interest attributable to non-controlling shareholders is reflected in non-controlling interests. Adjustments to non-controlling interests that do not involve the loss of control are accounted for as equity transactions and adjustments are based on a proportionate amount of the net assets of the subsidiary.

c) Foreign Currency Translation

The functional currency and presentation currency of the Company is the US dollar. The monetary assets and liabilities of the Company that are denominated in foreign currencies are translated at the rate of exchange at the statement of financial position date while non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at the exchange rates approximating those in effect on the date of the transactions. Exchange gains and losses arising on translation are included in profit or loss.

The functional currency of MCSA and NX Gold is the Brazilian Real (“BRL”). The assets and liabilities of MCSA and NX Gold are translated into the US dollar presentation currency using the rate of exchange at the statement of financial position date while revenues and expenses are translated at the exchange rates approximating those in effect on the date of the transactions. Exchange gains and losses arising on translation are included in a separate component of shareholders’ equity.

d) Use of Estimates and Judgments

In preparing these financial statements, management has made judgments, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of the assets, liabilities, revenues and expenses. Actual results may differ from these estimates.

The estimates and assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

Critical Judgments

Functional currency

The functional currency of the Company and each of its subsidiaries is the currency of the primary economic environment in which the entities operate. The Company has determined that the functional currency for the Company is the US dollar while the functional currency for MCSA and NX Gold is the Brazilian Real. Assessment of functional currency involves certain judgements to determine the primary economic environment and the Company reconsiders the functional currency of its entities if there is a change in events and conditions which determined the primary economic environment.

Page 6

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Legal claims and contingent liabilities

The recognition of legal provisions and contingent liabilities involves the assessment of claims made against the Company and each of its subsidiaries. The recognition of a legal provision, or disclosure of a contingent liability, involves certain judgements to determine the probability of whether a cash outflow will occur. In making this judgment, management has assessed various criteria and also relies on the opinions of its legal advisers to assist in making this assessment.

Key Sources of Estimation Uncertainty

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates and such differences could be significant. Significant estimates made by management affecting the consolidated financial statements include:

Impairment of mineral, property, plant and equipment

The Company evaluates each asset or cash generating unit every reporting period to determine whether there are any indications of impairment. If any such indication exists, which is often judgmental, a formal estimate of recoverable amount is performed and an impairment loss is recognized to the extent that the carrying amount exceeds the recoverable amount. The recoverable amount of an asset or cash generating group of assets is measured at the higher of fair value less costs to sell and value in use. The evaluation of asset carrying values for indications of impairment includes consideration of both external and internal sources of information, including such factors as market and economic conditions, production budgets and forecasts, and life-of-mine estimates.

When required, the determination of fair value and value in use requires management to make estimates and assumptions about expected production, sales volumes, commodity prices, mineral reserves, operating costs, closure and rehabilitation costs and future capital expenditures. The estimates and assumptions are subject to risk and uncertainty; hence, there is the possibility that changes in circumstances will alter these projections, which may impact the recoverable amount of the assets. In such circumstances, some or all of the carrying value of the assets may be further impaired or the impairment charge reduced with the impact recorded in profit or loss.

Mineral reserve and resource estimates including life of mine plan

The Company estimates its mineral reserves and mineral resources based on information compiled by competent individuals. Mineral reserves are used in the calculation of depreciation, impairment assessments and for forecasting the timing of payment of mine closure and rehabilitation costs.

There are numerous uncertainties inherent in estimating mineral reserves, and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the estimation methodology, forecasted prices of commodities, exchange rates, production costs or recovery rates may change the economic status of mineral reserves and may, ultimately, result in changes in the mineral reserves.

The carrying amounts of the Company’s mineral properties, plant and equipment are depleted in part based on recoverable mineral reserve tonnes processed, depending on the use of the asset. Changes to estimates of recoverable quantities of metals, mineral reserve tonnes and depletable costs, including changes resulting from revisions to the Company’s mine plans and changes in metals prices forecasts, can result in a change to future depreciation and depletion rates and may result in impairment charges.

Page 7

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Mine closure and rehabilitation costs

Significant estimates and assumptions are made in determining the provision for mine closure and rehabilitation as there are numerous factors that will affect the ultimate liability payable. These factors include estimation of the extent and cost of rehabilitation activities, timing of future cash flows, discount rates, inflation rate, and regulatory requirements.

Changes in the above factors can result in a change to the provision recognized by the Company. Changes to mine closure and rehabilitation costs are recorded with a corresponding change to the carrying amounts of related mineral properties, plant and equipment. Adjustments to the carrying amounts of related mineral properties, plant and equipment can result in a change to future depreciation and depletion expense.

Significant assumptions used to determine mine closure and rehabilitation costs are included in Note 11(a).

Inventory

The net recoverable value of stockpile inventory and production in work in progress inventory is based on the quantity of recoverable metal inventory which is an estimate based on the tons of ore added and removed from the process, expected grade and recovery rates. The quantity of recoverable metal in finished concentrate inventory is an estimate based on initial weights and assay results. The net recoverable value of these inventories also requires estimates of expected selling prices and, where applicable, costs to complete.

Income taxes

The determination of the Company’s tax expense for the period and deferred tax assets and liabilities involves significant estimation and judgement by management. In determining these amounts, management interprets tax legislation in a variety of jurisdictions and makes estimates of the expected timing of the reversal of deferred tax assets and liabilities. Management also makes estimates of future earnings, which affect the extent to which potential future tax benefits may be used. The Company is subject to assessments by various taxation authorities, which may interpret legislation differently. These differences may affect the final amount or the timing of the payment of taxes. The Company provides for such differences where known based on management’s best estimate of the probable outcome of these matters.

e) Changes in Accounting Standards Adopted During the Year

The following new and amended IFRS pronouncements were adopted effective January 1, 2019:

IFRS 16 Leases

IFRS 16 introduces a single, on-balance sheet accounting model for lessees. As a result, the Company, as a lessee, has recognized right-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. The Company may elect to not apply IFRS 16 to leases with a term of less than 12 months, which election is made by underlying class of assets to which the right of use asset relates, or leases where the underlying asset is of low value, which election is made on an asset by asset basis. Lessor accounting remains similar to previous accounting policies.

Previously, the Company determined at contract inception whether an arrangement was or contained a lease under IFRIC 4, Determining Whether an Arrangement contains a Lease. The Company now assesses whether a contract is or contains a lease based on the new definition of a lease. Under IFRS 16, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

Page 8

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The Company’s accounting policy in Note 3(m) has been updated to reflect the Company’s new accounting policies under IFRS 16.

Transition

The Company adopted IFRS 16 using the modified retrospective approach. Accordingly, the comparative information presented for 2018 has not been restated.

On transition to IFRS 16, the Company elected to apply the practical expedient to grandfather the assessment of which transactions are leases. Accordingly, IFRS 16 was applied only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed. Therefore, the definition of a lease under IFRS 16 has been applied only to contracts entered into or changed on or after January 1, 2019.

As a lessee, the Company previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Company recognizes right-of-use assets and lease liabilities for most leases. However, the Company has elected not to recognize right-of-use assets and lease liabilities for some leases of low-value assets and with a term of less than 12 months. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

The Company leases various assets including equipment, offices and properties that had previously been classified as operating leases under IAS 17. On transition lease liabilities for these leases were measured at the present value of remaining lease payments, discounted at the Company’s or subsidiary’s incremental borrowing rate as of January 1, 2019. The average incremental borrowing rate at January 1, 2019 used for base calculations was 10%. The Company elected to measure the right-of-use assets at an amount equal to the lease liability.

The Company used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

• Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term.

• Applied a single discount rate to a portfolio of leases with reasonably similar characteristics (such as leases with a similar remaining lease term for a similar class of underlying asset in a similar economic environment).

• Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

The Company did not have any leases classified as finance leases under IAS 17 on the adoption date.

The Company presents right-of-use assets in mineral, property, plant and equipment in the statement of financial position, the same line item as it presents underlying assets of the same nature that it owns. The Company presents lease liabilities as a separate line item on the statement of financial position.

Page 9

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The impact on transition is summarized below:

	December 31, 2018		IFRS 16 adjustments		January 1, 2019
Mineral, property, plant and equipment	$	280,804	$	4,708	$	285,512
Current portion of lease liabilities		-		4,221		4,221
Lease liabilities (long-term)		-		487		487

	January 1, 2019
Operating lease commitments at December 31, 2018	$	221
Arrangements reassessed as leases		4,914
Effect of discounting using the incremental borrowing rate at January 1, 2019		(427	)
Lease liabilities recognized as IFRS 16 adjustment at January 1, 2019	$	4,708

IFRIC 23 – Uncertainty over Income Tax Treatments

The Company has adopted IFRIC Interpretation 23 (“Interpretation 23”) – Uncertainty over Income Tax Treatments from January 1, 2019. The Interpretation provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. There is no material impact on the financial statements from the adoption of Interpretation 23.

3. Significant Accounting Policies

a) Revenue

Revenue is generated from the sale of sale of metals in concentrate and gold doré. The Company’s performance obligations relate primarily to the delivery of the concentrate or gold doré to customers, with each shipment representing a separate performance obligation.

Revenue from the sale of metals in concentrate and gold doré is recognized at the point the customer obtains control of the product. Control is transferred when title has passed to the purchaser, the product is physically delivered to the customer, the customer controls the risks and rewards of ownership and the Company has a present right to payment for the product which is generally when the concentrate or ore is delivered to a location designated by the customer.

The sales amount is typically based on quoted market and contractual prices which are fixed at the time the shipment is received at the customers’ premises. In certain circumstances the sales price of metals in concentrate may be determined in a period subsequent to the date of sale (provisionally priced sales) based on the terms of specific copper concentrate contracts. Provisionally priced sales are recognized based on an estimate of metal contained using forward market prices corresponding with the expected date that final sales prices will be fixed. The period between provisional pricing and final settlement can be up to one month. The settlement receivable is recorded at fair value each reporting period by reference to forward market prices until the date of final pricing, with the changes in fair value recorded as an adjustment to revenue.

b) Tax Incentives

The Company receives certain tax incentives in Brazil. These tax incentives are recognized in profit or loss in the period the incentives are received or receivable and recorded against the expenditure that they are intended to compensate.

Page 10

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

c) Finance Income and Finance Expense

Finance income includes interest on cash and cash equivalents, restricted cash and financial investments, and gains related to changes in the fair value of financial assets measured at fair value through profit. Interest income is recognized as it accrues in profit or loss, using the effective interest method.

Finance expense comprise interest expense on loans and borrowings, unwinding of the discount on provisions and leases, commitment fees and losses related to changes in the fair value of financial assets measured at fair value through profit or loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognized in profit or loss using the effective interest method.

d) Employee Benefits

Short-term employee benefit obligations are recognized as personnel expenses as the corresponding service is provided. Liabilities are recognized at the amount that is expected to be paid if the Company has a present legal or constructive obligation to pay that amount based on past services rendered by the employee, and the obligation can be estimated reliably. There are no long-term employee benefit plans.

e) Taxation

Income tax expense comprises current and deferred tax. Current income tax is the expected tax payable or receivable on the taxable income or loss for the year using tax rates enacted or substantively enacted at the reporting date.

Deferred income tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred income tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the tax laws that have been enacted or substantively enacted at the reporting date. Deferred income tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity. Deferred income tax is not recognized for the initial recognition of assets or liabilities in a transaction that is not a business combination and that effects neither accounting nor taxable income or loss, differences related to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future and taxable differences arising from the initial recognition of goodwill.

A deferred income tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred income tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

f) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of consumable inventory is determined on a weighted average acquisition cost basis. Cost of stockpile inventory, products in progress and finished goods is determined based on a weighted average production cost basis and includes the cost of mining and processing ore including direct labour and materials; depreciation and amortization; and an appropriate share of production overheads based on normal operating capacity.

Net realizable value of stockpile inventory, products in progress and finished goods is the estimated selling price in the ordinary course of business, less estimated completion costs and selling expenses.

Page 11

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Provisions for low turnover or obsolete supplies and consumables inventory are established by management as deemed necessary.

g) Mineral, Property, Plant and Equipment

Mineral, property, plant and equipment is measured at acquisition or construction cost, including capitalized borrowing costs, less accumulated depreciation and accumulated impairment losses.

i) Acquisition and disposal

The cost of mineral, property, plant and equipment include expenditures directly attributable to an asset’s acquisition. The cost of assets constructed by Company includes the cost of materials and direct labor, any other costs to bring the asset in the place and conditions required to be operated in the manner intended by management, costs of disassembly and restoration of the site and borrowing costs on qualifying assets.

When parts of mineral, property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of mineral, property, plant and equipment.

Gains and losses on disposal of mineral, property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of equipment and are recognized net within other income.

ii) Subsequent costs

The cost of replacing plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the item will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced item is derecognized. The costs of the day-to-day servicing of equipment are included in profit or loss.

iii) Development and construction in progress

When economically viable mineral reserves have been determined and the decision to proceed with development has been approved, exploration and evaluation assets are first assessed for impairment, then reclassified to construction-in-progress or mineral properties. The expenditures related to development and construction are capitalized as construction-in-progress and are included within mineral, property, plant and equipment. Costs associated with the commissioning of new assets incurred before they are operating in the way intended by management, including directly attributable costs of testing, are capitalized. Construction- in-progress includes the purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for its intended use including advances on long-lead items. Construction-in-progress is not depreciated.

Once the asset is operating in the way intended by management, construction-in-progress costs are reclassified to mineral properties or plant and equipment.

Pre-production costs of removing overburden to access ore in the open pit mines and developing access headings in the underground mines are capitalized as pre-production stripping or development costs respectively and are included within mineral, property, plant and equipment. Revenues earned during pre- production periods are also capitalized.

Page 12

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

iv) Mineral properties

Mineral properties consist of the cost of acquiring and developing mineral properties. Once in production, mineral properties are amortized on a units-of-production basis over the component of the ore body to which they relate.

v) Stripping costs and development in the production phase

Where open pit production stripping or underground development activities do not result in inventory produced, but does provide improved access to the ore body, the costs are classified as mineral properties when these activities meet all of the following criteria: (1) it is probable that the future economic benefit associated with the activity will flow to the Company; (2) the Company can estimate the mineral reserve of the ore body for which access has been improved; and (3) the costs relating to the activity associated with that mineral reserve can be measured reliably.

For underground mines, costs incurred to access a mineral reserve of the ore body are capitalized to mineral properties or construction-in-progress and are depreciated on a units-of-production basis over the expected useful life of the identified mineral reserve of the ore body to which access has been improved as a result of the development activity. For open pit mines, stripping costs are capitalized to mineral properties or construction-in-progress until an average stripping ratio is achieved (waste/ore) for the mine. After the stripping ratio is achieved, all stripping costs are classified as production costs. The capitalized stripping costs are depreciated over the related mineral reserves accessed by the stripping activity.

vi) Mine closure and rehabilitation costs

The Company’s provision for mine closure and rehabilitation liabilities represents management’s best estimate of the present value of the future cash outflows required to settle estimated reclamation and closure costs at the end of a mine’s life. The provision reflects estimates of future costs, inflation, movements in foreign exchange rates and assumptions of risks associated with the future cash outflows, and the applicable risk-free interest rates for discounting the future cash outflows. Changes in the above factors can result in a change to the provision recognized by the Company.

vii) Depreciation

Items of mineral, property, plant and equipment are depreciated on a straight-line method based on the estimated economic useful life of each component as follows:

Buildings	Up to 25 years
Mining equipment	4 years
Mobile equipment & other assets	5 years
Mineral properties	Units of production
Mine closure and rehabilitation costs	Units of production or period until remediation
Right of use assets	Shorter of the term of lease and life of asset

The depletion of mineral, properties and mine closure and rehabilitation costs is determined based on the ratio of tons of copper/kg of gold contained in the ore mined and total proven and probable mineral reserve tonnes of contained copper/kg of contained gold.

Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate.

Page 13

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

h) Exploration and Evaluation Assets

Exploration and evaluation costs relate to the initial search for a mineral deposit, the cost of acquisition of a mineral property interest or exploration rights and the subsequent evaluation to determine the economic potential of the mineral deposit. The exploration and evaluation stage commences when the Company obtains the legal right or license to begin exploration and subsequently exploration and evaluation expenses are capitalized as exploration and evaluation assets. Costs incurred prior to the Company obtaining the legal rights are expensed.

When the exploration and evaluation of a mineral property indicates that development of the mineral property is technically and commercially feasible, the future economic benefits are probable, and the Company has the intention and sufficient resources to complete the development and use or sell the asset, the related costs are transferred from exploration and evaluation assets to mineral property, plant and equipment.

Management reviews the carrying value of capitalized exploration costs for indicators that the carrying value is impaired at least annually and when facts and circumstances suggest that the carrying amount may exceed the recoverable amount. The review is based on the Company’s intentions for further exploration and development of the undeveloped property, results of drilling, commodity prices and other economic and geological factors. Subsequent recovery of the resulting carrying value depends on successful development or sale of the undeveloped project. If a property does not prove viable, all non-recoverable costs associated with the project, net of any previous impairment provisions, are written off.

i) Financial Instruments

Non-derivative financial assets

The Company classifies its financial assets in the following categories: at fair value through profit or loss (“FVTPL”), at fair value through other comprehensive income (“FVTOCI”) or at amortized cost. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Measurement and classification of financial assets is dependent on the Company’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. Financial assets are derecognized when they mature or are sold, and substantially all the risks and rewards of ownership have been transferred.

Fair values

A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

When measuring the fair value of an asset or liability, the Company uses observable market data, as much as possible. Fair values are classified into different levels in a hierarchy based on the inputs used in the valuation techniques, as follows:

• Level 1: quoted prices (without adjustments) in active markets for identical assets or liabilities.

• Level 2: inputs other than Level 1 quoted prices, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3: inputs, for assets or liabilities, that are not based on observable market information (non- observable inputs).

Page 14

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The Company recognizes transfers between levels of the hierarchy of fair value at the end of the reporting period during which the change occurred.

When applicable, additional information on the assumptions used in the fair value calculations are disclosed in the specific notes of the corresponding asset or liability.

Financial assets at FVTPL

Financial assets carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the income statement. Realized and unrealized gains and losses arising from changes in the fair value of the financial asset held at FVTPL are included in profit or loss in the period in which they arise. Derivatives are also categorized as FVTPL unless they are designated as hedges.

Financial assets at FVTOCI

Investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses arising from changes in fair value recognized in other comprehensive income. Gains or losses on financial assets classified as FVTOCI remain within accumulated other comprehensive income following the derecognition of the investment.

Financial assets at amortized cost

Financial assets at amortized cost are initially recognized at fair value and subsequently carried at amortized cost less any impairment. They are classified as current assets or non-current assets based on their maturity date. Gains and losses on derecognition of financial assets classified amortized cost are recognized in profit or loss.

Financial liabilities

Financial liabilities are recognized initially at fair value, net of transaction costs incurred, and are subsequently measured at amortized cost. Any difference between the amounts originally received, net of transaction costs, and the redemption value is recognized in profit and loss over the period to maturity using the effective interest method.

Derivative instruments

Derivative instruments, including embedded derivatives in executory contracts or financial liability contracts, are classified as at FVTPL and, accordingly, are recorded in the statement of financial position at fair value. Unrealized gains and losses on derivatives not designated in a hedging relationship are recorded as part of the revenue or expense item to which the derivative relates, depending on the nature of the derivative. Fair values for derivative instruments are determined using inputs based on market conditions existing at the balance sheet date or settlement date of the derivative. Derivatives embedded in non-derivative contracts are recognized separately unless they are closely related to the host contract.

Trade receivables related to provisionally priced sales are measured at fair value with changes recognized in profit or loss.

Compound instruments

Equity components of compound instruments, such as convertible debt, are separated from the debt host contract using the residual method. The Company determines the fair value of the debt component by discounting the expected principal and interest payments using an appropriate discount rate reflective of debt instruments with similar risks but without the equity component. The difference between the proceeds received and the amount assigned to the debt component is allocated to the equity component.

Page 15

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Share capital

Common shares are classified as equity. Incremental costs directly attributable to the issuance of common shares and share options are recognized as a deduction from equity, net of any tax effects. The Company includes the value of share purchase warrants included in the issuance of equity units, which consist of common shares and warrants, in share capital.

Classification and Measurement Changes

The Company has assessed the classification and measurement of its financial assets and financial liabilities under IFRS 9 in the following table:

	Measurement Category
Financial Assets: Cash, cash equivalents and restricted cash Trade receivables Deposits Other non-current assets - term deposits	Amortized cost Amortized cost Amortized cost Amortized cost
Financial Liabilities: Trade payables Loans and borrowings Derivatives	Amortized cost Amortized cost Fair value through profit or loss

Cash and cash equivalents, restricted cash and deposits

Cash is comprised of cash on hand and demand deposits. Cash equivalents, restricted cash and deposits are short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in fair value.

Trade receivables

Trade receivables relate to amounts receivable from sales with fixed or determinable payments that are not quoted in an active market. These receivables are non-interest bearing and are recognized at face amount, except when fair value is materially different, and are subsequently measured at amortized cost. Trade receivables recorded are net of lifetime expected credit losses.

Other non-current assets – term deposits

Term deposits are directly related to loan agreements with a Brazilian financial institution which requires the establishment of a reserve fund. Redemptions of financial investments are conditional on the Company making the scheduled loan repayments. These term deposits are classified as, and subsequently measured at, amortized cost. These term deposits are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortized cost using the effective interest method, less any impairment losses.

Page 16

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

j) Impairment

i) Financial assets

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the loss allowance for the financial asset is measured at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the loss allowance is measured for the financial asset at an amount equal to twelve months’ expected credit losses. For trade receivables the Company applies the simplified approach to providing for expected credit losses, which allows the use of a lifetime expected loss provision. Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease can be objectively related to an event occurring after the impairment was recognized. The expected lifetime credit loss provision for trade receivables is based on historical counterparty default rates and adjusted for relevant forward-looking information, when required. As the Company’s three primary significant customers are considered to have a low default rate and historical default rates are low, the lifetime expected credit loss allowance for trade receivables is nominal as at December 31, 2019. Accordingly, the Company did not record a provision for expected credit losses for trade receivables.

ii) Non-Financial assets

At each reporting date the carrying amounts of the Company’s mineral, property, plant and equipment and exploration and evaluation assets are reviewed to determine whether there is any indication that those assets are impaired. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use, which is the present value of future cash flows expected to be derived from the asset or its related cash generating unit. For purposes of impairment testing, assets are grouped at the lowest levels that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the associated assets are reduced to their recoverable amount and the impairment loss is recognized in the profit or loss for the period.

Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment charge is reversed through profit or loss only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of any applicable depreciation, if no impairment loss had been recognized.

k) Provisions

i) Mine closure and rehabilitation provision

The Company records the present value of estimated costs of legal and constructive obligations related to mine closure and rehabilitation in the period in which the obligation occurs. Mine closure and rehabilitation activities include facility decommissioning and dismantling; removal and treatment of waste materials; site and land rehabilitation, including compliance with and monitoring of environmental regulations; and related costs required to perform this work and/or operate equipment designed to reduce or eliminate environmental effects. The provision is adjusted each period for new disturbances, and changes in regulatory requirements, the estimated amount of future cash flows required to discharge the obligation, the timing of such cash flows and the pre-tax discount rate specific to the liability. The unwinding of the discount is recognized in profit or loss as a finance expense.

Page 17

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

When the provision is initially recognized, the corresponding cost is capitalized by increasing the carrying amount of the related asset and is amortized to profit or loss on a unit-of-production basis.

ii) Other provisions

Other provisions are recognized, based on a past event, when the Company has a legal or constructive obligation that can be estimated reliably, and it is probable that an economic mineral resource will be required to settle the obligation. Provisions are measured by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and specific risks for the liability. The discount is unwound over the period over which the cash flows are expected to be incurred with the related expense included in finance expense.

l) Share-Based Compensation

The grant date fair value of share-based payment awards granted to employees and consultants, including directors and officers, is recognized as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non -market vesting conditions are expected to be performed or satisfied such that the amount ultimately recognized as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

m) Leases

A contract is or contains a lease when the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right- of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses, and adjusted for certain re-measurements of the lease liability. The cost of the right-of- use asset includes the amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date, less any lease incentives received, any initial direct costs; and if applicable, an estimate of costs to be incurred by the Company in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. The incremental borrowing rate reflects the rate of interest that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. Generally, the Company uses its incremental borrowing rate as the discount rate.

The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.

Page 18

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The Company does not recognize right-of-use assets and lease liabilities for leases of low-value assets and leases with lease terms that are less than 12 months. Lease payments associated with these leases are instead recognized as an expense over the lease term on either a straight-line basis, or another systematic basis if more representative of the pattern of benefit.

The Company has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The assessment of whether the Company is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognized.

n) Income (Loss) per Share

Basic income (loss) per share is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted income (loss) per common share is calculated by adjusting the weighted average number of common shares outstanding for the effect of conversion of all potentially dilutive share equivalents, such as stock options and warrants, and assumes that the receipt of proceeds upon exercise of the options are used to repurchase common shares at the average market price during the period. The net effect of the shares issued less the shares assumed to be repurchased is added to the basic weighted average shares outstanding. For convertible instruments, the common shares to be included in the diluted per share calculation assumes that the instrument is converted at the beginning of the period (or the issue date if later). For Share Units (as defined herein, see note 12(b)), the common shares to be included in the diluted per share calculation is based on the number of shares that would be issuable if the reporting date were the end of the vesting period. The profit or loss attributable to common shareholders is adjusted to eliminate related interest costs of dilutive securities recognized in profit or loss for the period.

4. Inventories

	December 31, 2019		December 31, 2018
Supplies and consumables	$	13,878	$	11,641
Stockpile		2,556		1,116
Work in progress		2,164		543
Finished goods		779		1,345
	$	19,377	$	14,645

5. Other Current Assets

	December 31, 2019		December 31, 2018
Advances to suppliers	$	1,046	$	766
Prepaid expenses		4,779		2,188
Advances to employees (a)		2,829		1,349
Value added federal taxes recoverable (b)		16,869		2,592
	$	25,523	$	6,895

(a) Advances to employees include short term advances of salary, vacation and other benefits granted to employees of the Company’s Brazilian subsidiaries.

(b) $12.2 million of this balance relates to a recent favourable legal decision that recognizes MCSA’s right to a tax credit as a result of historical over-payments. MCSA will be able to use these tax credits against a variety of taxes, including income taxes and taxes on future sales (note 18).

Page 19

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

6. Mineral, Property, Plant and Equipment

	Buildings			Mining Equipment			Mineral Properties			Projects in Progress			Mobile Equipment & Other Assets			Mine Closure Costs			Right-of-Use Assets			Total
Cost:
Balance at December 31, 2017	$	16,229		$	46,576		$	144,366		$	55,705		$	10,548		$	12,570		$	-		$	285,994
Reclassification of NX Gold amounts from assets held for sale		1,661			2,443			28,216			-			102			647			-			33,069
Additions		471			33,451			3,694			61,898			1,446			1,109			-			102,069
Disposals		-			(1,008	)		(313	)		(1,655	)		(1,085	)		-			-			(4,061	)
Transfers		-			2,695			63,008			(65,703	)		-			-			-			-
Foreign exchange		(2,622	)		(9,310	)		(29,072	)		(8,098	)		(1,175	)		(1,985	)		-			(52,262	)
Balance at December 31, 2018		15,739			74,847			209,899			42,147			9,836			12,341			-			364,809
Adoption of IFRS 16 (note 2(e))		-			-			-			-			-			-			4,708			4,708
Additions		-			15,429			5,255			91,392			1,348			2,266			3,220			118,910
Disposals		-			(1,819	)		-			(2,267	)		(1,414	)		-			(463	)		(5,963	)
Transfers		2,532			18,313			55,754			(76,672	)		73			-			-			-
Foreign exchange		(662	)		(3,595	)		(9,516	)		(1,895	)		(362	)		(500	)		(234	)		(16,764	)
Balance at December 31, 2019	$	17,609		$	103,175		$	261,392		$	52,705		$	9,481		$	14,107		$	7,231		$	465,700
Accumulated depreciation:
Balance at December 31, 2017	$	(1,083	)	$	(9,057	)	$	(19,155	)	$	-		$	(1,696	)	$	(620	)	$	-		$	(31,611	)
Reclassification of NX Gold amounts from assets held for sale		(1,660	)		(1,922	)		(8,092	)		-			(93	)		(581	)		-			(12,348	)
Depreciation expense		(985	)		(8,657	)		(34,242	)		-			(1,652	)		(1,092	)		-			(46,628	)
Disposals		-			556			-			-			2			-			-			558
Foreign exchange		459			2,100			2,891			-			301			273			-			6,024
Balance at December 31, 2018		(3,269	)		(16,980	)		(58,598	)		-			(3,138	)		(2,020	)		-			(84,005	)
Depreciation expense		(922	)		(11,032	)		(29,286	)		-			(1,582	)		(1,033	)		(3,869	)		(47,724	)
Disposals		-			1,196			-			-			3			-			14			1,213
Foreign exchange		144			1,217			2,591			-			145			95			140			4,332
Balance at December 31, 2019	$	(4,047	)	$	(25,599	)	$	(85,293	)	$	-		$	(4,572	)	$	(2,958	)	$	(3,715	)	$	(126,184	)
Net book value December 31, 2018	$	12,470		$	57,867		$	151,301		$	42,147		$	6,698		$	10,321		$	-		$	280,804
Net book value December 31, 2019	$	13,562		$	77,576		$	176,099		$	52,705		$	4,909		$	11,149		$	3,516		$	339,516

Page 20

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

6. Mineral, Property, Plant and Equipment (continued)

Of the $118.9 million in mineral, property, plant and equipment purchases during the year ended December 31, 2019, $8.6 million was obtained through financing arrangements directly from equipment suppliers.

Certain equipment is secured for the equipment finance loans (note 9).

Included in mineral, property, plant and equipment is $7.3 million (December 31, 2018 - $10.4 million) related to the value of mineral resources beyond proven and probable reserves not currently being amortized. During the year ended December 31, 2019, $3.1 million (year ended December 31, 2018 - $8.2 million) was transferred from mineral resources to amortizable mineral reserves as a result of an update to MCSA’s proven and probable reserves during the year. In addition, $52.7 million (December 31, 2018 - $42.1 million) related to projects in progress are not currently being amortized.

7. Exploration and Evaluation Assets

Exploration and evaluation assets relate to the Boa Esperança Property located in the Municipality of Tucumã, in the state of Pará, Brazil which consists of a single mineral concession. This prospective copper/gold property is in advanced stages of exploration with various geological mineral resource studies and is the subject of a completed feasibility study.

8. Accounts Payable and Accrued Liabilities

	December 31, 2019		December 31, 2018
Trade suppliers	$	21,811	$	19,007
Payroll and related charges		20,058		14,802
Other accrued liabilities		1,818		2,581
	$	43,687	$	36,390

Page 21

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

9. Loans and Borrowings

Description	Denomination	Security	Time to Maturity	Coupon rate	Principal to be repaid		Carrying value December 31, 2019(1)		Carrying value December 31, 2018
Bank loan (at acquisition)	USD	Unsecured	-	7.50%	$	-	$	-	$	558
Bank loan (at acquisition)	BRL R$	Secured	-	7.50%		-		-		8,607
Bank loan (at acquisition)	BRL R$	Unsecured	83 months	CDI + 0.5%		6,736		5,941		6,969
Bank loan (NX Gold)	BRL R$	Unsecured	-	95% CDI		-		-		106
Bank loan (MCSA)	USD	Unsecured	12 months	4.43%		1,500		1,503		3,000
Bank loan (MCSA)	BRL R$	Unsecured	2 months	CDI + 3.7%		204		204		1,484
Line of credit (NX Gold)	BRL R$	Unsecured	9 months	15.00%		645		670		-
Equipment finance loan (Plural)	BRL R$	Secured	23 months	CDI + 7.0%		2,853		2,892		-
Equipment finance loans	BRL R$	Secured	1 - 50 months	11.88%-16.49%		5,400		5,585		1,346
Equipment finance loans	EURO	Secured	8-36 months	5.5%-7.0%		3,945		3,996		3,645
Equipment finance loans	USD	Secured	29-38 months	6.99%-7.95%		4,094		4,125		2,994
Senior non-revolving credit facility	USD	Secured	48 months	LIBOR + 2.75%-4.75%		80,000		79,091		79,056
Senior revolving credit facility	USD	Secured	36 months	LIBOR + 2.75%-4.75%		56,000		55,363		44,469
Total					$	161,377	$	159,370	$	152,234
Current portion:							$	18,984	$	10,602
Non-current portion:							$	140,386	$	141,632

(1) Carrying value includes accrued interest.

	December 31, 2019			December 31, 2018
Balance, beginning of year	$	152,234		$	139,166
Reclassification of NX Gold amounts from assets held for sale		-			2,071
New senior non-revolving credit facility		-			78,837
New senior revolving credit facility, net		10,565			44,346
New equipment finance loans		24,890			11,652
New bank loans		10,976			4,581
Debt extinguishment		-			(124,697	)
Principal and interest payments		(51,581	)		(19,670	)
Interest accretion		11,236			14,965
Loss on debt settlement		1,783			5,476
Effect of foreign exchange rate changes		(733	)		(4,493	)
Balance, end of period	$	159,370		$	152,234

(a) Senior credit facility

In December 2018, the Company replaced the $50 million senior secured non-revolving credit facility completed on December 29, 2017 with a new $130 million facility from a syndicate of Canadian financial institutions. The facility is comprised of an $80 million senior secured amortizing non-revolving credit facility (“Term Facility”) and a $50 million senior secured revolving term credit facility (“Revolving Credit Facility”) (collectively the “Facilities”). The Term Facility has a 5-year term with equal quarterly principal payments of $6.2 million beginning on December 13, 2020, while the Revolving Credit Facility is payable at maturity on December 13, 2022. The Facilities bear interest on a sliding scale at a rate of LIBOR plus 2.75% to 4.75% depending on the Company’s consolidated leverage ratio at the time. The Company incurred transaction costs associated with the Facilities of $2.3 million which have been included in the carrying value of the Facilities and are being amortized using an effective interest rate of 5.64%. The settlement of the previous $50 million senior secured non-revolving credit facility resulted in a loss on settlement of $1.8 million.

In January 2019, the Company entered into an interest rate swap transaction with a Canadian financial institution whereby the floating LIBOR interest on a notional amount of $65 million was swapped for a fixed interest rate of 2.69%. This interest rate swap transaction is in effect for the term of the Term Facility, with the notional amount reduced as principal payments are made. Settlements are being made on a quarterly basis.

Page 22

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

During the second quarter of 2019, the Company refinanced a loan held by the Company’s subsidiary, MCSA, by extending the Revolving Credit Facility. The credit limit of the Revolving Credit Facility was increased by $20.0 million to $70.0 million. All other terms of the Facilities remained unchanged. Upon completion of the amendment, the Company drew $11.0 million to repay certain of its bank loans held by MCSA. As at December 31, 2019, the Company had a remaining $14.0 million undrawn on this secured Revolving Credit Facility.

The Facilities are secured by pledges of shares of MCSA and NX Gold. The Company is required to comply with certain financial covenants. As of the date of these consolidated financial statements, the Company is in compliance with these covenants.

(b) Bank loans and equipment finance loans

The bank loans (at acquisition) relate to the Company’s subsidiary, MCSA, and were recognized at the date the Company acquired MCSA at fair value and have subsequently been recognized at amortized cost, net of settlements. Interest is being recognized using the effective interest rate method at an interest rate of 11.29% for the remaining such loan at December 31, 2019.

In June 2019, the Company repaid one of MCSA’s bank loans (at acquisition) in full using funds from the Company’s Revolving Credit Facility and recognized a loss on settlement of $1.8 million. During the year ended December 31, 2018, the Company acquired and/or settled certain of the MCSA bank loans (at acquisition) with a carrying value of $68.8 million. The settlement of these loans resulted in a loss of $3.7 million.

As per the terms of one of MCSA’s bank loans, the Company is required to maintain a separate debt service bank account with sufficient funds to guarantee scheduled principal payments by MCSA. At December 31, 2019, $1.5 million was on deposit in said designated debt service account and is presented as restricted cash in the statement of financial position.

MCSA is required to comply with certain financial covenants which MCSA is in compliance with at December 31, 2019. The equipment finance loans are secured by the corresponding equipment relating to them and a guarantee by the Company.

(c) MCSA and NX Gold lines of credit

At December 31, 2019, the Company’s subsidiaries MCSA and NX Gold have the following credit facilities available:

MCSA entered into a credit agreement for a line of credit of up to BRL $30.0 million at an interest rate of CDI (“Brazilian Interbank Deposit Rate”) + 9% per annum. MCSA may drawdown on this line of credit at any time until November 30, 2020. In addition, MCSA also entered into a second credit agreement for a total line of credit of up to BRL $30.0 million at an interest rate of 14.98% per annum. MCSA may drawdown on this line of credit at any time until August 27, 2020. The Company and NX Gold provide unsecured guarantees for these credit agreements. At December 31, 2019, no amounts had been drawn from either of these credit facilities

NX Gold entered into an agreement for a line of credit of up to BRL $7.5 million at an interest rate of 14.98% per annum. NX Gold may drawdown on this line of credit at any time until August 27, 2020. As at December 31, 2019, BRL $2.7 million ($0.7 million) has been drawn from NX Gold’s line of credit.

Subsequent to December 31, 2019, NX Gold entered into a credit agreement for a line of credit of up to BRL $7.5 million at an interest rate of 14.34% per annum. NX Gold may drawdown on this line of credit at any time until February 22, 2021. NX Gold is using BRL $1.5 million of this line of credit to provide a letter of credit to a supplier until January 31, 2022. The Company provides unsecured guarantees for these credit agreements.

Page 23

Ero Copper Corp. 

Notes to Consolidated Financial Statements  

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(d) Plural loan

During the quarter ended December 31, 2019, MCSA secured a new equipment finance loan with Plural Bank for BRL $12.0 million for a term of 24 months and at an interest rate of 7% + CDI per annum. Concurrently, MCSA entered into an interest rate swap transaction and a foreign exchange swap transaction with Plural Bank whereby the floating interest of 7% + CDI on a notional amount of BRL $12.0 million was swapped for a fixed interest rate of 9.90%, and a notional principal amount of BRL $12.0 million was swapped for the USD currency at a rate of 3.9500. This interest rate and foreign exchange swap transactions are in effect for the term of the loan.

(e) Debt repayments

Repayments of the principal portion of loans and borrowings is as follows:

2020	$	18,984
2021		30,318
2022		83,286
2023		25,918
2024		1,004
2025 and beyond		1,867
	$	161,377

10. Value Added, Payroll and Other Taxes

	December 31, 2019		December 31, 2018
Value-added taxes payable	$	2,865	$	2,873
Tax based on net sales of copper and gold		5,287		3,064
Federal sales tax		-		1,984
Social security installments (a)		9,519		8,744
Income taxes		1,108		944
Other taxes		909		341
Total value added, payroll and other taxes		19,688		17,950
Less: current portion of value added, payroll and other taxes		13,994		11,357
Non-current value added, payroll and other taxes	$	5,694	$	6,593

(a)    The Company’s subsidiary, MCSA, has an agreement with the National Institute of Social Security in Brazil to pay outstanding social security contributions in installments over a period to 2024.

Page 24

Ero Copper Corp. 

Notes to Consolidated Financial Statements  

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

11. Provisions and Contingent Liabilities

	Mine Closure
	and			Legal
	Rehabilitation			Claims			Total
Balance at December 31, 2017	$	22,688		$	7,626		$	30,314
Reclassification of NX Gold amounts from assets held for sale		6,082			329			6,411
Additions (reductions) due to change in estimated cash flows		1,136			(2,825	)		(1,689	)
Unwinding of the discount		3,767			-			3,767
Settled		(1,967	)		-			(1,967	)
Foreign exchange		(4,352	)		(975	)		(5,327	)
Balance at December 31, 2018		27,354			4,155			31,509
Additions (reductions) due to change in estimated cash flows		2,266			(625	)		1,641
Unwinding of the discount		3,508			-			3,508
Settled		(1,786	)		-			(1,786	)
Foreign exchange		(1,145	)		(146	)		(1,291	)
Balance at December 31, 2019	$	30,197		$	3,384		$	33,581

(a) Mine closure and rehabilitation

The Company’s provision for mine closure and rehabilitation consists of costs accrued based on the current best estimate of mine closure and reclamation activities that will be required upon completion of mining. The Company’s provision for future site closure and reclamation costs is based on the level of known disturbance at the reporting date, known legal requirements and cost estimates prepared by a third-party specialist.

Management used a pre-tax discount rates in the range of 4.34% - 6.5% (2018 – 6.5%) and an inflation factor in the range of 3.5% – 3.75% (2018 – 4.2%) in preparing the Company’s provision for mine closure and rehabilitation. Although the ultimate amount to be incurred is uncertain, based on development, legal requirements and estimated costs as at December 31, 2019, the undiscounted inflation-adjusted liability for provision for mine closure and rehabilitation is estimated to be approximately $45.7 million (2018 - $48.7 million), of which $36.8 million (2018 - $39.1 million) relates to MCSA and $8.9 million (2018 - $9.6 million) relates to NX Gold. The cash expenditures are expected to occur over a period of time extending several years after the projected closure, which for both MCSA and NX Gold is currently 2026.

(b) Legal claims

There are various legal actions that are in process against the Company’s Brazilian subsidiaries related to labor, civil and tax matters. Based on an analysis of individual judicial and administrative legal claims, the following provision has been made for probable losses associated with these claims:

	December 31, 2019		December 31, 2018
Labour claims (i)	$	3,311	$	3,561
Tax claims (ii)		73		522
Other claims		-		72
	$	3,384	$	4,155

(i) Labor claims

The labor claims related primarily to claims made by existing and former employees for alleged travel time reimbursements, overtime and severance payments. Of the claims made, the Company has assessed, with the assistance of its legal counsel, that the probable loss on such claims is $3.3 million and such amount has been accrued.

Page 25

Ero Copper Corp. 

Notes to Consolidated Financial Statements  

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(ii) Tax claims

The provisions for tax claims relate to tax assessments, interest and penalties resulting from unpaid income and social contribution taxes by MCSA.

In relation to the above-mentioned claims and those discussed in Note 11(c) below, MCSA and NX Gold were required to place a total of $1.2 million in trust as of December 31, 2019 (December 31, 2018 - $1.3 million), which is included in other non-current assets on the statement of financial position.

(c) Contingent liabilities

As of December 31, 2019, based on the opinion of its legal advisers, the Company has not recognized a provision for the following claims of MCSA and NX Gold as it is not probable that a cash outflow will occur. 

	December 31, 2019		December 31, 2018
Social security tax (i)	$	3,681	$	3,715
Taxes (ii)		14,990		14,800
Labour (refer to note 11(b)(i))		6,303		3,380
Mining and other (iii)		6,080		-
	$	31,054	$	21,895

(i) Social security tax

Social security claims relate to potential social security tax payments related to past payments to employees, including profit sharing, and payments made to external contractors. The Company strongly believes, based on precedent court case rulings, that part of the claim will be cancelled after administrative and judicial discussions. The estimated portion of the claim expected to be cancelled of $3.7 million is included in the table above.

(ii) Tax

There are 129 tax claims (2018 – 99 tax claims) against MCSA which were evaluated as possible, but not probable, losses by external legal counsel. The main subjects under discussion for the tax claims involve the validity of tax credits used to offset federal taxes.

(iii) Mining

In June 2019, MCSA was notified of five administrative claims filed by the Nacional Mining Agency regarding alleged differences in the calculation of certain sales taxes on mining revenue by MCSA. The Company, based on the opinion of its legal advisors, does not believe such claims will result in a probable cash outflow.

12. Share Capital

As at December 31, 2019, the Company’s authorized share capital consists of an unlimited number of common shares without par value. As at December 31, 2019, 85,703,646 (2018 – 84,738,650) common shares were outstanding.

In January 2017, the Company issued $2.75 million of convertible debentures with an interest rate of 10% to be repaid within two years or to be converted to units, at the option of the holder, at a conversion price of $0.75 per unit, with each unit consisted of one common share and one-quarter of one common share purchase warrant. Each whole warrant entitled the holder to purchase one common share at a price of $1.20 per common share until December 12, 2021. The Company had the right to accelerate the expiry of any warrants issued in relation to these convertible debentures if the closing share price on a recognized exchange reached or exceeded $1.70 for 20 consecutive trading days. In February 2018, all of the convertible debenture holders converted their debentures into units, resulting in the issuance of 4,059,450 common shares and 1,014,861 common share purchase warrants. These warrants were subsequently exercised for an equivalent number of common shares for gross proceeds received by the Company of $1.2 million.

Page 26

Ero Copper Corp. 

Notes to Consolidated Financial Statements  

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(a) Options

In January 2018, the Company granted 60,000 options to an employee of the Company at an exercise price of CAD$7.95 per share with a term to expiry of five years. In addition, the Company also granted in January 2018 125,000 options to an employee of the Company at an exercise price of CAD$7.76 per share with a term to expiry of five years. These stock options vest in three equal installments on each annual anniversary date from the date of grant. The total fair value of these options to be expensed over the vesting period was $0.5 million.

In June 2018, the Company granted 174,000 options to an employee and a director of the Company at an exercise price of CAD$10.25 per share with a term to expiry of five years. 150,000 of these stock options vest in three equal installments on each annual anniversary date from the date of grant, while 24,000 of these stock options vested immediately. The total fair value of these options to be expensed over the vesting period was $0.6 million.

In July 2018, the Company granted 200,000 options to an employee of the Company at an exercise price of CAD$9.01 per share with a term to expiry of five years. These stock options vest in three equal installments on each annual anniversary date from the date of grant. The total fair value of these options to be expensed over the vesting period was $0.6 million.

On December 31, 2018, the Company granted 1,155,519 options to certain officers, directors, consultants and employees of the Company at an exercise price of CAD$9.76 per share with a term to expiry of five years. These stock options vest in three equal installments on each annual anniversary date from the date of grant. The total fair value of these options to be expensed over the vesting period was $3.5 million.

On January 2, 2019, the Company granted 125,000 options to directors of the Company at an exercise price of CAD$9.80 per share with a term to expiry of five years. These options vested immediately, and their total fair value was $0.5 million.

On August 15, 2019, the Company granted 40,000 options to directors of the Company at an exercise price of CAD$21.09 per share with a term to expiry of five years. 23,828 of these options vested immediately, while 16,172 will vest upon shareholder approval. Their total fair value was $0.3 million.

On December 12, 2019, the Company granted 470,228 options to certain officers, directors, consultants and employees of the Company at an exercise price of CAD$20.52 per share with a term to expiry of five years. These stock options vest in three equal installments on each annual anniversary date from the date of grant. The total fair value of these options to be expensed over the vesting period was $2.7 million.

	Number of   Stock Options			Weighted Average   Exercise Price
Outstanding stock options, December 31, 2017		3,493,000		$	3.28
Issued		1,714,519			6.97
Exercised		(283,000	)		1.50
Outstanding stock options, December 31, 2018		4,924,519			4.64
Issued		635,228			14.20
Exercised		(498,330	)		2.75
Outstanding stock options, December 31, 2019		5,061,417		$	6.23

Page 27

Ero Copper Corp. 

Notes to Consolidated Financial Statements  

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The weighted average share price on the date of exercise for the year ended December 31, 2019 was $14.60 (year ended December 31, 2018 - $8.91).

As at December 31, 2019, the following stock options were outstanding:

Expiry Date	Number of Stock Options		Weighted Average Exercise Price		Vested and Exercisable   Number of Stock Options		Weighted Average Remaining Life in Years
May 15, 2022		972,001		1.50 USD		433,665		2.37
July 10, 2022		100,000		1.50 USD		66,666		2.53
November 24, 2022		318,000		6.48 CAD		212,000		2.90
December 7, 2022		1,393,335		6.74 CAD		946,664		2.94
January 18, 2023		60,000		7.95 CAD		20,000		3.05
January 23, 2023		83,334		7.76 CAD		-		3.07
June 19, 2023		144,000		10.25 CAD		44,000		3.47
July 16, 2023		200,000		9.01 CAD		66,666		3.54
December 31, 2023		1,155,519		9.76 CAD		385,165		4.00
January 2, 2024		125,000		9.80 CAD		125,000		4.01
August 15, 2024		40,000		21.09 CAD		23,828		4.63
December 12, 2024		470,228		20.52 CAD		-		4.95
		5,061,417		6.23 USD		2,323,654		3.33

In determining the weighted average exercise price of all outstanding options in the tables above and below, the CAD prices were converted to USD at the December 31, 2019 exchange rate of 1.2989.

The fair value of options granted in the years ended December 31, 2019 and 2018 was determined using the Black- Scholes option pricing model. Expected volatility is estimated by considering historic average share price volatility of comparable companies. The weighted average inputs used in the measurement of fair values at grant date of the options are the following:

	2019			2018
Expected term (years)		3.0			3.0
Forfeiture rate		0	%		0	%
Volatility		53.3	%		60.7	%
Dividend yield		0	%		0	%
Risk-free interest rate		1.68	%		1.92	%
Weighted-average fair value per option	$	5.42		$	2.98

For the year ended December 31, 2019, the Company recorded share-based compensation $4.7 million (2018 - $3.2 million) with respect to its outstanding stock options.

Subsequent to December 31, 2019, the Company granted 73,456 options to directors and certain employees of the Company at an exercise price of CAD$23.42 per share with a term to expiry of five years. The 43,456 options to directors vested immediately, while the 30,000 options to employees vest in three equal installments on each annual anniversary date from the date of grant.

Subsequent to December 31, 2019, 53,332 options were exercised for gross proceeds of $0.2 million.

(b) Share Unit Plan

The Company has a share unit plan (the “Share Unit Plan”) pursuant to which the Board, at the compensation committee’s recommendation, may grant share units (“Share Units”) to any director, officer, employee, or consultant of the Company or its subsidiaries. At the time of grant of a Share Unit, the Board, at the compensation committee’s recommendations, may establish performance conditions for the vesting of the Share Units. The performance conditions may be graduated such that different percentages (which may be greater or lower than 100%) of the Share Units in a grant become vested depending on the satisfaction of one or more performance conditions. Performance conditions may include terms or conditions relating to: (i) the market price of the Shares; (ii) the return to holders of shares, with or without reference to other comparable companies; (iii) the financial performance or results of the Company or its subsidiaries; (iv) the achievement of performance conditions or other performance criteria relating to the Company or its subsidiaries; (v) any other terms and conditions the Board may in its sole discretion determine with respect to vesting or the acceleration of vesting; and (vi) the vesting date of the Share Units. The Board may, in its discretion, subsequent to the grant of a Share Unit, waive any such performance condition or determine that it has been satisfied subject to applicable law. Each Share Unit entitles the holder thereof to receive one common share, without payment of additional consideration, on the redemption date selected by the Board following the date of vesting of such Share Unit, which will be within 30 days of the date of vesting, or at a later deferred date, subject to certain exception and restrictions.

Page 28

Ero Copper Corp. 

Notes to Consolidated Financial Statements  

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

On December 31, 2018, 215,288 Share Units were issued and on December 12, 2019, 225,659 Share Units were issued to certain officers and employees of the Company pursuant to the Company’s Share Unit Plan. These Share Units will vest three years from the date they were approved for granting by the Board (December 31, 2021 and December 12, 2022, respectively) and the number of Share Units that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain market and non-market performance conditions. Each vested Share Unit entitles the holder thereof to receive on or about the applicable date of vesting of such Share Unit (i) one common share; (ii) a cash amount equal to the fair market value of one common share as at the applicable date of vesting; or (iii) a combination of (i) and (ii), as determined by the Board in its sole discretion. The Company currently intends to settle these Share Units using common shares. Accordingly, they are classified as equity settled instruments.

As at December 31, 2019, 437,463 Share Units have been issued and are outstanding to certain officers and employees of the Company pursuant to the Company’s Share Unit Plan.

For the Share Units with non-market performance conditions, the fair value of the Share Units granted was determined using the share price at the date of grant. For the Share Units with market performance conditions, the fair value of the Share Units granted was determined using a Geometric Brownian Motion model. Expected volatility is estimated by considering historic share price information. The inputs used in the measurement of fair values at grant date of the Share Units issued are the following:

	December 12, 2019			December 31, 2018
Expected term (years)		3.0			3.0
Forfeiture rate		0	%		0	%
Volatility		44.5	%		45.4	%
Dividend yield		0	%		0	%
Risk-free interest rate		1.69	%		1.95	%
Weighted-average fair value per Share Unit	$	18.97		$	17.75

During the year ended December 31, 2019, the Company recorded share-based compensation of $1.0 million (2018 - $nil) with respect to the Share Units.

Subsequent to December 31, 2019, 1,000 Share Units were issued to certain employees of the Company pursuant to the Company’s Share Unit Plan.

(c) Deferred Share Unit Plan

On December 12, 2019, a Deferred Share Unit Plan (“DSU Plan”) was established by the Board as a component of our compensation for independent directors. Only independent directors are eligible to participate and to receive deferred share units (“DSUs”) under the DSU Plan. DSUs may be awarded by the Board from time to time to provide independent directors with appropriate equity-based compensation for the services they render to the Company and may be subject to terms and conditions with respect to vesting of such DSUs. In addition, independent directors may elect to receive a portion or all of their respective annual cash remuneration in the form of DSUs, which will be fully vested upon such grant. The number of DSUs to be awarded to a participant under the DSU Plan is determined by dividing the portion of that participant’s annual cash remuneration by the fair market value of a common share on the last day of the quarter in which such portion of the annual cash remuneration was earned. Pursuant to the DSU Plan, DSUs may only be settled by way of cash payment. A participant is not entitled to payment in respect of the DSUs until his or her death, retirement or removal from the Board. The settlement amount of each DSU is based on the fair market value of a common share on the DSU redemption date multiplied by the number of DSUs being redeemed.

Page 29

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Subsequent to December 31, 2019, 23,674 DSUs were issued to independent directors.

(d) Warrants

As at December 31, 2019, 2,866,662 (December 31, 2018 – 3,333,328) common share purchase warrants were outstanding with a weighted average exercise price of $1.20 and a weighted average remaining contractual life of 1.95 years.

During the year ended December 31, 2019, 466,666 warrants were exercised for gross proceeds of $0.6 million.

(e) Net Income (Loss) per Share

	Year ended  December 31, 2019		Year ended  December 31, 2018
Weighted average number of common shares outstanding		85,244,277		83,927,977
Dilutive effect of warrants		2,788,885		-
Dilutive effect of stock options		2,919,799		-
Dilutive effect of Share Units		437,463		-
Weighted average number of diluted common shares outstanding		91,390,425		83,927,977
Net income (loss) attributable to owners of the Company	$	91,883	$	(3,155	)
Basic net income (loss) per share attributable to owners of the Company		1.08		(0.04	)
Diluted net income (loss) per share attributable to owners of the Company		1.01		(0.04	)

For the year ended December 31, 2018, the potentially dilutive effect of warrants and stock options are excluded from the dilutive net income (loss) per share calculation as the Company incurred a loss for the year.

13. Revenue

	Year ended December 31, 2019			Year ended December 31, 2018
Copper concentrate
- sales within Brazil	$	176,885		$	137,039
- export sales		69,499			49,382
- price adjustments on provisionally priced sales		(187	)		(1,691	)
Gold
- export sales		38,646			48,375
	$	284,843		$	233,105

Page 30

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Under the terms of the Company’s contract with its primary customer, sales are provisionally priced on the date of sale based on the previous month’s average copper price. The final sales price for all shipments in a month is determined at the end of the month in which the sale is recognized. As at December 31, 2019, there are no sales subject to provisional pricing. During the year ended December 31, 2019, the Company recognized $0.2 million (2018 - $1.7 million) related to provisional price adjustments related to such provisionally priced sales.

14. Cost of Product Sold

	Year ended December 31, 2019		Year ended December 31, 2018
Materials	$	21,788	$	19,356
Salaries and benefits		40,787		36,130
Depreciation and depletion		46,014		45,188
Contracted services		23,691		20,806
Maintenance costs		18,383		15,842
Utilities		11,154		9,341
Other costs		1,000		948
	$	162,817	$	147,611

15. General and Administrative Expenses

	Year ended December 31, 2019			Year ended December 31, 2018
Accounting and legal	$	1,507		$	1,672
Amortization and depreciation		157			109
Office and sundry		7,192			6,335
Provisions		(625	)		361
Salaries and consulting fees		13,427			11,250
Incentive payments		8,684			7,211
Transfer agent and filing fees		206			176
Travel and conference		2,269			1,886
	$	32,817		$	29,000

16. Finance Expense

	Year ended December 31, 2019		Year ended December 31, 2018
Interest on loans and borrowings	$	11,236	$	14,965
Accretion of purchase price adjustments		512		662
Accretion of mine closure and rehabilitation provision		3,508		3,767
Commitment fees		1,681		585
Interest on lease liabilities		366		-
Other finance expenses		3,125		2,583
	$	20,428	$	22,562

Page 31

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

17. Foreign Exchange Loss

The following foreign exchange gains (losses) arise as a result of balances and transactions in the Company’s Brazilian subsidiaries that are denominated in currencies other than the Brazilian Reais (BRL$), which is their functional currency.

	Year ended December 31, 2019			Year ended December 31, 2018
Foreign exchange on USD denominated debt in Brazil	$	(4,406	)	$	(9,808	)
Realized foreign exchange on derivative contracts (note 21)		185			(10,119	)
Unrealized foreign exchange on derivative contracts (note 21)		(250	)		1,137
Other		(677	)		(1,923	)
	$	(5,148	)	$	(20,713	)

18. Recovery of Value Added Taxes

During the year ended December 31, 2019, the Company recognized a recovery of $21.6 million in net income related to value added taxes previously paid on sales in Brazil. The recovery was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant taxing authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim, which approval was received in July 2019. These credits can be used to offset the payment of a variety of other taxes, including income taxes and taxes on future sales. Of the recovery recognized, $3.2 million has been applied to taxes during the 2019 year, $12.2 million has been included in other current assets based on the expected timing of their use, with the remaining $6.2 million recognized in other non-current assets in the statement of financial position.

19. Income Taxes

(a) Reconciliation of income taxes

A reconciliation of the income tax expense to the amount calculated using the Company’s combined Canadian federal and provincial statutory income tax rate of 27% (2018 – 27%) is as follows:

	Year Ended December 31, 2019			Year Ended December 31, 2018
Net income in the year before tax	$	74,829		$	2,661
Tax rate		27	%		27	%
Income tax expense at statutory rate	$	20,204		$	718
Tax effect of:
Difference in tax rate of foreign jurisdictions		(7,557	)		(1,489	)
Non-deductible (taxable) items		(6,334	)		(596	)
Change in temporary differences not previously recognized		(24,570	)		4,071
Reduction (utilization) of tax losses against other liabilities		-			952
Other		631			1,996
Income tax expense (recovery)	$	(17,626	)	$	5,652

Page 32

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

	Year Ended December 31, 2019			Year Ended December 31, 2018
Current income tax:
Relating to current income tax charge	$	10,645		$	2,899
Deferred income tax:
Relating to recognition of previously unrecognized temporary differences		(33,836	)		-
Relating to origination and reversal of temporary differences		5,565			2,753
Income tax expense (recovery)	$	(17,626	)	$	5,652

(b) Deferred income tax assets (liabilities)

The general movement in the deferred income tax asset (liability) is as follows:

	Year Ended December 31, 2019			Year Ended December 31, 2018
At the beginning of the year	$	(15,811	)	$	(16,655	)
Reduction (utilization) of tax losses against other liabilities		-			952
Deferred income tax recovery (expense)		28,271			(2,753	)
Foreign exchange		639			2,645
At the end of the year	$	13,099		$	(15,811	)

Recognized deferred tax and assets and liabilities consist of the following:

	December 31, 2019			December 31, 2018
Deferred tax assets:
Non-capital losses - Brazil	$	28,792		$	6,311
Other - Brazil		3,192			-
Mine closure and rehabilitation provision - Brazil		4,605			-
Non-capital losses - Canada		317			-
Financing fees and other - Canada		1,349			1,660
		38,256			7,971
Deferred tax liabilities
Mineral property, plant and equipment - Brazil		(9,612	)		(7,227	)
Loans and borrowings - Brazil		(12,192	)		(14,698	)
Other - Brazil		(1,687	)		(197	)
Loans and borrowings - Canada		(1,666	)		(1,660	)
		(25,157	)		(23,782	)
Net deferred income tax assets (liabilities)	$	13,099		$	(15,811	)

Page 33

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Deferred tax assets of $11.7 million (December 31, 2018 - $22.5 million) have not been recognized for the following deductible temporary differences as it is not probable that the benefits of these temporary differences will be realized:

	Year Ended December 31, 2019				Year Ended December 31, 2018
	Brazil		Canada		Brazil		Canada
Exploration and evaluation assets	$	47,986	$	-	$	49,920	$	-
Mineral property, plant and equipment		-		72		8,974		42
Share issuance/Financing costs		-		-		-		640
Non-capital losses		-		14,196		72,672		7,194
Other		-		4,251		-		2,588
	$	47,986	$	18,519	$	131,566	$	10,464

The Company has loss carry forwards in Brazil totalling $83.0 million (December 31, 2018 - $114.1 million) which may be carried forward indefinitely to offset future taxable income in Brazil. Use of these losses is limited to 30% of taxable income annually. The Company also has loss carry forwards in Canada totalling $15.4 million (December 31, 2018 - $7.2 million) which may be carried forward for 20 years to offset future taxable income, which expire between 2036 and 2039.

20. Related Party Transactions

Key management personnel consist of the Company’s directors and officers and their compensation includes director retainer fees and management salaries paid to these individuals, as well as share-based compensation. The aggregate value of compensation paid to key management personnel for the year ended December 31, 2019 was $7.5 million ($5.4 million for the year ended December 31, 2018). In addition, 444,265 options and 171,754 Share Units were issued to key management personnel during the year ended December 31, 2019 (1,100,155 options and 130,636 Share Units for the year ended December 31, 2018) with $4.1 million recognized in share-based compensation expense for the year ended December 31, 2019 ($2.3 million for the year ended December 31, 2018).

During the year ended December 31, 2019, key management personnel exercised 286,666 options and 300,000 warrants for cash proceeds to the Company of $0.6 million and $0.4 million, respectively (133,000 options for $0.2 million for the year ended December 31, 2018). During the year ended December 31, 2018, key management personnel converted convertible debentures into 1,476,164 common shares and 369,040 common share purchase warrants. The warrants were subsequently exercised into 369,040 common shares.

As at December 31, 2019, $3.9 million was payable to key management as incentive compensation and is included in accounts payable and accrued liabilities in the consolidated financial statements (December 31, 2018 - $2.7 million). Such amounts are unsecured, non-interest bearing and will be paid under normal trade terms.

21. Financial Instruments

Fair value

Fair values of financial assets and liabilities are determined based on available market information and valuation methodologies appropriate to each situation. However, some judgments are required in the interpretation of the market data to produce the most appropriate realization value estimate. As a consequence, the estimates presented herein do not necessarily indicate the amounts that could be realized in the current exchange market. The use of different market information and/or evaluation methodologies may have a material effect on the market value amount.

Page 34

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

As at December 31, 2019, derivatives were measured at fair value based on Level 2 inputs. The fair value of derivatives is disclosed under market risk below.

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, deposits, financial investments and accounts payable and accrued liabilities approximate their fair values due to their short terms to maturity or market rates of interest used to discount amounts. The carrying value of value added, payroll and other taxes approximate fair value based on the discount rate applied. At December 31, 2019, the carrying value of loans and borrowings is $159.4 million while the fair value is approximately $161.4 million. The effective interest rates used to amortize these loans are a close approximation of market rates of interest at December 31, 2019 (Level 2 of the fair value hierarchy).

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers. The carrying amount of the financial assets below represents the maximum credit risk exposure as at December 31, 2019 and December 31, 2018:

	December 31, 2019		December 31, 2018
Cash and cash equivalents	$	21,485	$	18,941
Restricted cash		1,500		3,000
Accounts receivable		7,680		7,219
Deposits		1,200		1,334
Derivatives		-		254
Other non-current assets - term deposits		1,196		686
	$	33,061	$	31,434

The Company invests cash and cash equivalents as well as restricted cash with financial institutions that are financially sound based on their credit rating. The Company’s exposure to credit risk associated with accounts receivable is influenced mainly by the individual characteristics of each customer. The Company currently has only three significant customers, all of which have no history of credit default with the Company. The Company has not incurred credit losses during the years ended December 31, 2019 and 2018, nor has a provision for credit losses been recognized.

Liquidity risk

Liquidity risk is the risk associated with the difficulties that the Company may have meeting the obligations associated with financial liabilities that are settled with cash payments or with another financial asset. The Company’s approach to liquidity management is to ensure as much as possible that sufficient liquidity exists to meet their maturity obligations on the expiration dates, under normal and stressful conditions, without causing unacceptable losses or with risk of undermining the normal operation of the Company.

The table below shows the Company’s maturity of financial liabilities on December 31, 2019:

Non-derivative Financial Liabilities	Carrying value		Contractual cash flows		Up to 12 months		1-2 years		3-5 years		More than 5 years
Loans and borrowings	$	159,370	$	161,377	$	18,984	$	30,318	$	110,208	$	1,867
Interest on loans and borrowings		-		22,788		8,749		7,172		6,737		130
Accounts payable and accrued liabilities		43,694		43,694		43,694		-		-		-
Value added, payroll and other taxes		19,688		20,428		13,994		1,968		4,466		-
	$	222,752	$	248,287	$	85,421	$	39,458	$	121,411	$	1,997

Page 35

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Market risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity prices. The purpose of market risk management is to manage and control exposures to market risks, within acceptable parameters, while optimizing return.

The Company may use derivatives, including forward contracts and swap contracts, to manage market risks.

(i) Foreign exchange currency risk

The Company’s subsidiaries in Brazil are exposed to exchange risks related to the US dollars and Euros. In order to minimize currency mismatches, the Company monitors its cash flow projections considering future sales expectations indexed to US dollar variation in relation to the cash requirement to settle the existing financings.

The Company’s exposure to foreign exchange currency risk at December 31, 2019 relates primarily to $9.6 million (December 31, 2018 – $10.2 million) in loans and borrowings of MCSA denominated in US dollars and Euros. Strengthening (weakening) in the Brazilian Real against the US dollar by 10% and 20%, would have increased (decreased) pre-tax net income by $0.6 million and $1.1 million, respectively (2018 – $0.7 million and $1.3 million). Strengthening (weakening) in the Brazilian Real against the Euro by 10% and 20%, would have increased (decreased) pre-tax net income by $0.4 million and $0.8 million, respectively (2018 – $0.4 million and $0.7 million). This analysis is based on the foreign currency exchange variation rate that the Company considered to be reasonably possible at the end of the year. The analysis assumes that all other variables, especially interest rates, are held constant.

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage market risks. At December 31, 2019, the Company’s subsidiaries have entered into foreign exchange collar contracts at zero cost for notional amounts of $336.6 million with an average floor rate of 3.86 BRL to US Dollar and an average cap rate of 4.41 BRL to US Dollar (December 31, 2018 – notional amount of $21.5 million in foreign exchange forward contracts). The maturity dates of these contracts are from January 15, 2020 to July 28, 2021 and are financially settled on a net basis. The fair value of these contracts at December 31, 2019 was nil, (December 31, 2018 – an asset of $0.3 million, which was included in Derivatives in the statement of financial position.) The change in fair value of foreign exchange collar contracts was a loss of $0.3 million for the year ended December 31, 2019 (a gain of $1.1 million for the year ended December 31, 2018) and has been recognized in foreign exchange loss. In addition, in the year ended December 31, 2019, the Company recognized a realized gain of $0.2 million, (a loss of $10.1 million for the year ended December 31, 2018) related to the settlement of foreign currency forward contracts.

(ii) Interest rate risk

The Company is principally exposed to the variation in interest rates on loans and borrowings with variable rates of interest. Management reduces interest rate risk exposure by entering into loans and borrowings with fixed rates of interest or by entering into derivative instruments that fix the ultimate interest rate paid.

The Company is principally exposed to interest rate risk through its Term Facilities of $136.0 million and Brazilian Real denominated bank loans of $9.8 million. Based on the Company’s net exposure at December 31, 2019, a 1% change in the variable rates would have an impact of $1.5 million on pre-tax annual net income, without consideration of the effects of the swap contracts below.

In order to mitigate the above volatility due to variable rates on loans, as at December 31, 2019, the Company has entered into an interest rate swap contract to manage interest rate risk (see note 9(a)) associated with its Canadian Facilities. The floating interest on a notional amount of $65 million was swapped for a fixed interest rate of 2.69%. The fair value of this contract at December 31, 2019 was a liability of $1.7 million and was included in Derivatives in the statement of financial position while the change in the fair value of this contract of $1.7 million was included in Finance Expenses in the statement of operations and comprehensive income.

Page 36

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

In addition, as at December 31, 2019, MCSA has entered into an interest rate and currency swap contract on the Plural Loan (see note 9(d)). The floating interest on a notional amount of BRL$12 million was swapped for a fixed interest rate of 9.9% and the BRL currency on the loan was swapped for USD at a rate of 3.9500. The fair value of this contract at December 31, 2019 was a liability of $0.1 million and was included in Derivatives in the statement of financial position while the change in the fair value of this contract of $0.1 million was included in Finance Expenses in the statement of operations and comprehensive income.

(iii) Price risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage commodity price risks. During the year ended December 31, 2019, the Company had entered into commodity swap collar contracts. As at December 31, 2019, these commodity swap collar contracts have all matured and the balance was $nil. The Company recognized a realized loss of $1.4 million for the year ended December 31, 2019 related to the settlement of commodity forward contracts.

22. Capital Management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue the development and production of its mine properties and to maintain a flexible capital structure for its projects for the benefit of its stakeholders.

In the management of capital, the Company includes the components of shareholders’ equity and debt facilities.

The Company manages the capital structure and makes adjustments to it considering changes in the economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new loans and borrowings, common shares, or acquire or dispose of assets. Management reviews the capital structure on a regular basis to ensure that the above-noted objectives are met.

Certain loan agreements contain operating and financial covenants that could restrict the ability of the Company and its subsidiary, MCSA, to, among other things, incur additional indebtedness needed to fund its respective operations, pay dividends or make other distributions, make investments, create liens, sell or transfer assets or enter into transactions with affiliates. There are no other restrictions or externally imposed capital requirements of the Company.

Page 37

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

23. Segment Disclosure

The Company’s operations are segmented by entity between MCSA, NX Gold and corporate head office, which is consistent with internal reporting purposes. The Company monitors the operating results of its operating segments separately for the purpose of making decisions about resource allocation and performance assessment. The accounting policies used in the operating segments are the same as those contained in Note 3.

Total revenue from MCSA is from two customers while total revenue from NX Gold is from one customer.

Segmented information is as follows:

Year ended December 31, 2019	MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	246,197		$	38,646		$	-		$	284,843
Depreciation and depletion		(40,107	)		(5,907	)		-			(46,014	)
Other cost of product sold expenses		(95,500	)		(21,303	)		-			(116,803	)
Cost of product sold		(135,607	)		(27,210	)		-			(162,817	)
Sales expenses		(4,962	)		-			-			(4,962	)
Gross profit		105,628			11,436			-			117,064
Expenses
General and administrative		(20,993	)		(2,308	)		(9,516	)		(32,817	)
Share-based compensation		-			-			(5,792	)		(5,792	)
Finance income		520			143			38			701
Finance expenses		(8,877	)		(1,366	)		(10,185	)		(20,428	)
Foreign exchange gain (loss)		(5,039	)		(76	)		(33	)		(5,148	)
Loss on debt settlement		(1,783	)		-			-			(1,783	)
Recovery of value added taxes		21,584			-			-			21,584
Other income		242			1,206			-			1,448
Income (loss) before taxes		91,282			9,035			(25,488	)		74,829
Current tax expense		(8,764	)		(1,881	)		-			(10,645	)
Deferred tax recovery		27,267			1,004			-			28,271
Net Income (Loss)	$	109,785		$	8,158		$	(25,488	)	$	92,455
Assets
Current	$	62,413		$	9,166		$	3,986		$	75,565
Non-current		364,117			20,180			2,812			387,109
Total Assets	$	426,530		$	29,346		$	6,798		$	462,674
Total Liabilities	$	107,045		$	15,934		$	140,637		$	263,616

Page 38

Ero Copper Corp. 

Notes to Consolidated Financial Statements 

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Year ended December 31, 2018	MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	184,730		$	48,375		$	-		$	233,105
Depreciation and depletion		34,104			11,084			-			45,188
Other cost of product sold expenses		81,242			21,181			-			102,423
Cost of product sold		(115,346	)		(32,265	)		-			(147,611	)
Sales expenses		(3,268	)		-			-			(3,268	)
Gross profit		66,116			16,110			-			82,226
Expenses
General and administrative		(16,340	)		(3,401	)		(9,259	)		(29,000	)
Share-based compensation		-			-			(3,225	)		(3,225	)
Finance income		844			28			431			1,303
Finance expenses		(16,215	)		(959	)		(5,388	)		(22,562	)
Foreign exchange loss		(20,301	)		(131	)		(281	)		(20,713	)
Gain (loss) on debt settlement		(3,708	)		-			(1,768	)		(5,476	)
Other income		1,653			(1,545	)		-			108
Income (loss) before taxes		12,049			10,102			(19,490	)		2,661
Current tax expense		-			(2,899	)		-			(2,899	)
Deferred tax expense		(1,932	)		(1,173	)		352			(2,753	)
Net Income (Loss)	$	10,117		$	6,030		$	(19,138	)	$	(2,991	)
Assets
Current	$	43,802		$	(630	)	$	7,782		$	50,954
Non-current		281,622			25,128			2,735			309,485
Total Assets	$	325,424		$	24,498		$	10,517		$	360,439
Total Liabilities	$	160,824		$	14,021		$	81,772		$	256,617

Page 39

EX-99.9

Exhibit 99.9

 

Ero Copper is a first-quartile copper producer focused on continued development of an emerging world-class mineral district in Brazil

Our primary asset is a 99.6% interest in the Brazilian copper mining company, Mineração Caraíba S.A. (“MCSA”), 100% owner of the Vale do Curaçá Property with over 40 years of operating history in the region, featuring excess mill capacity and a highly-prospective under-explored land package within the Curaçá Valley totaling approximately 153,741 hectares.

TSX: ERO
WWW.EROCOPPER.COM

Table of Contents

[3] 2019 Highlights

[4] Letter from the Executive Chairman

[5] Letter from the President & CEO

[7] Management’s Discussion and Analysis

[40] Consolidated Financial Statements

[84] Corporate Information

Continuing Organic Growth Industry-Leading Exploration Program

ERO COPPER | 2019 ANNUAL REPORT | 1

ERO COPPER | 2019 ANNUAL REPORT | 2

2019 Highlights

Operating

• Record copper production at MCSA Mining Complex of 42,318 tonnes copper in concentrate, a 39% year-on-year increase

• C1 cash costs of $0.93/lb copper produced^(*), a 22% year-on-year reduction

• At the NX Gold Mine, successfully transitioned from mining the Brás and Buracão veins to mining of the new Santo Antonio vein

Financial

• Record revenues of $284.8 million

• Record EBITDA^(*) of $141.4 million

• Record net income attributable to owners of the Company of $91.9 million ($1.01 per diluted share outstanding)

• Record cash flow from operations of $127.8 million

• Ended the year with cash and cash equivalents of $21.5 million and approximately $30 million in undrawn credit facilities

Safety

• Zero fatalities

• LTIFR of 0.99 on over seven million man-hours worked in 2019

Sustainability

• Our 2019 Sustainability Report will be published in the first half of 2020

Exploration

• Approximately 235 kilometers drilled at MCSA Mining Complex with approximately 23% allocated to regional exploration

• Several significant discoveries made at MCSA Mining Complex in 2019

• New “Super Pod” discovered within the Deepening Extension of the Pilar Mine

• Greater than 100% increase in mineral reserves at the MCSA Mining Complex, announced in October 2019

• Greater than 400% increase in mineral resources at NX Gold Mine, announced in December 2019

*EBITDA and C1 cash cost of copper produced (per lb) are non-IFRS measures – please refer to the attached Management’s Discussion and Analysis and Consolidated Financial Statements

ERO COPPER | 2019 ANNUAL REPORT | 3

Letter from the Executive Chairman

Dear Fellow Shareholders,

Ero Copper had another strong year in 2019, highlighted by significant year over year copper production growth while maintaining first-quartile operating costs at $0.93 per pound of copper produced. In addition, we continued to execute our strategy of investing in our copper operations to unlock the vast exploration potential of the Curaçá Valley.

Building upon the success of 2018, our performance in 2019 is a direct reflection of our world-class operating asset base combined with our exceptional operational teams in Brazil. The commitment to excellence and operational improvement demonstrated by our colleagues in Brazil allows us to execute our growth strategy.

At our MCSA operations, we achieved record throughput, copper grades and metallurgical recoveries in 2019. This resulted in record annual copper production, a significant 39% year-on-year increase.

At our NX Gold operations, we announced an initial three-year mine life extension in late 2019 that will serve as a solid foundation of gold production on which to build longer-term growth through exploration success. We successfully commenced mining of the San Antonio vein, which we expect to provide the foundation for the NX Gold Mine for years to come.

In 2019, we strengthened our Board of Directors with the appointment of Dr. Sally Eyre and Chantal Gosselin. These appointments added significant capital markets, financial and mining experience that complement the existing skillset of our Board of Directors.

We believe that a strong commitment to sustainability is central to our social license to operate. The investments we are making within our mining operations and within our local communities continue to support the long-term growth of the region. We are committed to responsible mining and believe that transparent reporting is imperative to the sustainability of our business. In recognition of this, we will be issuing our first sustainability report outlining this performance during the first half of 2020.

I would like to take this opportunity to thank all of our stakeholders for their continued support and, in particular, the many employees and contractors of the Company and each of the communities in which we operate.

I look forward to building on our success in 2020.

Christopher Noel Dunn

Executive Chairman

March 12, 2020

ERO COPPER | 2019 ANNUAL REPORT | 4

Letter from the President & CEO

Dear Shareholders,

2019 proved to be another great year for the Company with continued operational execution, improved financial stability and significant growth of our exploration programs during the year. I am confident the best is yet to come as we continue to grow our business.

Solid Performance in 2019

Ero Copper achieved strong operating and financial results in 2019, exceeding copper production guidance and achieving C1 cash costs well below guidance.

Following the successful construction and commissioning of the Vermelhos mine in 2018, our operational team at MCSA carried positive momentum into 2019, delivering 39% year-on-year copper production growth.

Our net earnings attributable to the owners of the Company was $91.9 million, or $1.01 per diluted share, in 2019 compared to ($3.2) million, or ($0.04) per in 2018. Cash and cash-equivalents at year-end totaled approximately $21.5 million and we ended the year with $30 million in undrawn revolving credit facilities. We are well positioned to execute on our strategy despite weakness in the spot copper price.

Additionally, our BRL per tonne mined key-performance indicators (“KPIs”) during the year showed significant year-on-year improvement in both underground and open pit mining operations while processing and indirect KPIs remained in-line.

Safety Performance

The health and safety of our employees and contractors is paramount to our business. We remain committed to improving the safety at each of our operations to ensure our team members can perform their roles safely and effectively.

We had a lost time injury frequency rate (“LTIFR”) of 0.99 in 2019, up from a record low of 0.32 in 2018 but down from 1.47 in 2017. We remain focused on continuous improvement and achieving our goal of zero lost time injuries.

Creating Value Through Exploration

We believe the exploration potential of the Curaçá Valley is immense and unlocking that value for our key stakeholders continues to be a core focus.

In 2019, we drilled approximately 235 km in the Curaçá Valley, with 26 drill rigs operating, we had one of the largest exploration programs globally. Approximately 23% of the drilling was focused on regional greenfield exploration and we expect this to increase to approximately 60% in 2020.

ERO COPPER | 2019 ANNUAL REPORT | 5

Our aggressive and exploration program in 2019 led to the significant discoveries of Baraúna and Siriema as well as a new “Super Pod” within the Deepening Extension of the Pilar Mine. Baraúna, located at the Pilar Mine, is immediately below the southern portion of the historic open pit. This combined with a new high-grade zone of mineralization in the Deepening Extension increases our confidence that we will continue to extend the mine life at Pilar well into the future. The Siriema discovery is located approximately 1.5 km south of the Vermelhos Mine and was the first target to be drilled following our regional targeting work. Siriema validates our data-driven exploration methodology and we look forward to testing our more than 140 regional exploration targets in the years ahead. It is also worth mentioning the discovery at Siriema included a zone of brecciated massive sulphide containing significant nickel, cobalt and platinum group metals, further highlighting the potential value of the Curaçá Valley as a major magmatic sulphide district.

Beyond new discoveries, our 2019 drilling programs contributed to a greater than 100% increase in mineral reserves at the MCSA mining complex and more than a 400% increase in mineral resources at the NX Gold Mine.

Outlook for 2020

I look forward to another positive year in 2020 with continued strong operational performance, completion of the HIG mill installation, commissioning of the recently installed ore sorting plant, and the execution of our 2020 exploration program.

In the year ahead, we will continue to build on the achievements of 2019 to unlock new value for our shareholders.

David Strang 

President, CEO and Director 

March 12, 2020

ERO COPPER | 2019 ANNUAL REPORT | 6

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED DECEMBER 31, 2019

ERO COPPER | 2019 ANNUAL REPORT | 7

MANAGEMENT’S DISCUSSION AND ANALYSIS

This Management’s Discussion and Analysis (“MD&A”) has been prepared as at March 12, 2020 and should be read in conjunction with the audited consolidated financial statements of Ero Copper Corp. (“Ero”, the “Company”, or “we”) as at, and for the year ended December 31, 2019, and related notes thereto, which are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”). All references in this MD&A to “Q4 2019” and “Q4 2018” are to the three months ended December 31, 2019 and December 31, 2018, respectively. All references to “Fiscal 2019”, “Fiscal 2018”, and “Fiscal 2017” are to the years ended December 31, 2019, December 31, 2018, and December 31, 2017, respectively. All dollar amounts are expressed in United States (“US”) dollars and tabular amounts are expressed in thousands of US dollars, unless otherwise indicated. References to “$” or “dollars” are to US dollars, references to “C$” are to Canadian dollars, and references to “R$” are to Brazilian Reais.

This MD&A refers to various non-IFRS measures, such as C1 cash cost of copper produced (per lb), C1 cash cost of gold produced (per ounce), EBITDA, Adjusted EBITDA, Adjusted net income attributable to owners of the Company, Adjusted net income per share attributable to owners of the Company, Working Capital (Deficit), Available Liquidity, and Net Debt. Please refer to the section titled "NON-IFRS MEASURES" within this MD&A for a discussion of non-IFRS measures.

This MD&A contains “forward-looking information” that is subject to risk factors set out in a cautionary note contained at the end of this MD&A. The Company cannot assure investors that such information will prove to be accurate, and actual results and future events may differ materially from those anticipated in such information. The results for the periods presented are not necessarily indicative of the results that may be expected for any future period. Investors are cautioned not to place undue reliance on this forward-looking information. All information contained in this MD&A is current and has been approved by the Board of Directors of the Company (the “Board”) as of March 12, 2020, unless otherwise stated.

BUSINESS OVERVIEW

Ero, headquartered in Vancouver, B.C., is focused on copper production growth from the Vale do Curaçá Property, located in Bahia, Brazil. The Company’s primary asset is a 99.6% interest in the Brazilian copper mining company, Mineraҫão Caraíba S.A. (“MCSA”), 100% owner of the Vale do Curaçá Property with over 40 years of operating history in the region. The Company currently mines copper ore from the Pilar and Vermelhos underground mines. In addition to the Vale do Curaçá Property, MCSA owns 100% of the Boa Esperanҫa development project, an IOCG-type copper project located in Pará, Brazil and the Company, directly and indirectly, owns 97.6% of the NX Gold Mine, an operating gold and silver mine located in Mato Grosso, Brazil. Additional information on the Company and its operations, including technical reports on the Vale do Curaçá, Boa Esperanҫa and NX Gold properties, can be found on the Company’s website (www.erocopper.com) and on SEDAR (www.sedar.com).

ERO COPPER | 2019 ANNUAL REPORT | 8

HIGHLIGHTS

	2019 - Q4			2019 - Q3			2019			2018 - Q4			2018
Operating Information
Copper (MCSA Operations)
Ore Processed (tonnes)		589,065			587,915			2,424,592			777,480			2,257,917
Grade (% Cu)		2.16			1.84			1.93			1.77			1.56
Cu Production (tonnes)		11,526			9,674			42,318			12,104			30,426
Cu Production (lbs)		25,411,100			21,326,717			93,295,598			26,685,324			67,076,849
Cu Sold in Concentrate (tonnes)		11,595			10,200			42,759			12,900			30,107
Cu Sold in Concentrate (lbs)		25,562,212			22,486,742			94,267,101			28,439,667			66,374,564
C1 cash cost of copper produced (per lb)	$	0.80		$	1.01		$	0.93		$	0.99		$	1.19
Gold (NX Gold Operations)
Au Production (ounces)		6,043			4,356			30,434			10,008			39,808
C1 cash cost of gold produced (per ounce)	$	980		$	1,169		$	691		$	540		$	520
Financial information ($millions, except per share amounts)
Revenues	$	75.7		$	60.6		$	284.8		$	85.1		$	233.1
Gross profit	$	31.1		$	21.3		$	117.1		$	39.0		$	82.2
EBITDA	$	34.3		$	35.1		$	141.4		$	40.2		$	70.5
Adjusted EBITDA	$	31.2		$	27.3		$	134.1		$	39.0		$	99.9
Cash flow from operations	$	35.9		$	29.5		$	127.8		$	24.0		$	82.9
Net income (loss)	$	45.4		$	16.3		$	92.5		$	11.3		$	(3.0	)
Net income (loss) attributable to owners of the Company	$	45.2		$	16.3		$	91.9		$	11.2		$	(3.2	)
Net income (loss) per share attributable to owners of the Company
- Basic	$	0.53		$	0.19		$	1.08		$	0.13		$	(0.04	)
- Diluted	$	0.49		$	0.18		$	1.01		$	0.13		$	(0.04	)
Adjusted net income attributable to owners of the Company	$	40.7		$	10.2		$	86.3		$	7.9		$	10.9
Adjusted net income per share attributable to owners of the Company
- Basic	$	0.47		$	0.12		$	1.01		$	0.09		$	0.13
- Diluted	$	0.44		$	0.11		$	0.94		$	0.09		$	0.12
Cash and Cash Equivalents	$	21.5		$	21.7		$	21.5		$	18.9		$	18.9
Working Capital (Deficit)	$	(4.9	)	$	6.4		$	(4.9	)	$	(9.3	)	$	(9.3	)
Net Debt	$	(136.4	)	$	(133.4	)	$	(136.4	)	$	(130.3	)	$	(130.3	)

ERO COPPER | 2019 ANNUAL REPORT | 9

2019 Highlights

2019 Operational Highlights

Another record year of copper production

· Increased year-on-year copper production by 39.1%, with 42,318 tonnes of copper produced in concentrate compared to 30,426 tonnes produced in 2018.

· Exceeded the Company’s 2019 original guidance of 37,000 tonnes of copper by 14.3%.

· C1 cash cost of $0.93 per pound of copper produced for 2019, $0.07 below the low-end of the Company’s 2019 guidance range of $1.00 to $1.10 per pound of copper produced.

· Total of approximately 2.4 million tonnes of ore grading 1.93% copper processed during the year producing 42,318 tonnes of copper in concentrate after average metallurgical recoveries of 90.5%.

· Advanced several key capital programs in 2019 including completion of approximately 235,000 meters of drilling, acceleration of development at Pilar and Vermelhos Mines to enhance operational flexibility and production volumes, commencement of civil works and infrastructure installation for the Company’s high-intensity grinding mill which is expected to be commissioned during Q2 2020, and installation of a 200,000 tonne per annum ore sorting plant that was commissioned in Q1 2020.

· Total annual gold and silver production at the NX Gold operations of 30,434 ounces gold and 19,641 ounces silver at C1 cash costs of $691 per ounce of gold produced.

2019 Financial Highlights

Cash position, liquidity and available lines of credit: Total cash and cash equivalents and available liquidity at December 31, 2019 was $21.5 million and $25.1 million compared to $18.9 million and $ 4.7 million, respectively, at the end of 2018. Increased liquidity is due to a reduction in the Company’s working capital deficit from $9.3 million at the end of 2018 to $4.9 million at the end of 2019, as well as an increase in the Company’s credit facilities during the year. As at the end of 2019, the Company had $14.0 million undrawn on its secured, revolving credit facility in Canada, plus an additional R$64.8 million in available undrawn lines of credit in Brazil.

Revenue: The Company increased year-on-year revenues from its copper operations at MCSA by 33.3%, totalling $246.2 million in 2019 compared to $184.7 million in 2018. The increase in revenue was attributed to the increase in year-on-year copper production.

Year-on-year decline in gold revenue from the Company’s gold operations at NX Gold was a result of decreased production volumes as we transition into the Santo Antonio vein, partially offset by increased gold prices, resulting in a net decrease in gold revenue of 20.1% totalling $38.6 million in 2019 compared to $48.4 million in 2018.

Mine gross profit: The Company significantly increased year-on-year mine gross profit from its copper operations at MCSA totaling $105.6 million in 2019 compared to $66.1 million in 2018. The increase in mine gross profit was primarily driven by increased revenues from increased copper production, and a decrease in cash costs over the prior year as a result of higher grades processed and improved metallurgical recoveries. The Company also recognized mine gross profit of $11.4 million in 2019 compared to $16.1 million in 2018 from its gold operations at NX Gold as a result of lower gold production volumes.

Net income: The Company recognized net income of $92.5 million (net income per share of $1.08) in 2019 compared to a net loss of $3.0 million in 2018 (loss per share of $0.04), attributable to increased mine gross profit, a recovery related to value added taxes previously paid on sales in Brazil, and the recognition of available tax losses and tax credits in MCSA.

During the year, the Company recognized a recovery of $21.6 million in net income related to value added taxes previously paid on sales in Brazil. The recovery was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant taxing authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim, for which approval was received in July 2019. These credits can be used to offset a variety of other taxes, including income taxes and taxes on future sales.

ERO COPPER | 2019 ANNUAL REPORT | 10

In addition, the Company recognized a $28.3 million net deferred tax recovery primarily resulting from the recognition of available tax losses and tax credits in MCSA. At December 31, 2019, the Company considered the taxable income generated since acquisition of MCSA and forecasted future taxable income and determined that it was now considered probable that the benefit of these losses and tax credits in MCSA would be realized.

Q4 2019 Highlights

Q4 Operational Highlights

Continued Strong Performance at MCSA Operations

· 589,065 tonnes processed grading 2.16% copper producing 11,526 tonnes of copper in concentrate after metallurgical recoveries that averaged 90.7% during the period.

· C1 cash cost of $0.80 per pound of copper produced during Q4 2019, a $0.21 per pound improvement over the third quarter, resulting in full-year 2019 C1 cash costs of $0.93 per pound of copper produced.

Exploration focus turns to regional greenfield targets in 2020

· One of the most comprehensive exploration programs underway globally with 26 drill rigs operating within the Curaçá Valley plus an additional four drill rigs operating at the NX Gold Mine.

· Prior to the end of the quarter, the Company released its fourth quarter exploration results outlining continued success within the Curaçá Valley including two new regional discoveries at N1 South and Vermelhos North, the identification of the “Keel Zone” - a nickel-platinum-group metals rich zone at Siriema in the Vermelhos District, plus the most significant set of holes drilled to date in the Deepening Extension of the Pilar Mine.

· Within the Vermelhos District, where 12 drill rigs are currently operating, the identification of a brecciated massive sulphide zone within the Siriema deposit containing copper, nickel, cobalt and platinum, palladium, rhodium and gold (“3PGE+Au”) was released. Results were highlighted by hole FSI-40 that intersected 9.1 meters grading 2.66% copper, 1.74% nickel, 0.07% cobalt and 1.46 grams per tonne 3PGE+Au including 5.6 meters grading 3.37% copper, 2.59% nickel, 0.10% cobalt, and 2.08 grams per tonne 3PGE+Au. The zone remains open at depth and has been delineated over approximately 150 meters in strike length, 105 meters down plunge and over an average thickness of 10 meters. The results of the multi-element analysis at Siriema represents the first evidence in the history of the Curaçá Valley of a consistent zone of elevated nickel and platinum-group metals (“PGMs”). Work continues to test the extension of the zone to depth and to the north is planned in 2020.

· In the Pilar District, where 11 drill rigs are currently operating, drilling in the Deepening Extension zone continues to significantly extend the known extent of high-grade copper mineralization at the mine both with respect to thickness and grade. The latest results are indicative of the emergence of a new high-grade mineralized chamber, or “Superpod”, highlighted by hole FC5616 that intersected 51.8 meters grading 3.49% copper including 33.4 meters grading 4.96% copper and hole FC5615 that intersected 62.5 meters grading 1.65% copper including 26.1 meters grading 2.37% copper. These results are complemented by previously announced intercepts FC47142 that intersected 34.7 meters grading 2.29% copper including 18.6 meters grading 3.15% copper and hole FC47139 that intersected 7.1 meters grading 6.50% copper including 4.1 meters grading 9.01% copper, both located on section 47, approximately 400 meters south of the new intercepts on section 56 (as referenced in the Company’s press release dated September 12, 2019).

· Three drill rigs are currently operating on regional exploration targets within the Surubim District.

ERO COPPER | 2019 ANNUAL REPORT | 11

Q4 NX Gold Operational Highlights

· Q4 2019 gold and silver production at the Company’s high-grade NX Gold Mine of 6,043 ounces of gold and 4,315 ounces of silver, a 39% improvement over the third quarter as first ore from the Santo Antonio vein was mined and processed.

· 43,207 tonnes grading 6.32 grams per tonne gold processed during the period, producing 6,043 ounces of gold after metallurgical recoveries that averaged 68.9% during Q4 2019.

· Fourth quarter C1 cash cost of $980 per ounce of gold produced, resulting in full year 2019 C1 cash costs of $691 per ounce of gold produced.

· The Company expects production to stabilize throughout 2020 as production reaches planned capacity from the Santo Antonio vein.

· An updated NI 43-101 (as defined herein) compliant mineral resource and mineral reserve estimate, and associated mine plan, was announced in the fourth quarter of 2019, outlining an updated, high-grade mineral reserve demonstrating a production profile averaging 40,500 oz per year over an initial three-year mine life.

· Four drill rigs are currently operating at the NX Gold Mine and exploration efforts are focused on conversion of the inferred portions of the Santo Antonio vein discovery and extensions of the Brás vein aimed at further increasing the life-of-mine.

Q4 Financial Highlights

Revenue: Revenues from the Company’s copper operations at MCSA decreased by 6.4% from $72.3 million in Q4 2018 to $67.7 million in Q4 2019. The decrease in revenue was attributed to the decrease in copper production.

Revenues from the Company’s gold operations at NX Gold decreased 37.1% from $12.8 million in Q4 2018 to $8.0 million in Q4 2019. The decline was primarily a result of decreased production volumes, partially offset by increased gold prices.

Mine gross profit: Mine gross profit from the Company’s copper operations at MCSA totaled $30.4 million in Q4 2019 compared to $33.9 million in Q4 2018. The decrease in mine gross profit was primarily driven by decreased revenues from decreased copper production, partially offset by a decrease in cash costs over the comparative period as a result of higher grades processed and improved metallurgical recoveries. The Company also recognized mine gross profit of $0.6 million in Q4 2019 compared to $0.6 million in Q4 2018 from its gold operations at NX Gold.

Net income: The Company recognized net income of $45.4 million (net income per share of $0.53) in Q4 2019 compared to a net income of $11.3 million in Q4 2018 (net income per share of $0.13), primarily attributable the recognition of available tax losses and tax credits in MCSA.

During Q4 2019, the Company recognized a $27.4 million net deferred tax recovery primarily resulting from the recognition of available tax losses and tax credits in MCSA. At December 31, 2019, the Company considered the taxable income generated since acquisition of MCSA and forecasted future taxable income and determined that it was now considered probable that the benefit of these losses and tax credits in MCSA would be realized.

ERO COPPER | 2019 ANNUAL REPORT | 12

REVIEW OF OPERATIONS

Mineração Caraíba S.A. (Vale do Curaçá):

	2019 - Q4		2019 - Q3		2019		2018 - Q4		2018
Operating Information
Copper (MCSA Operations)
Ore Processed (tonnes)		589,065		587,915		2,424,592		777,480		2,257,917
Grade (% Cu)		2.16		1.84		1.93		1.77		1.56
Cu Production (tonnes)		11,526		9,674		42,318		12,104		30,426
Cu Production (lbs)		25,411,100		21,326,717		93,295,598		26,685,324		67,076,849
Concentrate Grade (% Cu)		35.0		33.7		34.8		34.5		34.5
Recovery (%)		90.7		89.2		90.5		87.8		86.3
Concentrate Sales (tonnes)		33,926		29,142		122,966		37,801		87,307
Cu Sold in Concentrate (tonnes)		11,595		10,200		42,759		12,900		30,107
Cu Sold in Concentrate (lbs)		25,562,212		22,486,742		94,267,101		28,439,667		66,374,564
C1 cash cost of copper produced (per lb)	$	0.80	$	1.01	$	0.93	$	0.99	$	1.19

MCSA operations continued to perform well during the fourth quarter, with a significant increase in both tonnes and grade mined from Pilar. During the quarter, 433,258 tonnes of ore were mined grading 1.73% copper, a 19% increase in tonnes mined, and a 15% increase in grade over the prior quarter (362,667 tonnes mined grading 1.51% copper during third quarter). At Vermelhos, production volumes were in-line with the prior quarter with 185,045 tonnes mined. Average grades mined at Vermelhos declined slightly to 3.39% copper due to normal stope sequencing. Increases in tonnage and grade mined from the Pilar mine resulted in a significant improvement in total contained copper, with a total of 618,303 tonnes mined grading 2.22% copper during the period. For the full year 2019, a total of approximately 2.46 million tonnes grading 1.98% copper was mined.

At the Company’s milling operations, 589,065 tonnes of ore grading 2.16% copper was processed during Q4 2019. Metallurgical recoveries averaged 90.7% during the period, resulting in average full-year 2019 recovery of 90.5%, an improvement over the Company’s guidance of 90.0%. During 2019, a total of 2.42 million tonnes of ore was processed grading 1.93% copper, resulting in the production of 42,318 tonnes of copper in concentrate. The benefit of several low-cost milling and flotation improvement initiatives undertaken at the end of 2018 have continued to support strong metallurgical performance in 2019. Going forward, improved metallurgical performance remains a key focus area of the Company, complimented by the high-intensity regrind mill project, currently underway.

The Company’s regrind mill project, sanctioned during the first quarter of 2019, remains on-budget and on-track for equipment delivery during the first quarter of 2020 with commissioning and ramp-up during the second quarter of 2020. A significant improvement in overall metallurgical recoveries of 3% to 4% and plant performance beyond those already realized are expected once the new mill is operational.

In addition to the regrind mill project, the Company completed delivery of a 200,000 tonne per annum ore sorting plant at the end of 2019. Construction of associated infrastructure was completed in the fourth quarter of 2019, and commissioning occurred during first quarter 2020, subsequent to the end of the year. The Company aims to test a variety of ore sources and grades from different deposits throughout the Curaçá Valley over the course of the first half of 2020 with the aim of better evaluating the potential of pre-concentration. The ore sorting project represents an investment in longer-term potential value optimization for deposits within the Company’s current portfolio.

ERO COPPER | 2019 ANNUAL REPORT | 13

C1 cash cost averaged $0.80 and $0.93 per pound of copper produced, respectively, during the three and twelve-month period ended December 31, 2019. C1 cash costs during the fourth quarter reflect the increase in contained copper produced driven by mill head-grades, resulting in a $0.21 decrease in C1 cash costs compared to third quarter. As a result of the Company’s increased production, and favorable prevailing foreign exchange rates, C1 cash costs for the full year came in $0.07 below the low end of the Company’s guidance of $1.00-$1.10 per pound of copper produced.

Subsequent to the end of the quarter, the Company announced its production, cash cost, and capital guidance for 2020. The Company provided annual copper production guidance of 41,000 to 43,000 tonnes of copper in concentrate at C1 cash costs between $0.85 and $ 0.95 per pound of copper produced. Capital cost guidance for 2020 is $74 million, with an additional $28 million to fund the 2020 exploration program through the end of Q3 2020. The program is designed to complete approximately 172,000 meters of drilling through the end of Q3 2020, an annualized run rate of approximately 230,000 meters of drilling. By year end, the Company expects that 60% of total drilling will be allocated to testing new greenfield targets identified through the Company’s airborne geophysical survey and ongoing data analysis.

In support of its strategy to drive organic growth of the Company through exploration and new project delivery, Ero will continue to run one of the most comprehensive drill programs globally throughout 2020. With 26 drill rigs currently operating, the Company remains focused on using a data driven approach to exploration. This program has already resulted in several new discoveries since 2016 including two new discoveries announced in the fourth quarter at N1 South and Vermelhos North, as well as the identification of a nickel-PGM rich zone at Siriema.

In the Vermelhos District, approximately 80 kilometers to the north of the Caraíba Mill complex, which includes the high-grade operating Vermelhos Mine, exploration continues to focus on continued testing of high-value exploration targets surrounding the Vermelhos Mine. Systematic testing of targets along the previously identified 10-kilometer trend of soil and induced polarization (“IP”) anomalies along the Paredao Antiform (known as the “Vermelhos System”) is ongoing, with the most recent discoveries of N1 South and Vermelhos North representing the current known southern and northern extent of the Vermelhos System, respectively.

In-mine exploration in the Vermelhos District also continues to deliver results as new mineralization was identified beneath the Toboggan and Sombrero orebodies with the most significant intercept returning 6.4 meters at 5.03% copper, as well as in the East Zone, where drilling in the deep portion of the East Zone returned 8.4 meters grading 4.02% copper at a depth of approximately 450 meters below surface. In-mine exploration at Vermelhos in 2020 will continue to test targets beneath the known extent of mineralization in the main orebody, as well the vertical extent of the East Zone.

In addition to in-mine exploration, drilling within the broader Vermelhos System remains focused on advancing the Siriema and N8/N9 deposits. Drilling at Siriema in the fourth quarter was focused on testing high priority areas within the “keel zone”, a high-grade zone of brecciated massive sulphide containing copper-nickel and PGMs, identified through down-hole electromagnetic (“EM”) surveys. Results were highlighted by hole FSI-40 which intersected 9.1 meters grading 2.66% copper, 1.74% nickel, 0.07% cobalt and 1.46 grams per tonne 3PGE+Au. Drilling at N8/N9 during the period was focused on testing the extent of known mineralization, as well as the high-grade zones within each orebody. The planned 2020 exploration program will continue to delineate the extent of the “keel zone” at Siriema and the extent of the N8/N9 orebodies.

During the fourth quarter, the Company re-prioritized drilling of the Deepening Extension where a new set of deep drill holes, drilled down plunge to the north have intersected thick and high-grade mineralization indicative of a newly identified mineralized chamber, or “Superpod”, in the Deepening. In addition, drilling of the Baraúna and South Extension zones continued to confirm extensions of mineralization within these zones.

ERO COPPER | 2019 ANNUAL REPORT | 14

Drilling in the Deepening Extension is currently targeting mineralization on the East Limb of the Pilar Mine between level -725 and level -1300 approximately 1,200 meters to 1,750 meters below surface and approximately 100 meters laterally from the current level of the primary ramp (completed to level -925). Underground drilling during the period continued work that commenced in mid-2019 to re-prioritize testing of the known extent of mineralization within the zone, including down-plunge exploration drilling beneath the deepest known extents of mineralization within the Pilar Mine. The results during the fourth quarter are among the most significant holes on a grade-meter basis drilled by the Company in the Pilar Mine since acquisition of the Vale do Curaçá Property in 2016. Results were highlighted by hole FC5616 that intersected 51.8 meters grading 3.49% copper including 33.4 meters grading 4.96% copper and hole FC5615 that intersected 62.5 meters grading 1.65% copper including 26.1 meters grading 2.37% copper. These results are complemented by the previously announced intercepts of FC47142 that intersected 34.7 meters grading 2.29% copper including 18.6 meters grading 3.15% copper and hole FC47139 that intersected 7.1 meters grading 6.50% copper including 4.1 meters grading 9.01% copper, both located on section 47, approximately 400 meters south of the new intercepts on section 56. Exploration results from the Deepening Extension continue to support the belief that the Pilar Mine is open at depth, where high-grade mineralization continues to be encountered approximately 350 meters below the deepest level of current development at the mine. Currently, five drill rigs are positioned to drill the Deepening, targeting resource conversion and testing the extent of the mineralization to the North, South, and at depth.

Elsewhere within the Pilar underground mine, drilling at Baraúna was performed from surface targeting mineralization beneath the southern portion of the open pit mine and extensions of mineralization to the south. Results were highlighted by hole FC1923 that intersected 31.8 meters grading 0.83% copper including 7.0 meters grading 1.31% copper immediately beneath the south pit wall and FC0901 that intersected 4.5 meters grading 0.44% copper from 19.6 meters down hole, approximately 200 meters south of the known limit of mineralization within the Pilar Mine. While results to date in this area are low-grade disseminated mineralization, additional geophysical work is ongoing to better refine high-grade targeting in this zone. Drilling in the South Extension continued to confirm the continuity of the orebody to the south, and current drilling is testing the extent of this zone at depth and to the South.

ERO COPPER | 2019 ANNUAL REPORT | 15

NX Gold S.A.

	2019 - Q4			2019 - Q3			2019			2018 - Q4			2018
Operating Information
Gold (NX Gold Operations)
Ore mined (tonnes)		40,453			33,601			154,271			37,950			119,469
Ore milled (tonnes)		43,207			34,813			158,275			38,464			117,857
Head grade (grams per tonne Au)		6.32			4.51			6.98			8.85			11.55
Recovery (%)		68.9	%		86.2	%		85.7	%		91.5	%		91.0	%
Gold ounces produced (oz)		6,043			4,356			30,434			10,008			39,808
Silver ounces produced (oz)		4,315			2,909			19,641			6,186			24,700
Gold sold (oz)		5,810			4,579			29,755			10,603			39,808
Silver sold (oz)		4,247			2,999			19,142			6,752			24,700
C1 cash cost of gold produced (per ounce)	$	980		$	1,169		$	691		$	540		$	520

The fourth quarter at the NX Gold Mine was a continuation of transitioning mining activity to the Santo Antonio vein. During the period, remaining exposed ore blocks continued to be mined from the Brás vein, while development and mining activities ramped up within Santo Antonio. As a result of first production from the Santo Antonio vein, ore production and grade were 20% and 30% improved versus the third quarter, respectively. During the fourth quarter, 43,207 tonnes of ore grading 6.32 grams per tonne of gold was processed, producing 6,043 ounces of gold and 4,315 ounces of silver as by-product after metallurgical recoveries that averaged 68.9%. Recoveries during the quarter were adversely impacted due to the transition of ore feed from Brás to Santo Antonio. Recoveries are expected to improve in the first quarter and throughout 2020. C1 cash costs averaged $980 per ounce of gold produced. For the full year, the NX Gold Mine produced 30,434 ounces of gold at C1 cash costs of $691 per ounce.

In the fourth quarter, the Company released its National Instrument 43-101, Standards of Disclosure for Mineral Projects (“NI 43-101”) compliant Mineral Resource and Mineral Reserve estimate outlining a significantly improved Mineral Reserve extending mine-life by three years and demonstrating average annual production of 40,500 ounces of gold. Subsequent to the end of the quarter, the Company released 2020 production, cash cost, and capital expenditure guidance for the NX Gold Mine. The Company expects to produce 38,000 to 40,000 ounces of gold at C1 cash costs of $475 to $575 per ounce. Capital costs are expected to be $6.0 million, plus an additional $3.5 million allocated to exploration for 2020.

Following the release of the NI 43-101 compliant Mineral Resource and Mineral Reserve estimate and mine plan in the fourth quarter, the exploration focus at NX Gold has shifted to infill drilling of the inferred portions of the Santo Antonio orebody with the focus of converting additional mineralization into measured and indicated mineral resources. The regional exploration program continues to work to identify new targets within the Company’s significant land holding in Mato Grosso. There are currently four drill rigs operating on the property.

ERO COPPER | 2019 ANNUAL REPORT | 16

2020 Guidance/Outlook

· Annual production guidance for the Curaçá Valley operations of 41,000 to 43,000 tonnes of copper in concentrate.

· C1 cash cost guidance of US$0.85 to US$0.95 per pound of copper produced and capital expenditure guidance of US$74.0 million^[1].

· An additional US$28 million^[1] to fund the 2020 exploration program in the Curaçá Valley. The program is highlighted by 172,000 meters of planned exploration drilling through September 2020, an annualized rate of approximately 230,000 meters, of which approximately 60% is planned for regional exploration including drill testing of new greenfield targets identified during the Company’s airborne geophysical survey and ongoing data analysis. This compares to approximately 235,000 meters drilled during 2019 of which only 23% was allocated to regional exploration.

· Annual production guidance for the NX Gold Mine of 38,000 to 40,000 ounces of gold at C1 cash costs of US$475 to US$575 per ounce of gold produced. Annual capital expenditure guidance for the NX Gold Mine of US$5.7 million plus US$3.5 million^[1] in ongoing exploration expenditures.

^[1] Capital and operating cost guidance presented in USD assuming a R$ / $ foreign exchange rate of 4.00.

2020 Production Outlook

	2019 Original			2019 Revised						2020
Curaçá Valley Operations	Guidance			Guidance			2019 Result			Guidance[1]
Tonnes Processed		2,050,000			2,350,000			2,424,592			2,150,000
Copper Grade (% Cu)		2.00	%		1.95	%		1.93	%		2.15	%
Copper Recovery (%)		88.0	%		90.0	%		90.5	%		91.0	%
Cu Production (000 tonnes)		36.0 - 38.0			40.0 - 42.0			42.3			41.0 - 43.0

	2019 Original		2019 Revised					2020
NX Gold Operations	Guidance		Guidance		2019 Result			Guidance[1]
Tonnes Processed		-		-		158,275			150,000
Gold Grade (gpt)		-		-		6.98			9.00
Gold Recovery (%)		-		-		85.7	%		90.0	%
Au Production (000 ounces)		-		-		30.4			38.0 - 40.0
Ag Production (000 ounces)		-		-		19.6			n/a

⁽¹⁾ Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s AIF (as defined herein) for complete risk factors.

2020 Cash Cost Guidance

The Company’s guidance for 2020 assumes a R$ / $ foreign exchange rate of 4.00, gold price of $1,450 per ounce and silver price of $17.00 per ounce.

	2019 Revised
	Guidance		2019 Result		2020 Guidance
Curaçá Valley C1 Cash Cost Guidance (US$/lb)[1]		$1.00 - $1.10		$0.93		$0.85 - $0.95
NX Gold Mine C1 Cash Cost Guidance (US$/oz)[1]		n/a		$691		$475 - $575

⁽¹⁾ Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s SEDAR filings for complete risk factors.

ERO COPPER | 2019 ANNUAL REPORT | 17

2020 Capital Expenditure Guidance

The Company’s capital expenditure guidance for 2020 assumes a R$ / $ foreign exchange rate of 4.00 and has been presented below in USD millions. Capital expenditure guidance, including discretionary capital for 2020, is based on a budgeted copper price of US$2.65 per pound of copper.

Curaçá Valley / Copper Operations	2019 Revised Guidance		2020 Guidance
Pilar Mine and Caraíba Mill Complex[1]	$	45.0	$	58.0
Vermelhos Mine	$	20.0	$	16.0
Boa Esperanҫa Project	$	1.0	$	0.2
Capital Expenditure Guidance	$	66.0	$	74.2
Curaçá Valley Exploration[2]	$	30.0	$	28.0

NX Gold Operations	2019 Guidance		2020 Guidance
Capital Expenditure Guidance		n/a	$	5.7
Exploration[2]		n/a	$	3.5
Total, NX Gold		n/a	$	9.2

^[1]   Pilar Mine and Caraíba Mill Complex capital expenditure guidance for 2020 includes completion of the high-intensity grinding mill and operation of the ore-sorting pilot plant.

^[2]   Exploration capital expenditure guidance for 2020 has been forecast through September of 2020 and, as with prior guidance, is dependent, in part, on future exploration success and subject to further review and revision.

Mineração Caraíba S.A.

Copper production from the Curaçá Valley operations for 2020 is expected to be between 41,000 and 43,000 tonnes, with ore fed solely from the Pilar and Vermelhos underground mines. Production from the Pilar Mine is expected to contribute a total of approximately 1.4 million tonnes grading 1.40% copper while production from the Vermelhos Mine is expected to contribute a total of approximately 750,000 tonnes grading 3.50% copper resulting in a blended mill head grade of approximately 2.15% copper.

NX Gold S.A.

Approximately 150,000 tonnes of ore will be mined and processed from the Santo Antonio vein in 2020 at an average grade of 9.00 grams per tonne of gold. Following average metallurgical recoveries of 90.0%, Gold production from the NX Gold Mine is expected to reach 38,000 to 40,000 ounces.

Boa Esperança

A full review of the Boa Esperança Feasibility Study¹ remains ongoing with the goal of extending the potential mine life and increasing copper production among other desktop optimization initiatives. The Company expects to provide an update on these initiatives during the first half of 2020.

^1. As defined herein under “NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION”.

ERO COPPER | 2019 ANNUAL REPORT | 18

REVIEW OF FINANCIAL RESULTS

The following table provides a summary of the financial results of the Company for Q4 2019 and Q4 2018. Tabular amounts are in thousands of US dollars, except share and per share amounts.

			Three months ended			Three months ended
	Notes		December 31, 2019			December 31, 2018
Revenue		1	$	75,688		$	85,084
Cost of product sold		2		(43,017	)		(44,661	)
Sales expenses				(1,595	)		(1,441	)
Gross profit				31,076			38,982
Expenses
General and administrative		3		(12,707	)		(10,456	)
Share-based compensation				(1,304	)		(723	)
Income before the undernoted				17,065			27,803
Other income (expenses)
Finance income				358			773
Finance expense		4		(2,014	)		(6,776	)
Foreign exchange gain		5		4,423			7,433
Loss on debt settlement		6		-			(5,476	)
Other income (expense)		7		368			(5,625	)
Income before income taxes				20,200			18,132
Income tax recovery (expense)
Current		8		(2,232	)		(1,853	)
Deferred		8		27,441			(4,999	)
				25,209			(6,852	)
Net income for the period				45,409			11,280
Other comprehensive income
Foreign currency translation gain				6,528			3,830
Comprehensive income			$	51,937		$	15,110
Net income attributable to:
Owners of the Company			$	45,169		$	11,210
Non-controlling interests				240			70
			$	45,409		$	11,280
Comprehensive income attributable to:
Owners of the Company			$	51,671		$	15,026
Non-controlling interests				266			84
			$	51,937		$	15,110
Net income per share attributable to owners of the Company
Net income per share
Basic			$	0.53		$	0.13
Diluted			$	0.49		$	0.13
Weighted average number of common shares outstanding
Basic				85,620,168			84,504,954
Diluted				91,670,988			88,638,656

ERO COPPER | 2019 ANNUAL REPORT | 19

Notes:

1. Revenues for Q4 2019 from copper sales was $67.7 million (Q4 2018 - $72.3 million), which included the sale of 11,595 copper tonnes in concentrate as compared to 12,900 copper tonnes for Q4 2018. The Company processed 24% less ore at a higher ore grade during Q4 2019 compared to Q4 2018. Revenues for Q4 2019 from gold sales was $8.0 million (Q4 2018 - $12.8 million), which included the sale of 5,810 ounces of gold, compared to 10,603 ounces of gold for Q4 2018.

2. Cost of product sold for Q4 2019 from copper sales was $35.6 million (Q4 2018 - $36.9 million) which consisted of $11.1 million (Q4 2018 - $9.3 million) in depreciation and depletion, $9.4 million (Q4 2018 - $8.5 million) in salaries and benefits, $4.6 million (Q4 2018 - $5.7 million) in materials and consumables, $4.3 million (Q4 2018 - $7.3 million) in contracted services, $3.9 million (Q4 2018 - $3.4 million) in maintenance costs, $2.2 million (Q4 2018 - $2.5 million) in utilities, and $0.2 million (Q4 2018 - $0.2 million) in other costs.

Cost of product sold for Q4 2019 from gold sales was $7.4 million (Q4 2018 - $7.8 million) which primarily comprised of $2.2 million (Q4 2018 - $1.8 million) in salaries and benefits, $1.2 million (Q4 2018 - $0.8 million) in contracted services, $1.2 million (Q4 2018 - $1.4 million) in maintenance costs, $1.1 million (Q4 2018 - $1.3 million) in materials and consumables, $0.9 million (Q4 2018 - $1.8 million) in depreciation and depletion, and $0.7 million (Q4 2018 - $0.6 million) in utilities.

3. General and administrative expenses for Q4 2019 include $10.3 million (Q4 2018 - $3.8 million) with respect to MCSA for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, $0.5 million (Q4 2018 - $1.8 million) with respect to NX Gold for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, and $1.9 million (Q4 2018 - $4.8 million) with respect to the corporate head office in Vancouver. Corporate head office costs are primarily comprised of $1.4 million (Q4 2018 - $4.0 million) in salaries, incentive payments, and consulting fees, $0.3 million (Q4 2018 - $0.2 million) in travel-related costs, and $0.2 million (Q4 2018 - $0.4 million) in professional fees. Increases in general and administrative expenses in Q4 2019 as compared to Q4 2018 reflect the growth of operations, which included higher headcounts, incentive payments for exceeding board-mandated performance targets during 2019, as well as rate increases related to annual union contract negotiations at MCSA.

4. Finance expense for Q4 2019 was $2.0 million (Q4 2018 - $6.8 million) and is primarily comprised of interest on loans at the corporate head office of $2.0 million (Q4 2018 - $1.5 million), interest on loans and borrowings at MCSA and NX Gold of $0.7 million (Q4 2018 - $3.1 million), commitment fees of $0.5 million (Q4 2018 - $0.6 million), partially offset by other finance income of $1.0 million (Q4 2018 - $2.0 million), and the reduction of asset retirement obligation accretion of $0.2 million (Q4 2018 - accretion of $3.8 million). Interest on loans and borrowings at MCSA and NX Gold decreased due to the repayments of certain loans during 2018 and 2019.

5. Foreign exchange gain for Q4 2019 was $4.4 million (Q4 2018 - $7.4 million). This amount is primarily comprised of a foreign exchange gain on USD denominated debt of $3.8 million (Q4 2018 - $4.8 million) in MCSA for which the functional currency is the Brazilian Real and a foreign exchange gain on unrealized derivative contracts of $1.4 million (Q4 2018 - $4.0 million), partially offset by a foreign exchange loss on realized derivative contracts of $0.5 million (Q4 2018 - $1.0 million). The decrease in foreign exchange gains was primarily a result of the foreign exchange rate between the Brazilian Real and the US dollar fluctuating less during Q4 2019 as compared to Q4 2018 and a decrease in the outstanding USD denominated debt held in MCSA.

6. In Q4 2018, the Company recognized a loss on settlement of debt of $5.5 million, comprising of a $3.7 million loss in early repayment fees for the settlement of certain debt in MCSA and a $1.8 million loss in loan settlement fees when the Company replaced its $50 million senior secured non-revolving credit facility with a $130 million facility from a syndicate of Canadian financial institutions.

7. Other income for Q4 2019 was $0.4 million (Q4 2018 - other expense of $5.6 million). Other income for Q4 2019 was not significant. Other expense in Q4 2018 primarily consisted of the write-off of state tax credits claimed that were deemed not recoverable for MCSA and NX Gold of $2.6 million and $1.6 million, respectively.

8. In Q4 2019, the Company recognized a $25.2 million income tax recovery (Q4 2018 - income tax expense of $6.9 million), primarily resulting from the recognition of available tax losses and tax credits in MCSA and partially offset by current tax expense in the period. At December 31, 2019, the Company considered the taxable income generated since acquisition of MCSA and forecasted future taxable income and determined that it was now considered probable that the benefit of these losses and tax credits in MCSA would be realized.

ERO COPPER | 2019 ANNUAL REPORT | 20

The following table provides a summary of the financial results of the Company for Fiscal 2019, Fiscal 2018, and Fiscal 2017. Tabular amounts are in thousands of US dollars, except share and per share amounts.

		Year ended			Year ended			Year ended
	Notes	December 31, 2019			December 31, 2018			December 31, 2017
Revenue	1	$	284,843		$	233,105		$	148,241
Cost of product sold	2		(162,817	)		(147,611	)		(128,009	)
Sales expenses			(4,962	)		(3,268	)		(2,225	)
Gross profit			117,064			82,226			18,007
Expenses
General and administrative	3		(32,817	)		(29,000	)		(22,940	)
Share-based compensation			(5,792	)		(3,225	)		(879	)
Income before the undernoted			78,455			50,001			(5,812	)
Other income (expenses)
Finance income			701			1,303			2,276
Finance expense	4		(20,428	)		(22,562	)		(20,709	)
Foreign exchange loss	5		(5,148	)		(20,713	)		(4,296	)
Loss on debt settlement	6		(1,783	)		(5,476	)		28,727
Recovery of value added taxes	7		21,584			-			-
Other income (expense)			1,448			108			1,788
Income before income taxes			74,829			2,661			1,974
Income tax recovery (expense)
Current	8		(10,645	)		(2,899	)		(1,104	)
Deferred	8		28,271			(2,753	)		16,614
			17,626			(5,652	)		15,510
Net income (loss) for the period			92,455			(2,991	)		17,484
Other comprehensive income (loss)
Foreign currency translation loss			(4,941	)		(27,801	)		(973	)
Comprehensive income (loss)		$	87,514		$	(30,792	)	$	16,511
Net income attributable to:
Owners of the Company		$	91,883		$	(3,155	)	$	22,466
Non-controlling interests			572			164			(4,982	)
		$	92,455		$	(2,991	)	$	17,484
Comprehensive income (loss) attributable to:
Owners of the Company		$	86,962		$	(30,845	)	$	21,497
Non-controlling interests			552			53			(4,986	)
		$	87,514		$	(30,792	)	$	16,511
Net income per share attributable to owners of the Company
Net income per share
Basic		$	1.08		$	(0.04	)	$	0.40
Diluted		$	1.01		$	(0.04	)	$	0.34
Weighted average number of common shares outstanding
Basic			85,244,277			83,927,977			56,252,358
Diluted			91,390,425			83,927,977			66,003,387
Cash and cash equivalents		$	21,485		$	18,941		$	51,098
Total assets		$	462,674		$	360,439		$	381,343
Non-current liabilities		$	183,135		$	196,352		$	196,265

ERO COPPER | 2019 ANNUAL REPORT | 21

Notes:

1. Revenues for Fiscal 2019 from copper sales was $246.2 million (Fiscal 2018 - $184.7 million) which included the sale of 42,759 copper tonnes in concentrate in Fiscal 2019 as compared to 30,107 copper tonnes in Fiscal 2018. The increase in revenue in Fiscal 2019 as compared to Fiscal 2018 includes production from the Vermelhos mine which commenced commercial production in October 2018. The Company processed 64% more ore at a higher ore grade during Fiscal 2019 as compared to Fiscal 2018. In addition, revenues for Fiscal 2019 included $38.6 million (Fiscal 2018 - $48.4 million) from the sale of 29,755 (Fiscal 2018 - 39,808) ounces of gold from NX Gold operations.

2. Cost of product sold for Fiscal 2019 from copper sales was $135.6 million (Fiscal 2018 - $115.3 million), which consisted of $40.1 million (Fiscal 2018 - $34.1 million) in depreciation and depletion, $33.7 million (Fiscal 2018 - $29.7 million) in salaries and benefits, $20.5 million (Fiscal 2018 - $17.6 million) in contracted services, $17.9 million (Fiscal 2018 - $14.9 million) in materials and consumables, $14.1 million (Fiscal 2018 - $10.8 million) in maintenance costs, $8.7 million (Fiscal 2018 - $7.5 million) in utilities, and $0.7 million (Fiscal 2018 - $0.7 million) in other costs. Cost of products sold during Fiscal 2019 increased 18% as compared to Fiscal 2018. Higher recoveries, higher ore grade, and efficiencies contributed towards cost containment relative to the increase in production volume. The increase in cost of products sold in Fiscal 2019 compared to Fiscal 2018 was primarily due to more copper being produced and sold as a result of the commencement of production at the Vermelhos underground mine in October 2018.

Cost of product sold during Fiscal 2019 from gold sales was $27.2 million (Fiscal 2018 - $32.3 million), which comprised of $5.9 million (Fiscal 2018 - $11.1 million) in depreciation and depletion, $7.1 million (Fiscal 2018 - $6.4 million) in salaries and benefits, $4.3 million (Fiscal 2018 - $5.0 million) in maintenance costs, $3.9 million (Fiscal 2018 - $4.5 million) in materials and consumables, $3.2 million (Fiscal 2018 - $3.2 million) in contracted services, $2.5 million (Fiscal 2018 - $1.8 million) in utilities, and $0.3 million (Fiscal 2018 - $0.3 million) in other costs.

3. General and administrative expenses during Fiscal 2019 include $21.0 million (Fiscal 2018 - $16.3 million) with respect to MCSA for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, $2.3 million (Fiscal 2018 - $3.4 million) with respect to NX Gold for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims and $9.5 million (Fiscal 2018 - $9.3 million) with respect to the corporate head office in Vancouver. Corporate head office costs are primarily comprised of $6.7 million (Fiscal 2018 - $6.4 million) in salaries, incentive payments, and consulting fees, $1.2 million (Fiscal 2018 - $0.9 million) in travel-related costs, $0.7 million (Fiscal 2018 - $1.0 million) in office and sundry costs, and $0.5 million (Fiscal 2018 - $0.9 million) in professional fees. Increases in general and administrative expenses in Fiscal 2019 as compared to Fiscal 2018 reflect the growth of operations, which included higher headcounts, incentive payments for exceeding board-mandated performance targets during 2019, as well as rate increases related to annual union contract negotiations at MCSA.

4. Finance expense for Fiscal 2019 was $20.4 million (Fiscal 2018 - $22.6 million) and is primarily comprised of interest on loans at the corporate head office of $8.3 million (Fiscal 2018 - $5.4 million), interest on loans and borrowings at MCSA and NX Gold of $2.9 million (Fiscal 2018 - $9.6 million), the accretion of asset retirement obligations of $3.5 million (Fiscal 2018 - $3.8 million), commitment fees of $1.7 million (Fiscal 2018 -$0.6 million), and other finance expenses of $3.1 million (Fiscal 2018 - $2.6 million). Interest on loans and borrowings at MCSA and NX Gold decreased due to the repayments of certain loans during 2018 and 2019, while interest on loans at the corporate head office increased due to the senior secured non-revolving credit facility entered into in December 2018, the proceeds of which were used to repay or settle debt at MCSA.

5. Foreign exchange loss for Fiscal 2019 was $5.1 million (Fiscal 2018 - $20.7 million), primarily comprised of a foreign exchange loss on US denominated debt of $4.4 million (Fiscal 2018 - $9.8 million) in MCSA where the functional currency is the Brazilian Real, a loss on other foreign exchange transactions of $0.7 million (Fiscal 2018 - $1.9 million), and a foreign exchange loss on unrealized derivative contracts of $0.3 million (Fiscal 2018 - $1.1 million gain), partially offset by a foreign exchange gain on realized derivative contracts of $0.2 million (Fiscal 2018 - $10.1 million loss). The decrease in foreign exchange losses in Fiscal 2019 was primarily due to the foreign exchange rate between the Brazilian Real and the US dollar not fluctuating significantly during Fiscal 2019 as compared to Fiscal 2018 and a decrease in the outstanding USD denominated debt held in MCSA.

6. Loss on debt settlement during Fiscal 2019 was $1.8 million (Fiscal 2018 - $5.5 million), representing the difference between the accounting fair value made to legally extinguish a bank loan held by MCSA during the second quarter of 2019 and the carrying value of the loan at the time. Loss on settlement of debt during Fiscal 2018 of $5.5 million was incurred in Q4 2018, comprising of a $3.7 million loss in early repayment fees for the settlement of certain debt in MCSA and a $1.8 million loss in loan settlement fees when the Company replaced its $50 million senior secured non-revolving credit facility with a $130 million facility from a syndicate of Canadian financial institutions.

7. During Fiscal 2019, the Company recognized a recovery of $21.6 million (Fiscal 2018 - $nil) in net income related to value added taxes previously paid on sales in Brazil. The recovery was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant taxing authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim, which approval was received in July 2019. These credits can be used to offset a variety of other taxes, including taxes on future sales. Of the recovery recognized, $3.2 million has been applied to taxes in the current year, $12.2 million has been included in other current assets based on the expected timing of their use, with the remaining $6.2 million recognized in other non-current assets in the statement of financial position.

8. During Fiscal 2019, the Company recognized a $17.6 million income tax recovery (Fiscal 2018 - income tax expense of $5.7 million), primarily resulting from the recognition of available tax losses and tax credits in MCSA and partially offset by current income tax expense. Current tax exposure increased as a result of higher taxable income in MCSA. At December 31, 2019, the Company considered the taxable income generated since acquisition of MCSA and forecasted future taxable income and determined that it was now considered probable that the benefit of these losses and tax credits in MCSA would be realized.

ERO COPPER | 2019 ANNUAL REPORT | 22

SUMMARY OF QUARTERLY RESULTS

The following table presents selected financial information for each of the most recent eight quarters. Tabular amounts are in millions of US Dollars, except share and per share amounts.

 

	2019												2018
Selected Financial Information	Dec 31(1)			Sept 30(2)			June 30			March 31			Dec 31(3)			Sept 30			June 30(4)			March 31
Revenue	$	75.7		$	60.6		$	76.5		$	72.0		$	85.1		$	47.3		$	61.0		$	39.7
Cost of product sold	$	(43.0	)	$	(38.4	)	$	(43.3	)	$	(38.1	)	$	(44.7	)	$	(27.9	)	$	(44.2	)	$	(30.8	)
Gross profit	$	31.1		$	21.3		$	32.1		$	32.6		$	39.0		$	18.8		$	15.9		$	8.5
Net income (loss) for period	$	45.4		$	16.3		$	15.3		$	15.5		$	11.3		$	5.2		$	(18.2	)	$	(1.3	)
Income (loss) per share attributable to owners of the Company
- Basic	$	0.53		$	0.19		$	0.18		$	0.18		$	0.13		$	0.06		$	(0.22	)	$	(0.02	)
- Diluted	$	0.49		$	0.18		$	0.17		$	0.17		$	0.13		$	0.06		$	(0.22	)	$	(0.02	)
Weighted average number of common shares outstanding
- Basic		85,620,168			85,505,675			85,032,841			84,804,389			84,736,476			84,504,954			84,458,914			81,974,876
- Diluted		91,670,988			91,320,363			90,696,926			89,917,828			89,191,707			88,638,656			84,458,914			81,974,876

Notes:

1. During Q4 2019, the Company recognized a $25.2 million income tax recovery primarily resulting from the recognition of available tax losses and tax credits in MCSA. At December 31, 2019, the Company considered the taxable income generated since acquisition of MCSA and forecasted future taxable income and determined that it was now considered probable that the benefit of these losses and tax credits in MCSA would be realized.

2. During the quarter ended September 30, 2019, the Company recognized a recovery of $21.6 million in net income related to value added taxes previously paid on sales in Brazil. The recovery was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant taxing authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim, for which approval was received in July 2019. These credits can be used to offset a variety of other taxes, including income taxes and taxes on future sales.

3. During Q4 2018, MCSA began commercial production of the Vermelhos Mine. This resulted in increased sales this quarter, generating higher net income for the period.

4. During the quarter ended June 30, 2018, the Company had an overall net loss of $18.2 million, which included $26.4 million in foreign exchange losses. The foreign exchange losses were comprised of a $12.2 million loss associated with US dollar denominated debt held by MCSA, whose functional currency is the Brazilian Real, $11.4 million loss on foreign exchange forward contracts and $2.8 million related to other operational exchange losses. The foreign exchange losses were unusually high this quarter due to volatility in the foreign exchange rates between the US dollar and the Brazilian Real.

LIQUIDITY, CAPITAL RESOURCES, AND CONTRACTUAL OBLIGATIONS

Liquidity

As at December 31, 2019, the Company held cash and cash equivalents of $21.5 million. Cash and cash equivalents are primarily comprised of cash held with reputable financial institutions and are invested in highly liquid short-term investments with maturities of three months or less. The funds are not exposed to liquidity risk and there are no restrictions on the ability of the Company to use these funds to meet its obligations.

Cash and cash equivalents increased by $2.5 million during Fiscal 2019. The Company’s cash flows from operating, investing and financing activities during Fiscal 2019 are summarized as follows:

• Cash from operating activities of $127.8 million.

Partially offset by:

• Cash used in investing activities of $106.7 million, including:

o $105.4 million of additions to mineral property, plant and equipment;

o $0.9 million of additions to exploration and evaluation assets;

o $0.5 million of additions to financial investments

ERO COPPER | 2019 ANNUAL REPORT | 23

• Cash flows used in financing activities of approximately $18.0 million, including:

o $41.3 million of repayment on loans and borrowings;

o $10.3 million of payment of interest on loans and borrowings;

o $4.1 million of lease payments;

o $3.7 million of other finance expenses

net of:

o $37.9 million proceeds from new loans and borrowings;

o $1.9 million proceeds from exercise of stock options and warrants;

o $1.5 million released from restricted cash

As at December 31, 2019, the Company had working capital deficit of $4.9 million.

Capital Resources

The Company’s primary sources of capital are comprised of cash from operations, cash and cash equivalents on hand and undrawn debt facilities. The Company will continuously monitor its capital structure and, based on changes in operations and economic conditions, may adjust such structure by issuing new common shares or new debt as necessary. While the Company has been successful in securing financing to date, there are no guarantees that it will be able to secure such financing in the future on terms acceptable to the Company, if at all. Taking into consideration cash flow from existing operations, and the existing undrawn revolving credit facility of $14.0 million in Canada and undrawn lines of credit totalling R$64.8 million in MCSA as at December 31, 2019, management believes that the Company has sufficient working capital and financial resources to maintain its planned operations and activities for the foreseeable future.

Contractual Obligations and Commitments

Certain loan agreements contain operating and financial covenants that could restrict the ability of the Company and its subsidiaries, MCSA and NX Gold S.A., to, among other things, incur additional indebtedness needed to fund its respective operations, pay dividends or make other distributions, make investments, create liens, sell or transfer assets or enter into transactions with affiliates. There are no other restrictions or externally imposed capital requirements of the Company.

MANAGEMENT OF RISKS AND UNCERTAINTIES

The Company thoroughly examines the various financial instruments and risks to which it is exposed and assesses the impact and likelihood of those risks. These risks may include credit risk, liquidity risk, currency risk, commodity price risk and interest rate risk. Where material, these risks are reviewed and monitored by the Board.

ERO COPPER | 2019 ANNUAL REPORT | 24

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers. The carrying amount of the financial assets below represents the maximum credit risk exposure as at December 31, 2019 and December 31, 2018:

	December 31, 2019		December 31, 2018
Cash and cash equivalents	$	21,485	$	18,941
Restricted cash		1,500	$	3,000
Accounts receivable		7,680	$	7,219
Deposits		1,200	$	1,334
Derivatives		-	$	254
Other non-current assets - term deposits		1,196	$	686
	$	33,061	$	31,434

The Company invests cash and cash equivalents as well as restricted cash with financial institutions that are financially sound based on their credit rating. The Company’s exposure to credit risk associated with accounts receivable is influenced mainly by the individual characteristics of each customer. The Company currently has only three significant customers, all of which have no history of credit default with the Company. The Company has not incurred credit losses during the years ended December 31, 2019 and 2018 nor has a provision for credit losses been recognized.

Liquidity risk

Liquidity risk is the risk associated with the difficulties that the Company may have meeting the obligations associated with financial liabilities that are settled with cash payments or with another financial asset. The Company's approach to liquidity management is to ensure as much as possible that sufficient liquidity exists to meet their maturity obligations on the expiration dates, under normal and stressful conditions, without causing unacceptable losses or with risk of undermining the normal operation of the Company.

The table below shows the Company's maturity of financial liabilities on December 31, 2019:

	Carrying		Contractual		Up to 12						More than 5
Non-derivative Financial Liabilities	value		cash flows		months		1-2 years		3-5 years		years
Loans and borrowings	$	159,370	$	161,377	$	18,984	$	30,318	$	110,208	$	1,867
Interest on loans and borrowings		-		22,788		8,749		7,172		6,737		130
Accounts payable and accrued liabilities		43,694		43,694		43,694		-		-		-
Value added, payroll and other taxes		19,688		20,428		13,994		1,968		4,466		-
	$	222,752	$	248,287	$	85,421	$	39,458	$	121,411	$	1,997

Market risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity prices. The purpose of market risk management is to manage and control exposures to market risks, within acceptable parameters, while optimizing return.

The Company may use derivatives, including forward contracts and swap contracts, to manage market risks.

ERO COPPER | 2019 ANNUAL REPORT | 25

Foreign exchange currency risk

The Company’s subsidiaries in Brazil are exposed to exchange risks related to the US dollars and Euros. In order to minimize currency mismatches, the Company monitors its cash flow projections considering future sales expectations indexed to US dollar variation in relation to the cash requirement to settle the existing financings.

The Company's exposure to foreign exchange currency risk at December 31, 2019 relates primarily to $9.6 million (December 31, 2018 – $10.2 million) in loans and borrowings of MCSA denominated in US dollars and Euros. Strengthening (weakening) in the Brazilian Real against the US dollar by 10% and 20%, would have increased (decreased) pre-tax net income by $0.6 million and $1.1 million, respectively (2018 – $0.7 million and $1.3 million). Strengthening (weakening) in the Brazilian Real against the Euro by 10% and 20%, would have increased (decreased) pre-tax net income by $0.4 million and $0.8 million, respectively (2018 – $0.4 million and $0.7 million). This analysis is based on the foreign currency exchange variation rate that the Company considered to be reasonably possible at the end of the year. The analysis assumes that all other variables, especially interest rates, are held constant.

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage market risks. At December 31, 2019, the Company’s subsidiaries have entered into foreign exchange collar contracts at zero cost for notional amounts of $336.6 million with an average floor rate of 3.86 R$ / $ and an average cap rate of 4.41 R$ / $ (December 31, 2018 – notional amount of $21.5 million in foreign exchange forward contracts). The maturity dates of these contracts are from January 15, 2020 to July 28, 2021 and are financially settled on a net basis. The fair value of these contracts at December 31, 2019 was nil, (December 31, 2018 – an asset of $0.3 million, which was included in Derivatives in the statement of financial position.) The change in fair value of foreign exchange collar contracts was a loss of $0.3 million for the year ended December 31, 2019 and (a gain of $1.1 million for the year ended December 31, 2018) has been recognized in foreign exchange loss. In addition, in the year ended December 31, 2019, the Company recognized a realized gain of $0.2 million, (a loss of $10.1 million for the year ended December 31, 2018) related to the settlement of foreign currency forward contracts.

Interest rate risk

The Company is principally exposed to the variation in interest rates on loans and borrowings with variable rates of interest. Management reduces interest rate risk exposure by entering into loans and borrowings with fixed rates of interest or by entering into derivative instruments that fix the ultimate interest rate paid.

The Company is principally exposed to interest rate risk through its senior credit facilities of $136.0 million and Brazilian Real denominated bank loans of $9.8 million. Based on the Company’s net exposure at December 31, 2019, a 1% change in the variable rates would have an impact of $1.5 million on pre-tax annual net income, without consideration of the effects of the swap contracts below.

In order to mitigate the above volatility due to variable rates on loans, as at December 31, 2019, the Company has entered into an interest rate swap contract to manage interest rate risk associated with its Canadian credit facilities. The floating interest on a notional amount of $65 million was swapped for a fixed interest rate of 2.69%. The fair value of this contract at December 31, 2019 was a liability of $1.7 million and was included in Derivatives in the statement of financial position.

In addition, as at December 31, 2019, MCSA has entered into an interest rate and currency swap contract on the Plural Loan. The floating interest on a notional amount of R$12 million was swapped for a fixed interest rate of 9.9% and the BRL currency on the loan was swapped for USD at a rate of 3.9500. The fair value of this contract at December 31, 2019 was a liability of $0.1 million and was included in derivatives in the statement of financial position while the change in the fair value of this contract of $0.1 million was included in Finance Expenses in the statement of operations and comprehensive income.

ERO COPPER | 2019 ANNUAL REPORT | 26

Price risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage commodity price risks. During the year ended December 31, 2019, the Company had entered into commodity swap collar contracts. As at December 31, 2019, these commodity swap collar contracts have all matured and the balance was $nil. The Company recognized a realized loss of $1.4 million for the year ended December 31, 2019 related to the settlement of commodity forward contracts.

For a discussion of additional risks applicable to the Company and its business and operations, including risks related to the Company’s foreign operations, the environment and legal proceedings, see “Risk Factors” in the Company’s Annual Information Form for the year ended December 31, 2019 and dated March 12, 2020 (the “AIF”).

OTHER FINANCIAL INFORMATION

Off-Balance Sheet Arrangements

As at December 31, 2019, the Company had no material off-balance sheet arrangements.

Contingencies

With the acquisition of MCSA, the Company inherited certain liabilities and MCSA has been subject to a number of claims (including claims related to tax, labour and social security matters and civil action) in the course of its business which individually are not material and have not been accrued for in the Company’s financial statements as it is not probable that a cash outflow will occur. While the Company believes that these claims are unlikely to be successful, if all such existing claims were decided against it, the Company could be exposed to a liability of up to approximately $31.1 million as at December 31, 2019 (December 31, 2018 - $21.9 million), which could have an adverse impact on the Company’s business, financial condition, results of operations, cash flows or prospects.

Outstanding Share Data

At March 12, 2020, the Company had 85,756,978 common shares, 5,081,541 stock options, 2,866,662 warrants, and 438,463 performance share units issued and outstanding.

Related Party Disclosures

For the year ended December 31, 2019, amounts paid to related parties were incurred in the normal course of business and measured at the exchange amount, which is the amount agreed upon by the transacting parties and on terms and conditions similar to non-related parties.

Key management personnel consist of the Company’s directors and officers and their compensation includes director retainer fees and management salaries paid to these individuals, as well as share-based compensation. The aggregate value of compensation paid to key management personnel for the year ended December 31, 2019 was $7.5 million ($5.4 million for the year ended December 31, 2018). In addition, 444,265 options and 171,754 share units were issued to key management personnel during the year ended December 31, 2019 (1,100,155 options and 130,636 share units for the year ended December 31, 2018), with $4.1 million recognized in share-based compensation expense for the year ended December 31, 2019 ($2.3 million for the year ended December 31, 2018).

During the year ended December 31, 2019, key management personnel exercised 286,666 options and 300,000 warrants for cash proceeds to the Company of $0.6 million and $0.4 million, respectively (133,000 options for $0.2 million for the year ended December 31, 2018). During the year ended December 31, 2018, key management personnel converted convertible debentures into 1,476,164 common shares and 369,040 common share purchase warrants. The warrants were subsequently exercised into 369,040 common shares.

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As at December 31, 2019, $3.9 million was payable to key management as incentive compensation and is included in the accounts payable and accrued liabilities in the consolidated financial statements (December 31, 2018 - $2.7 million). Such amounts were unsecured, non-interest bearing and were repaid under normal trade terms.

Subsequent to December 31, 2019, 23,674 deferred share units were issued to directors, and 43,456 options were granted to directors.

ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

Critical Accounting Judgments and Estimates

The preparation of consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions about future events that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, events or actions, actual results may differ from these estimates.

The Company’s significant accounting policies and accounting estimates are contained in the Company’s December 31, 2019 consolidated financial statements. Certain of these policies, such as, capitalization and depreciation of property, plant and equipment and mining interests, derivative instruments, and decommissioning liabilities provisions involve critical accounting estimates because they require management of the Company to make subjective or complex judgments about matters that are inherently uncertain, and because of the likelihood that materially different amounts could be reported under different conditions or using different assumptions.

In preparing its financial statements, management has made judgments, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of the assets, liabilities, revenues and expenses. Actual results may differ from these estimates.

The estimates and assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

Critical Judgments

Functional currency

The functional currency of the Company and each of its subsidiaries is the currency of the primary economic environment in which the entities operate. The Company has determined that the functional currency for the Company is the US dollar while the functional currency for MCSA and NX Gold is the Brazilian Real. Assessment of functional currency involves certain judgements to determine the primary economic environment and the Company reconsiders the functional currency of its entities if there is a change in events and conditions which determined the primary economic environment.

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Legal claims and contingent liabilities

The recognition of legal provisions and contingent liabilities involves the assessment of claims made against the Company and each of its subsidiaries. The recognition of a legal provision, or disclosure of a contingent liability, involves certain judgements to determine the probability of whether a cash outflow will occur. In making this judgment, management has assessed various criteria and also relies on the opinions of its legal advisers to assist in making this assessment.

Key Sources of Estimation Uncertainty

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates and such differences could be significant. Significant estimates made by management affecting the consolidated financial statements include:

Impairment of property, plant and equipment

The Company evaluates each asset or cash generating unit every reporting period to determine whether there are any indications of impairment. If any such indication exists, which is often judgmental, a formal estimate of recoverable amount is performed and an impairment loss is recognized to the extent that the carrying amount exceeds the recoverable amount. The recoverable amount of an asset or cash generating group of assets is measured at the higher of fair value less costs to sell and value in use. The evaluation of asset carrying values for indications of impairment includes consideration of both external and internal sources of information, including such factors as market and economic conditions, production budgets and forecasts, and life-of-mine estimates.

When required, the determination of fair value and value in use requires management to make estimates and assumptions about expected production, sales volumes, commodity prices, mineral reserves, operating costs, closure and rehabilitation costs and future capital expenditures. The estimates and assumptions are subject to risk and uncertainty; hence, there is the possibility that changes in circumstances will alter these projections, which may impact the recoverable amount of the assets. In such circumstances, some or all of the carrying value of the assets may be further impaired or the impairment charge reduced with the impact recorded in profit or loss.

Mineral reserve and resource estimates including life of mine plan

The Company estimates its mineral reserves and mineral resources based on information compiled by competent individuals. Mineral reserves are used in the calculation of depreciation, impairment assessments and for forecasting the timing of payment of mine closure and rehabilitation costs.

There are numerous uncertainties inherent in estimating mineral reserves, and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the estimation methodology, forecasted prices of commodities, exchange rates, production costs or recovery rates may change the economic status of mineral reserves and may, ultimately, result in changes in the mineral reserves.

The carrying amounts of the Company’s mineral properties, plant and equipment are depleted in part based on recoverable mineral reserve tonnes processed, depending on the use of the asset. Changes to estimates of recoverable quantities of metals, mineral reserve tonnes and depletable costs, including changes resulting from revisions to the Company’s mine plans and changes in metals prices forecasts, can result in a change to future depreciation and depletion rates and may result in impairment charges.

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Mine closure and rehabilitation costs

Significant estimates and assumptions are made in determining the provision for mine closure and rehabilitation as there are numerous factors that will affect the ultimate liability payable. These factors include estimation of the extent and cost of rehabilitation activities, timing of future cash flows, discount rates, inflation rate, and regulatory requirements.

Changes in the above factors can result in a change to the provision recognized by the Company. Changes to mine closure and rehabilitation costs are recorded with a corresponding change to the carrying amounts of related mineral properties, plant and equipment. Adjustments to the carrying amounts of related mineral properties, plant and equipment can result in a change to future depreciation and depletion expense.

Significant assumptions used to determine mine closure and rehabilitation costs are included in Note 11(a) to the consolidated financial statements.

Inventory

The net recoverable value of stockpile inventory and production in work in progress inventory is based on the quantity of recoverable metal inventory which is an estimate based on the tons of ore added and removed from the process, expected grade and recovery rates. The quantity of recoverable metal in finished concentrate inventory is an estimate based on initial weights and assay results. The net recoverable value of these inventories also requires estimates of expected selling prices and, where applicable, costs to complete.

Income taxes

The determination of the Company’s tax expense for the period and deferred tax assets and liabilities involves significant estimation and judgement by management. In determining these amounts, management interprets tax legislation in a variety of jurisdictions and makes estimates of the expected timing of the reversal of deferred tax assets and liabilities. Management also makes estimates of future earnings, which affect the extent to which potential future tax benefits may be used. The Company is subject to assessments by various taxation authorities, which may interpret legislation differently. These differences may affect the final amount or the timing of the payment of taxes. The Company provides for such differences where known based on management’s best estimate of the probable outcome of these matters.

New Accounting Standards Adopted in the Current Period

The following new and amended IFRS pronouncements were adopted effective January 1, 2019:

i) IFRS 16 Leases

IFRS 16 introduces a single, on-balance sheet accounting model for lessees. As a result, the Company, as a lessee, has recognized right-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. The Company may elect to not apply IFRS 16 to leases with a term of less than 12 months, which election is made by underlying class of assets to which the right of use asset relates, or leases where the underlying asset is of low value, which election is made on an asset by asset basis. Lessor accounting remains similar to previous accounting policies.

Previously, the Company determined at contract inception whether an arrangement was or contained a lease under IFRIC 4, Determining Whether an Arrangement contains a Lease. The Company now assesses whether a contract is or contains a lease based on the new definition of a lease. Under IFRS 16, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

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The Company adopted IFRS 16 using the modified retrospective approach. Accordingly, the comparative information presented for 2018 has not been restated. The impact of adoption of IFRS 16 is disclosed in note 2(e) of the consolidated financial statements.

As a result of applying IFRS 16, the Company recognized right-of-use assets of $4.7 million and lease liabilities of $4.7 million upon adoption.

ii) IFRIC 23 – Uncertainty over Income Tax Treatments

The Company has adopted IFRIC Interpretation 23 (“Interpretation 23”) – Uncertainty over Income Tax Treatments from January 1, 2019. The Interpretation provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. There is no material impact on the financial statements from the adoption of Interpretation 23.

Local Currency Operating Metrics – Presented in Brazilian Real

		2019 - Q4			2019 - Q3			2019			2018 - Q4			2018
Costs (MCSA Operations)
Mining - UG (Pilar)	R$		66,743			60,294			234,887			63,863			201,948
- UG (Vermelhos)			39,864			38,952			140,124			19,288			19,288
- OP			29			761			8,521			16,894			62,867
Processing			22,250			21,309			83,041			23,058			70,583
Indirect			12,822			10,504			46,607			10,783			30,058
Production costs			141,708			131,820			513,180			133,886			384,744
Capex development			(45,009	)		(36,108	)		(125,918	)		(27,815	)		(68,705	)
By-product credits			(16,876	)		(12,720	)		(50,823	)		(11,090	)		(28,310	)
Treatment, refining and other			3,895			2,622			7,358			(2,676	)		(1,772	)
C1 cash costs	R$		83,717			85,614			343,798			92,305			285,957
Breakdown Mined and Processed (tonnes)
UG Mined			675,258			677,535			2,527,386			687,872			1,836,455
OP Mined			-			15,259			727,578			700,732			4,096,723
Total Mined (t):			675,258			692,794			3,254,964			1,388,604			5,933,178
Total Processed (t)			589,065			587,915			2,424,592			777,480			2,257,917
Cu Production (t)			11,526			9,674			42,318			12,104			30,426
UG Mining Total - R$/tonne mined			91.22			93.19			98.56			120.88			120.47
Pilar - R$/tonne mined(1)			78.56			87.91			91.26			n/a			n/a
Vermelhos - R$/tonne mined(1)			118.52			102.63			112.93			n/a			n/a
OP Mining - R$/tonne mined[2]			n/a			49.89			11.71			24.11			15.35
Processing - R$/tonne processed			37.77			36.25			34.25			29.66			31.26
Indirect - R$/tonne processed			21.77			17.87			19.22			13.87			13.31

Footnotes

General - Above only includes amounts from MCSA. NX Gold operations are excluded.

[1] Starting 2019, the Company breaks out the cost metrics for underground mining between Pilar and Vermelhos.

[2] There was no OP production in Q4 2019.

ERO COPPER | 2019 ANNUAL REPORT | 31

NON-IFRS MEASURES

Financial results of the Company are prepared in accordance with IFRS. The Company utilizes certain non-IFRS measures, including C1 cash cost of copper produced (per lb), C1 cash cost of gold produced (per ounce), EBITDA, Adjusted EBITDA, Adjusted net income (loss) attributable to owners of the Company, Adjusted earnings (loss) per share, net debt and working capital, which are not measures recognized under IFRS. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The tables below provide a reconciliation of these non-IFRS measures to the most directly comparable IFRS measures as contained in the Company’s financial statements.

Unless otherwise noted, the non-IFRS measures presented below have been calculated on a consistent basis for the periods presented.

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C1 Cash Cost of Copper Produced (per lb)

C1 cash cost of copper produced (per lb) is the sum of production costs, net of capital expenditure development costs and by-product credits, divided by the copper pounds produced. C1 cash costs reported by the Company include treatment, refining charges, offsite costs, and certain tax credits relating to sales invoiced to the Company’s Brazilian customer on sales. By-product credits are calculated based on actual precious metal sales (net of treatment costs) during the period divided by the total pounds of copper produced during the period. C1 cash cost of copper produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

The following table provides a reconciliation of C1 cash cost of copper produced per pound to cost of goods sold, its most directly comparable IFRS measure.

	2019 - Q4			2019 - Q3			2019			2018 - Q4			2018
Reconciliation:
Cost of Product Sold	$	35,620		$	32,396		$	135,607		$	36,894		$	115,346
Add (less):
Depreciation/amortization/depletion		(11,128	)		(9,675	)		(40,107	)		(9,244	)		(34,104	)
Incentive payments		(2,870	)		-			(2,870	)		-			-
Net change in inventory		322			544			1,062			(1,204	)		1,491
Transportation costs & other		1,479			902			4,598			1,019			3,083
By-product credits		(4,101	)		(3,202	)		(12,822	)		(2,911	)		(7,607	)
Treatment, refining, and other		935			632			1,814			(263	)		(705	)
Foreign exchange translation
adjustments		74			(77	)		(70	)		2,161			2,001
C1 cash costs	$	20,330		$	21,520		$	87,212		$	26,452		$	79,505

	2019 - Q4			2019 - Q3			2019			2018 - Q4			2018
Costs
Mining	$	25,910		$	25,172		$	97,308		$	28,045		$	79,046
Processing		5,406			5,363			21,035			6,052			19,167
Indirect		3,116			2,644			11,581			2,830			8,134
Production costs		34,432			33,179			129,924			36,927			106,347
Capex development		(10,936	)		(9,089	)		(31,705	)		(7,301	)		(18,530	)
By-product credits		(4,101	)		(3,202	)		(12,822	)		(2,911	)		(7,607	)
Treatment, refining and other		935			632			1,814			(263	)		(705	)
C1 cash costs	$	20,330		$	21,520		$	87,212		$	26,452		$	79,505
Costs per pound
Payable copper produced (lb)(1)		25,411			21,327			93,295			26,685			67,077
Mining	$	1.02		$	1.18		$	1.04		$	1.05		$	1.18
Processing	$	0.21		$	0.25		$	0.23		$	0.23		$	0.29
Indirect	$	0.12		$	0.12		$	0.12		$	0.11		$	0.12
Capex development	$	(0.43	)	$	(0.42	)	$	(0.34	)	$	(0.27	)	$	(0.28	)
By-product credits	$	(0.16	)	$	(0.15	)	$	(0.14	)	$	(0.11	)	$	(0.11	)
Treatment, refining and other	$	0.04		$	0.03		$	0.02		$	(0.04	)	$	(0.01	)
C1 cash cost of copper produced (per lb)	$	0.80		$	1.01		$	0.93		$	0.99		$	1.19

Footnote

[1] Total includes amount produced from the newly constructed Vermelhos underground mine as of 2018 Q4 and pre-production ore.

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C1 Cash Cost of Gold produced (per ounce)

C1 cash cost of gold produced (per ounce) is the sum of production costs, net of capital expenditure development costs and silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. C1 cash cost of gold produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

The following table provides a reconciliation of C1 cash cost of gold produced per ounce to cost of goods sold, its most directly comparable IFRS measure.

	2019 - Q4			2019 - Q3			2019			2018 - Q4			2018
Reconciliation:
Cost of Product Sold	$	7,397		$	5,982		$	27,210		$	7,768		$	32,265
Add (less):
Depreciation/amortization/depletion		(881	)		(1,051	)		(5,907	)		(1,810	)		(11,084	)
Incentive payments		(634	)		-			(634	)		-			-
Net change in inventory		120			235			710			(308	)		-
By-product credits		(67	)		(47	)		(281	)		(90	)		(354	)
Foreign exchange translation adjustments		(18	)		(21	)		(46	)		(150	)		(87	)
C1 cash costs	$	5,917		$	5,098		$	21,052		$	5,410		$	20,740

	2019 - Q4			2019 - Q3			2019			2018 - Q4			2018
Costs
Mining	$	3,255		$	2,791		$	11,413		$	3,033		$	11,958
Processing		2,274			1,821			7,588			1,944			7,290
Indirect		995			850			3,479			668			2,541
Production costs		6,524			5,462			22,480			5,645			21,789
Capex development		(540	)		(317	)		(1,147	)		(145	)		(695	)
By-product credits		(67	)		(47	)		(281	)		(90	)		(354	)
C1 cash costs	$	5,917		$	5,098		$	21,052		$	5,410		$	20,740
Costs per ounce
Payable gold produced (ounces)		6,043			4,356			30,434			10,008			39,808
Mining	$	539		$	641		$	375		$	300		$	300
Processing	$	376		$	418		$	249		$	190		$	183
Indirect	$	165		$	195		$	114		$	70		$	64
Capex development	$	(89	)	$	(73	)	$	(38	)	$	(10	)	$	(17	)
By-product credits	$	(11	)	$	(12	)	$	(9	)	$	(10	)	$	(10	)
C1 cash cost of gold produced (per ounce)	$	980		$	1,169		$	691		$	540		$	520

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Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and Adjusted EBITDA

EBITDA represents earnings before interest expense, income taxes, depreciation, and amortization. Adjusted EBITDA includes further adjustments for non-recurring items and/or items not indicative to the future operating performance of the Company. The Company believes EBITDA and adjusted EBITDA are appropriate supplemental measures of debt service capacity and performance of its operations.

Adjusted EBITDA is calculated by removing the following income statement items:

- Recovery of value added taxes

- Foreign exchange loss (gain)

- Loss on gold hedge contracts

- Share based compensation

- Loss on debt settlement

	2019 - Q4			2019 - Q3			2019			2018 - Q4			2018
Reconciliation:
Net income (loss)	$	45,409		$	16,307		$	92,455		$	11,280		$	(2,991	)
Adjustments:
Finance expenses		2,014			5,206			20,428			6,776			22,562
Tax expense (recovery)		(25,209	)		2,825			(17,626	)		6,852			5,652
Depreciation/amortization/depletion		12,042			10,768			46,171			15,301			45,297
EBITDA		34,256			35,106			141,428			40,209			70,520
Recovery of value added taxes		-			(21,584	)		(21,584	)		-			-
Foreign exchange loss (gain)		(4,423	)		10,866			5,148			(7,433	)		20,713
Loss on gold hedge contracts		15			1,514			1,505			-			-
Share based compensation		1,304			1,353			5,792			723			3,225
Loss on debt settlement		-			-			1,783			5,476			5,476
Adjusted EBITDA	$	31,152		$	27,255		$	134,072		$	38,975		$	99,934

Adjusted net income attributable to owners of the Company and Adjusted net income per share attributable to owners of the Company

The Company uses the financial measure “Adjusted net income attributable to owners of the Company” and “Adjusted net income per share attributable to owners of the Company” (“Adjusted EPS”) to supplement information in its consolidated financial statements. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, the Company and certain investor and analysts use this information to evaluate the Company’s performance. The Company excludes the following items from net earnings to provide a measure which allows the Company and investors to evaluate the operating results of the underlying core operations: i) net recovery of value added taxes, ii) share based compensation iii) unrealized foreign exchange loss (gain) on USD denominated debt in MCSA, iv) unrealized loss (gain) on foreign exchange derivative contracts, v) unrealized loss on gold hedge contracts, and vi) loss on debt settlement. The presentation of Adjusted EPS is not meant to substitute the net income (loss) per share attributable to owners of the Company (“EPS”) presented in accordance with IFRS, but rather it should be evaluated in conjunction with such IFRS measures.

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The following table provides a detailed reconciliation of net income (loss) attributable to owners of the Company as reported in the Company’s consolidated financial statements to adjusted net income attributable to owners of the Company and Adjusted EPS.

	2019 - Q4			2019 - Q3			2019			2018 - Q4			2018
Reconciliation:
Net income (loss) as reported attributable to the owners of the Company	$	45,169		$	16,280		$	91,883		$	11,210		$	(3,155	)
Adjustments for:
Net recovery of value added taxes		-			(17,783	)		(17,783	)		-			-
Share based compensation		1,304			-			5,792			-			-
Unrealized foreign exchange loss (gain) on USD denominated debt in MCSA		(3,738	)		9,559			4,388			(4,816	)		9,769
Unrealized loss (gain) on foreign exchange derivative contracts		(1,404	)		1,398			249			(3,977	)		(1,132	)
Unrealized loss (gain) on gold hedge contracts		(677	)		719			-			-			-
Loss on debt settlement		-			-			1,776			5,461			5,461
Adjusted net income attributed to owners of the Company	$	40,654		$	10,173		$	86,305		$	7,878		$	10,943
Weighted average number of common shares - basic		85,620,168			85,505,675			85,244,277			84,736,476			83,927,977
Weighted average number of common shares - diluted		91,670,988			91,320,363			91,390,425			89,191,707			83,927,977
Adjusted earnings per share - basic	$	0.47		$	0.12		$	1.01		$	0.09		$	0.13
Adjusted earnings per share - diluted	$	0.44		$	0.11		$	0.94		$	0.09		$	0.12

Net Debt

Net debt is determined based on cash and cash equivalents, restricted cash and loans and borrowings as reported in the Company’s consolidated financial statements. The Company uses net debt as a measure of the Company’s ability to pay down its debt. The following table provides a calculation of net debt based on amounts presented in the Company’s consolidated financial statements as at December 31, 2019 and December 31, 2018.

	December 31,			December 31,
	2019			2018
Cash and cash equivalents	$	21,485		$	18,941
Restricted cash		1,500			3,000
Less: Current portion of loans and borrowings		(18,984	)		(10,602	)
Long-term portion of loans and borrowings		(140,386	)		(141,632	)
Net Debt	$	(136,385	)	$	(130,293	)

Working Capital and Available Liquidity

Working capital is determined based on current assets and current liabilities as reported in the Company’s consolidated financial statements. The Company uses working capital as a measure of the Company’s short-term financial health and operating efficiency. Available liquidity includes the Company’s working capital and undrawn revolving credit facilities in place. The following table provides a calculation for these based on amounts presented in the Company’s consolidated financial statements as at December 31, 2019 and December 31, 2018.

	December 31,			December 31,
	2019			2018
Current Assets	$	75,565		$	50,954
Less: Current Liabilities		(80,481	)		(60,265	)
Working Capital (Deficit)	$	(4,916	)	$	(9,311	)
Available undrawn revolving credit facilities		30,000			14,000
Available Liquidity	$	25,084		$	4,689

Disclosure Controls and Procedures

The Company’s management, with the participation of the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), has evaluated the effectiveness of the Company’s disclosure controls and procedures (“DC&P”). Based on the results of that evaluation, the Company’s CEO and CFO have concluded that, as of December 31, 2019, the Company’s DC&P were effective to provide reasonable assurance that the information required to be disclosed by the Company in reports it files is recorded, processed, summarized, and reported within the appropriate time periods and is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

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Internal Control over Financial Reporting

The Company’s management, with the participation of the CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”). The Company’s ICFR is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Any system of ICFR, no matter how well designed, has inherent limitations and cannot provide absolute assurance that all misstatements and instances of fraud, if any, within the Company have been prevented or detected. The Company’s ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

The Company uses the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The Company’s management, under the supervision of the CEO and CFO, has evaluated the design and operating effectiveness of the Company’s ICFR and concluded that the Company’s ICFR were effective as of December 31, 2019.

There were no changes in the Company’s ICFR that materially affected, or are reasonably likely to materially affect, ICFR during Q4 2019.

NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION

Unless otherwise indicated, scientific and technical information in this MD&A relating to Ero’s properties (“Technical Information”) is based on information contained in the following reports:

The report prepared in accordance with NI 43-101 and entitled “2019 Updated Mineral Resources and Mineral Reserves Statements of Mineração Caraíba’s Vale do Curaçá Mineral Assets, Curaçá Valley”, dated November 25, 2019 with an effective date of September 18, 2019, prepared by Rubens Jose De Mendonça, MAusIMM, of Planminas – Projectos e Consultoria em Mineração Ltd. (“Planminas”), Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, and Bernardo Horta de Cerqueira Viana, MAIG, all of GE21 Consultoria Mineral Ltda. (“GE21”), and each a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “Vale do Curaçá Technical Report”).

The report prepared in accordance with NI 43-101 and entitled “Mineral Resource and Mineral Reserve Estimate of the NX Gold Mine, Nova Xavantina”, dated February 3, 2020 with an effective date of September 30, 2019, prepared by Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, and Paulo Roberto Bergmann, FAusIMM, each of GE21 and a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “NX Gold Technical Report”).

The report prepared in accordance with NI 43-101 and entitled “Feasibility Study, Technical Report for the Boa Esperança Copper Project, Pará State Brazil”, dated September 7, 2017 with an effective date of June 1, 2017, prepared by Rubens Mendonça, MAusIMM of SRK Consultores do Brasil Ltda. (“SRK” or “SRK Brazil”) as at the date of the report (now of Planminas) and Carlos Barbosa, MAIG and Girogio di Tomi, MAusIMM, both of SRK Brazil, and each a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “Boa Esperança Feasibility Study”).

Reference should be made to the full text of the Vale do Curaçá Technical Report, the NX Gold Technical Report and the Boa Esperança Technical Report, each of which is available for review under the Company’s profile on SEDAR at www.sedar.com.

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The disclosure of Technical Information in this MD&A was reviewed and approved by Ricardo Emerson Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

Cautionary Note Regarding Forward-Looking Statements

This MD&A contains “forward-looking information” within the meaning of applicable Canadian securities laws. Forward-looking information includes statements that use forward-looking terminology such as “may”, “could”, “would”, “will”, “should”, “intend”, “target”, “plan”, “expect”, “budget”, “estimate”, “forecast”, “schedule”, “anticipate”, “believe”, “continue”, “potential”, “view” or the negative or grammatical variation thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, statements with respect to the Company's expected operations at the Vermelhos and Pilar Mines as well as at the NX Gold Property, drilling plans, plans for the Company's exploration program, timing of any updated mineral resource and reserve updates and technical reports, the Company's ability to service its ongoing obligations, the Company's future production outlook, cash costs, capital resources, expenditures, the impact of new accounting standards and amendments on the Company's financial statements, and current global macroeconomic uncertainty stemming from the onset of Covid-19.

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this Press Release including, without limitation, assumptions about: favourable equity and debt capital markets; the ability to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Company’s properties and assets; future prices of copper and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any mineral reserve and mineral resource estimates; the geology of the Vale do Curaçá Property, NX Gold Property and the Boa Esperanҫa Property being as described in the technical reports for these properties; production costs; the accuracy of budgeted exploration and development costs and expenditures; the price of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to operate in a safe, efficient and effective manner; political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favourable terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour stability; stability in financial and capital goods markets; availability of equipment; positive relations with local groups and the Company’s ability to meet its obligations under its agreements with such groups; and satisfying the terms and conditions of the Company’s current loan arrangements. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive, global health, and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.

Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. Such risks include, without limitation the risk factors listed under the heading “Risk Factors” in the AIF.

Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking information, there may be other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended.

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The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained herein. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.

Forward-looking information contained herein is made as of the date of this MD&A and the Company disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.

Cautionary Notes Regarding Mineral Resource and Reserve Estimates

In accordance with applicable Canadian securities regulatory requirements, all mineral reserve and mineral resource estimates of the Company disclosed or incorporated by reference in this MD&A have been prepared in accordance with NI 43-101 and are classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards for Mineral Resources and Mineral Reserves, adopted by the CIM Council on May 10, 2014 (the “CIM Standards”).

Mineral resources which are not mineral reserves do not have demonstrated economic viability. Pursuant to the CIM Standards, mineral resources have a higher degree of uncertainty than mineral reserves as to their existence as well as their economic and legal feasibility. Inferred mineral resources, when compared with Measured or Indicated mineral resources, have the least certainty as to their existence, and it cannot be assumed that all or any part of an Inferred mineral resource will be upgraded to an Indicated or Measured mineral resource as a result of continued exploration. Pursuant to NI 43-101, Inferred mineral resources may not form the basis of any economic analysis. Accordingly, readers are cautioned not to assume that all or any part of a mineral resource exists, will ever be converted into a mineral reserve, or is or will ever be economically or legally mineable or recovered.

ADDITIONAL INFORMATION

Additional information about Ero and its business activities, including the AIF, is available under the Company’s profile at www.sedar.com.

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CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2019 AND 2018

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KPMG LLP

PO Box 10426 777 Dunsmuir Street

Vancouver BC V7Y 1K3

Canada

Telephone (604) 691-3000

Fax (604) 691-3031

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of Ero Copper Corp.

Opinion

We have audited the consolidated financial statements of Ero Copper Corp. (“the Company”), which comprise:

– the consolidated statements of financial position as at December 31, 2019 and December 31, 2018;

– the consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity and cash flows for the years then ended; and

– notes to the consolidated statements, including a summary of significant accounting policies

(Hereinafter referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2019 and December 31, 2018, and its consolidated financial performance and consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “Auditors’ Responsibilities for the Audit of the Financial Statements” section of our auditors’ report.

We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.

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Other Information

Management is responsible for the other information. Other information comprises:

– the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions; and

– information, other than the financial statements and the auditors’ report thereon, included in a document likely to be entitled “Annual Report”.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated.

We obtained the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions as at the date of this auditors’ report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditors’ report. We have nothing to report in this regard.

The information, other than the financial statements and the auditors’ report thereon, included in a document likely to be entitled “Annual Report” is expected to be made available to us after the date of this auditors’ report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company‘s financial reporting process.

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Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

– Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

– Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.

– Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

– Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.

– Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represents the underlying transactions and events in a manner that achieves fair presentation.

– Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

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– Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

– Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

/s/ KPMG LLP

Chartered Professional Accountants

The engagement partner on the audit resulting in this auditors’ report is Robert Ryan Owsnett, CPA, CA.

Vancouver, Canada

March 12, 2020

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Ero Copper Corp.

Consolidated Statements of Financial Position

(Amounts in thousands of US Dollars, except share and per share amounts)

			As at			As at
ASSETS	Notes		December 31, 2019			December 31, 2018
Current
Cash and cash equivalents			$	21,485		$	18,941
Restricted cash		9(b)		1,500			3,000
Accounts receivable				7,680			7,219
Inventories		4		19,377			14,645
Derivatives		21		-			254
Other current assets		5		25,523			6,895
				75,565			50,954
Non-Current
Mineral, property, plant and equipment		6		339,516			280,804
Exploration and evaluation assets		7		25,878			25,563
Deposits		11(b)		1,200			1,334
Deferred income tax assets		19		13,099			-
Other non-current assets		18		7,416			1,784
				387,109			309,485
Total Assets			$	462,674		$	360,439
LIABILITIES
Current
Accounts payable and accrued liabilities		8	$	43,694		$	36,390
Deferred revenue				-			1,916
Current portion of loans and borrowings		9		18,984			10,602
Current portion of value added, payroll and other taxes payable		10		13,994			11,357
Current portion of derivatives		21		650			-
Current portion of lease liabilities				3,159			-
				80,481			60,265
Non-Current
Loans and borrowings		9		140,386			141,632
Provisions		11		33,581			31,509
Value added, payroll and other taxes		10		5,694			6,593
Derivatives		21		1,059			-
Lease liabilities				487			-
Other non-current liabilities				1,928			807
Deferred income tax liabilities		19		-			15,811
				183,135			196,352
Total Liabilities				263,616			256,617
SHAREHOLDERS’ EQUITY
Share capital		12		120,492			117,944
Equity reserves				(24,489	)		(24,755	)
Retained earnings				102,220			10,337
Equity attributable to owners of the Company				198,223			103,526
Non-controlling interests				835			296
				199,058			103,822
Total Liabilities and Equity			$	462,674		$	360,439

Nature of operations (Note 1); Contingencies (Note 11(c)); Subsequent events (Notes 9(c) and 12)

APPROVED ON BEHALF OF THE BOARD:

“David Strang” ,CEO & Director ”Matthew Wubs” , Director

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Ero Copper Corp.

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Amounts in thousands of US Dollars, except share and per share amounts)

	Notes	Year ended December 31, 2019			Year ended December 31, 2018
Revenue	13	$	284,843		$	233,105
Cost of product sold	14		(162,817	)		(147,611	)
Sales expenses			(4,962	)		(3,268	)
Gross profit			117,064			82,226
Expenses
General and administrative	15		(32,817	)		(29,000	)
Share-based compensation	12(a)(b)		(5,792	)		(3,225	)
Income before the undernoted			78,455			50,001
Other income (expenses)
Finance income			701			1,303
Finance expense	16		(20,428	)		(22,562	)
Foreign exchange loss	17		(5,148	)		(20,713	)
Loss on debt settlement	9(a)(b)		(1,783	)		(5,476	)
Recovery of value added taxes	18		21,584			-
Other income			1,448			108
Income before income taxes			74,829			2,661
Income tax recovery (expense)
Current	19		(10,645	)		(2,899	)
Deferred	19		28,271			(2,753	)
			17,626			(5,652	)
Net income (loss) for the year			92,455			(2,991	)
Other comprehensive income (loss)
Foreign currency translation loss			(4,941	)		(27,801	)
Comprehensive income (loss)		$	87,514		$	(30,792	)
Net income (loss) attributable to:
Owners of the Company			91,883			(3,155	)
Non-controlling interests			572			164
		$	92,455		$	(2,991	)
Comprehensive income (loss) attributable to:
Owners of the Company			86,962			(30,845	)
Non-controlling interests			552			53
		$	87,514		$	(30,792	)
Income (loss) per share attributable to owners of the Company	12(e)
Net income (loss) per share
Basic		$	1.08		$	(0.04	)
Diluted		$	1.01		$	(0.04	)
Weighted average number of common shares outstanding
Basic			85,244,277			83,927,977
Diluted			91,390,425			83,927,977

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Ero Copper Corp.

Consolidated Statement of Changes in Shareholders’ Equity

(Amounts in thousands of US Dollars, except share and per share amounts)

			Share Capital					Equity Reserves
	Notes			Number of shares		Amount		Contributed surplus			Foreign exchange			Convertible debentures			Retained earnings			Total			Non-controlling interest			Total equity
Balance, December 31, 2017					79,381,339	$	113,050	$	879		$	(962	)	$	3,011		$	14,011		$	129,989		$	(243	)	$	129,746
Income (loss) for the year					-		-		-			-			-			(3,155	)		(3,155	)		164			(2,991	)
Other comprehensive loss for the year					-		-		-			(27,690	)		-			-			(27,690	)		(111	)		(27,801	)
Total comprehensive loss for the year					-		-		-			(27,690	)		-			(3,155	)		(30,845	)		53			(30,792	)
Shares issued for:
Exercise of options and warrants					1,297,861		1,850		(207	)		-			-			-			1,643			-			1,643
Convertible debentures		12			4,059,450		3,044		-			-			(3,044	)		-			-			-			-
Accrued interest on convertible debentures					-		-		-			-			33			(33	)		-			-			-
Stock-based compensation					-		-		3,225			-			-			-			3,225			-			3,225
Reclassification of non-controlling interest allocation					-		-		-			-			-			(486	)		(486	)		486			-
Balance, December 31, 2018					84,738,650	$	117,944	$	3,897		$	(28,652	)	$	-		$	10,337		$	103,526		$	296		$	103,822
Income for the year					-		-		-			-			-			91,883			91,883			572			92,455
Other comprehensive loss for the year					-		-		-			(4,921	)		-			-			(4,921	)		(20	)		(4,941	)
Total comprehensive income for the year					-		-		-			(4,921	)		-			91,883			86,962			552			87,514
Shares issued for:
Exercise of options and warrants					964,996		2,548		(605	)		-			-			-			1,943			-			1,943
Share-based compensation		12(a)(b)			-		-		5,792			-			-			-			5,792			-			5,792
Dividends to non-controlling interest					-		-		-			-			-						-			(13	)		(13	)
Balance, December 31, 2019					85,703,646	$	120,492	$	9,084		$	(33,573	)	$	-		$	102,220		$	198,223		$	835		$	199,058

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Ero Copper Corp.

Consolidated Statements of Cash Flows

(Amounts in thousands of US Dollars, except share and per share amounts)

	Year ended December 31, 2019			Year ended December 31, 2018
Cash Flows from Operating Activities
Net income (loss) for the year	$	92,455		$	(2,991	)
Adjustments for:
Amortization and depreciation		46,171			45,297
Income tax expense (recovery)		(17,626	)		5,652
Loss on debt settlement		1,783			5,476
Recovery of value added taxes		(21,584	)		-
Write-off of plant and equipment		3,475			3,782
Unrealized derivative contracts		1,427			-
Provisions		(625	)		(1,464	)
Share-based compensation		5,792			3,225
Finance income		(701	)		(1,303	)
Finance expenses		20,428			22,562
Foreign exchange loss		5,148			20,713
Derivative contract settlements		(1,011	)		(10,119	)
Changes in:
Accounts receivable		(756	)		(4,616	)
Inventories		(5,946	)		(5,225	)
Other assets		(4,636	)		3,192
Accounts payable and accrued liabilities		11,604			6,855
Deferred revenue		(1,882	)		1,707
Value added, payroll and other taxes		43			(5,606	)
Provision settlements		(1,786	)		(1,967	)
		131,773			85,170
Income taxes paid		(3,943	)		(2,228	)
		127,830			82,942
Cash Flows used in Investing Activities
Additions to mineral property, plant and equipment		(105,382	)		(97,556	)
Additions to exploration and evaluation assets		(892	)		(3,616	)
Interest received		38			198
Other		(505	)		-
		(106,741	)		(100,974	)
Cash Flows used in Financing Activities
Restricted cash		1,500			(807	)
Lease liability payments		(4,082	)		-
New loans and borrowings, net of finance costs		37,867			141,488
Loans and borrowings paid		(41,305	)		(127,369	)
Interest paid on loans and borrowings		(10,276	)		(11,522	)
Other finance expenses		(3,668	)		(10,765	)
Issuance of share capital, net of issuance costs		1,943			1,643
		(18,021	)		(7,332	)
Effect of exchange rate changes on cash and cash  equivalents		(524	)		(6,842	)
Net increase (decrease) in cash and cash equivalents		2,544			(32,206	)
Cash and cash equivalents - beginning of year		18,941			51,147
Cash and cash equivalents - end of year	$	21,485		$	18,941

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

1. Nature of Operations

Ero Copper Corp. (“Ero" or the "Company") was incorporated on May 16, 2016 under the Business Corporations Act (British Columbia) and maintains its head office at Suite 1050, 625 Howe Street, Vancouver, BC, V6C 2T6. The Company’s shares are publicly traded on the Toronto Stock Exchange under the symbol “ERO”.

The Company’s principal asset is its 99.6% ownership interest in Mineração Caraíba S.A. (“MCSA”). The Company also currently owns, directly and indirectly, a 97.6% ownership interest in NX Gold S.A. (“NX Gold”).

MCSA is a Brazilian company which holds a 100% interest in the Vale do Curaçá Property and the Boa Esperança Property (Note 7). MCSA’s predominant activity is the production and sale of copper concentrate from the Vale do Curaçá Property, with gold and silver produced and sold as by-products. The Company currently mines copper ore from the Pilar underground mine (“Pilar UG Mine”) and the Vermelhos underground mine (“Vermelhos UG Mine”). The Boa Esperança Property is located within the municipality of Tucumã in the southeastern part of the state of Pará, Brazil, and consists of a single mineral concession covering an area of 4,034 hectares (“ha”).

NX Gold is a Brazilian gold mining company focused on the exploration and commercialization of gold as its main product and silver as its sub-product. NX Gold wholly owns a 31,096 ha property, located approximately 18 kilometers west of the town of Nova Xavantina, southeastern Mato Grosso State, Brazil, consisting of a single mining concession covering an area of 620 ha, where all gold mining and processing activities occur.

2. Basis of Preparation

a) Statement of Compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee.

These consolidated financial statements were authorized for issue by the Board of Directors of the Company (the “Board”) on March 12, 2020.

b) Basis of Presentation and Principles of Consolidation

These consolidated financial statements have been prepared on a historical cost basis except for fair-value through-profit-or-loss and derivative financial instruments, which are measured at fair value.

These consolidated financial statements include the accounts of the Company and its subsidiaries. Subsidiaries are entities controlled by the Company. Control over a subsidiary is defined to exist when the Company is exposed to variable returns from involvement with an investee and has the ability to affect the returns through power over the investee. All intercompany balances and transactions are eliminated upon consolidation.

The Company applies the acquisition method to account for business combinations. The consideration transferred by the Company to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities assumed and the equity interests issued by the Company, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred.

The Company recognizes identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognized in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values.

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Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Goodwill arising from acquisitions is the excess of the sum of a) fair value of consideration transferred, b) the recognized amount of any non-controlling interest in the acquiree and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount would be recognized in profit or loss immediately.

Since the Company does not own 100% of its interests in MCSA and NX Gold, the interest attributable to non-controlling shareholders is reflected in non-controlling interests. Adjustments to non-controlling interests that do not involve the loss of control are accounted for as equity transactions and adjustments are based on a proportionate amount of the net assets of the subsidiary.

c) Foreign Currency Translation

The functional currency and presentation currency of the Company is the US dollar. The monetary assets and liabilities of the Company that are denominated in foreign currencies are translated at the rate of exchange at the statement of financial position date while non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at the exchange rates approximating those in effect on the date of the transactions. Exchange gains and losses arising on translation are included in profit or loss.

The functional currency of MCSA and NX Gold is the Brazilian Real (“BRL”). The assets and liabilities of MCSA and NX Gold are translated into the US dollar presentation currency using the rate of exchange at the statement of financial position date while revenues and expenses are translated at the exchange rates approximating those in effect on the date of the transactions. Exchange gains and losses arising on translation are included in a separate component of shareholders’ equity.

d) Use of Estimates and Judgments

In preparing these financial statements, management has made judgments, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of the assets, liabilities, revenues and expenses. Actual results may differ from these estimates.

The estimates and assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

Critical Judgments

Functional currency

The functional currency of the Company and each of its subsidiaries is the currency of the primary economic environment in which the entities operate. The Company has determined that the functional currency for the Company is the US dollar while the functional currency for MCSA and NX Gold is the Brazilian Real. Assessment of functional currency involves certain judgements to determine the primary economic environment and the Company reconsiders the functional currency of its entities if there is a change in events and conditions which determined the primary economic environment.

ERO COPPER | 2019 ANNUAL REPORT | 50

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Legal claims and contingent liabilities

The recognition of legal provisions and contingent liabilities involves the assessment of claims made against the Company and each of its subsidiaries. The recognition of a legal provision, or disclosure of a contingent liability, involves certain judgements to determine the probability of whether a cash outflow will occur. In making this judgment, management has assessed various criteria and also relies on the opinions of its legal advisers to assist in making this assessment.

Key Sources of Estimation Uncertainty

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates and such differences could be significant. Significant estimates made by management affecting the consolidated financial statements include:

Impairment of mineral, property, plant and equipment

The Company evaluates each asset or cash generating unit every reporting period to determine whether there are any indications of impairment. If any such indication exists, which is often judgmental, a formal estimate of recoverable amount is performed and an impairment loss is recognized to the extent that the carrying amount exceeds the recoverable amount. The recoverable amount of an asset or cash generating group of assets is measured at the higher of fair value less costs to sell and value in use. The evaluation of asset carrying values for indications of impairment includes consideration of both external and internal sources of information, including such factors as market and economic conditions, production budgets and forecasts, and life-of-mine estimates.

When required, the determination of fair value and value in use requires management to make estimates and assumptions about expected production, sales volumes, commodity prices, mineral reserves, operating costs, closure and rehabilitation costs and future capital expenditures. The estimates and assumptions are subject to risk and uncertainty; hence, there is the possibility that changes in circumstances will alter these projections, which may impact the recoverable amount of the assets. In such circumstances, some or all of the carrying value of the assets may be further impaired or the impairment charge reduced with the impact recorded in profit or loss.

Mineral reserve and resource estimates including life of mine plan

The Company estimates its mineral reserves and mineral resources based on information compiled by competent individuals. Mineral reserves are used in the calculation of depreciation, impairment assessments and for forecasting the timing of payment of mine closure and rehabilitation costs.

There are numerous uncertainties inherent in estimating mineral reserves, and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the estimation methodology, forecasted prices of commodities, exchange rates, production costs or recovery rates may change the economic status of mineral reserves and may, ultimately, result in changes in the mineral reserves.

The carrying amounts of the Company’s mineral properties, plant and equipment are depleted in part based on recoverable mineral reserve tonnes processed, depending on the use of the asset. Changes to estimates of recoverable quantities of metals, mineral reserve tonnes and depletable costs, including changes resulting from revisions to the Company’s mine plans and changes in metals prices forecasts, can result in a change to future depreciation and depletion rates and may result in impairment charges.

ERO COPPER | 2019 ANNUAL REPORT | 51

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Mine closure and rehabilitation costs

Significant estimates and assumptions are made in determining the provision for mine closure and rehabilitation as there are numerous factors that will affect the ultimate liability payable. These factors include estimation of the extent and cost of rehabilitation activities, timing of future cash flows, discount rates, inflation rate, and regulatory requirements.

Changes in the above factors can result in a change to the provision recognized by the Company. Changes to mine closure and rehabilitation costs are recorded with a corresponding change to the carrying amounts of related mineral properties, plant and equipment. Adjustments to the carrying amounts of related mineral properties, plant and equipment can result in a change to future depreciation and depletion expense.

Significant assumptions used to determine mine closure and rehabilitation costs are included in Note 11(a).

Inventory

The net recoverable value of stockpile inventory and production in work in progress inventory is based on the quantity of recoverable metal inventory which is an estimate based on the tons of ore added and removed from the process, expected grade and recovery rates. The quantity of recoverable metal in finished concentrate inventory is an estimate based on initial weights and assay results. The net recoverable value of these inventories also requires estimates of expected selling prices and, where applicable, costs to complete.

Income taxes

The determination of the Company’s tax expense for the period and deferred tax assets and liabilities involves significant estimation and judgement by management. In determining these amounts, management interprets tax legislation in a variety of jurisdictions and makes estimates of the expected timing of the reversal of deferred tax assets and liabilities. Management also makes estimates of future earnings, which affect the extent to which potential future tax benefits may be used. The Company is subject to assessments by various taxation authorities, which may interpret legislation differently. These differences may affect the final amount or the timing of the payment of taxes. The Company provides for such differences where known based on management’s best estimate of the probable outcome of these matters.

e) Changes in Accounting Standards Adopted During the Year

The following new and amended IFRS pronouncements were adopted effective January 1, 2019:

IFRS 16 Leases

IFRS 16 introduces a single, on-balance sheet accounting model for lessees. As a result, the Company, as a lessee, has recognized right-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. The Company may elect to not apply IFRS 16 to leases with a term of less than 12 months, which election is made by underlying class of assets to which the right of use asset relates, or leases where the underlying asset is of low value, which election is made on an asset by asset basis. Lessor accounting remains similar to previous accounting policies.

Previously, the Company determined at contract inception whether an arrangement was or contained a lease under IFRIC 4, Determining Whether an Arrangement contains a Lease. The Company now assesses whether a contract is or contains a lease based on the new definition of a lease. Under IFRS 16, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

ERO COPPER | 2019 ANNUAL REPORT | 52

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The Company’s accounting policy in Note 3(m) has been updated to reflect the Company’s new accounting policies under IFRS 16.

Transition

The Company adopted IFRS 16 using the modified retrospective approach. Accordingly, the comparative information presented for 2018 has not been restated.

On transition to IFRS 16, the Company elected to apply the practical expedient to grandfather the assessment of which transactions are leases. Accordingly, IFRS 16 was applied only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed. Therefore, the definition of a lease under IFRS 16 has been applied only to contracts entered into or changed on or after January 1, 2019.

As a lessee, the Company previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Company recognizes right-of-use assets and lease liabilities for most leases. However, the Company has elected not to recognize right-of-use assets and lease liabilities for some leases of low-value assets and with a term of less than 12 months. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

The Company leases various assets including equipment, offices and properties that had previously been classified as operating leases under IAS 17. On transition lease liabilities for these leases were measured at the present value of remaining lease payments, discounted at the Company’s or subsidiary’s incremental borrowing rate as of January 1, 2019. The average incremental borrowing rate at January 1, 2019 used for base calculations was 10%. The Company elected to measure the right-of-use assets at an amount equal to the lease liability.

The Company used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

• Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term.

• Applied a single discount rate to a portfolio of leases with reasonably similar characteristics (such as leases with a similar remaining lease term for a similar class of underlying asset in a similar economic environment).

• Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

The Company did not have any leases classified as finance leases under IAS 17 on the adoption date.

The Company presents right-of-use assets in mineral, property, plant and equipment in the statement of financial position, the same line item as it presents underlying assets of the same nature that it owns. The Company presents lease liabilities as a separate line item on the statement of financial position.

ERO COPPER | 2019 ANNUAL REPORT | 53

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The impact on transition is summarized below:

	December 31, 2018		IFRS 16 adjustments		January 1, 2019
Mineral, property, plant and equipment	$	280,804	$	4,708	$	285,512
Current portion of lease liabilities		-		4,221		4,221
Lease liabilities (long-term)		-		487		487

	January 1, 2019
Operating lease commitments at December 31, 2018	$	221
Arrangements reassessed as leases		4,914
Effect of discounting using the incremental borrowing rate at January 1, 2019		(427	)
Lease liabilities recognized as IFRS 16 adjustment at January 1, 2019	$	4,708

IFRIC 23 – Uncertainty over Income Tax Treatments

The Company has adopted IFRIC Interpretation 23 (“Interpretation 23”) – Uncertainty over Income Tax Treatments from January 1, 2019. The Interpretation provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. There is no material impact on the financial statements from the adoption of Interpretation 23.

3. Significant Accounting Policies

a) Revenue

Revenue is generated from the sale of sale of metals in concentrate and gold doré. The Company’s performance obligations relate primarily to the delivery of the concentrate or gold doré to customers, with each shipment representing a separate performance obligation.

Revenue from the sale of metals in concentrate and gold doré is recognized at the point the customer obtains control of the product. Control is transferred when title has passed to the purchaser, the product is physically delivered to the customer, the customer controls the risks and rewards of ownership and the Company has a present right to payment for the product which is generally when the concentrate or ore is delivered to a location designated by the customer.

The sales amount is typically based on quoted market and contractual prices which are fixed at the time the shipment is received at the customers’ premises. In certain circumstances the sales price of metals in concentrate may be determined in a period subsequent to the date of sale (provisionally priced sales) based on the terms of specific copper concentrate contracts. Provisionally priced sales are recognized based on an estimate of metal contained using forward market prices corresponding with the expected date that final sales prices will be fixed. The period between provisional pricing and final settlement can be up to one month. The settlement receivable is recorded at fair value each reporting period by reference to forward market prices until the date of final pricing, with the changes in fair value recorded as an adjustment to revenue.

b) Tax Incentives

The Company receives certain tax incentives in Brazil. These tax incentives are recognized in profit or loss in the period the incentives are received or receivable and recorded against the expenditure that they are intended to compensate.

ERO COPPER | 2019 ANNUAL REPORT | 54

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

c) Finance Income and Finance Expense

Finance income includes interest on cash and cash equivalents, restricted cash and financial investments, and gains related to changes in the fair value of financial assets measured at fair value through profit. Interest income is recognized as it accrues in profit or loss, using the effective interest method.

Finance expense comprise interest expense on loans and borrowings, unwinding of the discount on provisions and leases, commitment fees and losses related to changes in the fair value of financial assets measured at fair value through profit or loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognized in profit or loss using the effective interest method.

d) Employee Benefits

Short-term employee benefit obligations are recognized as personnel expenses as the corresponding service is provided. Liabilities are recognized at the amount that is expected to be paid if the Company has a present legal or constructive obligation to pay that amount based on past services rendered by the employee, and the obligation can be estimated reliably. There are no long-term employee benefit plans.

e) Taxation

Income tax expense comprises current and deferred tax. Current income tax is the expected tax payable or receivable on the taxable income or loss for the year using tax rates enacted or substantively enacted at the reporting date.

Deferred income tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred income tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the tax laws that have been enacted or substantively enacted at the reporting date. Deferred income tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity. Deferred income tax is not recognized for the initial recognition of assets or liabilities in a transaction that is not a business combination and that effects neither accounting nor taxable income or loss, differences related to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future and taxable differences arising from the initial recognition of goodwill.

A deferred income tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred income tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

f) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of consumable inventory is determined on a weighted average acquisition cost basis. Cost of stockpile inventory, products in progress and finished goods is determined based on a weighted average production cost basis and includes the cost of mining and processing ore including direct labour and materials; depreciation and amortization; and an appropriate share of production overheads based on normal operating capacity.

Net realizable value of stockpile inventory, products in progress and finished goods is the estimated selling price in the ordinary course of business, less estimated completion costs and selling expenses.

ERO COPPER | 2019 ANNUAL REPORT | 55

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Provisions for low turnover or obsolete supplies and consumables inventory are established by management as deemed necessary.

g) Mineral, Property, Plant and Equipment

Mineral, property, plant and equipment is measured at acquisition or construction cost, including capitalized borrowing costs, less accumulated depreciation and accumulated impairment losses.

i)  Acquisition and disposal

The cost of mineral, property, plant and equipment include expenditures directly attributable to an asset’s acquisition. The cost of assets constructed by Company includes the cost of materials and direct labor, any other costs to bring the asset in the place and conditions required to be operated in the manner intended by management, costs of disassembly and restoration of the site and borrowing costs on qualifying assets.

When parts of mineral, property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of mineral, property, plant and equipment.

Gains and losses on disposal of mineral, property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of equipment and are recognized net within other income.

ii)  Subsequent costs

The cost of replacing plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the item will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced item is derecognized. The costs of the day-to-day servicing of equipment are included in profit or loss.

iii)  Development and construction in progress

When economically viable mineral reserves have been determined and the decision to proceed with development has been approved, exploration and evaluation assets are first assessed for impairment, then reclassified to construction-in-progress or mineral properties. The expenditures related to development and construction are capitalized as construction-in-progress and are included within mineral, property, plant and equipment. Costs associated with the commissioning of new assets incurred before they are operating in the way intended by management, including directly attributable costs of testing, are capitalized. Construction-in-progress includes the purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for its intended use including advances on long-lead items. Construction-in-progress is not depreciated.

Once the asset is operating in the way intended by management, construction-in-progress costs are reclassified to mineral properties or plant and equipment.

Pre-production costs of removing overburden to access ore in the open pit mines and developing access headings in the underground mines are capitalized as pre-production stripping or development costs respectively and are included within mineral, property, plant and equipment. Revenues earned during pre-production periods are also capitalized.

ERO COPPER | 2019 ANNUAL REPORT | 56

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

iv)  Mineral properties

Mineral properties consist of the cost of acquiring and developing mineral properties. Once in production, mineral properties are amortized on a units-of-production basis over the component of the ore body to which they relate.

v)  Stripping costs and development in the production phase

Where open pit production stripping or underground development activities do not result in inventory produced, but does provide improved access to the ore body, the costs are classified as mineral properties when these activities meet all of the following criteria: (1) it is probable that the future economic benefit associated with the activity will flow to the Company; (2) the Company can estimate the mineral reserve of the ore body for which access has been improved; and (3) the costs relating to the activity associated with that mineral reserve can be measured reliably.

For underground mines, costs incurred to access a mineral reserve of the ore body are capitalized to mineral properties or construction-in-progress and are depreciated on a units-of-production basis over the expected useful life of the identified mineral reserve of the ore body to which access has been improved as a result of the development activity. For open pit mines, stripping costs are capitalized to mineral properties or construction-in-progress until an average stripping ratio is achieved (waste/ore) for the mine. After the stripping ratio is achieved, all stripping costs are classified as production costs. The capitalized stripping costs are depreciated over the related mineral reserves accessed by the stripping activity.

vi)  Mine closure and rehabilitation costs

The Company’s provision for mine closure and rehabilitation liabilities represents management’s best estimate of the present value of the future cash outflows required to settle estimated reclamation and closure costs at the end of a mine’s life. The provision reflects estimates of future costs, inflation, movements in foreign exchange rates and assumptions of risks associated with the future cash outflows, and the applicable risk-free interest rates for discounting the future cash outflows. Changes in the above factors can result in a change to the provision recognized by the Company.

vii)  Depreciation

Items of mineral, property, plant and equipment are depreciated on a straight-line method based on the estimated economic useful life of each component as follows:

Buildings	Up to 25 years
Mining equipment	4 years
Mobile equipment & other assets	5 years
Mineral properties	Units of production
Mine closure and rehabilitation costs	Units of production or period until remediation
Right of use assets	Shorter of the term of lease and life of asset

The depletion of mineral, properties and mine closure and rehabilitation costs is determined based on the ratio of tons of copper/kg of gold contained in the ore mined and total proven and probable mineral reserve tonnes of contained copper/kg of contained gold.

Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate.

ERO COPPER | 2019 ANNUAL REPORT | 57

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

h) Exploration and Evaluation Assets

Exploration and evaluation costs relate to the initial search for a mineral deposit, the cost of acquisition of a mineral property interest or exploration rights and the subsequent evaluation to determine the economic potential of the mineral deposit. The exploration and evaluation stage commences when the Company obtains the legal right or license to begin exploration and subsequently exploration and evaluation expenses are capitalized as exploration and evaluation assets. Costs incurred prior to the Company obtaining the legal rights are expensed.

When the exploration and evaluation of a mineral property indicates that development of the mineral property is technically and commercially feasible, the future economic benefits are probable, and the Company has the intention and sufficient resources to complete the development and use or sell the asset, the related costs are transferred from exploration and evaluation assets to mineral property, plant and equipment.

Management reviews the carrying value of capitalized exploration costs for indicators that the carrying value is impaired at least annually and when facts and circumstances suggest that the carrying amount may exceed the recoverable amount. The review is based on the Company’s intentions for further exploration and development of the undeveloped property, results of drilling, commodity prices and other economic and geological factors. Subsequent recovery of the resulting carrying value depends on successful development or sale of the undeveloped project. If a property does not prove viable, all non-recoverable costs associated with the project, net of any previous impairment provisions, are written off.

i) Financial Instruments

Non-derivative financial assets

The Company classifies its financial assets in the following categories: at fair value through profit or loss (“FVTPL”), at fair value through other comprehensive income (“FVTOCI”) or at amortized cost. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Measurement and classification of financial assets is dependent on the Company’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. Financial assets are derecognized when they mature or are sold, and substantially all the risks and rewards of ownership have been transferred.

Fair values

A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

When measuring the fair value of an asset or liability, the Company uses observable market data, as much as possible. Fair values are classified into different levels in a hierarchy based on the inputs used in the valuation techniques, as follows:

• Level 1: quoted prices (without adjustments) in active markets for identical assets or liabilities.

• Level 2: inputs other than Level 1 quoted prices, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3: inputs, for assets or liabilities, that are not based on observable market information (non-observable inputs).

ERO COPPER | 2019 ANNUAL REPORT | 58

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The Company recognizes transfers between levels of the hierarchy of fair value at the end of the reporting period during which the change occurred.

When applicable, additional information on the assumptions used in the fair value calculations are disclosed in the specific notes of the corresponding asset or liability.

Financial assets at FVTPL

Financial assets carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the income statement. Realized and unrealized gains and losses arising from changes in the fair value of the financial asset held at FVTPL are included in profit or loss in the period in which they arise. Derivatives are also categorized as FVTPL unless they are designated as hedges.

Financial assets at FVTOCI

Investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses arising from changes in fair value recognized in other comprehensive income. Gains or losses on financial assets classified as FVTOCI remain within accumulated other comprehensive income following the derecognition of the investment.

Financial assets at amortized cost

Financial assets at amortized cost are initially recognized at fair value and subsequently carried at amortized cost less any impairment. They are classified as current assets or non-current assets based on their maturity date. Gains and losses on derecognition of financial assets classified amortized cost are recognized in profit or loss.

Financial liabilities

Financial liabilities are recognized initially at fair value, net of transaction costs incurred, and are subsequently measured at amortized cost. Any difference between the amounts originally received, net of transaction costs, and the redemption value is recognized in profit and loss over the period to maturity using the effective interest method.

Derivative instruments

Derivative instruments, including embedded derivatives in executory contracts or financial liability contracts, are classified as at FVTPL and, accordingly, are recorded in the statement of financial position at fair value. Unrealized gains and losses on derivatives not designated in a hedging relationship are recorded as part of the revenue or expense item to which the derivative relates, depending on the nature of the derivative. Fair values for derivative instruments are determined using inputs based on market conditions existing at the balance sheet date or settlement date of the derivative. Derivatives embedded in non-derivative contracts are recognized separately unless they are closely related to the host contract.

Trade receivables related to provisionally priced sales are measured at fair value with changes recognized in profit or loss.

Compound instruments

Equity components of compound instruments, such as convertible debt, are separated from the debt host contract using the residual method. The Company determines the fair value of the debt component by discounting the expected principal and interest payments using an appropriate discount rate reflective of debt instruments with similar risks but without the equity component. The difference between the proceeds received and the amount assigned to the debt component is allocated to the equity component.

ERO COPPER | 2019 ANNUAL REPORT | 59

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Share capital

Common shares are classified as equity. Incremental costs directly attributable to the issuance of common shares and share options are recognized as a deduction from equity, net of any tax effects. The Company includes the value of share purchase warrants included in the issuance of equity units, which consist of common shares and warrants, in share capital.

Classification and Measurement Changes

The Company has assessed the classification and measurement of its financial assets and financial liabilities under IFRS 9 in the following table:

	Measurement Category
Financial Assets:
Cash, cash equivalents and restricted cash	Amortized cost
Trade receivables	Amortized cost
Deposits	Amortized cost
Other non-current assets - term deposits	Amortized cost
Financial Liabilities:
Trade payables	Amortized cost
Loans and borrowings	Amortized cost
Derivatives	Fair value through profit or loss

Cash and cash equivalents, restricted cash and deposits

Cash is comprised of cash on hand and demand deposits. Cash equivalents, restricted cash and deposits are short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in fair value.

Trade receivables

Trade receivables relate to amounts receivable from sales with fixed or determinable payments that are not quoted in an active market. These receivables are non-interest bearing and are recognized at face amount, except when fair value is materially different, and are subsequently measured at amortized cost. Trade receivables recorded are net of lifetime expected credit losses.

Other non-current assets – term deposits

Term deposits are directly related to loan agreements with a Brazilian financial institution which requires the establishment of a reserve fund. Redemptions of financial investments are conditional on the Company making the scheduled loan repayments. These term deposits are classified as, and subsequently measured at, amortized cost. These term deposits are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortized cost using the effective interest method, less any impairment losses.

ERO COPPER | 2019 ANNUAL REPORT | 60

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

j) Impairment

i) Financial assets

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the loss allowance for the financial asset is measured at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the loss allowance is measured for the financial asset at an amount equal to twelve months’ expected credit losses. For trade receivables the Company applies the simplified approach to providing for expected credit losses, which allows the use of a lifetime expected loss provision. Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease can be objectively related to an event occurring after the impairment was recognized. The expected lifetime credit loss provision for trade receivables is based on historical counterparty default rates and adjusted for relevant forward-looking information, when required. As the Company’s three primary significant customers are considered to have a low default rate and historical default rates are low, the lifetime expected credit loss allowance for trade receivables is nominal as at December 31, 2019. Accordingly, the Company did not record a provision for expected credit losses for trade receivables.

ii) Non-Financial assets

At each reporting date the carrying amounts of the Company’s mineral, property, plant and equipment and exploration and evaluation assets are reviewed to determine whether there is any indication that those assets are impaired. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use, which is the present value of future cash flows expected to be derived from the asset or its related cash generating unit. For purposes of impairment testing, assets are grouped at the lowest levels that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the associated assets are reduced to their recoverable amount and the impairment loss is recognized in the profit or loss for the period.

Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment charge is reversed through profit or loss only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of any applicable depreciation, if no impairment loss had been recognized.

k) Provisions

i) Mine closure and rehabilitation provision

The Company records the present value of estimated costs of legal and constructive obligations related to mine closure and rehabilitation in the period in which the obligation occurs. Mine closure and rehabilitation activities include facility decommissioning and dismantling; removal and treatment of waste materials; site and land rehabilitation, including compliance with and monitoring of environmental regulations; and related costs required to perform this work and/or operate equipment designed to reduce or eliminate environmental effects. The provision is adjusted each period for new disturbances, and changes in regulatory requirements, the estimated amount of future cash flows required to discharge the obligation, the timing of such cash flows and the pre-tax discount rate specific to the liability. The unwinding of the discount is recognized in profit or loss as a finance expense.

ERO COPPER | 2019 ANNUAL REPORT | 61

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

When the provision is initially recognized, the corresponding cost is capitalized by increasing the carrying amount of the related asset and is amortized to profit or loss on a unit-of-production basis.

ii) Other provisions

Other provisions are recognized, based on a past event, when the Company has a legal or constructive obligation that can be estimated reliably, and it is probable that an economic mineral resource will be required to settle the obligation. Provisions are measured by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and specific risks for the liability. The discount is unwound over the period over which the cash flows are expected to be incurred with the related expense included in finance expense.

l) Share-Based Compensation

The grant date fair value of share-based payment awards granted to employees and consultants, including directors and officers, is recognized as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be performed or satisfied such that the amount ultimately recognized as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

m) Leases

A contract is or contains a lease when the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses, and adjusted for certain re-measurements of the lease liability. The cost of the right-of-use asset includes the amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date, less any lease incentives received, any initial direct costs; and if applicable, an estimate of costs to be incurred by the Company in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. The incremental borrowing rate reflects the rate of interest that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. Generally, the Company uses its incremental borrowing rate as the discount rate.

The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.

ERO COPPER | 2019 ANNUAL REPORT | 62

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The Company does not recognize right-of-use assets and lease liabilities for leases of low-value assets and leases with lease terms that are less than 12 months. Lease payments associated with these leases are instead recognized as an expense over the lease term on either a straight-line basis, or another systematic basis if more representative of the pattern of benefit.

The Company has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The assessment of whether the Company is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognized.

n) Income (Loss) per Share

Basic income (loss) per share is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted income (loss) per common share is calculated by adjusting the weighted average number of common shares outstanding for the effect of conversion of all potentially dilutive share equivalents, such as stock options and warrants, and assumes that the receipt of proceeds upon exercise of the options are used to repurchase common shares at the average market price during the period. The net effect of the shares issued less the shares assumed to be repurchased is added to the basic weighted average shares outstanding. For convertible instruments, the common shares to be included in the diluted per share calculation assumes that the instrument is converted at the beginning of the period (or the issue date if later). For Share Units (as defined herein, see note 12(b)), the common shares to be included in the diluted per share calculation is based on the number of shares that would be issuable if the reporting date were the end of the vesting period. The profit or loss attributable to common shareholders is adjusted to eliminate related interest costs of dilutive securities recognized in profit or loss for the period.

4. Inventories

	December 31, 2019		December 31, 2018
Supplies and consumables	$	13,878	$	11,641
Stockpile		2,556		1,116
Work in progress		2,164		543
Finished goods		779		1,345
	$	19,377	$	14,645

5. Other Current Assets

	December 31, 2019		December 31, 2018
Advances to suppliers	$	1,046	$	766
Prepaid expenses		4,779		2,188
Advances to employees (a)		2,829		1,349
Value added federal taxes recoverable (b)		16,869		2,592
	$	25,523	$	6,895

(a) Advances to employees include short term advances of salary, vacation and other benefits granted to employees of the Company’s Brazilian subsidiaries.

(b) $12.2 million of this balance relates to a recent favourable legal decision that recognizes MCSA’s right to a tax credit as a result of historical over-payments. MCSA will be able to use these tax credits against a variety of taxes, including income taxes and taxes on future sales (note 18).

ERO COPPER | 2019 ANNUAL REPORT | 63

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

6. Mineral, Property, Plant and Equipment

													Mobile
				Mining			Mineral			Projects in			Equipment &			Mine Closure			Right-of-Use
	Buildings			Equipment			Properties			Progress			Other Assets			Costs			Assets			Total
Cost:
Balance at December 31, 2017	$	16,229		$	46,576		$	144,366		$	55,705		$	10,548		$	12,570		$	-		$	285,994
Reclassification of NX Gold amounts from assets held for sale		1,661			2,443			28,216			-			102			647			-			33,069
Additions		471			33,451			3,694			61,898			1,446			1,109			-			102,069
Disposals		-			(1,008	)		(313	)		(1,655	)		(1,085	)		-			-			(4,061	)
Transfers		-			2,695			63,008			(65,703	)		-			-			-			-
Foreign exchange		(2,622	)		(9,310	)		(29,072	)		(8,098	)		(1,175	)		(1,985	)		-			(52,262	)
Balance at December 31, 2018		15,739			74,847			209,899			42,147			9,836			12,341			-			364,809
Adoption of IFRS 16 (note 2(e))		-			-			-			-			-			-			4,708			4,708
Additions		-			15,429			5,255			91,392			1,348			2,266			3,220			118,910
Disposals		-			(1,819	)		-			(2,267	)		(1,414	)		-			(463	)		(5,963	)
Transfers		2,532			18,313			55,754			(76,672	)		73			-			-			-
Foreign exchange		(662	)		(3,595	)		(9,516	)		(1,895	)		(362	)		(500	)		(234	)		(16,764	)
Balance at December 31, 2019	$	17,609		$	103,175		$	261,392		$	52,705		$	9,481		$	14,107		$	7,231		$	465,700
Accumulated depreciation:
Balance at December 31, 2017	$	(1,083	)	$	(9,057	)	$	(19,155	)	$	-		$	(1,696	)	$	(620	)	$	-		$	(31,611	)
Reclassification of NX Gold amounts from assets held for sale		(1,660	)		(1,922	)		(8,092	)		-			(93	)		(581	)		-			(12,348	)
Depreciation expense		(985	)		(8,657	)		(34,242	)		-			(1,652	)		(1,092	)		-			(46,628	)
Disposals		-			556			-			-			2			-			-			558
Foreign exchange		459			2,100			2,891			-			301			273			-			6,024
Balance at December 31, 2018		(3,269	)		(16,980	)		(58,598	)		-			(3,138	)		(2,020	)		-			(84,005	)
Depreciation expense		(922	)		(11,032	)		(29,286	)		-			(1,582	)		(1,033	)		(3,869	)		(47,724	)
Disposals		-			1,196			-			-			3			-			14			1,213
Foreign exchange		144			1,217			2,591			-			145			95			140			4,332
Balance at December 31, 2019	$	(4,047	)	$	(25,599	)	$	(85,293	)	$	-		$	(4,572	)	$	(2,958	)	$	(3,715	)	$	(126,184	)
Net book value December 31, 2018	$	12,470		$	57,867		$	151,301		$	42,147		$	6,698		$	10,321		$	-		$	280,804
Net book value December 31, 2019	$	13,562		$	77,576		$	176,099		$	52,705		$	4,909		$	11,149		$	3,516		$	339,516

ERO COPPER | 2019 ANNUAL REPORT | 64

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

6. Mineral, Property, Plant and Equipment (continued)

Of the $118.9 million in mineral, property, plant and equipment purchases during the year ended December 31, 2019, $8.6 million was obtained through financing arrangements directly from equipment suppliers.

Certain equipment is secured for the equipment finance loans (note 9).

Included in mineral, property, plant and equipment is $7.3 million (December 31, 2018 - $10.4 million) related to the value of mineral resources beyond proven and probable reserves not currently being amortized. During the year ended December 31, 2019, $3.1 million (year ended December 31, 2018 - $8.2 million) was transferred from mineral resources to amortizable mineral reserves as a result of an update to MCSA’s proven and probable reserves during the year. In addition, $52.7 million (December 31, 2018 - $42.1 million) related to projects in progress are not currently being amortized.

7. Exploration and Evaluation Assets

Exploration and evaluation assets relate to the Boa Esperança Property located in the Municipality of Tucumã, in the state of Pará, Brazil which consists of a single mineral concession. This prospective copper/gold property is in advanced stages of exploration with various geological mineral resource studies and is the subject of a completed feasibility study.

8. Accounts Payable and Accrued Liabilities

	December 31, 2019		December 31, 2018
Trade suppliers	$	21,811	$	19,007
Payroll and related charges		20,058		14,802
Other accrued liabilities		1,818		2,581
	$	43,687	$	36,390

ERO COPPER | 2019 ANNUAL REPORT | 65

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

9. Loans and Borrowings

							Carrying value		Carrying value
					Principal to		December 31,		December 31,
Description	Denomination	Security	Time to Maturity	Coupon rate		be repaid		2019(1)		2018
Bank loan (at acquisition)	USD	Unsecured	-	7.50%	$	-	$	-	$	558
Bank loan (at acquisition)	BRL R$	Secured	-	7.50%		-		-		8,607
Bank loan (at acquisition)	BRL R$	Unsecured	83 months	CDI + 0.5%		6,736		5,941		6,969
Bank loan (NX Gold)	BRL R$	Unsecured	-	95% CDI		-		-		106
Bank loan (MCSA)	USD	Unsecured	12 months	4.43%		1,500		1,503		3,000
Bank loan (MCSA)	BRL R$	Unsecured	2 months	CDI + 3.7%		204		204		1,484
Line of credit (NX Gold)	BRL R$	Unsecured	9 months	15.00%		645		670		-
Equipment finance loan (Plural)	BRL R$	Secured	23 months	CDI + 7.0%		2,853		2,892		-
Equipment finance loans	BRL R$	Secured	1 - 50 months	11.88%-16.49%		5,400		5,585		1,346
Equipment finance loans	EURO	Secured	8-36 months	5.5%-7.0%		3,945		3,996		3,645
Equipment finance loans	USD	Secured	29-38 months	6.99%-7.95%		4,094		4,125		2,994
Senior non-revolving credit facility	USD	Secured	48 months	LIBOR + 2.75%-4.75%		80,000		79,091		79,056
Senior revolving credit facility	USD	Secured	36 months	LIBOR + 2.75%-4.75%		56,000		55,363		44,469
Total					$	161,377	$	159,370	$	152,234
Current portion:							$	18,984	$	10,602
Non-current portion:							$	140,386	$	141,632

(1)  Carrying value includes accrued interest.  

	December 31, 2019			December 31, 2018
Balance, beginning of year	$	152,234		$	139,166
Reclassification of NX Gold amounts from assets held for sale		-			2,071
New senior non-revolving credit facility		-			78,837
New senior revolving credit facility, net		10,565			44,346
New equipment finance loans		24,890			11,652
New bank loans		10,976			4,581
Debt extinguishment		-			(124,697	)
Principal and interest payments		(51,581	)		(19,670	)
Interest accretion		11,236			14,965
Loss on debt settlement		1,783			5,476
Effect of foreign exchange rate changes		(733	)		(4,493	)
Balance, end of period	$	159,370		$	152,234

(a)       Senior credit facility

In December 2018, the Company replaced the $50 million senior secured non-revolving credit facility completed on December 29, 2017 with a new $130 million facility from a syndicate of Canadian financial institutions. The facility is comprised of an $80 million senior secured amortizing non-revolving credit facility (“Term Facility”) and a $50 million senior secured revolving term credit facility (“Revolving Credit Facility”) (collectively the “Facilities”). The Term Facility has a 5-year term with equal quarterly principal payments of $6.2 million beginning on December 13, 2020, while the Revolving Credit Facility is payable at maturity on December 13, 2022. The Facilities bear interest on a sliding scale at a rate of LIBOR plus 2.75% to 4.75% depending on the Company’s consolidated leverage ratio at the time. The Company incurred transaction costs associated with the Facilities of $2.3 million which have been included in the carrying value of the Facilities and are being amortized using an effective interest rate of 5.64%. The settlement of the previous $50 million senior secured non-revolving credit facility resulted in a loss on settlement of $1.8 million.

In January 2019, the Company entered into an interest rate swap transaction with a Canadian financial institution whereby the floating LIBOR interest on a notional amount of $65 million was swapped for a fixed interest rate of 2.69%. This interest rate swap transaction is in effect for the term of the Term Facility, with the notional amount reduced as principal payments are made. Settlements are being made on a quarterly basis.

ERO COPPER | 2019 ANNUAL REPORT | 66

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

During the second quarter of 2019, the Company refinanced a loan held by the Company’s subsidiary, MCSA, by extending the Revolving Credit Facility. The credit limit of the Revolving Credit Facility was increased by $20.0 million to $70.0 million. All other terms of the Facilities remained unchanged. Upon completion of the amendment, the Company drew $11.0 million to repay certain of its bank loans held by MCSA. As at December 31, 2019, the Company had a remaining $14.0 million undrawn on this secured Revolving Credit Facility.

The Facilities are secured by pledges of shares of MCSA and NX Gold. The Company is required to comply with certain financial covenants. As of the date of these consolidated financial statements, the Company is in compliance with these covenants.

(b)  Bank loans and equipment finance loans

The bank loans (at acquisition) relate to the Company’s subsidiary, MCSA, and were recognized at the date the Company acquired MCSA at fair value and have subsequently been recognized at amortized cost, net of settlements. Interest is being recognized using the effective interest rate method at an interest rate of 11.29% for the remaining such loan at December 31, 2019.

In June 2019, the Company repaid one of MCSA’s bank loans (at acquisition) in full using funds from the Company’s Revolving Credit Facility and recognized a loss on settlement of $1.8 million. During the year ended December 31, 2018, the Company acquired and/or settled certain of the MCSA bank loans (at acquisition) with a carrying value of $68.8 million. The settlement of these loans resulted in a loss of $3.7 million.

As per the terms of one of MCSA’s bank loans, the Company is required to maintain a separate debt service bank account with sufficient funds to guarantee scheduled principal payments by MCSA. At December 31, 2019, $1.5 million was on deposit in said designated debt service account and is presented as restricted cash in the statement of financial position.

MCSA is required to comply with certain financial covenants which MCSA is in compliance with at December 31, 2019. The equipment finance loans are secured by the corresponding equipment relating to them and a guarantee by the Company.

(c)  MCSA and NX Gold lines of credit

At December 31, 2019, the Company’s subsidiaries MCSA and NX Gold have the following credit facilities available:

MCSA entered into a credit agreement for a line of credit of up to BRL $30.0 million at an interest rate of CDI (“Brazilian Interbank Deposit Rate”) + 9% per annum. MCSA may drawdown on this line of credit at any time until November 30, 2020. In addition, MCSA also entered into a second credit agreement for a total line of credit of up to BRL $30.0 million at an interest rate of 14.98% per annum. MCSA may drawdown on this line of credit at any time until August 27, 2020. The Company and NX Gold provide unsecured guarantees for these credit agreements. At December 31, 2019, no amounts had been drawn from either of these credit facilities

NX Gold entered into an agreement for a line of credit of up to BRL $7.5 million at an interest rate of 14.98% per annum. NX Gold may drawdown on this line of credit at any time until August 27, 2020. As at December 31, 2019, BRL $2.7 million ($0.7 million) has been drawn from NX Gold’s line of credit.

Subsequent to December 31, 2019, NX Gold entered into a credit agreement for a line of credit of up to BRL $7.5 million at an interest rate of 14.34% per annum. NX Gold may drawdown on this line of credit at any time until February 22, 2021. NX Gold is using BRL $1.5 million of this line of credit to provide a letter of credit to a supplier until January 31, 2022. The Company provides unsecured guarantees for these credit agreements.

ERO COPPER | 2019 ANNUAL REPORT | 67

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(d)  Plural loan

During the quarter ended December 31, 2019, MCSA secured a new equipment finance loan with Plural Bank for BRL $12.0 million for a term of 24 months and at an interest rate of 7% + CDI per annum. Concurrently, MCSA entered into an interest rate swap transaction and a foreign exchange swap transaction with Plural Bank whereby the floating interest of 7% + CDI on a notional amount of BRL $12.0 million was swapped for a fixed interest rate of 9.90%, and a notional principal amount of BRL $12.0 million was swapped for the USD currency at a rate of 3.9500. This interest rate and foreign exchange swap transactions are in effect for the term of the loan.

(e)  Debt repayments

Repayments of the principal portion of loans and borrowings is as follows:

2020	$	18,984
2021		30,318
2022		83,286
2023		25,918
2024		1,004
2025 and beyond		1,867
	$	161,377

10. Value Added, Payroll and Other Taxes

	December 31, 2019		December 31, 2018
Value-added taxes payable	$	2,865	$	2,873
Tax based on net sales of copper and gold		5,287		3,064
Federal sales tax		-		1,984
Social security installments (a)		9,519		8,744
Income taxes		1,108		944
Other taxes		909		341
Total value added, payroll and other taxes		19,688		17,950
Less: current portion of value added, payroll and other taxes		13,994		11,357
Non-current value added, payroll and other taxes	$	5,694	$	6,593

(a) The Company’s subsidiary, MCSA, has an agreement with the National Institute of Social Security in Brazil to pay outstanding social security contributions in installments over a period to 2024.

ERO COPPER | 2019 ANNUAL REPORT | 68

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

11. Provisions and Contingent Liabilities

	Mine Closure
	and			Legal
	Rehabilitation			Claims			Total
Balance at December 31, 2017	$	22,688		$	7,626		$	30,314
Reclassification of NX Gold amounts from assets held for sale		6,082			329			6,411
Additions (reductions) due to change in estimated cash flows		1,136			(2,825	)		(1,689	)
Unwinding of the discount		3,767			-			3,767
Settled		(1,967	)		-			(1,967	)
Foreign exchange		(4,352	)		(975	)		(5,327	)
Balance at December 31, 2018		27,354			4,155			31,509
Additions (reductions) due to change in estimated cash flows		2,266			(625	)		1,641
Unwinding of the discount		3,508			-			3,508
Settled		(1,786	)		-			(1,786	)
Foreign exchange		(1,145	)		(146	)		(1,291	)
Balance at December 31, 2019	$	30,197		$	3,384		$	33,581

(a)   Mine closure and rehabilitation

The Company’s provision for mine closure and rehabilitation consists of costs accrued based on the current best estimate of mine closure and reclamation activities that will be required upon completion of mining. The Company’s provision for future site closure and reclamation costs is based on the level of known disturbance at the reporting date, known legal requirements and cost estimates prepared by a third-party specialist.

Management used a pre-tax discount rates in the range of 4.34% - 6.5% (2018 – 6.5%) and an inflation factor in the range of 3.5% – 3.75% (2018 – 4.2%) in preparing the Company’s provision for mine closure and rehabilitation. Although the ultimate amount to be incurred is uncertain, based on development, legal requirements and estimated costs as at December 31, 2019, the undiscounted inflation-adjusted liability for provision for mine closure and rehabilitation is estimated to be approximately $45.7 million (2018 - $48.7 million), of which $36.8 million (2018 - $39.1 million) relates to MCSA and $8.9 million (2018 - $9.6 million) relates to NX Gold. The cash expenditures are expected to occur over a period of time extending several years after the projected closure, which for both MCSA and NX Gold is currently 2026.

(b)   Legal claims

There are various legal actions that are in process against the Company’s Brazilian subsidiaries related to labor, civil and tax matters. Based on an analysis of individual judicial and administrative legal claims, the following provision has been made for probable losses associated with these claims:

	December 31, 2019		December 31, 2018
Labour claims (i)	$	3,311	$	3,561
Tax claims (ii)		73		522
Other claims		-		72
	$	3,384	$	4,155

(i)   Labor claims

The labor claims related primarily to claims made by existing and former employees for alleged travel time reimbursements, overtime and severance payments. Of the claims made, the Company has assessed, with the assistance of its legal counsel, that the probable loss on such claims is $3.3 million and such amount has been accrued.

ERO COPPER | 2019 ANNUAL REPORT | 69

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(ii)  Tax claims

The provisions for tax claims relate to tax assessments, interest and penalties resulting from unpaid income and social contribution taxes by MCSA.

In relation to the above-mentioned claims and those discussed in Note 11(c) below, MCSA and NX Gold were required to place a total of $1.2 million in trust as of December 31, 2019 (December 31, 2018 - $1.3 million), which is included in other non-current assets on the statement of financial position.

(c)   Contingent liabilities

As of December 31, 2019, based on the opinion of its legal advisers, the Company has not recognized a provision for the following claims of MCSA and NX Gold as it is not probable that a cash outflow will occur.

	December 31, 2019		December 31, 2018
Social security tax (i)	$	3,681	$	3,715
Taxes (ii)		14,990		14,800
Labour (refer to note 11(b)(i))		6,303		3,380
Mining and other (iii)		6,080		-
	$	31,054	$	21,895

(i)  Social security tax

Social security claims relate to potential social security tax payments related to past payments to employees, including profit sharing, and payments made to external contractors. The Company strongly believes, based on precedent court case rulings, that part of the claim will be cancelled after administrative and judicial discussions. The estimated portion of the claim expected to be cancelled of $3.7 million is included in the table above.

(ii)  Tax

There are 129 tax claims (2018 – 99 tax claims) against MCSA which were evaluated as possible, but not probable, losses by external legal counsel. The main subjects under discussion for the tax claims involve the validity of tax credits used to offset federal taxes.

(iii) Mining

In June 2019, MCSA was notified of five administrative claims filed by the Nacional Mining Agency regarding alleged differences in the calculation of certain sales taxes on mining revenue by MCSA. The Company, based on the opinion of its legal advisors, does not believe such claims will result in a probable cash outflow.

12. Share Capital

As at December 31, 2019, the Company’s authorized share capital consists of an unlimited number of common shares without par value. As at December 31, 2019, 85,703,646 (2018 – 84,738,650) common shares were outstanding.

In January 2017, the Company issued $2.75 million of convertible debentures with an interest rate of 10% to be repaid within two years or to be converted to units, at the option of the holder, at a conversion price of $0.75 per unit, with each unit consisted of one common share and one-quarter of one common share purchase warrant. Each whole warrant entitled the holder to purchase one common share at a price of $1.20 per common share until

ERO COPPER | 2019 ANNUAL REPORT | 70

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

December 12, 2021. The Company had the right to accelerate the expiry of any warrants issued in relation to these convertible debentures if the closing share price on a recognized exchange reached or exceeded $1.70 for 20 consecutive trading days. In February 2018, all of the convertible debenture holders converted their debentures into units, resulting in the issuance of 4,059,450 common shares and 1,014,861 common share purchase warrants. These warrants were subsequently exercised for an equivalent number of common shares for gross proceeds received by the Company of $1.2 million.

(a)   Options

In January 2018, the Company granted 60,000 options to an employee of the Company at an exercise price of CAD$7.95 per share with a term to expiry of five years. In addition, the Company also granted in January 2018 125,000 options to an employee of the Company at an exercise price of CAD$7.76 per share with a term to expiry of five years. These stock options vest in three equal installments on each annual anniversary date from the date of grant. The total fair value of these options to be expensed over the vesting period was $0.5 million.

In June 2018, the Company granted 174,000 options to an employee and a director of the Company at an exercise price of CAD$10.25 per share with a term to expiry of five years. 150,000 of these stock options vest in three equal installments on each annual anniversary date from the date of grant, while 24,000 of these stock options vested immediately. The total fair value of these options to be expensed over the vesting period was $0.6 million.

In July 2018, the Company granted 200,000 options to an employee of the Company at an exercise price of CAD$9.01 per share with a term to expiry of five years. These stock options vest in three equal installments on each annual anniversary date from the date of grant. The total fair value of these options to be expensed over the vesting period was $0.6 million.

On December 31, 2018, the Company granted 1,155,519 options to certain officers, directors, consultants and employees of the Company at an exercise price of CAD$9.76 per share with a term to expiry of five years. These stock options vest in three equal installments on each annual anniversary date from the date of grant. The total fair value of these options to be expensed over the vesting period was $3.5 million.

On January 2, 2019, the Company granted 125,000 options to directors of the Company at an exercise price of CAD$9.80 per share with a term to expiry of five years. These options vested immediately, and their total fair value was $0.5 million.

On August 15, 2019, the Company granted 40,000 options to directors of the Company at an exercise price of CAD$21.09 per share with a term to expiry of five years. 23,828 of these options vested immediately, while 16,172 will vest upon shareholder approval. Their total fair value was $0.3 million.

On December 12, 2019, the Company granted 470,228 options to certain officers, directors, consultants and employees of the Company at an exercise price of CAD$20.52 per share with a term to expiry of five years. These stock options vest in three equal installments on each annual anniversary date from the date of grant. The total fair value of these options to be expensed over the vesting period was $2.7 million.

	Number of			Weighted Average
	Stock Options			Exercise Price
Outstanding stock options, December 31, 2017		3,493,000		$	3.28
Issued		1,714,519			6.97
Exercised		(283,000	)		1.50
Outstanding stock options, December 31, 2018		4,924,519			4.64
Issued		635,228			14.20
Exercised		(498,330	)		2.75
Outstanding stock options, December 31, 2019		5,061,417		$	6.23

ERO COPPER | 2019 ANNUAL REPORT | 71

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

The weighted average share price on the date of exercise for the year ended December 31, 2019 was $14.60 (year ended December 31, 2018 - $8.91).

As at December 31, 2019, the following stock options were outstanding:

						Vested and		Weighted
						Exercisable		Average
	Number of		Weighted Average			Number of		Remaining
Expiry Date	Stock Options		Exercise Price			Stock Options		Life in Years
May 15, 2022		972,001		1.50	USD		433,665		2.37
July 10, 2022		100,000		1.50	USD		66,666		2.53
November 24, 2022		318,000		6.48	CAD		212,000		2.90
December 7, 2022		1,393,335		6.74	CAD		946,664		2.94
January 18, 2023		60,000		7.95	CAD		20,000		3.05
January 23, 2023		83,334		7.76	CAD		-		3.07
June 19, 2023		144,000		10.25	CAD		44,000		3.47
July 16, 2023		200,000		9.01	CAD		66,666		3.54
December 31, 2023		1,155,519		9.76	CAD		385,165		4.00
January 2, 2024		125,000		9.80	CAD		125,000		4.01
August 15, 2024		40,000		21.09	CAD		23,828		4.63
December 12, 2024		470,228		20.52	CAD		-		4.95
		5,061,417		6.23	USD		2,323,654		3.33

In determining the weighted average exercise price of all outstanding options in the tables above and below, the CAD prices were converted to USD at the December 31, 2019 exchange rate of 1.2989.

The fair value of options granted in the years ended December 31, 2019 and 2018 was determined using the Black-Scholes option pricing model. Expected volatility is estimated by considering historic average share price volatility of comparable companies. The weighted average inputs used in the measurement of fair values at grant date of the options are the following:

	2019			2018
Expected term (years)		3.0			3.0
Forfeiture rate		0	%		0	%
Volatility		53.3	%		60.7	%
Dividend yield		0	%		0	%
Risk-free interest rate		1.68	%		1.92	%
Weighted-average fair value per option	$	5.42		$	2.98

For the year ended December 31, 2019, the Company recorded share-based compensation $4.7 million (2018 - $3.2 million) with respect to its outstanding stock options.

Subsequent to December 31, 2019, the Company granted 73,456 options to directors and certain employees of the Company at an exercise price of CAD$23.42 per share with a term to expiry of five years. The 43,456 options to directors vested immediately, while the 30,000 options to employees vest in three equal installments on each annual anniversary date from the date of grant.

Subsequent to December 31, 2019, 53,332 options were exercised for gross proceeds of $0.2 million.

ERO COPPER | 2019 ANNUAL REPORT | 72

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(b)   Share Unit Plan

The Company has a share unit plan (the “Share Unit Plan”) pursuant to which the Board, at the compensation committee’s recommendation, may grant share units (“Share Units”) to any director, officer, employee, or consultant of the Company or its subsidiaries. At the time of grant of a Share Unit, the Board, at the compensation committee’s recommendations, may establish performance conditions for the vesting of the Share Units. The performance conditions may be graduated such that different percentages (which may be greater or lower than 100%) of the Share Units in a grant become vested depending on the satisfaction of one or more performance conditions. Performance conditions may include terms or conditions relating to: (i) the market price of the Shares; (ii) the return to holders of shares, with or without reference to other comparable companies; (iii) the financial performance or results of the Company or its subsidiaries; (iv) the achievement of performance conditions or other performance criteria relating to the Company or its subsidiaries; (v) any other terms and conditions the Board may in its sole discretion determine with respect to vesting or the acceleration of vesting; and (vi) the vesting date of the Share Units. The Board may, in its discretion, subsequent to the grant of a Share Unit, waive any such performance condition or determine that it has been satisfied subject to applicable law. Each Share Unit entitles the holder thereof to receive one common share, without payment of additional consideration, on the redemption date selected by the Board following the date of vesting of such Share Unit, which will be within 30 days of the date of vesting, or at a later deferred date, subject to certain exception and restrictions.

On December 31, 2018, 215,288 Share Units were issued and on December 12, 2019, 225,659 Share Units were issued to certain officers and employees of the Company pursuant to the Company’s Share Unit Plan. These Share Units will vest three years from the date they were approved for granting by the Board (December 31, 2021 and December 12, 2022, respectively) and the number of Share Units that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain market and non-market performance conditions. Each vested Share Unit entitles the holder thereof to receive on or about the applicable date of vesting of such Share Unit (i) one common share; (ii) a cash amount equal to the fair market value of one common share as at the applicable date of vesting; or (iii) a combination of (i) and (ii), as determined by the Board in its sole discretion. The Company currently intends to settle these Share Units using common shares. Accordingly, they are classified as equity settled instruments.

As at December 31, 2019, 437,463 Share Units have been issued and are outstanding to certain officers and employees of the Company pursuant to the Company’s Share Unit Plan.

For the Share Units with non-market performance conditions, the fair value of the Share Units granted was determined using the share price at the date of grant. For the Share Units with market performance conditions, the fair value of the Share Units granted was determined using a Geometric Brownian Motion model. Expected volatility is estimated by considering historic share price information. The inputs used in the measurement of fair values at grant date of the Share Units issued are the following:

	December 12, 2019			December 31, 2018
Expected term (years)		3.0			3.0
Forfeiture rate		0	%		0	%
Volatility		44.5	%		45.4	%
Dividend yield		0	%		0	%
Risk-free interest rate		1.69	%		1.95	%
Weighted-average fair value per Share Unit	$	18.97		$	17.75

During the year ended December 31, 2019, the Company recorded share-based compensation of $1.0 million (2018 - $nil) with respect to the Share Units.

Subsequent to December 31, 2019, 1,000 Share Units were issued to certain employees of the Company pursuant to the Company’s Share Unit Plan.

ERO COPPER | 2019 ANNUAL REPORT | 73

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(c)   Deferred Share Unit Plan

On December 12, 2019, a Deferred Share Unit Plan (“DSU Plan”) was established by the Board as a component of our compensation for independent directors. Only independent directors are eligible to participate and to receive deferred share units (“DSUs”) under the DSU Plan. DSUs may be awarded by the Board from time to time to provide independent directors with appropriate equity-based compensation for the services they render to the Company and may be subject to terms and conditions with respect to vesting of such DSUs. In addition, independent directors may elect to receive a portion or all of their respective annual cash remuneration in the form of DSUs, which will be fully vested upon such grant. The number of DSUs to be awarded to a participant under the DSU Plan is determined by dividing the portion of that participant’s annual cash remuneration by the fair market value of a common share on the last day of the quarter in which such portion of the annual cash remuneration was earned. Pursuant to the DSU Plan, DSUs may only be settled by way of cash payment. A participant is not entitled to payment in respect of the DSUs until his or her death, retirement or removal from the Board. The settlement amount of each DSU is based on the fair market value of a common share on the DSU redemption date multiplied by the number of DSUs being redeemed.

Subsequent to December 31, 2019, 23,674 DSUs were issued to independent directors.

(d)  Warrants

As at December 31, 2019, 2,866,662 (December 31, 2018 – 3,333,328) common share purchase warrants were outstanding with a weighted average exercise price of $1.20 and a weighted average remaining contractual life of 1.95 years.

During the year ended December 31, 2019, 466,666 warrants were exercised for gross proceeds of $0.6 million.

(e)  Net Income (Loss) per Share

	Year ended		Year ended
	December 31,		December 31,
	2019		2018
Weighted average number of common shares outstanding		85,244,277		83,927,977
Dilutive effect of warrants		2,788,885		-
Dilutive effect of stock options		2,919,799		-
Dilutive effect of Share Units		437,463		-
Weighted average number of diluted common shares outstanding		91,390,425		83,927,977
Net income (loss) attributable to owners of the Company	$	91,883	$	(3,155	)
Basic net income (loss) per share attributable to owners of the Company		1.08		(0.04	)
Diluted net income (loss) per share attributable to owners of the Company		1.01		(0.04	)

For the year ended December 31, 2018, the potentially dilutive effect of warrants and stock options are excluded from the dilutive net income (loss) per share calculation as the Company incurred a loss for the year.

13. Revenue

	Year ended			Year ended
	December 31, 2019			December 31, 2018
Copper concentrate
- sales within Brazil	$	176,885		$	137,039
- export sales		69,499			49,382
- price adjustments on provisionally priced sales		(187	)		(1,691	)
Gold
- export sales		38,646			48,375
	$	284,843		$	233,105

ERO COPPER | 2019 ANNUAL REPORT | 74

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Under the terms of the Company’s contract with its primary customer, sales are provisionally priced on the date of sale based on the previous month’s average copper price. The final sales price for all shipments in a month is determined at the end of the month in which the sale is recognized. As at December 31, 2019, there are no sales subject to provisional pricing. During the year ended December 31, 2019, the Company recognized $0.2 million (2018 - $1.7 million) related to provisional price adjustments related to such provisionally priced sales.

14. Cost of Product Sold

	Year ended		Year ended
	December 31, 2019		December 31, 2018
Materials	$	21,788	$	19,356
Salaries and benefits		40,787		36,130
Depreciation and depletion		46,014		45,188
Contracted services		23,691		20,806
Maintenance costs		18,383		15,842
Utilities		11,154		9,341
Other costs		1,000		948
	$	162,817	$	147,611

15. General and Administrative Expenses

	Year ended			Year ended
	December 31, 2019			December 31, 2018
Accounting and legal	$	1,507		$	1,672
Amortization and depreciation		157			109
Office and sundry		7,192			6,335
Provisions		(625	)		361
Salaries and consulting fees		13,427			11,250
Incentive payments		8,684			7,211
Transfer agent and filing fees		206			176
Travel and conference		2,269			1,886
	$	32,817		$	29,000

16. Finance Expense

	Year ended		Year ended
	December 31, 2019		December 31, 2018
Interest on loans and borrowings	$	11,236	$	14,965
Accretion of purchase price adjustments		512		662
Accretion of mine closure and rehabilitation provision		3,508		3,767
Commitment fees		1,681		585
Interest on lease liabilities		366		-
Other finance expenses		3,125		2,583
	$	20,428	$	22,562

ERO COPPER | 2019 ANNUAL REPORT | 75

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

17. Foreign Exchange Loss

The following foreign exchange gains (losses) arise as a result of balances and transactions in the Company’s Brazilian subsidiaries that are denominated in currencies other than the Brazilian Reais (BRL$), which is their functional currency.

	Year ended			Year ended
	December 31, 2019			December 31, 2018
Foreign exchange on USD denominated debt in Brazil	$	(4,406	)	$	(9,808	)
Realized foreign exchange on derivative contracts (note 21)		185			(10,119	)
Unrealized foreign exchange on derivative contracts (note 21)		(250	)		1,137
Other		(677	)		(1,923	)
	$	(5,148	)	$	(20,713	)

18. Recovery of Value Added Taxes

During the year ended December 31, 2019, the Company recognized a recovery of $21.6 million in net income related to value added taxes previously paid on sales in Brazil. The recovery was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant taxing authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim, which approval was received in July 2019. These credits can be used to offset the payment of a variety of other taxes, including income taxes and taxes on future sales. Of the recovery recognized, $3.2 million has been applied to taxes during the 2019 year, $12.2 million has been included in other current assets based on the expected timing of their use, with the remaining $6.2 million recognized in other non-current assets in the statement of financial position.

19. Income Taxes

(a)  Reconciliation of income taxes

A reconciliation of the income tax expense to the amount calculated using the Company’s combined Canadian federal and provincial statutory income tax rate of 27% (2018 – 27%) is as follows:

	Year Ended December 31, 2019			Year Ended December 31, 2018
Net income in the year before tax	$	74,829		$	2,661
Tax rate		27	%		27	%
Income tax expense at statutory rate	$	20,204		$	718
Tax effect of:
Difference in tax rate of foreign jurisdictions		(7,557	)		(1,489	)
Non-deductible (taxable) items		(6,334	)		(596	)
Change in temporary differences not previously recognized		(24,570	)		4,071
Reduction (utilization) of tax losses against other liabilities		-			952
Other		631			1,996
Income tax expense (recovery)	$	(17,626	)	$	5,652

ERO COPPER | 2019 ANNUAL REPORT | 76

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

	Year Ended December 31, 2019			Year Ended December 31, 2018
Current income tax:
Relating to current income tax charge	$	10,645		$	2,899
Deferred income tax:
Relating to recognition of previously unrecognized temporary differences		(33,836	)		-
Relating to origination and reversal of temporary differences		5,565			2,753
Income tax expense (recovery)	$	(17,626	)	$	5,652

(b)  Deferred income tax assets (liabilities)

The general movement in the deferred income tax asset (liability) is as follows:

	Year Ended December 31, 2019			Year Ended December 31, 2018
At the beginning of the year	$	(15,811	)	$	(16,655	)
Reduction (utilization) of tax losses against other liabilities		-			952
Deferred income tax recovery (expense)		28,271			(2,753	)
Foreign exchange		639			2,645
At the end of the year	$	13,099		$	(15,811	)

Recognized deferred tax and assets and liabilities consist of the following:

	December 31, 2019			December 31, 2018
Deferred tax assets:
Non-capital losses - Brazil	$	28,792		$	6,311
Other - Brazil		3,192			-
Mine closure and rehabilitation provision - Brazil		4,605			-
Non-capital losses - Canada		317			-
Financing fees and other - Canada		1,349			1,660
		38,256			7,971
Deferred tax liabilities
Mineral property, plant and equipment - Brazil		(9,612	)		(7,227	)
Loans and borrowings - Brazil		(12,192	)		(14,698	)
Other - Brazil		(1,687	)		(197	)
Loans and borrowings - Canada		(1,666	)		(1,660	)
		(25,157	)		(23,782	)
Net deferred income tax assets (liabilities)	$	13,099		$	(15,811	)

ERO COPPER | 2019 ANNUAL REPORT | 77

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Deferred tax assets of $11.7 million (December 31, 2018 - $22.5 million) have not been recognized for the following deductible temporary differences as it is not probable that the benefits of these temporary differences will be realized:

	Year Ended December 31, 2019				Year Ended December 31, 2018
	Brazil		Canada		Brazil		Canada
Exploration and evaluation assets	$	47,986	$	-	$	49,920	$	-
Mineral property, plant and equipment		-		72		8,974		42
Share issuance/Financing costs		-		-		-		640
Non-capital losses		-		14,196		72,672		7,194
Other		-		4,251		-		2,588
	$	47,986	$	18,519	$	131,566	$	10,464

The Company has loss carry forwards in Brazil totalling $83.0 million (December 31, 2018 - $114.1 million) which may be carried forward indefinitely to offset future taxable income in Brazil. Use of these losses is limited to 30% of taxable income annually. The Company also has loss carry forwards in Canada totalling $15.4 million (December 31, 2018 - $7.2 million) which may be carried forward for 20 years to offset future taxable income, which expire between 2036 and 2039.

20. Related Party Transactions

Key management personnel consist of the Company’s directors and officers and their compensation includes director retainer fees and management salaries paid to these individuals, as well as share-based compensation. The aggregate value of compensation paid to key management personnel for the year ended December 31, 2019 was $7.5 million ($5.4 million for the year ended December 31, 2018). In addition, 444,265 options and 171,754 Share Units were issued to key management personnel during the year ended December 31, 2019 (1,100,155 options and 130,636 Share Units for the year ended December 31, 2018) with $4.1 million recognized in share-based compensation expense for the year ended December 31, 2019 ($2.3 million for the year ended December 31, 2018).

During the year ended December 31, 2019, key management personnel exercised 286,666 options and 300,000 warrants for cash proceeds to the Company of $0.6 million and $0.4 million, respectively (133,000 options for $0.2 million for the year ended December 31, 2018). During the year ended December 31, 2018, key management personnel converted convertible debentures into 1,476,164 common shares and 369,040 common share purchase warrants. The warrants were subsequently exercised into 369,040 common shares.

As at December 31, 2019, $3.9 million was payable to key management as incentive compensation and is included in accounts payable and accrued liabilities in the consolidated financial statements (December 31, 2018 - $2.7 million). Such amounts are unsecured, non-interest bearing and will be paid under normal trade terms.

21. Financial Instruments

Fair value

Fair values of financial assets and liabilities are determined based on available market information and valuation methodologies appropriate to each situation. However, some judgments are required in the interpretation of the market data to produce the most appropriate realization value estimate. As a consequence, the estimates presented herein do not necessarily indicate the amounts that could be realized in the current exchange market. The use of different market information and/or evaluation methodologies may have a material effect on the market value amount.

ERO COPPER | 2019 ANNUAL REPORT | 78

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

As at December 31, 2019, derivatives were measured at fair value based on Level 2 inputs. The fair value of derivatives is disclosed under market risk below.

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, deposits, financial investments and accounts payable and accrued liabilities approximate their fair values due to their short terms to maturity or market rates of interest used to discount amounts. The carrying value of value added, payroll and other taxes approximate fair value based on the discount rate applied. At December 31, 2019, the carrying value of loans and borrowings is $159.4 million while the fair value is approximately $ 161.4 million. The effective interest rates used to amortize these loans are a close approximation of market rates of interest at December 31, 2019 (Level 2 of the fair value hierarchy).

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers. The carrying amount of the financial assets below represents the maximum credit risk exposure as at December 31, 2019 and December 31, 2018:

	December 31, 2019		December 31, 2018
Cash and cash equivalents	$	21,485	$	18,941
Restricted cash		1,500		3,000
Accounts receivable		7,680		7,219
Deposits		1,200		1,334
Derivatives		-		254
Other non-current assets - term deposits		1,196		686
	$	33,061	$	31,434

The Company invests cash and cash equivalents as well as restricted cash with financial institutions that are financially sound based on their credit rating. The Company’s exposure to credit risk associated with accounts receivable is influenced mainly by the individual characteristics of each customer. The Company currently has only three significant customers, all of which have no history of credit default with the Company. The Company has not incurred credit losses during the years ended December 31, 2019 and 2018, nor has a provision for credit losses been recognized.

Liquidity risk

Liquidity risk is the risk associated with the difficulties that the Company may have meeting the obligations associated with financial liabilities that are settled with cash payments or with another financial asset. The Company's approach to liquidity management is to ensure as much as possible that sufficient liquidity exists to meet their maturity obligations on the expiration dates, under normal and stressful conditions, without causing unacceptable losses or with risk of undermining the normal operation of the Company.

The table below shows the Company's maturity of financial liabilities on December 31, 2019:

	Carrying		Contractual		Up to 12						More than 5
Non-derivative Financial Liabilities	value		cash flows		months		1-2 years		3-5 years		years
Loans and borrowings	$	159,370	$	161,377	$	18,984	$	30,318	$	110,208	$	1,867
Interest on loans and borrowings		-		22,788		8,749		7,172		6,737		130
Accounts payable and accrued liabilities		43,694		43,694		43,694		-		-		-
Value added, payroll and other taxes		19,688		20,428		13,994		1,968		4,466		-
	$	222,752	$	248,287	$	85,421	$	39,458	$	121,411	$	1,997

ERO COPPER | 2019 ANNUAL REPORT | 79

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Market risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity prices. The purpose of market risk management is to manage and control exposures to market risks, within acceptable parameters, while optimizing return.

The Company may use derivatives, including forward contracts and swap contracts, to manage market risks.

(i) Foreign exchange currency risk

The Company’s subsidiaries in Brazil are exposed to exchange risks related to the US dollars and Euros. In order to minimize currency mismatches, the Company monitors its cash flow projections considering future sales expectations indexed to US dollar variation in relation to the cash requirement to settle the existing financings.

The Company's exposure to foreign exchange currency risk at December 31, 2019 relates primarily to $9.6 million (December 31, 2018 – $10.2 million) in loans and borrowings of MCSA denominated in US dollars and Euros. Strengthening (weakening) in the Brazilian Real against the US dollar by 10% and 20%, would have increased (decreased) pre-tax net income by $0.6 million and $1.1 million, respectively (2018 – $0.7 million and $1.3 million). Strengthening (weakening) in the Brazilian Real against the Euro by 10% and 20%, would have increased (decreased) pre-tax net income by $0.4 million and $0.8 million, respectively (2018 – $0.4 million and $0.7 million). This analysis is based on the foreign currency exchange variation rate that the Company considered to be reasonably possible at the end of the year. The analysis assumes that all other variables, especially interest rates, are held constant.

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage market risks. At December 31, 2019, the Company’s subsidiaries have entered into foreign exchange collar contracts at zero cost for notional amounts of $336.6 million with an average floor rate of 3.86 BRL to US Dollar and an average cap rate of 4.41 BRL to US Dollar (December 31, 2018 – notional amount of $21.5 million in foreign exchange forward contracts). The maturity dates of these contracts are from January 15, 2020 to July 28, 2021 and are financially settled on a net basis. The fair value of these contracts at December 31, 2019 was nil, (December 31, 2018 – an asset of $0.3 million, which was included in Derivatives in the statement of financial position.) The change in fair value of foreign exchange collar contracts was a loss of $0.3 million for the year ended December 31, 2019 (a gain of $1.1 million for the year ended December 31, 2018) and has been recognized in foreign exchange loss. In addition, in the year ended December 31, 2019, the Company recognized a realized gain of $0.2 million, (a loss of $10.1 million for the year ended December 31, 2018) related to the settlement of foreign currency forward contracts.

(ii) Interest rate risk

The Company is principally exposed to the variation in interest rates on loans and borrowings with variable rates of interest. Management reduces interest rate risk exposure by entering into loans and borrowings with fixed rates of interest or by entering into derivative instruments that fix the ultimate interest rate paid.

The Company is principally exposed to interest rate risk through its Term Facilities of $136.0 million and Brazilian Real denominated bank loans of $9.8 million. Based on the Company’s net exposure at December 31, 2019, a 1% change in the variable rates would have an impact of $1.5 million on pre-tax annual net income, without consideration of the effects of the swap contracts below.

In order to mitigate the above volatility due to variable rates on loans, as at December 31, 2019, the Company has entered into an interest rate swap contract to manage interest rate risk (see note 9(a)) associated with its Canadian Facilities. The floating interest on a notional amount of $65 million was swapped for a fixed interest rate of 2.69%. The fair value of this contract at December 31, 2019 was a liability of $1.7 million and was included in Derivatives in the statement of financial position while the change in the fair value of this contract of $1.7 million was included in Finance Expenses in the statement of operations and comprehensive income.

ERO COPPER | 2019 ANNUAL REPORT | 80

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

In addition, as at December 31, 2019, MCSA has entered into an interest rate and currency swap contract on the Plural Loan (see note 9(d)). The floating interest on a notional amount of BRL$12 million was swapped for a fixed interest rate of 9.9% and the BRL currency on the loan was swapped for USD at a rate of 3.9500. The fair value of this contract at December 31, 2019 was a liability of $0.1 million and was included in Derivatives in the statement of financial position while the change in the fair value of this contract of $0.1 million was included in Finance Expenses in the statement of operations and comprehensive income.

(iii) Price risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage commodity price risks. During the year ended December 31, 2019, the Company had entered into commodity swap collar contracts. As at December 31, 2019, these commodity swap collar contracts have all matured and the balance was $nil. The Company recognized a realized loss of $1.4 million for the year ended December 31, 2019 related to the settlement of commodity forward contracts.

22. Capital Management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue the development and production of its mine properties and to maintain a flexible capital structure for its projects for the benefit of its stakeholders.

In the management of capital, the Company includes the components of shareholders’ equity and debt facilities.

The Company manages the capital structure and makes adjustments to it considering changes in the economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new loans and borrowings, common shares, or acquire or dispose of assets. Management reviews the capital structure on a regular basis to ensure that the above-noted objectives are met.

Certain loan agreements contain operating and financial covenants that could restrict the ability of the Company and its subsidiary, MCSA, to, among other things, incur additional indebtedness needed to fund its respective operations, pay dividends or make other distributions, make investments, create liens, sell or transfer assets or enter into transactions with affiliates. There are no other restrictions or externally imposed capital requirements of the Company.

ERO COPPER | 2019 ANNUAL REPORT | 81

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

23. Segment Disclosure

The Company’s operations are segmented by entity between MCSA, NX Gold and corporate head office, which is consistent with internal reporting purposes. The Company monitors the operating results of its operating segments separately for the purpose of making decisions about resource allocation and performance assessment. The accounting policies used in the operating segments are the same as those contained in Note 3.

Total revenue from MCSA is from two customers while total revenue from NX Gold is from one customer.

Segmented information is as follows:

Year ended December 31, 2019	MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	246,197		$	38,646		$	-		$	284,843
Depreciation and depletion		(40,107	)		(5,907	)		-			(46,014	)
Other cost of product sold expenses		(95,500	)		(21,303	)		-			(116,803	)
Cost of product sold		(135,607	)		(27,210	)		-			(162,817	)
Sales expenses		(4,962	)		-			-			(4,962	)
Gross profit		105,628			11,436			-			117,064
Expenses
General and administrative		(20,993	)		(2,308	)		(9,516	)		(32,817	)
Share-based compensation		-			-			(5,792	)		(5,792	)
Finance income		520			143			38			701
Finance expenses		(8,877	)		(1,366	)		(10,185	)		(20,428	)
Foreign exchange gain (loss)		(5,039	)		(76	)		(33	)		(5,148	)
Loss on debt settlement		(1,783	)		-			-			(1,783	)
Recovery of value added taxes		21,584			-			-			21,584
Other income		242			1,206			-			1,448
Income (loss) before taxes		91,282			9,035			(25,488	)		74,829
Current tax expense		(8,764	)		(1,881	)		-			(10,645	)
Deferred tax recovery		27,267			1,004			-			28,271
Net Income (Loss)	$	109,785		$	8,158		$	(25,488	)	$	92,455
Assets
Current	$	62,413		$	9,166		$	3,986		$	75,565
Non-current		364,117			20,180			2,812			387,109
Total Assets	$	426,530		$	29,346		$	6,798		$	462,674
Total Liabilities	$	107,045		$	15,934		$	140,637		$	263,616

ERO COPPER | 2019 ANNUAL REPORT | 82

Ero Copper Corp.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

Year ended December 31, 2018	MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	184,730		$	48,375		$	-		$	233,105
Depreciation and depletion		34,104			11,084			-			45,188
Other cost of product sold expenses		81,242			21,181			-			102,423
Cost of product sold		(115,346	)		(32,265	)		-			(147,611	)
Sales expenses		(3,268	)		-			-			(3,268	)
Gross profit		66,116			16,110			-			82,226
Expenses
General and administrative		(16,340	)		(3,401	)		(9,259	)		(29,000	)
Share-based compensation		-			-			(3,225	)		(3,225	)
Finance income		844			28			431			1,303
Finance expenses		(16,215	)		(959	)		(5,388	)		(22,562	)
Foreign exchange loss		(20,301	)		(131	)		(281	)		(20,713	)
Gain (loss) on debt settlement		(3,708	)		-			(1,768	)		(5,476	)
Other income		1,653			(1,545	)		-			108
Income (loss) before taxes		12,049			10,102			(19,490	)		2,661
Current tax expense		-			(2,899	)		-			(2,899	)
Deferred tax expense		(1,932	)		(1,173	)		352			(2,753	)
Net Income (Loss)	$	10,117		$	6,030		$	(19,138	)	$	(2,991	)
Assets
Current	$	43,802		$	(630	)	$	7,782		$	50,954
Non-current		281,622			25,128			2,735			309,485
Total Assets	$	325,424		$	24,498		$	10,517		$	360,439
Total Liabilities	$	160,824		$	14,021		$	81,772		$	256,617

ERO COPPER | 2019 ANNUAL REPORT | 83

Corporate Information

Corporate Office

1050 – 625 Howe Street

Vancouver, British Columbia

Canada V6C 2T6

T: +1 604 449 9244

F: +1 604 398 3767

info@erocopper.com

Board of Directors

Christopher Noel Dunn – Executive Chairman

David Strang

Lyle Braaten

Steven Busby

Dr. Sally Eyre

Robert Getz

Chantal Gosselin

John Wright

Matthew Wubs

Executive Team

Christopher Noel Dunn – Executive Chairman

David Strang – President & Chief Executive Officer

Wayne Drier – Chief Financial Officer

Michel (Mike) Richard – Chief Geological Officer

Anthea Bath – Vice President, Technical Services

Makko DeFilippo – Vice President, Corporate Development

Deepk Hundal – Vice President, General Counsel & Corporate Secretary

Pablo Mejia-Herrera – Vice President, Exploration

Michal Romanowski – Vice President, Evaluations & Planning

Jonathan Singh – Vice President, Finance

Brazilian Leadership

Manoel Valério de Brito – Co-CEO and COO of MCSA

Eduardo De Come – Co-CEO and CFO of MCSA

Auditors

KPMG LLP

777 Dunsmuir Street

Vancouver, British Columbia

Canada V7Y 1K3

Register and Transfer Agent

Computershare Investor Services Inc.

510 Burrard Street, 3rd Floor

Vancouver, British Columbia

Canada V6C 3B9

+1-604-661-9400

service@computershare.com

External Legal Counsel

Blake, Cassels & Graydon LLP

595 Burrard Street

P.O Box 49314, Suite 2600, Three Bentall Centre

Vancouver, British Columbia

Canada V7X 1L3

Share Information

TSX: ERO

Common shares outstanding as at Dec. 31, 2019:

85.7 million

Investor Contact

Makko DeFilippo

Vice President, Corporate Development

T: +1 604 429 9244

E: info@erocopper.com

Annual Meeting Details

Thursday, May 7^th, 2020 – 3:30pm (PST)

Lancaster Room at the Rosewood Hotel Georgia

801 W Georgia Street

Vancouver, British Columbia

Canada V6C 1P7

ERO COPPER | 2019 ANNUAL REPORT | 84

Cautionary Note Regarding Forward-Looking Statements

This Annual Report contains “forward-looking information” within the meaning of applicable Canadian securities laws. Forward-looking information includes statements that use forward-looking terminology such as “may”, “could”, “would”, “will”, “should”, “intend”, “target”, “plan”, “expect”, “budget”, “estimate”, “forecast”, “schedule”, “anticipate”, “believe”, “continue”, “potential”, “view” or the negative or grammatical variation thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, statements with respect to the Company's expected operations at the Vermelhos and Pilar Mines as well as at the NX Gold Property, drilling plans, plans for the Company's exploration program, timing of any updated mineral resource and reserve updates and technical reports, the Company's ability to service its ongoing obligations, the Company's future production outlook, cash costs, capital resources, expenditures, the impact of new accounting standards and amendments on the Company's financial statements, and current global macroeconomic uncertainty stemming from the onset of Covid-19.

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this Press Release including, without limitation, assumptions about: favourable equity and debt capital markets; the ability to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Company’s properties and assets; future prices of copper and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any mineral reserve and mineral resource estimates; the geology of the Vale do Curaçá Property, NX Gold Property and the Boa Esperanҫa Property being as described in the technical reports for these properties; production costs; the accuracy of budgeted exploration and development costs and expenditures; the price of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to operate in a safe, efficient and effective manner; political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favourable terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour stability; stability in financial and capital goods markets; availability of equipment; positive relations with local groups and the Company’s ability to meet its obligations under its agreements with such groups; and satisfying the terms and conditions of the Company’s current loan arrangements. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive, global health, and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.

Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. Such risks include, without limitation the risk factors listed under the heading “Risk Factors” in the Annual Information Form for the year ended December 31, 2019 and dated March 12, 2020.

Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward- looking information, there may be other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended.

The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained herein. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.

Forward-looking information contained herein is made as of the date of this Annual Report and the Company disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.

ERO COPPER | 2019 ANNUAL REPORT | 85

 

EX-99.10

Exhibit 99.10

Table of Contents

[2] About this Report

[3] Letter from the President & CEO

[4] Energy Management & GHG Emissions

[4] Water Management

[5] Waste & Hazardous Materials Management

[6] Biodiversity Impacts

[6] Women in Leadership

[7] Workforce Health & Safety

[8] Community Relations

[10] Appendix 1: SASB Data Tables

[13] Appendix 2: GRI Data Tables

ERO COPPER | 2019 SUSTAINABILITY REPORT | 1

About This Report

We are proud of our ongoing environmental and social programs and the long-lasting positive impact they are making in the communities in which we operate. As a Company, we are committed to responsible mining and transparent reporting, both integral to driving sustainability in our business. For 2019, we are delighted to be issuing our first annual sustainability report.

This 2019 Sustainability Report (the “Report”) provides information and disclosure on the performance of Ero Copper Corp. (“Ero”, the “Company”, “we” or “our”) with respect to sustainability matters of material importance to the Company and its stakeholders. The reporting period for the Report is January 1, 2019 to December 31, 2019.  

The Company’s 2019 Annual Report provides further detail on the financial and operational performance of the Company for the year ended December 31, 2019. For additional information, including risk factors associated with the Company’s operations and performance, please refer to the Annual Information Form dated March 12, 2020 available on the Company’s website (www.erocopper.com) and on SEDAR (www.sedar.com).

Reporting Framework

Ero is reporting in alignment with the Sustainability Accounting Standards Board (“SASB”) standards in order to effectively and transparently communicate our sustainability efforts. The Company’s 2019 data and key metrics have been incorporated into the SASB Metals and Mining standard in Appendix 1 of this Report.

In addition, this Report contains standard disclosures from the Global Reporting Initiative (“GRI”) Sustainability Reporting Guidelines (the “Standard Disclosures”). The following Standard Disclosures are listed in Appendix 2 of this Report:

•      102-8: Information on employees and other workers

•      302-1: Energy consumption within the organization

•      303-3: Water withdrawal

•      MM1: Amount of land (owned or leased, and managed for productive activities or extractive use) disturbed or rehabilitated

•      305-1: Direct Greenhouse Gas (GHG) emissions

•      305-2: Energy Indirect (Scope 2) GHG emissions

•      401-1: New employee hires and employee turnover

•      403-2: Occupational Health and Safety 

*Photo on front cover provided by VRIFY Technology Inc. 

ERO COPPER | 2019 SUSTAINABILITY REPORT | 2

From the President & CEO

 

We understand that a commitment to sustainability is central to our social license to operate. As a company, we are committed to the safety and well being of our employees, the environment and fostering long-term sustainable growth within our communities to ensure they thrive both during and well beyond the life of our mines.

A key aspect of our ongoing sustainability effort is effective and transparent reporting. We are pleased to be issuing our first annual sustainability report for 2019. To ensure our social and environmental disclosure is clear, measurable and aligned with a well -known industry standard, we have reported using the Sustainability Accounting Standards Board (SASB) framework. In addition, we have included certain Standard Disclosures from the Global Reporting Initiative (GRI) Sustainability Disclosure Guidelines to supplement our disclosure. We look forward to enhancing the breadth and coverage of our sustainability reporting in the years ahead.

Brazil has a well-developed mining culture and a robust sustainability framework. In support of further developing sustainability initiatives in Brazil, the Instituto Brasileiro de Mineração (“IBRAM”) – the national mining industry association in Brazil – joined The Mining Association of Canada’s (“MAC”) initiative Towards Sustainable Mining (“TSM”) in 2019. The adoption of the initiative by IBRAM covers tailings management, engagement with civil society, safety and health, environmental standards, and enhanced transparency and accountability. Mineração Caraíba S/A (“MCSA”), a subsidiary of Ero, is a proud member of IBRAM and we look forward to contributing to the implementation of the program in order to ensure its success in the coming years.

Our commitment to the local communities near our operations is comprehensive and diverse. Highlighting these efforts in 2019, with our partners in Brazil, we helped to develop and license two goat milk cooperatives, empowered local entrepreneurs through our ongoing entrepreneurship programs, trained and developed the next generation of miners through our young apprentice programs and provided financial and volunteer support to local programs targeting at-risk youth in our nearby communities, to name a few.

Throughout our operations, we continue to implement innovative ways to reduce fresh-water use, decrease our operating footprint where possible, rehabilitate areas disturbed by historic mining activity and eliminate or reduce reliance on conventional tailings dams.

The health and safety of our employees, contractors, consultants and neighboring communities is a key objective of ours. In 2019, our Time Injury Frequency Rate (“LTIFR”) was 0.99. We remain focused on our goal of achieving zero lost time accidents.

I invite you to read this Report, which highlights what responsible mining means for all of us at Ero.

David Strang

President, CEO and Director

March 31, 2020

ERO COPPER | 2019 SUSTAINABILITY REPORT | 3

Energy Management & Greenhouse Gas Emissions

Energy Use

Mining, transport and processing of ore and waste rock requires significant energy use. Our operations use regional-grid sourced electricity, diesel and liquified petroleum fuels. Electrical power supplied to the Company’s operations in Bahia and Mato Grosso, is 100% renewable comprised of hydro-electric, wind and solar energy.

Electrical power is supplied to the Company’s Curaçá Valley operations in Bahia State by the Companhia Hidroelétrica do São Francisco (CHESF) via an overhead transmission line from the Sobradinho Hydroelectric Power Dam at 230 kV.

Electrical power is supplied to the NX Gold Mine in Mato Grosso State from the substation in Nova Xavantina City via a 34.5 kV power line installed and maintained by the Energy Supply Company of Mato Grosso (ENERGISA S/A).

Green House Gas Emissions / Monitoring

We monitor fuel and energy use at each of our operations and use this data to estimate greenhouse gas emissions. Please refer to the Appendices of this Report for emissions data.

Water Management

Water Access

Water supplied to the MCSA Mining Complex is pumped from the São Francisco River via an 86-kilometer pipeline owned and maintained by MCSA. MCSA uses a small fraction of the total fresh-water pumped from the pipeline for its mining and processing operations, the balance of which is provided to communities throughout the region. As operator of the pipeline, MCSA provides water to the region’s municipalities of Massaroca City, Abobora City and Umburnas City as well as local farmers located along the pipeline – a critical component of the infrastructure in the region.

At the NX Gold Mine, water is sourced from surface run-off, sumps in the underground mine and a fully permitted water supply system to withdraw fresh-water from the neighboring Mortes River as required.

Water Recycling

In 2019, the MCSA Mining Complex achieved an 88% fresh-water recycle rate as a result of the tailings co-disposal method and re-use of process water. The NX Gold Mine achieved a 90% fresh-water recycle rate in 2019.

ERO COPPER | 2019 SUSTAINABILITY REPORT | 4

Waste & Hazardous Materials Management

Tailings Management

The Company currently manages seven tailings facilities at its operations in Brazil (four at the MCSA Mining Complex and three at the NX Gold Mine). Each of these facilities is routinely inspected by the Company's internal technical teams, third-party engineering firms and applicable regulatory agencies. Due to the flat lying topography, non-existence of down-stream communities and limited post-deposition elevation of each of the facilities, all seven of the dams monitored by the Company are classified as low risk⁽¹⁾.

At the MCSA Mining Complex, the Company's largest operation, a conventional tailings dam is no longer in use as a result of tailings co-disposal implementation. The co-disposal method entails utilizing surface waste rock stockpiles by allowing process tailings to permeate the inherent void space within the piles. This method has produced excellent results since 2011, increasing process water recycling rates, significantly reducing pumping costs, creating a substrate for revegetation of the waste rock stockpiles and, since implementation, has eliminated the need for conventional tailings storage. The historic tailings facility is currently being reclaimed as part of the Company’s ongoing environmental sustainability efforts.

At the NX Gold Mine, non-inert tails from the Company’s carbon in leach (CIL) process are stored in a high-density polyethylene (HDPE) lined excavated pit. Inert tails are stored in a single-lift rockfill dam of segmented ring-dyke design, with only one cell operating at any given time. De-watered inert tailings from these cells are transported periodically from the tailings storage facility to areas disturbed by historic artisanal mining activity in the region. Once filled, these areas are revegetated and reclaimed as part of the Company's ongoing environmental sustainability efforts.

Please refer to the Company’s Tailings Management page and the Technical Reports⁽²⁾ for both the MCSA Mining Complex and NX Gold Mine for additional information on the Company's tailings management practices and supplemental scientific and technical information.

(1) In accordance with ordinance No. 70.389, May 17th, 2017 from Departamento Nacional de Produção Mineral (now ANM - National Mining Agency of Brazil).

(2) Please refer to the end of this Report for additional technical and scientific disclosure.

ERO COPPER | 2019 SUSTAINABILITY REPORT | 5

Biodiversity Impacts

Impacts and Mitigation

We are focused on limiting disturbance of the natural environment throughout our operational activity, from exploration to mining. Our operations have closure plans that seek to minimize the physical, chemical and biological impacts and maximize the socio-economic stability of the area.

At the MCSA Mining Complex, we are actively rehabilitating the historic tailings dam and revegetating several historically mined areas.

“Roots” Nursery Program

We provide local farmers with technical and financial support to grow plants and seedlings suitable for our revegetation needs. MCSA purchases plants and seedlings from these local producers, providing a sustainable way for the community to benefit from our ongoing environmental rehabilitation programs in the region.

Women in Leadership

We recognize and embrace the benefit of a diverse workforce and senior leadership. In 2019, approximately 10% of our workforce, and 12% of our new hires, were women – including in key supervisor and management roles. We actively consider diversity criteria when determining the composition of senior management. Please refer to our Diversity Policy for additional information.

Anthea Bath Vice President, Technical Services

Mrs. Bath has over 15 years experience in the mining industry in roles spanning the value chain. Prior to joining Ero, she worked for Sibanye Gold as VP, Commercial Services and held several senior positions with Anglo American including in supply chain, business optimization and market development. Mrs. Bath founded and was formerly the CEO of an energy development company headquartered in South Africa. She holds a Masters degree in Environmental Engineering and a Bachelors degree in Chemical Engineering from the University of Pretoria, South Africa.

Alline Simões Manager, Ore Processing Plant, MCSA

Mrs. Simões has been working at MCSA since 2004 and is currently responsible for all milling and processing operations. She graduated in Mining Engineering from the Federal University of Pernambuco (UFPE) and has over 16 years of experience in mineral processing at all stages of the process. She is a specialist in mineral flotation and obtained a post-graduate degree in Production Engineering from the UNINTER International University Center. Mrs. Simões is currently obtaining an MBA in Project Management from Fundação Getúlio Vargas (FGV).

ERO COPPER | 2019 SUSTAINABILITY REPORT | 6

Workforce Health & Safety

Commitment

We are committed to protecting the health and safety of employees and contractors at our operations through a combination of health and safety best-practices, active monitoring of health and safety matters and, where necessary, implementing new standards and management programs. Our greatest resource is our people. Please refer to the Company’s Health & Safety Policy for additional details.

All policies can be found on the Company’s website (www.erocopper.com).

Training & Performance

In 2019, the Company’s operations worked in excess of seven million man-hours, and in support of our goal of zero lost-time injuries, more than 40,000 hours of health and safety training were performed.

As a result of performance-based monitoring and the implementation of new programs we achieved a lost time injury frequency rate (“LTIFR”) of 0.99 in 2019. We remain focused on continuous improvement and achieving our goal of zero lost-time injuries.

Coronavirus Disease 2019 (“COVID-19”) Response Measures

Ero has been closely monitoring the COVID-19 pandemic in early 2020 in order to protect the health and wellbeing of our employees, contractors and local communities. Ensuring the health of our and key stakeholders is critical to our economic activity in Brazil, and we have implemented several measures to minimize the impacts of the COVID-19 pandemic including, but not limited to:

• Creating a COVID-19 committee comprised of senior members of the organization and local health administrators

• Eliminating all non-essential travel between our operations and corporate offices

• Promoting frequent handwashing and social distancing to reduce methods of transmission at our operations and within our communities

• Increased cleaning and disinfecting of high-traffic areas on site such as buses, bathrooms and the cafeteria

• Requiring employees and contractors to stay home from work and self-isolate if they are showing any symptoms

• Screening all essential visitors, such as foreign contractors, for symptoms prior to visiting site, including testing for COVID-19 where possible to ensure negative results before entry to site

• Ordering of 3,000 COVID-19 testing kits for the Company’s operations and local municipalities to facilitate rapid testing throughout the community if required

• Encouraging work from home wherever possible

• Implementing social distancing practices at our corporate office and operations:

• Smaller shifts for meals in the cafeteria

• Reduction of passenger numbers on buses

• Video and teleconferencing in place of in person meetings

The Company continues to monitor the situation and modify these measures as appropriate.

ERO COPPER | 2019 SUSTAINABILITY REPORT | 7

Community Relations

MCSA Community Development (Curaçá Valley, Bahia, Brazil)

The closest town to the mining and processing operations of the Pilar Mine and Caraíba Mill (part of the MCSA Mining Complex) is the town of Pilar, located approximately 15 kilometers from the entrance to the mine. The town was built to support the mine in the late 1970's and today has a population of approximately 10,000 people. Pilar continues to house the majority of the Company’s employees and their families. Since 2017, the Company broadened its scope of ongoing community development programs to further advance sustainable initiatives throughout the broader Curaçá Valley. The Company’s area of influence stretches over 100 kilometers within the Curaçá Valley, including the Pilar and Vermelhos Mines, and encompasses several small communities including the town of Pilar. A selection of ongoing programs include:

Local Goat Cheese Program

MCSA developed this program with the goal of fostering a sustainable agro-business within the Curaçá Valley. To do this, goat milk cooperatives were established throughout the region, creating central collection and processing locations for the creation of value-added goat's milk products including goat cheeses, candies, soaps and shampoos. In 2019, the first two collection and production facilities were constructed, certified and now cheese is sold locally at markets, fairs and specialty stores throughout Bahia State. MCSA continues to support the cooperatives with distribution, marketing and provide technical assistance to the farmers participating in the program to increase yields and improve the overall health of the region's livestock.

Entrepreneurship Program

The MCSA Entrepreneurship Program is focused on creating sustainable craft businesses throughout the region. The program offers classes and workshops on design and manufacturing of leather goods as well as baking courses using local specialty ingredients. Products are marketed and sold locally at open air markets and fairs in the region.

ERO COPPER | 2019 SUSTAINABILITY REPORT | 8

Community Relations (cont’d)

 

Young Apprentice Program

The Young Apprentice Program has been operating since 2009 at the Vale do Curaçá Professional Training Center (maintained by MCSA), in partnership with Brazil’s National Service for Industrial Learning (SENAI). Over 10 years, the program has trained approximately 500 people, all between 18 and 21 years old.

At the end of each cycle of the Young Apprentice Program, a Company-hosted graduation ceremony is held to celebrate the important step at the beginning of each graduate’s career. Throughout the 10 years of the program, approximately 60% of the graduates have been hired directly by MCSA.

NX Gold Mine Community Development (Nova Xavantina,Mato Grosso, Brazil)

The closest town to the mining and processing operations of the NX Gold Mine is the town of Nova Xavantina, located approximately 18 kilometers from the entrance to the mine. With a total population of approximately 20,000 people, the town’s primary economic activity is supporting the extensive local agro-business. NX Gold provides financial support, technical assistance and volunteer hours to several well-established charitable organizations in the town of Nova Xavantina, as well as sponsorship of local fairs, rodeos, cultural events and youth sports teams. A selection of these organizations include:

Project Hope

The Project Hope program is focused on providing support for many of the vulnerable youth in the community. The program offers courses in financial literacy as well as job training and currently supports approximately 70 vulnerable local youth.

Association of Parents and Friends of the Exceptional

An organization that cares for children and adults with special needs in the local community. The organization coordinates activities focused on the development of physical, cognitive and fine motor skills.

ERO COPPER | 2019 SUSTAINABILITY REPORT | 9

Appendix 1: SASB Data Tables

Table 1: Sustainability Disclosure Topics & Accounting Metrics

TOPIC	METRIC	REPORT	SASB CODE
Greenhouse Gas Emissions	Gross global Scope 1 emissions, percentage covered under emissions- limiting regulations	94,322 tonnes CO2-equivalent.	EM-MM-110a.1
	Discussion of long-term and short- term strategy or plan to manage Scope 1 emissions, emissions reduction targets, and an analysis of performance against those targets	Smoke opacity is measured using the Ringelmann Scale with an opacimeter in all diesel equipment and vehicles, as required by Brazilian law. Additionally preventative maintenance is performed to ensure the Company’s fleet of equipment is operating as they should. Please refer to page 4 of this Report for additional details on management of greenhouse gas emissions.	EM-MM-110a.2
Air Quality	Air emissions of the following pollutants: (1) CO, (2) NOx (excluding N2O), (3) SOx, (4) particulate matter (PM10), (5) mercury (Hg), (6) lead (Pb), and (7) volatile organic compounds (VOCs)	Mining operations in 2019 were predominantly underground and, as a result, have low air emissions. Air quality, including particulate emissions are not material to the Company’s environmental performance.	EM-MM-120a.1
Energy Management	1) Total energy consumed, (2) percentage grid electricity, (3) percentage renewable	(1) Direct electricity of 175,688     MWh (2) 100% (3) 100%	EM-MM-130a.1
Water Management	(1) Total fresh water withdrawn, (2) total fresh water consumed, percentage of each in regions with High or Extremely High Baseline Water Stress	(1) 4,583,204 m3, 0% (2) 2,475,190 m3, 0%	EM-MM-140a.1
	Number of incidents of non- compliance associated with water quality permits, standards, and regulations	Zero.	EM-MM-140a.2
Waste & Hazardous Materials Management	Total weight of tailings waste, percentage recycled	2,303,210 tonnes, 13% recycled.	EM-MM-150a.1
	Number of tailings impoundments, broken down by MSHA hazard potential	Please refer to page 5 of this Report. Additional information on each of the tailings impoundments can be found on the Company's website under the Tailings Management page.	EM-MM-150a.3

ERO COPPER | 2019 SUSTAINABILITY REPORT | 10

Table 1: continued

TOPIC	METRIC	REPORT	SASB CODE
Biodiversity Impacts	Description of environmental management policies and practices for active sites	See page 6 of this Report.	EM-MM-160a.1
	Percentage of mine sites where acid rock drainage is: (1) predicted to occur, (2) actively mitigated, and (3) under treatment or remediation	(1)    0% (2)    0% (3)    0%	EM-MM-160a.2
	Percentage of (1) proved and (2) probable reserves in or near sites with protected conservation status or endangered species habitat	(1)    0% (2)    0%	EM-MM-160a.3
Security, Human Rights & Rights of Indigenous Peoples	Percentage of (1) proved and (2) probable reserves in or near areas of conflict	(1)    0% (2)    0%	EM-MM-210a.1
	Percentage of (1) proved and (2) probable reserves in or near indigenous land	(1)    0% (2)    0%	EM-MM-210a.2
	Discussion of engagement processes and due diligence practices with respect to human rights, indigenous rights, and operation in areas of conflict	Please refer to the Global Human  Rights Policy on the Company’s website.	EM-MM-210a.3
Community Relations	Discussion of process to manage risks and opportunities associated with community rights and interests	See pages 8-9 of this Report. Please refer to the Corporate Social Responsibility Policy on the Company’s website for more information.	EM-MM-210b.1
	Number and duration of non-technical delays	None.	EM-MM-210b.2
Labour Relations	Percentage of active workforce covered under collective bargaining agreements, broken down by U.S. and foreign employees	100% of the Company’s active workforce in Brazil is covered under collective bargaining agreements.	EM-MM-310a.1
	Number and duration of strikes and lockouts	None.	EM-MM-310a.2

ERO COPPER | 2019 SUSTAINABILITY REPORT | 11

Table 1: continued

TOPIC	METRIC	REPORT	SASB CODE
Workforce Health & Safety	1) MSHA all incident rate, 2) fatality rate, 3) near miss frequency rate (NMFR) and 4) average hours of health, safety and emergency response training for a) full-time employees and b) contract employees	1) 0.99 2) 0 3) n/a 4) Full-time employees and contract employees receive an average of more than than 12.5 hours of health, safety and emergency response training.	EM-MM-320a.1
Business Ethics & Transparency	Description of the management system for prevention of corruption and bribery throughout the value chain	Ero Copper has an Anti-Corruption  Policy which requires that directors, officers, employees and consultants of the Company conduct business in a manner that does not contravene local and international anti-bribery and anti-corruption laws that apply to the Company, including the Criminal Code (Canada) and Corruption of Foreign Public Officials Act (Canada).	EM-MM-510a.1
	Production in countries that have the 20 lowest rankings in Transparency International’s Corruption Perception Index	100% of 2019 production came from Brazil which is ranked 106 out of 180 in the Transparency International’s Corruption Perception Index (2019).	EM-MM-5101.2

Table 2: Activity Metrics (SASB)

METRIC	REPORT	SASB CODE
Production of (1) metal ores and (2) finished metal products	At the MCSA Mining Complex: (1) 2,424,592 tonnes ore processed grading 1.93% copper and (2) 42,318 tonnes copper in concentrate. At the NX Gold Mine: (1) 158,275 tonnes ore processed grading 6.98 grams per tonne gold and (2) 30,434 troy ounces of gold.	EM-MM-000.A
Total number of employees, percentage contractors	Total employees and contractors of 3,873 of which ~41% are contractors.	EM-MM-000.B

ERO COPPER | 2019 SUSTAINABILITY REPORT | 12

Appendix 2: GRI Data Tables

102-8: Information on employees and other workers

													Total
									Total				Employees &
As at December 31, 2019	Admin		Geology		Engineering		Labour		Employees		Contractors		Contractors
Corporate Office		11		4		2		-		17		-		17
Brazil
São Paulo Office		9		-		-		-		9		-		9
Tucumã City Office		2		-		-		1		3		-		3
MCSA		289		39		69		1,532		1,929		1,351		3,280
NXGold		71		7		11		253		342		222		564
Total		382		50		82		1,786		2,300		1,573		3,873

302-1: Energy consumption within the organization

	MCSA		NX Gold
Diesel (m3)		7,460		860
Gasoline (m3)		80		-
Carbon (tonnes)		-		-
Liquified Petroleum Gas, LPG (m3)		25,490		10,084
Ammonium Nitrate, ANFO (tonnes)		38		-
Emulsion (tonnes)		2,234		217
Electricity (MWh)		154,936		20,752

(Gigajoules)	MCSA		NX Gold
Diesel		288,538		33,265
Gasoline		2,761		-
Carbon		-		-
Liquified Petroleum Gas, LPG		650,760		257,445
Ammonium Nitrate, ANFO		87		-
Emulsion		5,137		499
Electricity		557,769		74,707
Total		1,505,052		107,972

(1) TSM - Energy and Greenhouse Gas Emissions Management Guide 2014; tonnes of emulsion converted to GJ using Orica standard conversion rate.

ERO COPPER | 2019 SUSTAINABILITY REPORT | 13

303-3: Water withdrawal

	MCSA			NX Gold			Total
Total Water Withdrawal
Mine Dewatering (m3)		1,458,584			518			1,459,102
Groundwater (m3)		7,296			35,020			42,316
Surface Water (m3)		2,415,860			17,014			2,432,874
Fresh-Water and Recycling for Mineral Processing
Fresh-Water for Mineral Processing (m3)		596,878			52,034			648,912
Recycled Process Water (m3)		4,559,580			486,560			5,046,140
% Recycled Process Water		88	%		90	%		89	%
Other Water Withdrawal
Water Provided to Nearby Communities (m3)		9,520,611			-			9,520,611

MM1: Amount of land (owned or leased, and managed for productive activities or extractive use) disturbed or rehabilitated

	MCSA		NX Gold		Total
Disturbed hectares		1,005		20		1,025
Reclaimed hectares		69		10		79

305-1: Direct Greenhouse Gas (GHG) emissions

305-2: Energy Indirect (Scope 2) GHG emissions

(tonnes of CO2 -equivalent)		MCSA		NX Gold
	Diesel		19,999		2,306
	Gasoline		184		-
Direct GHG Emissions(1)	Carbon		-		-
	Liquified Petroleum Gas, LPG		38,617		15,277
	Ammonium Nitrate, ANFO		7		-
	Emulsion		422		41
Energy Indirect (Scope 2)
GHG Emissions(2)	Electricity (CO2-equivalent)		15,405		2,063
	Total		74,635		19,687

(1) Based on the National Inventory Report Canada 2018 Direct (Scope 1) GHG emissions. The global warming potential (GWP) is based on the information provided by the Government of Canada. Gasses included in this calculation are CO2, CH4 and N2O.

(2) The GHG Protocol. Gasses included in this calculation are: CO2, CH4 and N2O.

ERO COPPER | 2019 SUSTAINABILITY REPORT | 14

401-1: New employee hires and employee turnover

New Employee Hires		2019
Age		MCSA			NX Gold
<30	Men		180			48
			4.6	%		1.2	%
	Women		38			9
			1.0	%		0.2	%
Between 30 and 50	Men		181			47
			4.7	%		1.2	%
	Women		13			4
			0.3	%		0.1	%
>50	Men		9			1
			0.2	%		0.0	%
	Women		0			0
			0.0	%		0.0	%
	Total		421			109
			10.9	%		2.8	%

Employee Turnover		2019
Age		MCSA			NX Gold
<30	Men		67			12
			1.7	%		0.3	%
	Women		29			18
			0.7	%		0.5	%
Between 30 and 50	Men		177			28
			3.0	%		0.7	%
	Women		6			4
			0.2	%		0.1	%
>50	Men		31			2
			0.8	%		0.1	%
	Women		0			1
			0.0	%		0.0	%
	Total		250			65
			6.5	%		1.7	%

403-2: Occupational Health and Safety        

Safety Performance	MCSA		NX Gold		Total
Lost time injury frequency(1)		1.00		0.90	0.99
Lost time injury severity(2)		97		212	115

(1) Lost time injury frequency is calculated as the number of lost time injuries, including fatalities, during the period per 1 million hours.

(2) Lost time injury severity is a measurement of the seriousness of injuries and is calculated as the number of workdays lost due to lost time injuries per 1 million hours.

ERO COPPER | 2019 SUSTAINABILITY REPORT | 15

Cautionary Note Regarding Forward-Looking Statements

This Sustainability Report contains “forward-looking information” within the meaning of applicable Canadian securities laws. Forward-looking information includes statements that use forward-looking terminology such as “may”, “could”, “would”, “will”, “should”, “intend”, “target”, “plan”, “expect”, “budget”, “estimate”, “forecast”, “schedule”, “anticipate”, “believe”, “continue”, “potential”, “view” or the negative or grammatical variation thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, statements with respect to the Company’s ongoing sustainability efforts, including but not limited to the expected benefit or effectiveness of any given program, the Company’s plans for future continuation of environmental remediation efforts, the expected contribution of the Company or its subsidiaries to the TSM in coming years, and the effectiveness of any mitigation strategy employed by the Company related to COVID-19.

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this Press Release including, without limitation, assumptions about: favourable equity and debt capital markets; the ability to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Company’s properties and assets; future prices of copper and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any mineral reserve and mineral resource estimates; the geology of the Vale do Curaçá Property, NX Gold Property and the Boa Esperanҫa Property being as described in the Technical Reports for these properties; production costs; the accuracy of budgeted exploration and development costs and expenditures; the price of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to operate in a safe, efficient and effective manner; political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favourable terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour stability; stability in financial and capital goods markets; availability of equipment; positive relations with local groups and the Company’s ability to meet its obligations under its agreements with such groups; and satisfying the terms and conditions of the Company’s current loan arrangements. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive, global health, and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.

Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. Such risks include, without limitation the risk factors listed under the heading “Risk Factors” in the Annual Information Form for the year ended December 31, 2019 and dated March 12, 2020.

Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking information, there may be other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended.

The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained herein. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.

Forward-looking information contained herein is made as of the date of this Sustainability Report and the Company disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.

Technical Reports

Where applicable, information of a scientific or technical nature in respect of the Vale do Curaçá Property included in this Report is based upon the technical information provided in the technical report dated November 25, 2019 with an effective date of September 18, 2019 entitled “2019 Updated Mineral Resources and Mineral Reserves Statements of Mineração Caraíba's Vale do Curaçá Mineral Assets, Curaçá Valley”, prepared by Rubens Jose De Mendonça, MAusIMM, of Projectos e Consultoria em Mineração Ltd. and Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, and Bernardo Horta de Cerqueira Viana, MAIG, all of GE21 Consultoria Mineral Ltda. (“GE21”), who are independent qualified persons under NI 43-101 (“2019 MCSA Mining Complex Technical Report”). Information of a scientific or technical nature in respect of the NX Gold Mine included in this Report is based on upon the technical report, dated February 3, 2020 with an effective date of September 30, 2019, entitled “Mineral Resource and Reserve Estimate of the NX Gold Mine, Nova Xavantina”, prepared by Porfírio Cabaleiro Rodriguez, MAIG, Paulo Roberto Begmann, FAusIMM and Leonardo de Moraes Soares, MAIG, all of GE21, who are independent qualified persons under NI 43-101 ("2019 NX Gold Mine Technical Report", and together with the 2019 MCSA Mining Complex Technical Report, the "Technical Reports").

All documents and corporate policies of the Company referred to herein can be found on the Company's website at www.erocopper.com.

ERO COPPER | 2019 SUSTAINABILITY REPORT | 16

EX-99.11

Exhibit 99.11

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTHS ENDED MARCH 31, 2021

1050 – 625 Howe Street, Vancouver, B.C., Canada V6C 2T6

Phone: 604-449-9244 | Website: www.erocopper.com | Email: info@erocopper.com

MANAGEMENT’S DISCUSSION AND ANALYSIS

This Management’s Discussion and Analysis (“MD&A”) has been prepared as at May 4, 2021 and should be read in conjunction with the unaudited condensed consolidated interim financial statements of Ero Copper Corp. (“Ero”, the “Company”, or “we”) as at, and for the three months ended March 31, 2021, and related notes thereto, which are prepared in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting as permitted by the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”). All references in this MD&A to “Q1 2021” and “Q1 2020” are to the three months ended March 31, 2021 and March 31, 2020, respectively. All dollar amounts are expressed in United States (“US”) dollars and tabular amounts are expressed in thousands of US dollars, unless otherwise indicated. References to “$”, “US$”, “dollars”, or “USD” are to US dollars, references to “C$” are to Canadian dollars, and references to “R$” or “BRL” are to Brazilian Reais.

This MD&A refers to various non-IFRS measures, such as C1 cash cost of copper produced (per lb), C1 cash cost of gold produced (per ounce), all-in sustaining cost (“AISC”) of gold produced (per ounce), EBITDA, Adjusted EBITDA, Adjusted net income attributable to owners of the Company, Adjusted net income per share attributable to owners of the Company, Working Capital (Deficit), Available Liquidity, and Net Debt. Please refer to the section titled "NON-IFRS MEASURES" within this MD&A for a discussion of non-IFRS measures.

This MD&A contains “forward-looking information” that is subject to risk factors set out in a cautionary note contained at the end of this MD&A. The Company cannot assure investors that such information will prove to be accurate, and actual results and future events may differ materially from those anticipated in such information. The results for the periods presented are not necessarily indicative of the results that may be expected for any future period. Investors are cautioned not to place undue reliance on this forward-looking information. All information contained in this MD&A is current and has been approved by the Board of Directors of the Company (the “Board”) as of May 4, 2021, unless otherwise stated.

BUSINESS OVERVIEW

Ero, headquartered in Vancouver, B.C., is focused on copper production growth from the MCSA Mining Complex located in Bahia State, Brazil, with over 40 years of operating history in the region. The Company's primary asset is a 99.6% interest in the Brazilian copper mining company, MCSA, 100% owner of the MCSA Mining Complex, which is comprised of operations located in the Curaçá Valley, Bahia State, Brazil, wherein the Company currently mines copper ore from the Pilar and Vermelhos underground mines, and the Boa Esperança development project, an IOCG-type copper project located in Pará, Brazil. The Company also owns 97.6% of the NX Gold Mine, an operating gold and silver mine located in Mato Grosso, Brazil. Additional information on the Company and its operations, including technical reports on the MCSA Mining Complex, Boa Esperança and NX Gold properties, can be found on the Company’s website (www.erocopper.com) and on SEDAR (www.sedar.com).

Ero Copper Corp. March 31, 2021 MD&A | Page 1 

HIGHLIGHTS

	2021 - Q1		2020 - Q4		2020 - Q1
Operating Information
Copper (MCSA Operations)
Ore Processed (tonnes)		597,594		483,447		607,959
Grade (% Cu)		2.30		2.26		1.95
Cu Production (tonnes)		12,638		10,018		10,657
Cu Production (lbs)		27,862,608		22,085,927		23,495,098
Cu Sold in Concentrate (tonnes)		12,469		10,265		10,432
Cu Sold in Concentrate (lbs)		27,488,413		22,629,431		22,999,136
C1 cash cost of copper produced (per lb)*	$	0.49	$	0.69	$	0.71
Gold (NX Gold Operations)
Au Production (ounces)		9,451		10,789		7,866
C1 cash cost of gold produced (per ounce)*	$	487	$	405	$	594
AISC of gold produced (per ounce)*	$	643	$	608	$	750
Financial information ($millions, except per share amounts)
Revenues	$	122.5	$	91.2	$	67.7
Gross profit	$	82.8	$	58.3	$	30.7
EBITDA*	$	55.2	$	91.3	$	(50.6	)
Adjusted EBITDA*	$	86.7	$	67.2	$	33.4
Cash flow from operations	$	62.1	$	38.6	$	37.3
Net income (loss)	$	32.1	$	66.3	$	(53.0	)
Net income (loss) attributable to owners of the
Company	$	31.7	$	65.8	$	(52.8	)
Net income (loss) per share attributable to
owners of the Company
- Basic	$	0.36	$	0.75	$	(0.62	)
- Diluted	$	0.34	$	0.71	$	(0.62	)
Adjusted net income attributable to owners of
the Company*	$	56.3	$	37.4	$	20.8
Adjusted net income per share attributable to
owners of the Company*
- Basic	$	0.64	$	0.43	$	0.24
- Diluted	$	0.61	$	0.40	$	0.23
Cash and Cash Equivalents	$	84.6	$	62.5	$	44.3
Working Capital (Deficit)*	$	63.5	$	35.8	$	(12.4	)
Net Debt*	$	74.5	$	105.6	$	140.1

*Please refer to the section titled "NON-IFRS MEASURES" within this MD&A for a discussion of non-IFRS measures. 

Ero Copper Corp. March 31, 2021 MD&A | Page 2 

Q1 2021 Highlights

Proactive mitigation of the potential impacts of the COVID-19 pandemic throughout 2020 and into 2021

· The Company continues to have no material disruption to operations, supply chains or sales channels as a result of the COVID-19 pandemic. Since the onset of the COVID-19 pandemic in early 2020, the Company has continued to take extraordinary measures to mitigate the impact of COVID-19 on its workforce and operations. Some of these measures include:

(i) eliminating all non-essential travel to and from the Company’s mining operations;

(ii) routine engagement with all suppliers and active stockpiling of key consumables to protect against any supply chain disruptions;

(iii) reducing physical interaction throughout the organization as much as possible by closing administrative offices and moving to a work-from-home format, increasing social distancing by limiting the number of employees travelling on provided buses between the Company’s mining communities and mines, limiting the number of employees in the cafeteria at any given time, cancelling all group meetings, implementing social-distancing for essential line-out meetings and encouraging work-from-home and video/telephone conferencing where feasible;

(iv) establishing COVID-19 committees with senior leadership and local health administrators for the regions in which the Company operates;

(v) purchasing thousands of COVID-19 testing kits for the Company’s operations, with the donation of a portion of these test kits, as well as other personal protective equipment, to each of the Company’s local municipalities to facilitate rapid testing throughout each community; and,

(vi) implementing wellness education, health screenings, and self-isolation protocols along with enhanced sanitization throughout the Company’s operations.

· The Company continues to closely monitor the COVID-19 pandemic and is engaged in ongoing operational and financial contingency planning to prudently manage the potential impact of the pandemic on its operations.

Record quarterly operational performance at MCSA Mining Complex and strong performance from the NX Gold Mine during Q1 2021

· 597,594 tonnes processed grading 2.30% copper producing record quarterly 12,638 tonnes of copper in concentrate after metallurgical recoveries that averaged 92.0% during Q1 2021 at the MCSA Mining Complex.

· 37,613 tonnes of ore grading 8.26 grams per tonne gold producing 9,451 ounces of gold and 5,794 ounces of silver as by-product after metallurgical recoveries that averaged 94.7% during Q1 2021 at the NX Gold Mine.

· Record quarterly Q1 2021 C1 cash costs of $0.49 per pound of copper produced at the MCSA Mining Complex, and strong operating cost performance at the NX Gold Mine with C1 cash cost of $487 per ounce of gold produced and AISC of $643 per ounce of gold produced (see Non-IFRS Measures).

· As a result of continued strong operating and financial performance throughout Q1 2021, the Company ended the period with cash and cash equivalents totaling $84.6 million, a quarter-on-quarter improvement of $22.1 million and a $40.3 million improvement since March 31, 2020.

Reiterating full-year production, operating cost and capital expenditure guidance for 2021

· 2021 copper production expected to be equally weighted between the first half and second half of the year with lower Q2 and Q3 production as a result of preventative mill maintenance planned during those periods as the Company prepares for expanded operations, including the restart of open pit mining from the Surubim Mine during the second half of 2021.

Ero Copper Corp. March 31, 2021 MD&A | Page 3 

Company’s ongoing exploration programs continue to highlight excellent potential and inherent optionality of the Curaçá Valley – discovery of two new mineralized regional systems and advancement of key targets

· Exploration activities during Q1 2021 continued to advance key target zones and two newly identified mineral systems. The Company’s ongoing core exploration programs are focused on developing multiple targets in parallel within the Company’s exploration portfolio that have the potential to meaningfully augment each phase of the Company’s life-of-mine production plans from near to medium-term and over the long-term at both MCSA and NX Gold:

(i) Regional Exploration Program: Regional exploration efforts within the Curaçá Valley are currently focused on drilling and completing additional ground geochemistry and ground geophysics including borehole electromagnetic (“EM”) surveys within several newly identified mineralized systems. Work is currently ongoing within two of these systems, each measuring between 800 meters and 2.2 kilometers in strike length. There are currently six drill rigs operating on these programs, as well as six dedicated geochemistry teams, four ground gravity teams and three ground induced polarization (“IP”) teams further refining drill locations within these new systems. Additional exploration work throughout the broader Curaçá Valley on other untested high-priority target areas remains ongoing.

(ii) In-Mine and Near Mine Exploration Programs: Exploration efforts are focused on extensions of continuity as well as discovery of new mineralized envelopes within the Deepening Extension Zone of the Pilar Mine, extensions at depth below the Vermelhos Mine main orebodies, extensions of mineralization within the Southern Vermelhos Corridor and extensions of the Santo Antonio Vein of the NX Gold Mine. Notable results during the period include (i) high-grade extensions and the deepest intercept drilled in the Deepening Extension Zone of the Pilar Mine to date, located approximately 150 meters below the limit of the 2020 inferred mineral resource shell, (ii) a newly discovered high-grade lens, known as the “Novo Zone”, located approximately 200 meters beneath the main Vermelhos orebodies and (iii) a near-development high-grade structure located 15 meters south of existing development within the Toboggan orebody of the Vermelhos Mine. Results from the ongoing NX Gold exploration program, where 10 drill rigs are currently operating, are expected in Q2 2021 due to third-party assay lab closures in Brazil.

(iii) Past Producing Mine Re-evaluation: Exploration efforts focused on near to medium-term production growth during the period comprised a re-evaluation of each of the Company’s fully permitted, past producing, mines within the Curaçá Valley. These efforts are centered upon using newly developed regional exploration datasets to evaluate the potential for targeted high-grade open pit and underground development. To date, target zones have been identified from just beneath the historic open pit limits to up to 70 meters beneath the pit bottom of two of the past producing mines. Active drilling within these programs is currently underway at Lagoa da Mina, the northern portion of the Angicos Mine (within the Surubim District) and at Suçuarana North (within the Pilar District). A targeting and drill program for high-grade mineralization beneath the Surubim Mine is currently being developed and is expected to commence during Q2 2021.

Please refer to the Company’s press release dated April 29, 2021 for the latest results from the Company’s ongoing exploration programs.

Corporate Highlights

· Ongoing studies regarding the Company’s optimization of the Boa Esperanҫa Project are expected to be concluded in early Q3. The 2017 feasibility study, which the Company expects to improve upon, outlined a low-capital intensity project producing an average of approximately 21,000 tonnes of payable copper per year over a 7.5 year mine life, resulting in a 32.7% internal rate of return.

· The Company amended its US$75 million senior secured amortizing non-revolving credit facility and US$75 million senior secured revolving credit facility (collectively the “Prior Facilities”) to combine these Prior Facilities into a US$150 million senior secured revolving credit facility all payable at maturity on March 31, 2025 (the “Revolving Credit Facility”). The amendment reduces the Company’s cost of borrowing depending on the Company’s consolidated leverage ratio, and eliminates principal payments previously due in 2022, 2023 and 2024 under the Prior Facilities.

Ero Copper Corp. March 31, 2021 MD&A | Page 4 

Q1 2021 Financial Report

· Cash flow from operations: Q1 2021 cash flow from operations was a record $62.1 million, an increase of $24.8 million from $37.3 million in Q1 2020.

· Net income (loss) per share: Q1 2021 net income per share was $0.36 and $0.34, on a basic and diluted basis, respectively, compared with Q1 2020 net loss per share of $0.62 and $0.62, on a basic and diluted basis, respectively.

· Adjusted net income per share (see Non-IFRS Measures): Q1 2021 adjusted net income per share was $0.64 and $0.61, on a basic and diluted basis, respectively, compared with Q1 2020 adjusted net income per share of $0.24 and $0.23, on a basic and diluted basis, respectively.

· Unrealized foreign exchange losses: Q1 2021 financial results were impacted by the weakening of the BRL against the USD in comparison to the end of the fourth quarter of 2020, mainly through the change in the mark-to-market valuation of derivatives used to hedge BRL revenues. During Q1 2021, the Company recognized a $17.0 million non-cash valuation loss on its USD/BRL foreign exchange collars, compared with a $52.7 million non-cash valuation loss on USD/BRL foreign exchange collars in Q1 2020.

- The Company uses these structures to hedge Brazilian Real-measured revenues. As a result of the COVID-19 pandemic and its impact on macro-economic interrelationships, there was a continual increase in implied volatility of the BRL versus USD.

- Generally accepted accounting standards dictate that the liability be recognized at fair value, which requires management to estimate fair value using a Black-Scholes valuation methodology and assumptions for the foreign exchange rate and volatility.

- The Company does not believe that this impact on the income statement reflects the underlying profitability of the Company as it provides no offset for the expected future benefits/costs of a lower/higher BRL/USD exchange rate on operating costs and capital expenditures of the Company’s underlying business. These benefits/costs may outweigh the Company’s projected hedge losses/gains that may result from these collars.

REVIEW OF OPERATIONS

Mineração Caraíba S.A. (Vale do Curaçá):

	2021 - Q1		2020 - Q4		2020 - Q1
Operating Information
Copper (MCSA Operations)
Ore Processed (tonnes)		597,594		483,447		607,959
Grade (% Cu)		2.30		2.26		1.95
Cu Production (tonnes)		12,638		10,018		10,657
Cu Production (lbs)		27,862,608		22,085,927		23,495,098
Concentrate Grade (% Cu)		34.6		33.3		33.5
Recovery (%)		92.0		91.7		89.8
Concentrate Sales (tonnes)		36,353		30,416		31,129
Cu Sold in Concentrate (tonnes)		12,469		10,265		10,432
Cu Sold in Concentrate (lbs)		27,488,413		22,629,431		22,999,136
C1 cash cost of copper produced (per lb)	$	0.49	$	0.69	$	0.71

Ero Copper Corp. March 31, 2021 MD&A | Page 5 

Q1 2021 was, by all measures, a record quarter for the Company’s MCSA Mining Complex, which despite challenges associated with managing the COVID-19 pandemic, continued to perform well. Quarter-on-quarter increases in tonnes mined, copper grades and metallurgical recoveries contributed to record quarterly copper production of 12,638 tonnes during the period. Improving metallurgical recoveries continue to be driven by the installation and commissioning of the Company’s new high-intensity grinding (“HIG”) Mill, which was completed at the end of Q3 2020. The system is now fully operational and its implementation has allowed the Company to achieve excellent metallurgical recoveries during the quarter, achieving elevated concentrate grades and mill throughput during the period as compared to Q4 2020.

At the Pilar Mine, 300,075 tonnes of ore were mined grading 1.87% copper (as compared to 356,016 tonnes of ore grading 1.74% copper during Q4 2020). At the Vermelhos Mine, 184,450 tonnes of ore were mined grading 2.92% copper (as compared to 187,659 tonnes of ore grading 3.19% copper in Q4 2020). In total, contributions from both mines during the period resulted in 484,525 tonnes of ore mined grading 2.27% copper. During Q1 2021, 597,594 tonnes of ore grading 2.30% copper was processed, producing 12,638 tonnes of copper after average metallurgical recoveries of 92.0%. Tonnes processed were augmented during the first quarter by mine and process stockpiles that accumulated during late Q4 2020.

During the period, the Company continued to progress pre-operational activities for the re-start of the Surubim open pit mine, expected later in 2021, and the planning and integration work-streams related to preventative maintenance on the Company’s ball mills that will occur sequentially during Q2 and Q3 2021. The sequential preventative maintenance shuts are being conducted to help prepare the Company’s mill for expanded operations and higher throughputs, including for when the Surubim mine is re-started in H2 2021. While this is expected to result in lower copper production during the second and third quarter, these planned maintenance activities were factored into the Company’s 2021 production guidance. Production for the year is expected to be equally weighted between the first and second half of the year.

C1 cash costs per pound of copper produced during Q1 2021 averaged a quarterly record of $0.49 (see Non-IFRS Measures), having benefited during the period from elevated grades mined and processed, strong overall operational and cost performance at the Company’s MCSA operations, continued weakness of the BRL versus the US dollar and strength in the underlying price of gold and silver produced as by-products. These factors combined contributed to a $0.20 decrease in C1 cash costs per pound of copper produced as compared to Q4 2020. Copper sales in concentrate increased 21% quarter-on-quarter to a record 12,469 tonnes of copper as a result of this strong operational performance.

On exploration, the Company’s organic growth strategy remains supported by one of the world’s largest exploration programs, with 26 drill rigs currently operating. Exploration results during the period, as highlighted in the Company’s April 29, 2021 press release, continue to underscore extensive exploration potential with new discoveries occurring in and around the existing operations, such as the recently announced Novo Zone, and regionally within the Curaçá Valley where two new mineralized systems have been identified. In addition to regional and in-mine programs, the Company commenced a strategic review using newly developed regional exploration datasets to evaluate the potential for targeted high-grade underground development beneath its fully permitted historic open pit operations within the Curaçá Valley. Collectively, these programs are expected to serve in improving the Company’s grade and overall copper production profile over the near to medium and long-term with a focus on (i) increasing production through utilization of available excess mill capacity and (ii) continuing to improve and augment the near- and medium-term production profile versus what is outlined in the current life of mine plan. Please refer to the Company’s press release dated April 29, 2021 for additional details.

Ero Copper Corp. March 31, 2021 MD&A | Page 6 

NX Gold S.A.

	2021 - Q1			2020 - Q4			2020 - Q1
Operating Information
Gold (NX Gold Operations)
Ore mined (tonnes)		37,774			45,574			36,211
Ore milled (tonnes)		37,613			45,574			36,211
Head grade (grams per tonne Au)		8.26			7.72			7.76
Recovery (%)		94.7	%		95.4	%		87.1	%
Gold ounces produced (oz)		9,451			10,789			7,866
Silver ounces produced (oz)		5,794			6,763			4,868
Gold sold (oz)		10,020			10,100			7,526
Silver sold (oz)		6,171			6,349			4,645
C1 cash cost of gold produced (per ounce)	$	487		$	405		$	594
AISC of gold produced (per ounce)	$	643		$	608		$	750

At the NX Gold Mine, quarter-on-quarter decreases in tonnes mined were offset by higher head-grades mined and processed and strong metallurgical performance which continued through Q1 2021, resulting in a 12% decrease in gold production relative to the prior period. Production during Q1 2021 totaled 9,451 ounces of gold and 5,794 ounces of silver (as by-product) from total mill feed of 37,613 tonnes grading 8.26 grams per tonne gold after metallurgical recoveries of 94.7% during the period. Stability of overall operations has been driven by both increases in the number of working faces in operation within the Santo Antonio Vein and strong metallurgical recovery performance. The NX Gold Mine achieved C1 cash costs during Q1 2021 of $487 per ounce of gold produced and AISC during the period averaged $643 per ounce of gold produced (see Non-IFRS Measures). Despite a decline in gold production, gold and silver sales were in-line with Q4 2020 as a result of finished inventory at year-end that was subsequently sold during Q1 2021.

Civil site works and electrical infrastructure works related to the mine’s modular paste-fill plant progressed as planned during the period. Commissioning of the plant and integration into the operations remains planned for the second half of 2021. Additionally, the exploration campaign at NX Gold is well underway, with 10 drill rigs currently operating. Exploration at the NX Gold Mine continues to focus primarily on testing down-plunge extensions of the Santo Antonio Vein as well as target both near-mine regional exploration targets and distal exploration targets up to 20 kilometers from the mine. Due to third-party laboratory closures in Brazil and a considerable backlog of pending assays, results from the ongoing NX Gold Mine program are expected during the Company’s Q2 2021 exploration update.

2021 Guidance/Outlook

The Company is reiterating its previously announced 2021 guidance.

· 2021 annual production guidance for the MCSA Mining Complex of 42,000 to 45,000 tonnes of copper in concentrate at C1 cash cost guidance^[1] range of US$0.75 to US$0.85 per pound of copper produced; and,

· 2021 annual production guidance for the NX Gold Mine of 34,500 to 37,500 ounces of gold at C1 cash cost and AISC guidance^[1] range of US$500 to US$600 and US$875 to US$975 per ounce of gold produced, respectively.

[1] C1 Cash Costs of copper produced (per lb.), C1 Cash Costs of gold produced (per oz.), and AISC are non-IFRS measures – Please refer to the section titled "NON-IFRS MEASURES" within this MD&A for a discussion of non-IFRS measures. Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s AIF (as defined herein) and Management of Risks and Uncertainties in this MD&A for complete risk factors.

Ero Copper Corp. March 31, 2021 MD&A | Page 7 

2021 Production Outlook

Copper production for 2021 is expected to be equally weighted between the first half and second half of the year with lower Q2 and Q3 production due to preventative mill maintenance scheduled during those periods as the Company prepares for expanded operations, including the restart of the Surubim open pit mine during the second half of 2021.

Gold production from NX Gold for 2021 is expected to come from ore mined from the Santo Antonio Vein.

MCSA Mining Complex	2021 Guidance[1]
Tonnes Processed		2,700,000
Copper Grade (% Cu)		1.75	%
Copper Recovery (%)		93.0	%
Cu Production (000 tonnes)		42.0 – 45.0

NX Gold Mine	2021 Guidance[1]
Tonnes Processed		167,000
Gold Grade (gpt)		7.20
Gold Recovery (%)		92.0	%
Au Production (000 ounces)		34.5 – 37.5
Ag Production (000 ounces)		n/a

[1] Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s SEDAR filings for complete risk factors, including the AIF (as defined herein) and Management of Risks and Uncertainties in this MD&A for complete risk factors.

2021 Cash Cost Guidance

The Company’s guidance for 2021 assumes a USD:BRL foreign exchange rate of 5.00, gold price of $1,750 per ounce and silver price of $20.00 per ounce.

	2021 Guidance
MCSA Mining Complex C1 Cash Cost Guidance (US$/lb)[1]	$0.75 - $0.85
NX Gold Mine C1 Cash Cost Guidance (US$/oz)[1]	$500 - $600
NX Gold Mine All-in Sustaining Cost (AISC) Guidance (US$/oz)[1]	$875 - $975

[1] C1 Cash Costs of copper produced (per lb.), C1 Cash Costs of gold produced (per oz.), and AISC are non-IFRS measures – Please refer to the section titled "NON-IFRS MEASURES" within this MD&A for a discussion of non-IFRS measures. Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s AIF (as defined herein) and Management of Risks and Uncertainties in this MD&A for complete risk factors.

Ero Copper Corp. March 31, 2021 MD&A | Page 8 

2021 Capital Expenditure Guidance

The Company’s capital expenditure guidance for 2021 assumes a USD:BRL foreign exchange rate of 5.00 and has been presented below in USD millions.

MCSA Operations	2021 Guidance
Pilar Mine and Caraíba Mill Complex (excluding Deepening Extension Project)	$ 45.0 - 50.0
Deepening Extension Project	12.5 – 15.0
Vermelhos Mine & District[1]	14.0 – 16.0
Surubim Open Pit Mine	10.0 – 12.0
Boa Esperanҫa Project	1.0 – 1.5
Capital Expenditure Guidance	$ 82.5 - 94.5
Curaçá Valley Exploration	$ 30.0 – 35.0

NX Gold Mine	2021 Guidance
Capital Expenditure Guidance	$ 13.0 – 15.0
Exploration	8.0 – 10.0
Total, NX Gold Mine	$ 21.0 – 25.0

[1] Vermelhos District includes open pit mining infrastructure expenditures of approximately US$6.0 million in 2021.

Mineração Caraíba S.A.

Copper production from the MCSA Mining Complex for 2021 is expected to come from ore mined from the Pilar and Vermelhos underground mines as well as the Surubim open pit mine, which is expected to restart operations later in 2021. Production from the Pilar Mine is expected to contribute a total of approximately 1.5 million tonnes grading 1.40% copper, production from the Vermelhos Mine is expected to contribute a total of approximately 0.8 million tonnes grading 2.40% copper and production from the Surubim Mine is expected to contribute a total of 0.2 million tonnes grading 0.60% copper as it is a partial year of operation. The blended mill head grade incorporating these sources is expected to be approximately 1.75% copper for the full year.

NX Gold S.A.

Gold production from NX Gold for 2021 is expected to come from ore mined from the Santo Antonio vein. Mining operations during the year are expected to total approximately 167,000 tonnes of ore grading 7.20 grams per tonne gold.

Boa Esperança

A full review of the Boa Esperança Feasibility Study^[1] remains ongoing with the goal of extending the potential mine life and increasing copper production among other desktop optimization initiatives. As a result of an ongoing internal technical review, several potential opportunities were identified to optimize and further realize the potential of the Boa Esperança project, including, but not limited to:

· Separating high-grade and low-grade copper domains within the mineral resource estimate to better optimize mining sequence, mineral reserve conversion and improve overall project economics;

· Increasing the overall size of the open pit, targeting an increase in in-pit mineral reserves, extension of mine life and an increase in life-of-mine copper production;

· Implementing bulk ore-sorting with the goal of enhancing mine selectivity; and,

· Re-designing processing plant reflecting optimization initiatives around selective mining and the implementation of ore-sorting.

The Company’s technical team continues to actively review these opportunities and is making headway in advancing them into actionable deliverables. The Company expects to provide additional guidance on these developments in Q3 2021.

[1] As defined herein under “NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION”.

Ero Copper Corp. March 31, 2021 MD&A | Page 9 

REVIEW OF FINANCIAL RESULTS

The following table provides a summary of the financial results of the Company for Q1 2021 and Q1 2020. Tabular amounts are in thousands of US dollars, except share and per share amounts.

			Three months ended			Three months ended
	Notes		March 31, 2021			March 31, 2020
Revenue		1	$	122,543		$	67,745
Cost of product sold		2		(38,360	)		(35,811	)
Sales expenses				(1,374	)		(1,282	)
Gross profit				82,809			30,652
Expenses
General and administrative		3		(8,501	)		(7,503	)
Share-based compensation				(2,346	)		(2,049	)
Income before the undernoted				71,962			21,100
Other income (expenses)
Finance income				970			467
Finance expense		4		(3,770	)		(6,651	)
Foreign exchange loss		5		(28,625	)		(81,922	)
Other expense				(651	)		(693	)
Income (loss) before income taxes				39,886			(67,699	)
Income tax recovery (expense)
Current				(7,090	)		(1,091	)
Deferred				(739	)		15,795
		6		(7,829	)		14,704
Net income (loss) for the period				32,057			(52,995	)
Other comprehensive loss
Foreign currency translation loss		7		(24,359	)		(49,919	)
Comprehensive income (loss)			$	7,698		$	(102,914	)
Net income (loss) attributable to:
Owners of the Company			$	31,749		$	(52,753	)
Non-controlling interests				308			(242	)
			$	32,057		$	(52,995	)
Comprehensive income (loss) attributable to:
Owners of the Company			$	7,487		$	(102,472	)
Non-controlling interests				211			(442	)
			$	7,698		$	(102,914	)
Net income (loss) per share attributable to owners of the Company
Net income (loss) per share
Basic			$	0.36		$	(0.62	)
Diluted			$	0.34		$	(0.62	)
Weighted average number of common shares outstanding
Basic				88,064,312			85,759,194
Diluted				92,902,306			85,759,194
Cash and cash equivalents			$	84,574		$	44,338
Total assets			$	506,128		$	409,640
Non-current liabilities			$	193,720		$	214,335

Ero Copper Corp. March 31, 2021 MD&A | Page 10 

Notes:

1. Revenues for Q1 2021 from copper sales was $104.8 million (Q1 2020 - $56.1 million), which included the sale of 12,469 copper tonnes in concentrate as compared to 10,432 copper tonnes for Q1 2020. The increase in revenues is primarily attributed to higher realized prices, and partially from higher sales volume. Revenues for Q1 2021 from gold sales was $17.8 million (Q1 2020 - $11.6 million), which included the sale of 10,020 ounces of gold, compared to 7,526 ounces of gold for Q1 2020. The increase in revenues is attributable to both higher sales volume and higher realized prices than in the comparative quarter.

2. Cost of product sold for Q1 2021 from copper sales was $31.6 million (Q1 2020 - $30.0 million) which consisted of $9.8 million (Q1 2020 - $9.6 million) in depreciation and depletion, $7.4 million (Q1 2020 - $7.0 million) in salaries and benefits, $4.8 million (Q1 2020 - $4.0 million) in materials and consumables, $3.8 million (Q1 2020 - $4.6 million) in contracted services, $3.8 million (Q1 2020 - $3.0 million) in maintenance costs, $1.9 million (Q1 2020 - $1.8 million) in utilities, and $0.1 million (Q1 2020 - $0.1 million) in other costs.

Cost of product sold for Q1 2021 from gold sales was $6.8 million (Q1 2020 - $5.9 million) which primarily comprised of $1.7 million (Q1 2020 - $0.9 million) in depreciation and depletion, $1.6 million (Q1 2020 - $1.7 million) in salaries and benefits, $1.3 million (Q1 2020 - $0.9 million) in contracted services, $1.0 million (Q1 2020 - $1.0 million) in materials and consumables, $0.6 million (Q1 2020 - $0.6 million) in utilities, and $0.5 million (Q1 2020 - $0.6 million) in maintenance costs.

The overall increase in cost of product sold in Q1 2021 as compared to Q1 2020 is primarily attributable to increases in production and sales at both MCSA and NX Gold.

3. General and administrative expenses for Q1 2021 include $4.2 million (Q1 2020 - $4.7 million) with respect to MCSA for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, $0.5 million (Q1 2020 - $0.5 million) with respect to NX Gold for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, and $3.8 million (Q1 2020 - $2.3 million) with respect to the corporate head office in Vancouver. Corporate head office costs are primarily comprised of $2.7 million (Q1 2020 - $1.6 million) in salaries, incentive payments, and consulting fees, $0.4 million (Q1 2020 - $0.3 million) in travel-related costs, $0.3 million (Q1 2020 - $0.2 million) in office and sundry costs, and $0.2 million (Q1 2020 - $0.1 million) in accounting and legal costs. General and administrative expenses in Q1 2021 increased from that in Q1 2020, primarily attributable to an increase in corporate headcount and administrative activities to support overall growth in operations.

4. Finance expense for Q1 2021 was $3.8 million (Q1 2020 - $6.7 million) and is primarily comprised of other finance expenses of $1.7 million (Q1 2020 - $1.5 million), interest on loans at the corporate head office of $1.4 million (Q1 2020 - $1.8 million), interest on loans and borrowings at MCSA and NX Gold of $0.3 million (Q1 2020 - $0.9 million), accretion of the asset retirement obligations of $0.2 million (Q1 2020 - $0.3 million), and commitment fees of $0.1 million (Q1 2020 - $0.3 million), partially offset by nominal gain on interest rate swap derivatives (Q1 2020 - $1.8 million loss). The overall decrease in finance expense in Q1 2021 as compared to Q1 2020 is primarily attributable to decrease in loans and borrowings.

5. Foreign exchange loss for Q1 2021 was $28.6 million (Q1 2020 - $81.9 million). This amount is primarily comprised of foreign exchange loss on unrealized derivative contracts of $17.0 million (Q1 2020 - $52.7 million), foreign exchange loss on USD denominated debt of $7.8 million (Q1 2020 - $26.9 million) in MCSA for which the functional currency is the BRL, and realized foreign exchange loss on derivative contracts of $5.7 million (Q1 2020 - $2.7 million), partially offset by other foreign exchange gains of $1.9 million (Q1 2020 - $0.3 million). The foreign exchange losses were primarily a result of a weakening of BRL against USD in Q1 2021 as compared to the prior quarter. The foreign exchange losses on unrealized derivative contracts are a result of mark-to-market calculations at period end and may not represent the amount that will ultimately be realized, which will depend on future changes to the USD/BRL foreign exchange rates.

6. In Q1 2021, the Company recognized $7.8 million in income tax expense (Q1 2020 - $14.7 million recovery). Income taxes from operations are partially offset by the recognition of temporary deductible differences associated with MCSA’s unrealized foreign exchange losses on derivatives and loans and borrowings denominated in USD which were lower in Q1 2021 compared to Q1 2020.

7. The foreign currency translation loss is a result of a weakening of the BRL against the USD during Q1 2021 when translating the net assets of the Company’s Brazilian subsidiaries to USD for presentation in the Company’s consolidated financial statements.

Ero Copper Corp. March 31, 2021 MD&A | Page 11 

SUMMARY OF QUARTERLY RESULTS

The following table presents selected financial information for each of the most recent eight quarters. Tabular amounts are in millions of US Dollars, except share and per share amounts.

 

	2021			2020												2019
Selected Financial Information	March 31			Dec 31(1)			Sept 30			June 30(2)			Mar 31(3)			Dec 31(4)			Sept 30(5)			June 30
Revenue	$	122.5		$	91.2		$	94.3		$	70.8		$	67.7		$	75.7		$	60.6		$	76.5
Cost of product sold	$	(38.4	)	$	(31.3	)	$	(33.3	)	$	(30.1	)	$	(35.8	)	$	(43.0	)	$	(38.4	)	$	(43.3	)
Gross profit	$	82.8		$	58.3		$	59.6		$	39.5		$	30.7		$	31.1		$	21.3		$	32.1
Net income (loss) for period	$	32.1		$	66.3		$	31.4		$	7.7		$	(53.0	)	$	45.4		$	16.3		$	15.3
Income (loss) per share attributable to owners of the Company
- Basic	$	0.36		$	0.75		$	0.36		$	0.09		$	(0.62	)	$	0.53		$	0.19		$	0.18
- Diluted	$	0.34		$	0.71		$	0.34		$	0.08		$	(0.62	)	$	0.49		$	0.18		$	0.17
Weighted average number of common shares outstanding
- Basic		88,064,312			87,321,832			86,448,318			85,933,443			85,759,194			85,620,168			85,505,675			85,032,841
- Diluted		92,902,306			92,642,103			91,961,897			91,428,969			85,759,194			91,670,988			91,320,363			90,696,926

Notes:

1. During the quarter ended December 31, 2020, the Company recognized $27.1 million in foreign exchange gains. The foreign exchange gains were primarily comprised of foreign exchange gain on unrealized derivative contracts of $27.7 million and a foreign exchange gain on USD denominated debt of $7.7 million in MCSA for which the functional currency is the BRL, partially offset by a realized foreign exchange loss on derivative contracts of $7.8 million and other foreign losses of $0.4 million. The foreign exchange gains were primarily a result of a strengthening of BRL against USD in Q4 2020. The foreign exchange gains on unrealized derivative contracts are a result of mark-to-market calculations at period end and may not represent the amount that will ultimately be realized, which will depend on future changes to the USD/BRL foreign exchange rates.

During the quarter ended December 31, 2020, the Company recognized a recovery of $8.9 million in net income related to value added taxes. The recovery was recognized as a result of a study conducted to revisit certain tax positions which concluded that it is probable that additional tax credits are available to be used to offset a variety of taxes.

2. During the quarter ended June 30, 2020, the Company had an overall net income of $7.7 million, despite $16.3 million in foreign exchange losses. The foreign exchange losses were comprised of a foreign exchange loss on unrealized derivative contracts of $8.5 million, a foreign exchange loss on realized derivative contracts of $4.4 million, and a foreign exchange loss on USD denominated debt of $3.0 million in MCSA for which the functional currency is the BRL. As with the preceding quarter, the foreign exchange losses were unusually high this quarter due to volatility in the foreign exchange rates between the USD and BRL resulting from the worldwide instability in currency rates as a result of the COVID-19 pandemic.

3. During Q1 2020, the Company recognized a $81.9 million in foreign exchange losses. The foreign exchange losses were mainly comprised of a $26.9 million loss associated with USD denominated debt held by MCSA, whose functional currency is the BRL, and $52.7 million losses associated with unrealized losses on foreign exchange currency collar contracts. These foreign exchange losses were unusually high this quarter due to volatility in the foreign exchange rates between the USD and the BRL resulting from the worldwide instability in currency rates as a result of the COVID-19 pandemic.

4. During the quarter ended December 31, 2019, the Company recognized a $25.2 million income tax recovery primarily resulting from the recognition of available tax losses and tax credits in MCSA. At December 31, 2019, the Company considered the taxable income generated since acquisition of MCSA and forecasted future taxable income and determined that it was now considered probable that the benefit of these losses and tax credits in MCSA would be realized.

5. During the quarter ended September 30, 2019, the Company recognized a recovery of $21.6 million in net income related to value added taxes previously paid on sales in Brazil. The recovery was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant taxing authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim, for which approval was received in July 2019. These credits can be used to offset a variety of other taxes, including income taxes and taxes on future sales.

Ero Copper Corp. March 31, 2021 MD&A | Page 12 

LIQUIDITY, CAPITAL RESOURCES, AND CONTRACTUAL OBLIGATIONS

Liquidity

As at March 31, 2021, the Company held cash and cash equivalents of $84.6 million. Cash and cash equivalents are primarily comprised of cash held with reputable financial institutions and are invested in highly liquid short-term investments with maturities of three months or less. The funds are not exposed to liquidity risk and there are no restrictions on the ability of the Company to use these funds to meet its obligations.

Cash and cash equivalents have increased by $22.1 million since December 31, 2020. The Company’s cash flows from operating, investing, and financing activities during Q1 2021 are summarized as follows:

· Cash from operating activities of $62.1 million

Partially offset by:

· Cash used in investing activities of $26.2 million, including:

o $25.9 million of additions to mineral property, plant and equipment;

o $0.5 million of additions to exploration and evaluation assets

net of:

o $0.1 million from other investments

· Cash used in financing activities of $9.9 million, including:

o $7.7 million of repayment on loans and borrowings;

o $1.9 million of payment of interest on loans and borrowings;

o $1.1 million of lease payments;

o $1.0 million of other finance expenses

net of:

o $1.1 million proceeds from exercise of stock options and warrants;

o $0.6 million proceeds from new loans and borrowings;

As at March 31, 2021, the Company had working capital of $63.5 million.

Capital Resources

The Company’s primary sources of capital are comprised of cash from operations, and cash and cash equivalents on hand. The Company continuously monitors its liquidity position and capital structure and, based on changes in operations and economic conditions, may adjust such structure by issuing new common shares or new debt as necessary. While the Company has been successful in securing financing to date, there are no guarantees that it will be able to secure such financing in the future on terms acceptable to the Company, if at all. Taking into consideration cash flow from existing operations, management believes that the Company has sufficient working capital and financial resources to maintain its planned operations and activities for the foreseeable future.

At March 31, 2021, we had unrestricted cash and cash equivalents of $84.6 million compared to $62.5 million at December 31, 2020. The increase is primarily due to an increase in cash from operations.

During the three-month period ended March 31, 2021, the Prior Facilities were amended to combine into a new $150.0 million senior secured revolving credit facility (the “Revolving Credit Facility”) payable entirely on March 31, 2025. The Revolving Credit Facility bears interest on a sliding scale at a rate of LIBOR plus 2.25% to 4.25% depending on the Company’s consolidated leverage ratio at the time. Commitment fees for any undrawn portion of the Revolving Credit Facility are on a sliding scale between 0.56% to 1.06%.

Ero Copper Corp. March 31, 2021 MD&A | Page 13 

The Company’s $150.0 million credit facility was fully drawn as of March 31, 2021. The Company is required to comply with certain financial covenants. As of the date of the consolidated financial statements, the Company is in compliance with these covenants.

Contractual Obligations and Commitments

Certain loan agreements contain operating and financial covenants that could restrict the ability of the Company and its subsidiaries, MCSA, Ero Gold, and NX Gold S.A., to, among other things, incur additional indebtedness needed to fund its respective operations, pay dividends or make other distributions, make investments, create liens, sell or transfer assets or enter into transactions with affiliates. There are no other restrictions or externally imposed capital requirements of the Company.

MANAGEMENT OF RISKS AND UNCERTAINTIES

The Company thoroughly examines the various financial instruments and risks to which it is exposed and assesses the impact and likelihood of those risks. These risks may include credit risk, liquidity risk, currency risk, commodity price risk and interest rate risk. Where material, these risks are reviewed and monitored by the Board.

COVID-19 Pandemic Risk

The outbreak of COVID-19 has had a significant impact on the volatility of commodity prices and USD/BRL exchange rates, and governmental actions to contain the outbreak may impact our ability to transport or market our concentrate or cause disruptions in our supply chains or interruption of production. A material spread of COVID-19 in jurisdictions where we operate could impact our ability to staff operations. A reduction in production or other COVID-19 related impacts, including but not limited to, low copper prices could cause a significant reduction in profitability of ongoing operations.

The global pandemic could cause temporary closure of businesses in regions that are significantly impacted by the health crises, or cause governments to take or continue to take preventative measures such as the closure of points of entry, including ports and borders.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers. The carrying amount of the financial assets below represents the maximum credit risk exposure as at March 31, 2021 and December 31, 2020:

	March 31, 2021		December 31, 2020
Cash and cash equivalents	$	84,574	$	62,508
Accounts receivable		30,877		20,353
Deposits and other non-current assets		519		595
	$	115,970	$	83,456

The Company invests cash and cash equivalents with financial institutions that are financially sound based on their credit rating. The Company’s exposure to credit risk associated with accounts receivable is influenced mainly by the individual characteristics of each customer. The Company currently has only four significant customers, all of which have no history of credit default with the Company. The Company has not incurred credit losses during the year ended March 31, 2021 nor recognized a provision for credit losses.

Ero Copper Corp. March 31, 2021 MD&A | Page 14 

Foreign exchange currency risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage market risks. At March 31, 2021, the Company had entered into foreign exchange collar contracts at zero cost for notional amounts of $270.7 million (December 31, 2020 - notional amount of $285.7 million) with an average floor rate of 4.07 BRL to US Dollar and an average cap rate of 4.73 BRL to US Dollar. The maturity dates of these contracts are from April 28, 2021 to September 28, 2022 and are financially settled on a net basis. The fair value of these contracts at March 31, 2021 was a liability of $48.5 million, (December 31, 2020 - $34.5 million) which is included in Derivatives in the statement of financial position. The fair value of these forward contracts as at March 31, 2021 was determined using an option pricing mode with the following assumptions: discount rate of 2.82% - 2.93%, foreign exchange rate of approximately 5.70, and volatility of 17.72% - 19.15%. The change in fair value of foreign exchange collar contracts was a loss of $17.0 million for the three-month period ended March 31, 2021 ($52.7 million for the three-month period ended March 31, 2020) and has been recognized in foreign exchange loss. In addition, during the three-month period ended March 31, 2021, the Company recognized a realized loss of $5.7 million ($2.7 million for the three-month period ended March 31, 2020) related to the settlement of foreign currency forward collar contracts.

Interest rate risk

The Company is principally exposed to the variation in interest rates on loans and borrowings with variable rates of interest. Management reduces interest rate risk exposure by entering into loans and borrowings with fixed rates of interest or by entering into derivative instruments that fix the ultimate interest rate paid.

The Company is principally exposed to interest rate risk through its Revolving Credit Facility of $150.0 million, Brazilian Real denominated bank loans of $3.8 million, and Brazilian Real denominated equipment finance loans of $0.6 million. Based on the Company’s net exposure at March 31, 2021, a 1% change in the variable rates would have an impact of $1.5 million on pre-tax annual net income, without consideration of the effects of the interest rate swap contract below.

In order to mitigate the above volatility due to variable rates on loans, as at March 31, 2021, the Company has entered into an interest rate swap contract to manage interest rate risk. At March 31, 2021, the floating interest on a notional amount of $50.0 million was swapped for a fixed interest rate of 1.678%. This interest rate swap transaction is in effect until March 31, 2025, with settlements made on a monthly basis. The fair value of this contract at March 31, 2021 was a liability of $2.0 million (December 31, 2020 - $2.5 million) and was included in Derivatives in the statement of financial position. The Company recognized a realized loss of $0.4 million on the termination of the original interest rate swap from 2019 (realized loss of $0.1 million for the three-month period ended March 31, 2020) and an unrealized gain of $0.4 million for the three-month period ended March 31, 2021 (unrealized loss of $1.7 million for the three-month period ended March 31, 2020), which was included in finance expense.

In addition, as at March 31, 2021, MCSA has entered into an interest rate and currency swap contract on the Plural Loan. At March 31, 2021, the floating interest on a notional amount of BRL $3.5 million was swapped for a fixed interest rate of 9.9% and the BRL currency on the loan was swapped for USD at a rate of 3.95. The fair value of this contract at March 31, 2021 was a liability of $0.3 million (December 31, 2020 - $0.3 million) and is included in Derivatives in the statement of financial position. The realized loss on this swap contract was $0.1 million for the three-month period ended March 31, 2021 and was included in finance expense.

Price risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage commodity price risks. At March 31, 2021, the Company has provisionally priced sales that are exposed to commodity price changes. Based on the Company’s net exposure at March 31, 2021, a 10% change in the price of copper would have an impact of $5.0 million on pre-tax net income.

Ero Copper Corp. March 31, 2021 MD&A | Page 15 

For a discussion of additional risks applicable to the Company and its business and operations, including risks related to the Company’s foreign operations, the environment and legal proceedings, see “Risk Factors” in the Company’s Annual Information Form for the year ended December 31, 2020 and dated March 16, 2021 (the “AIF”).

OTHER FINANCIAL INFORMATION

Off-Balance Sheet Arrangements

As at March 31, 2021, the Company had no material off-balance sheet arrangements.

Contingencies

MCSA is subject to a number of claims (including claims related to tax, labour and social security matters and civil action) in the course of its business which individually are not material and have not been accrued for in the Company’s financial statements as it is not probable that a material cash outflow will occur. While the Company believes that these claims are unlikely to be successful, if all such existing claims were decided against it, the Company could be exposed to a liability of up to approximately $19.9 million as at March 31, 2021 (December 31, 2020 - $21.8 million), which could have an adverse impact on the Company’s business, financial condition, results of operations, cash flows or prospects.

Outstanding Share Data

As of May 4, 2021, the Company had 88,154,409 common shares, 4,483,281 stock options, 1,533,330 warrants, and 727,761 performance share units issued and outstanding.

Related Party Disclosures

For the three months ended March 31, 2021, amounts paid to related parties were incurred in the normal course of business and measured at the exchange amount, which is the amount agreed upon by the transacting parties and on terms and conditions similar to non-related parties.

The aggregate value of compensation paid to key management personnel for the three months ended March 31, 2021 was $1.9 million ($1.8 million for the three months ended March 31, 2020). In addition, 50,000 options and 3,325 DSUs were issued to key management personnel and non-executive directors during the three months ended March 31, 2021 (43,456 options and 32,327 DSUs for the three months ended March 31, 2020). For key management personnel, $1.4 million was recognized in share-based compensation expense for the three months ended March 31, 2021 for options, share units, and DSUs issued ($1.3 million for the three months ended March 31, 2020).

During the three months ended March 31, 2021, key management personnel exercised 50,000 options and 66,666 warrants for total cash proceeds to the Company of $0.2 million (25,000 options for total cash proceeds of $38 thousand for the three months ended March 31, 2020).

As at March 31, 2021, $0.9 million was payable to key management as incentive compensation and is included in accounts payable and accrued liabilities in the statement of financial position (December 31, 2020 - $3.7 million). Such amounts are unsecured, non-interest bearing and will be paid under normal trade terms.

Ero Copper Corp. March 31, 2021 MD&A | Page 16 

ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

Critical Accounting Judgments and Estimates

The preparation of consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions about future events that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, events or actions, actual results may differ from these estimates.

The Company’s significant accounting policies and accounting estimates are contained in the Company’s December 31, 2020 consolidated financial statements. Certain of these policies, such as, capitalization and depreciation of property, plant and equipment and mining interests, derivative instruments, and decommissioning liabilities provisions involve critical accounting estimates because they require management of the Company to make subjective or complex judgments about matters that are inherently uncertain, and because of the likelihood that materially different amounts could be reported under different conditions or using different assumptions.

In preparing its financial statements, management has made judgments, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of the assets, liabilities, revenues, and expenses. Actual results may differ from these estimates.

The estimates and assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively. For a description of the critical judgements in application of the accounting policies and information about assumptions and estimations uncertainties, refer to the Company’s MD&A for the year ended December 31, 2020, which is available on SEDAR at www.sedar.com.

Ero Copper Corp. March 31, 2021 MD&A | Page 17 

Local Currency Operating Metrics – Presented in Brazilian Real

		2021 - Q1			2020 - Q4			2020 - Q1
Costs (MCSA Operations)
Mining [1]- UG (Pilar)	R$		34,663			40,532			28,996
- UG (Vermelhos)			30,340			28,149			31,190
Processing			21,921			21,657			19,049
Indirect			17,900			18,897			12,629
Production costs[1]			104,824			109,235			91,864
By-product credits			(33,935	)		(24,246	)		(15,792	)
Treatment, refining and other			4,371			(2,854	)		(1,627	)
C1 cash costs R$	R$		75,260			82,135			74,445
Breakdown Mined and Processed (tonnes)
UG Mined			519,295			588,792			612,510
Total Mined (t):			519,295			588,792			612,510
Total Processed (t)			597,594			483,447			607,959
Cu Production (t)			12,638			10,018			10,657
UG Mining Total - R$/tonne mined			125.18			116.65			98.26
Pilar - R$/tonne mined			106.54			103.55			79.68
Vermelhos - R$/tonne mined			156.44			142.63			125.46
Processing - R$/tonne processed			36.68			44.80			31.33
Indirect - R$/tonne processed			29.95			39.09			20.77

Footnotes

General - Above only includes amounts from MCSA. NX Gold operations are excluded.

[1] - Beginning in the third quarter of 2020, production costs are presented net of capex development. Comparative figures have been adjusted to conform with the revised presentation.

Ero Copper Corp. March 31, 2021 MD&A | Page 18 

Capital Expenditures

The following table presents capital expenditures at the Company’s operations.

	2021 - Q1		2020 - Q4		2020 - Q1
MCSA Operations
Pilar Mine and Caraíba Mill Complex		12,838		12,464		9,881
Vermelhos Mine		2,678		3,579		2,399
Boa Esperanҫa Project		103		61		33
Capital Expenditure		15,619		16,104		12,313
Capex Development (included in above)		7,334		7,111		9,173
Exploration		6,675		7,702		6,845
NX Gold Operations
Capital Expenditure		2,249		3,843		3,120
Capex Development (included in above)		1,621		1,407		1,833
Exploration		1,840		1,454		861

NON-IFRS MEASURES

Financial results of the Company are prepared in accordance with IFRS. The Company utilizes certain non-IFRS measures, including C1 cash cost of copper produced (per lb), C1 cash cost of gold produced (per ounce), AISC of gold produced (per ounce), EBITDA, Adjusted EBITDA, Adjusted net income attributable to owners of the Company, Adjusted net income per share, net debt, working capital (deficit) and available liquidity, which are not measures recognized under IFRS. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The tables below provide a reconciliation of these non-IFRS measures to the most directly comparable IFRS measures as contained in the Company’s financial statements.

Unless otherwise noted, the non-IFRS measures presented below have been calculated on a consistent basis for the periods presented.

Ero Copper Corp. March 31, 2021 MD&A | Page 19 

C1 Cash Cost of Copper Produced (per lb)

C1 cash cost of copper produced (per lb) is the sum of production costs, net of capital expenditure development costs and by-product credits, divided by the copper pounds produced. C1 cash costs reported by the Company include treatment, refining charges, offsite costs, and certain tax credits relating to sales invoiced to the Company’s Brazilian customer on sales. By-product credits are calculated based on actual precious metal sales (net of treatment costs) during the period divided by the total pounds of copper produced during the period. C1 cash cost of copper produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

The following table provides a reconciliation of C1 cash cost of copper produced per pound to cost of goods sold, its most directly comparable IFRS measure.

	2021 - Q1			2020 - Q4			2020 - Q1
Reconciliation:
Cost of Product Sold	$	31,568		$	25,800		$	29,954
Add (less):
Depreciation/amortization/depletion		(9,766	)		(7,950	)		(9,566	)
Incentive payments		(813	)		(761	)		(594	)
Net change in inventory		(2,668	)		888			(208	)
Transportation costs & other		975			1,040			1,020
By-product credits		(6,200	)		(4,493	)		(3,543	)
Treatment, refining, and other		779			(554	)		(368	)
Foreign exchange translation adjustments		(153	)		1,225			1
C1 cash costs	$	13,722		$	15,195		$	16,696

	2021 - Q1			2020 - Q4			2020 - Q1
Costs
Mining[1]	$	11,869		$	12,727		$	13,501
Processing		4,010			4,013			4,273
Indirect		3,264			3,502			2,833
Production costs[1]		19,143			20,242			20,607
By-product credits		(6,200	)		(4,493	)		(3,543	)
Treatment, refining and other		779			(554	)		(368	)
C1 cash costs	$	13,722		$	15,195		$	16,696

Costs per pound
Payable copper produced (lb 000)		27,863			22,086			23,495
Mining[1]	$	0.43		$	0.58		$	0.57
Processing	$	0.14		$	0.18		$	0.18
Indirect	$	0.12		$	0.16		$	0.12
By-product credits	$	(0.22	)	$	(0.20	)	$	(0.15	)
Treatment, refining and other	$	0.03		$	(0.03	)	$	(0.02	)
C1 cash cost of copper produced (per lb)	$	0.49		$	0.69		$	0.71

[1] - Beginning in the third quarter of 2020, production costs are presented net of capex development. Comparative figures have been adjusted to conform with the revised presentation.

Ero Copper Corp. March 31, 2021 MD&A | Page 20 

C1 Cash Cost of Gold produced (per ounce) and AISC of Gold produced (per ounce)

C1 cash cost of gold produced (per ounce) is the sum of production costs, net of capital expenditure development costs and silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. C1 cash cost of gold produced per ounce is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

AISC of gold produced (per ounce) is the sum of production costs, site general and administrative costs, accretion of mine closure and rehabilitation provision, sustaining capital expenditures, sustaining leases, and royalties and production taxes, net of silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. All-in sustaining cost of gold produced per ounce is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

The following table provides a reconciliation of C1 cash cost of gold produced per ounce and AISC of gold produced per ounce to cost of goods sold, its most directly comparable IFRS measure.

	2021 - Q1			2020 - Q4			2020 - Q1
Reconciliation:
Cost of Product Sold	$	6,792		$	5,523		$	5,857
Add (less):
Depreciation/amortization/depletion		(1,708	)		(1,174	)		(883	)
Incentive payments		(283	)		(120	)		(172	)
Net change in inventory		(127	)		255			(71	)
By-product credits		(148	)		(141	)		(72	)
Foreign exchange translation adjustments		81			26			9
C1 cash costs	$	4,607		$	4,369		$	4,668
Site general and administrative		307			721			557
Accretion of mine closure and rehabilitation provision		(49	)		88			(76	)
Sustaining capital expenditure		485			600			176
Sustaining leases		462			502			401
Royalties and production taxes		269			281			176
AISC	$	6,081		$	6,561		$	5,902

Ero Copper Corp. March 31, 2021 MD&A | Page 21 

			2021 - Q1			2020 - Q4			2020 - Q1
Costs
Mining[1]			$	2,263		$	2,280		$2,144
Processing				1,680			1,624		1,798
Indirect				812			606		798
Production costs		[1]		4,755			4,510		4,740
By-product credits				(148	)		(141	)	(72)
C1 cash costs			$	4,607		$	4,369		$4,668
Site general and administrative				307			721		557
Accretion of mine closure and rehabilitation provision				(49	)		88		(76)
Sustaining capital expenditure				485			600		176
Sustaining leases				462			502		401
Royalties and production taxes				269			281		176
AISC			$	6,081		$	6,561		$5,902
Costs per ounce
Payable gold produced (ounces)				9,451			10,789		7,866
Mining	[1]		$	239		$	211		$273
Processing			$	178		$	151		$229
Indirect			$	86		$	56		$101
By-product credits			$	(16	)	$	(13	)	$(9)
C1 cash cost of gold produced (per ounce)			$	487		$	405		$594
AISC of gold produced (per ounce)			$	643		$	608		$750

[1] - Beginning in the third quarter of 2020, production costs are presented net of capex development. Comparative figures have been adjusted to conform with the revised presentation.

Ero Copper Corp. March 31, 2021 MD&A | Page 22 

Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and Adjusted EBITDA

EBITDA represents earnings before interest expense, income taxes, depreciation, and amortization. Adjusted EBITDA includes further adjustments for non-recurring items and/or items not indicative to the future operating performance of the Company. The Company believes EBITDA and adjusted EBITDA are appropriate supplemental measures of debt service capacity and performance of its operations.

Adjusted EBITDA is calculated by removing the following income statement items:

- Foreign exchange loss (gain)

- Share based compensation

- Incremental costs in response to COVID-19 pandemic

	2021 - Q1		2020 - Q4			2020 - Q1
Reconciliation:
Net income	$	32,057	$	66,342		$	(52,995	)
Adjustments:
Finance expenses		3,770		2,556			6,651
Tax expense (recovery)		7,829		13,234			(14,704	)
Depreciation/amortization/depletion		11,511		9,161			10,481
EBITDA		55,167		91,293			(50,567	)
Foreign exchange loss (gain)		28,625		(27,142	)		81,922
Share based compensation		2,346		2,549			2,049
Incremental costs in response to COVID-19 pandemic		556		481			-
Adjusted EBITDA	$	86,694	$	67,181		$	33,404

Note: In the fourth quarter of 2020, incremental costs in response to COVID-19 pandemic was included as an adjustment to the calculation of Adjusted EBITDA.

Adjusted net income attributable to owners of the Company and Adjusted net income per share attributable to owners of the Company

The Company uses the financial measure “Adjusted net income attributable to owners of the Company” and “Adjusted net income per share attributable to owners of the Company” (“Adjusted EPS”) to supplement information in its consolidated financial statements. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, the Company and certain investor and analysts use this information to evaluate the Company’s performance. The Company excludes the following items from net income to provide a measure which allows the Company and investors to evaluate the operating results of the underlying core operations:

- Share based compensation

- Unrealized foreign exchange loss (gain) on USD denominated debt in MCSA

- Unrealized loss (gain) on foreign exchange derivative contracts, net of tax

- Incremental costs in response to COVID-19 pandemic

- Unrealized loss (gain) on interest rate derivative contracts

The presentation of Adjusted EPS is not meant to substitute the net income (loss) per share attributable to owners of the Company (“EPS”) presented in accordance with IFRS, but rather it should be evaluated in conjunction with such IFRS measures.

The following table provides a detailed reconciliation of net income (loss) attributable to owners of the Company as reported in the Company’s consolidated financial statements to adjusted net income attributable to owners of the Company and Adjusted EPS.

Ero Copper Corp. March 31, 2021 MD&A | Page 23 

	2021 - Q1			2020 - Q4			2020 - Q1
Reconciliation:
Net income as reported attributable to the owners of the
Company	$	31,749		$	65,786		$	(52,753	)
Adjustments for:
Share based compensation		2,346			2,549			2,049
Unrealized foreign exchange loss (gain) on USD denominated
debt in MCSA		7,800			(7,682	)		26,766
Unrealized loss (gain) on foreign exchange derivative
contracts, net of tax		14,299			(23,077	)		43,081
Incremental costs in response to COVID-19 pandemic		556			481			-
Unrealized loss (gain) on interest rate derivative contracts		(415	)		(640	)		1,691
Adjusted net income attributed to owners of the Company	$	56,335		$	37,417		$	20,834
Weighted average number of common shares - basic		88,064,312			87,321,832			85,759,194
Weighted average number of common shares - diluted		92,902,306			92,642,103			91,409,738
Adjusted EPS - basic	$	0.64		$	0.43		$	0.24
Adjusted EPS - diluted	$	0.61		$	0.40		$	0.23

Note: In the fourth quarter of 2020, incremental costs in response to COVID-19 pandemic is included as an adjustment to the calculation of Adjusted EPS.

Net Debt

Net debt is determined based on cash and cash equivalents, restricted cash and loans and borrowings as reported in the Company’s consolidated financial statements. The Company uses net debt as a measure of the Company’s ability to pay down its debt. The following table provides a calculation of net debt based on amounts presented in the Company’s consolidated financial statements as at March 31, 2021, December 31, 2020, and March 31, 2020.

	March 31,			December 31,			March 31,
	2021			2020			2020
Current portion of loans and borrowings	$	5,971		$	12,539		$	19,821
Long-term portion of loans and borrowings		153,090			155,563			165,760
Less: Cash and cash equivalents		(84,574	)		(62,508	)		(44,338	)
Restricted cash		-			-			(1,125	)
Net Debt	$	74,487		$	105,594		$	140,118

Working Capital (Deficit) and Available Liquidity

Working capital is determined based on current assets and current liabilities as reported in the Company’s consolidated financial statements. The Company uses working capital as a measure of the Company’s short-term financial health and operating efficiency. Available liquidity includes the Company’s working capital and undrawn revolving credit facilities in place. The following table provides a calculation for these based on amounts presented in the Company’s consolidated financial statements as at March 31, 2021, December 31, 2020, and March 31, 2020.

	March 31			December 31,			March 31
	2021			2020			2020
Current Assets	$	150,770		$	127,541		$	84,693
Less: Current Liabilities		(87,309	)		(91,720	)		(97,076	)
Working Capital	$	63,461		$	35,821		$	(12,383	)
Available undrawn revolving credit facilities		10,600			11,621			-
Available Liquidity	$	74,061		$	47,442		$	(12,383	)

Ero Copper Corp. March 31, 2021 MD&A | Page 24 

Disclosure Controls and Procedures and Internal Control over Financial Reporting

The Company’s management, with the participation of the CEO and CFO, is responsible for establishing and maintaining adequate disclosure controls and procedures (“DC&P”) and internal control over financial reporting (“ICFR”).

The Company’s DC&P are designed to provide reasonable assurance that material information related to the Company is identified and communicated on a timely basis.

The Company’s ICFR is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Any system of ICFR, no matter how well designed, has inherent limitations and cannot provide absolute assurance that all misstatements and instances of fraud, if any, within the Company have been prevented or detected. The Company’s ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

The Company uses the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

There were no changes in the Company’s DC&P and ICFR that materially affected, or are reasonably likely to materially affect, ICFR during Q1 2021.

NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION

Unless otherwise indicated, scientific and technical information in this MD&A relating to Ero’s properties (“Technical Information”) is based on information contained in the following reports:

The report prepared in accordance with National Instrument 43-101, Standards of Disclosure for Mineral Projects (“NI 43-101”) and entitled “2020 Updated Mineral Resources and Mineral Reserves Statements of Mineração Caraíba’s Vale do Curaçá Mineral Assets, Curaçá Valley”, dated January 14, 2021 with an effective date of October 1, 2020, prepared by Porfirio Cabaleiro Rodrigues, MAIG, Bernardo Horta de Cerqueira Viana, MAIG, Paulo Roberto Bergmann, FAusIMM, Fábio Valério Câmara Xavier, MAIG, Dr. Augusto Ferreira Mendonça, RM SME, all of GE21 Consultoria Mineral Ltda. (“GE21”), and Dr. Beck (Alizeibek) Nader, FAIG, of BNA Mining Solutions, and each a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “MCSA Mining Complex Technical Report”).

The report prepared in accordance with NI 43-101 and entitled “Mineral Resource and Mineral Reserve Estimate of the NX Gold Mine, Nova Xavantina”, dated January 8, 2021 with an effective date of September 30, 2020, prepared by Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, Bernardo Horta de Cerqueira Viana, MAIG, and Paulo Roberto Bergmann, FAusIMM, each of GE21 and a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “NX Gold Technical Report”).

The report prepared in accordance with NI 43-101 and entitled “Feasibility Study, Technical Report for the Boa Esperança Copper Project, Pará State Brazil”, dated September 7, 2017 with an effective date of June 1, 2017, prepared by Rubens Mendonça, MAusIMM of SRK Consultores do Brasil Ltda. (“SRK” or “SRK Brazil”) as at the date of the report and Carlos Barbosa, MAIG and Girogio di Tomi, MAusIMM, both of SRK Brazil, and each a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “Boa Esperança Feasibility Study”).

Ero Copper Corp. March 31, 2021 MD&A | Page 25 

Reference should be made to the full text of the MCSA Mining Complex Technical Report, the NX Gold Technical Report and the Boa Esperança Technical Report, each of which is available for review under the Company’s profile on SEDAR at www.sedar.com.

The disclosure of Technical Information in this MD&A was reviewed and approved by Emerson Ricardo Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

Cautionary Note Regarding Forward-Looking Statements

This MD&A contains “forward-looking information” within the meaning of applicable Canadian securities laws. Forward-looking information includes statements that use forward-looking terminology such as “may”, “could”, “would”, “will”, “should”, “intend”, “target”, “plan”, “expect”, “budget”, “estimate”, “forecast”, “schedule”, “anticipate”, “believe”, “continue”, “potential”, “view” or the negative or grammatical variation thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, statements with respect to mineral reserve and mineral resource estimates as well as LOM plans; targeting additional mineral resources and expansion of deposits; the Company’s expectations, strategies and plans for the MCSA Mining Complex, the NX Gold Property and the Boa Esperança Property, including the Company’s planned exploration, development and production activities; the significance and timing of any particular exploration program or result and the Company’s expectations for current and future exploration plans including, but not limited to, planned areas of additional exploration, the significance of any drill results or new discoveries and targets, including without limitation, extensions of defined mineralized zones, possibilities for mine life extensions or continuity of high-grade mineralization, the recoverable value of any metals other than copper, further extensions and expansion of mineralization near the Company’s existing operations and throughout the Curaçá Valley or the NX Gold Mine, statements with respect to the importance of any new discoveries including newly identified mineral systems, the significance of re-evaluation of the Company’s past producing open pit mines, the timing and advancement of ongoing projects including the Deepening Extension Project and the re-start of the Surubim open pit mine; estimated completion dates for certain milestones; successfully adding or upgrading mineral resources and successfully developing new deposits; the costs and timing of future exploration and development including but not limited to the Deepening Extension Project at the MCSA Mining Complex; the significance of any potential optimization initiatives in connection with the Boa Esperança Property; the impact of the COVID-19 pandemic on the Company’s planned drill programs; the timing and amount of future production at the MCSA Mining Complex and the NX Gold Property;, the Company's ability to service its ongoing obligations, the Company's future production outlook, cash costs, capital resources, expenditures, and current global macroeconomic uncertainty stemming from the COVID-19 pandemic and its impact on the Company’s business, financial condition, results of operations, cash flows and prospects.

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this MD&A including, without limitation, assumptions about: continued effectiveness of the measures taken by the Company to mitigate the possible impact of COVID-19 on its workforce and operations; favourable equity and debt capital markets; the ability to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Company’s properties and assets; future prices of copper and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any mineral reserve and mineral resource estimates; the geology of the MCSA Mining Complex, NX Gold Property and the Boa Esperanҫa Property being as described in the technical reports for these properties; production costs; the accuracy of budgeted exploration and development costs and expenditures; the price of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to operate in a safe, efficient and effective manner; work force conditions to remain healthy in the face of prevailing epidemics, pandemics or other health risks (including COVID-19), political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favourable terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour stability; stability in financial and capital goods markets; availability of equipment and critical supplies, spare parts and consumables; positive relations with local groups and the Company’s ability to meet its obligations under its agreements with such groups; and satisfying the terms and conditions of the Company’s current loan arrangements. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive, global health, and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.

Ero Copper Corp. March 31, 2021 MD&A | Page 26 

Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. Such risks include, without limitation the risk factors listed under the heading “Risk Factors” in the AIF.  

Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking information, there may be other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended.

The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained herein. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.

Forward-looking information contained herein is made as of the date of this MD&A and the Company disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.

Cautionary Notes Regarding Mineral Resource and Reserve Estimates

In accordance with applicable Canadian securities regulatory requirements, all mineral reserve and mineral resource estimates of the Company disclosed or incorporated by reference in this MD&A have been prepared in accordance with NI 43-101 and are classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards for Mineral Resources and Mineral Reserves, adopted by the CIM Council on May 10, 2014 (the “CIM Standards”).

Mineral resources which are not mineral reserves do not have demonstrated economic viability. Pursuant to the CIM Standards, mineral resources have a higher degree of uncertainty than mineral reserves as to their existence as well as their economic and legal feasibility. Inferred mineral resources, when compared with Measured or Indicated mineral resources, have the least certainty as to their existence, and it cannot be assumed that all or any part of an Inferred mineral resource will be upgraded to an Indicated or Measured mineral resource as a result of continued exploration. Pursuant to NI 43-101, Inferred mineral resources may not form the basis of any economic analysis. Accordingly, readers are cautioned not to assume that all or any part of a mineral resource exists, will ever be converted into a mineral reserve, or is or will ever be economically or legally mineable or recovered.

Ero Copper Corp. March 31, 2021 MD&A | Page 27 

ADDITIONAL INFORMATION

Additional information about Ero and its business activities, including the AIF, is available under the Company’s profile at www.sedar.com.

Ero Copper Corp. March 31, 2021 MD&A | Page 28 

EX-99.12

Exhibit 9.12

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

 1

Ero Copper Corp.
Condensed Consolidated Statements of Financial Position

(Amounts in thousands of US Dollars)

(Unaudited)

		As at			As at
ASSETS	Notes		March 31, 2021			December 31, 2020
Current
Cash and cash equivalents		$	84,574		$	62,508
Accounts receivable			30,877			20,353
Inventories	3		21,028			25,496
Other current assets	4		14,291			19,184
			150,770			127,541
Non-Current
Mineral, property, plant and equipment	5		321,581			333,702
Exploration and evaluation assets	6		20,290			21,024
Deposits			444			513
Deferred income tax assets			12,938			14,223
Other non-current assets			105			96
			355,358			369,558
Total Assets		$	506,128		$	497,099
LIABILITIES
Current
Accounts payable and accrued liabilities		$	30,469		$	37,878
Current portion of loans and borrowings	7		5,971			12,539
Current portion of value added, payroll and other taxes payable			12,546			13,361
Current portion of derivatives	15		35,926			26,540
Current portion of lease liabilities			2,397			1,402
			87,309			91,720
Non-Current
Loans and borrowings	7		153,090			155,563
Provisions			19,350			21,450
Value added, payroll and other taxes			4,539			1,468
Derivatives	15		14,881			10,811
Lease liabilities			595			346
Other non-current liabilities			1,265			1,666
			193,720			191,304
Total Liabilities			281,029			283,024
SHAREHOLDERS’ EQUITY
Share capital	8		127,676			126,152
Equity reserves			(89,820	)		(67,291	)
Retained earnings			185,591			153,842
Equity attributable to owners of the Company			223,447			212,703
Non-controlling interests			1,652			1,372
			225,099			214,075
Total Liabilities and Equity		$	506,128		$	497,099

Contingencies (Note 17); Subsequent events (Note 8(a))

APPROVED ON BEHALF OF THE BOARD:

“David Strang” ,   CEO & Director ”Matthew Wubs” ,   Director

The accompanying notes are an integral part of these condensed consolidated interim financial statements Page 1

The accompanying notes are an integral part of these condensed consolidated interim financial statements Page 1

Ero Copper Corp.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Amounts in thousands of US Dollars, except share and per share amounts)
(Unaudited)

			Three-month			Three-month period
			period ended			ended March 31,
	Notes		March 31, 2021			2020
Revenue		9	$	122,543		$	67,745
Cost of product sold		10		(38,360	)		(35,811	)
Sales expenses				(1,374	)		(1,282	)
Gross profit				82,809			30,652
Expenses
General and administrative		11		(8,501	)		(7,503	)
Share-based compensation		8(a) to (c)		(2,346	)		(2,049	)
Income before the undernoted				71,962			21,100
Other income (expenses)
Finance income				970			467
Finance expense		12		(3,770	)		(6,651	)
Foreign exchange loss		13		(28,625	)		(81,922	)
Other expenses				(651	)		(693	)
Income (loss) before income taxes				39,886			(67,699	)
Income tax recovery (expense)
Current				(7,090	)		(1,091	)
Deferred				(739	)		15,795
				(7,829	)		14,704
Net income (loss) for the period				32,057			(52,995	)
Other comprehensive loss
Foreign currency translation loss				(24,359	)		(49,919	)
Comprehensive income (loss)			$	7,698		$	(102,914	)
Net income (loss) attributable to:
Owners of the Company				31,749			(52,753	)
Non-controlling interests				308			(242	)
			$	32,057		$	(52,995	)
Comprehensive income (loss) attributable to:
Owners of the Company				7,487			(102,472	)
Non-controlling interests				211			(442	)
			$	7,698		$	(102,914	)
Net income (loss) per share attributable to owners of the Company		8(e)
Net income (loss) per share
Basic			$	0.36		$	(0.62	)
Diluted			$	0.34		$	(0.62	)
Weighted average number of common shares
outstanding
Basic				88,064,312			85,759,194
Diluted				92,902,306			85,759,194

The accompanying notes are an integral part of these condensed consolidated interim financial statements Page 2

Ero Copper Corp.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Amounts in thousands of US Dollars, except share and per share amounts)
(Unaudited)

		Share Capital				Equity Reserves
		Number of				Contributed			Foreign			Retained						Non-controlling
	Notes	shares		Amount		surplus			exchange			earnings			Total			interest			Total equity
Balance, December 31, 2019			85,703,646	$	120,492	$	9,084		$	(33,573	)	$	102,220		$	198,223		$	835		$	199,058
Income for the period			-		-		-			-			(52,753	)		(52,753	)		(242	)		(52,995	)
Other comprehensive loss for the period			-		-		-			(49,719	)		-			(49,719	)		(200	)		(49,919	)
Total comprehensive loss for the period			-		-		-			(49,719	)		(52,753	)		(102,472	)		(442	)		(102,914	)
Shares issued for:
Exercise of options and warrants			94,998		429		(130	)		-			-			299			-			299
Share-based compensation	8(a) to (b)		-		-		1,796			-			-			1,796			-			1,796
Dividends to non-controlling interest																			(10	)		(10	)
Balance, March 31, 2020			85,798,644	$	120,921	$	10,750		$	(83,292	)	$	49,467		$	97,846		$	383		$	98,229
Balance, December 31, 2020			87,879,261	$	126,152	$	15,637		$	(82,928	)	$	153,842		$	212,703		$	1,372		$	214,075
Income for the period			-		-		-			-			31,749			31,749			308			32,057
Other comprehensive loss for the period			-		-		-			(24,262	)		-			(24,262	)		(97	)		(24,359	)
Total comprehensive income (loss) for the period			-		-		15,637			(24,262	)		31,749			7,487			211			7,698
Shares issued for:
Exercise of options and warrants			272,648		1,524		(408	)		-			-			1,116			-			1,116
Share-based compensation	8(a) to (b)		-		-		2,141			-			-			2,141			-			2,141
Dividends to non-controlling interest			-		-		-			-			-			-			69			69
Balance, March 31, 2021			88,151,909	$	127,676	$	17,370		$	(107,190	)	$	185,591		$	223,447		$	1,652		$	225,099

The accompanying notes are an integral part of these condensed consolidated interim financial statements Page 3

Ero Copper Corp.

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands of US Dollars)

(Unaudited)  

	Three-month			Three-month
	period ended			period ended
	March 31, 2021			March 31, 2020
Cash Flows from / (used in) Operating Activities
Net income (loss) for the period	$	32,057		$	(52,995	)
Adjustments for:
Amortization and depreciation		11,511			10,481
Income tax expense (recovery)		7,829			(14,704	)
Write-off of plant and equipment		75			-
Provisions		(68	)		343
Share-based compensation		2,346			2,049
Finance income		(970	)		(467	)
Finance expenses		3,770			6,651
Foreign exchange loss		28,625			81,922
Changes in:
Accounts receivable		(12,189	)		5,862
Inventories		1,287			(1,937	)
Other assets		4,961			1,441
Accounts payable and accrued liabilities		(11,828	)		(1,058	)
Value added, payroll and other taxes		1,009			2,787
		68,415			40,375
Derivative contract settlements		(5,711	)		(2,651	)
Provision settlements		(352	)		(410	)
Income taxes paid		(240	)		-
		62,112			37,314
Cash Flows from / (used in) Investing Activities
Additions to mineral property, plant and equipment		(25,873	)		(28,367	)
Additions to exploration and evaluation assets		(464	)		(54	)
Other investments		126			518
		(26,211	)		(27,903	)
Cash Flows from / (used in) Financing Activities
Restricted cash		-			375
Lease liability payments		(1,085	)		(1,171	)
New loans and borrowings, net of finance costs		630			45,689
Loans and borrowings paid		(7,662	)		(21,230	)
Interest paid on loans and borrowings		(1,921	)		(2,448	)
Other finance expenses		(1,013	)		(766	)
Issuance of share capital, net of issuance costs		1,116			299
		(9,935	)		20,748
Effect of exchange rate changes on cash and cash equivalents		(3,900	)		(7,306	)
Net increase in cash and cash equivalents		22,066			22,853
Cash and cash equivalents - beginning of period		62,508			21,485
Cash and cash equivalents - end of period	$	84,574		$	44,338

The accompanying notes are an integral part of these condensed consolidated interim financial statements

The accompanying notes are an integral part of these condensed consolidated interim financial statements Page 4

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

1. Nature of Operations

Ero Copper Corp. (“Ero" or the "Company") was incorporated on May 16, 2016 under the Business Corporations Act (British Columbia) and maintains its head office at Suite 1050, 625 Howe Street, Vancouver, BC, V6C 2T6. The Company’s shares are publicly traded on the Toronto Stock Exchange under the symbol “ERO”.

The Company’s principal asset is its 99.6% ownership interest in Mineração Caraíba S.A. (“MCSA”). The Company also currently owns a 97.6% ownership interest in NX Gold S.A. (“NX Gold”) indirectly through its wholly-owned subsidiary, Ero Gold Corp. (“Ero Gold”).

MCSA is a Brazilian company which holds a 100% interest in the MCSA Mining Complex and the Boa Esperança Property (Note 6). MCSA’s predominant activity is the production and sale of copper concentrate from the MCSA Mining Complex, located in Bahia, Brazil, with gold and silver produced and sold as by-products. The Company currently mines copper ore from the Pilar underground mine (“Pilar UG Mine”) and the Vermelhos underground mine (“Vermelhos UG Mine”). The Boa Esperança Property is located within the municipality of Tucumã in the southeastern part of the state of Pará, Brazil, and consists of a single mineral concession covering an area of 4,034 hectares (“ha”).

NX Gold is a Brazilian gold mining company focused on the production and sale of gold as its main product and silver as its by-product. NX Gold wholly owns a 31,096 ha property, located approximately 18 kilometers west of the town of Nova Xavantina, in southeastern Mato Grosso State, Brazil, consisting of a single mining concession covering an area of 620 ha, where all gold mining and processing activities occur.

On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. Although COVID-19 has not materially impacted the Company’s operations during the three-month period ended March 31, 2021, the situation is dynamic and the ultimate duration and magnitude of the impact on the economy and our business are not known at this time. These impacts could include an impact on the Company’s ability to obtain debt and equity financing, impairment of investments, impairments in the value of long-lived assets, continued fluctuation in the value of the Brazilian Real or potential future decreases in revenue or the profitability of ongoing operations.

2. Basis of Preparation

a) Statement of Compliance

These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting and follow the same accounting policies and methods of application as the Company’s most recent annual consolidated financial statements for the year ended December 31, 2020. These condensed consolidated interim financial statements do not include all of the information required for full consolidated annual financial statements and should be read in conjunction with the consolidated financial statements of the Company as at and for the year ended December 31, 2020, prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee.

These condensed consolidated interim financial statements were authorized for issue by the Board of Directors of the Company (the “Board”) on May 4, 2021.

Page 5

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

b) New Accounting Standards and Interpretations

The following amendment to accounting standards has been issued but not yet adopted in the financial statements:

· On May 14, 2020, the IASB published a narrow scope amendment to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use. The amendment prohibits deducting from the cost of property, plant and equipment amounts received from selling items produced while preparing the asset for its intended use. Instead, amounts received will be recognized as sales proceeds and related cost in profit or loss. The effective date is for annual periods beginning on or after January 1, 2022. The Company will not adopt this amendment until the effective date but does not anticipate a material impact on its consolidated financial statements.

c) Use of Judgments and Estimates

In preparing these condensed consolidated interim financial statements, management has made judgments, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ. Significant judgments made by management in applying the Company’s accounting policies and key sources of estimation uncertainty were the same as those applied in the most recent annual audited consolidated financial statements for the year ended December 31, 2020.

3. Inventories

	March 31, 2021		December 31, 2020
Supplies and consumables	$	16,157	$	15,619
Stockpile		1,819		3,569
Work in progress		2,162		5,234
Finished goods		890		1,074
	$	21,028	$	25,496

4. Other Current Assets

	March 31, 2021		December 31, 2020
Advances to suppliers	$	544	$	500
Prepaid expenses		5,497		2,635
Advances to employees (a)		640		2,091
Value added federal taxes recoverable (b)		7,610		13,958
	$	14,291	$	19,184

(a) Advances to employees include short term advances of salary, vacation and other benefits granted to employees of the Company’s subsidiaries MCSA and NX Gold.

(b) At March 31, 2021, $5.0 million (December 31, 2020 - $12.0 million) of this balance relates to additional taxes recoverable identified by a study conducted to revisit certain tax positions in 2020 and a 2019 favourable legal decision that recognizes MCSA’s right to a tax credit as a result of historical over-payment. MCSA is able to use these tax credits against a variety of taxes, including taxes on future sales. During the three-month period ended March 31, 2021, the Company used $7.0 million of these credits to offset current income taxes payable.

Page 6

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

5. Mineral, Property, Plant and Equipment

Additions to mineral, property, plant and equipment totaled $25.9 million during the three-month period ended March 31, 2021 (three-month period ended March 31, 2020 - $27.8 million), none of which was obtained through financing arrangements with equipment suppliers (three-month period ended March 31, 2020 - $7.8 million).

Certain equipment has been provided as security for the equipment finance loans (note 7(b)).

Included in mineral, property, plant and equipment is $59.8 million (December 31, 2020 - $56.8 million) related to projects in progress are not currently being amortized.

6. Exploration and Evaluation Assets

Exploration and evaluation assets relate to the Boa Esperança Property located in the Municipality of Tucumã, in the state of Pará, Brazil which consists of a single mineral concession. This prospective copper/gold property is in advanced stages of exploration with various geological mineral resource studies and is the subject of a completed feasibility study.

7. Loans and Borrowings

									Carrying value, including
									accrued interest
							Principal to		March 31,		December 31,
Description	Denomination	Security	Time to Maturity		Coupon rate		be repaid		2021		2020
Bank loan	BRL R$	Unsecured		68 months		CDI + 0.5%		3,846		3,493		3,980
Line of credit (MCSA)	BRL R$	Unsecured		-		CDI + 9.0%		-		-		1,447
Lines of credit (MCSA)	BRL R$	Unsecured		-		9.60%-13.20%		-		-		4,221
Equipment finance loan (Plural)	BRL R$	Secured		8 months		CDI + 7.0%		614		707		1,065
Equipment finance loans	BRL R$	Secured		2 - 39 months		11.88%-16.49%		1,077		1,278		1,607
Equipment finance loans	EURO	Secured		15 - 21 months		5.5%-7.0%		905		1,488		1,791
Equipment finance loans	USD	Secured		13 - 29 months		6.50%-7.95%		4,638		4,759		5,605
Senior non-revolving credit facility	USD	Secured		-		LIBOR + 2.50%-4.25%		-		-		74,193
Senior revolving credit facility	USD	Secured		48 months		LIBOR + 2.25%-4.25%		150,000		147,336		74,193
Total							$	161,080	$	159,061	$	168,102
Current portion:									$	5,971	$	12,539
Non-current portion:									$	153,090	$	155,563

	March 31, 2021			December 31, 2020
Balance, beginning of period	$	168,102		$	159,370
New senior revolving credit facility, net		-			13,652
New equipment finance loans		-			19,278
New lines of credit		630			36,726
Principal and interest payments		(9,583	)		(67,118	)
Interest accretion		1,679			9,921
Effect of foreign exchange rate changes		(1,767	)		(3,727	)
Balance, end of period	$	159,061		$	168,102

Page 7

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

(a) Senior credit facility

The Company had a $150.0 million facility from a syndicate of Canadian financial institutions. The facility was comprised of a $75.0 million senior secured amortizing non-revolving credit facility (“Term Facility”) and a $75.0 million senior secured revolving term credit facility (“Revolving Credit Facility”) (collectively the “Facilities”). The Term Facility required quarterly payments commencing on March 31, 2022 and the Revolving Credit Facility was due on March 31, 2024. The Facilities bore interest on a sliding scale at a rate of LIBOR plus 2.50% to 4.25%, depending on the Company’s consolidated leverage ratio at the time.

During the three-month period ended March 31, 2021, the Facilities were amended to combine the Facilities into a new $150.0 million senior secured revolving credit facility (“New Revolving Credit Facility”) payable entirely on March 31, 2025. The New Revolving Credit Facility bears interest on a sliding scale at a rate of LIBOR plus 2.25% to 4.25% depending on the Company’s consolidated leverage ratio at the time. Commitment fees for any undrawn portion of the Revolving Credit Facility are on a sliding scale between 0.56% to 1.06%.

The New Revolving Credit Facility includes standard and customary terms and conditions with respect to fees, representations, warranties, and financial covenants that remain unchanged from those of the Facilities.

The New Revolving Credit Facility is secured by pledges of shares of MCSA, NX Gold and Ero Gold. The Company is required to comply with certain financial covenants. As of the date of these condensed consolidated interim financial statements, the Company is in compliance with these covenants.

During the three-month period ended March 31, 2021, the existing interest rate swap arrangement was replaced with a new interest rate swap arrangement whereby the floating interest on a notional amount of $50.0 million of the New Revolving Credit Facility was swapped for a fixed interest rate of 1.68%. The interest rate swap arrangement is in effect until March 31, 2025. Interest swap settlements are being made on a monthly basis.

(b) Bank loan and equipment finance loans

The bank loan relates to the Company’s subsidiary, MCSA, and was recognized at the date the Company acquired MCSA at fair value and has subsequently been recognized at amortized cost, net of settlements. Interest is being recognized using the effective interest rate method at an interest rate of 11.29%.

MCSA is required to comply with certain financial covenants which MCSA is in compliance with at March 31, 2021. The equipment finance loans are secured by the corresponding equipment relating to them and a guarantee by the Company.

(c) MCSA and NX Gold lines of credit

At March 31, 2021, the Company’s subsidiaries, MCSA and NX Gold, have the following credit facilities available:

MCSA had a non-revolving line of credit of up to BRL $30.0 million at an interest rate of CDI (“Brazilian Interbank Deposit Rate”) + 9% per annum. At December 31, 2020, BRL $7.5 million ($1.4 million) had been drawn from this credit facility. During the three-month period ended March 31, 2021, this credit facility was repaid in full and terminated.

MCSA has a credit agreement for a line of credit of up to BRL $14.9 million at an interest rate of 14.30% per annum. The Company and NX Gold provide unsecured guarantees for this credit agreement. The full amount of BRL $14.9 million remains available to be drawn at any time until May 24, 2021.

Page 8

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

MCSA had various supply credit arrangements, of which BRL $21.8 million ($4.2 million) remained outstanding as at December 31, 2020. The interest rates on these credit agreements ranged from 9.60% to 24.34%. During the three-month period ended March 31, 2021, these credit facilities were repaid in full and terminated.

MCSA has a credit agreement for a line of credit of up to BRL $30.0 million at an interest rate of CDI + 8.858%. MCSA may drawdown on this line of credit at any time until September 20, 2021. At March 31, 2021, no amount has been drawn from this credit facility.

NX Gold has a credit agreement for a line of credit of up to BRL $7.5 million at an interest rate of 14.30% per annum. NX Gold may drawdown on this line of credit at any time until February 22, 2022. The Company and MCSA provide unsecured guarantees for this credit agreement. At March 31, 2021, no amounts had been drawn from this line of credit.

NX Gold has a credit agreement for a line of credit of up to BRL $8.0 million at an interest rate of CDI + 8.858%. NX Gold may drawdown on this line of credit at any time until September 20, 2021. At March 31, 2021, no amount has been drawn from this credit facility.

(d) Plural loan

MCSA has an equipment finance loan with Plural Bank for BRL $12.0 million for a term of 24 months and at an interest rate of 7% + CDI per annum. In connection with this loan, MCSA entered into an interest rate swap transaction and a foreign exchange swap transaction with Plural Bank whereby the floating interest of 7% + CDI on a notional amount of BRL $3.5 million was swapped for a fixed interest rate of 9.90%, and a notional principal amount of BRL $3.5 million was swapped for the USD currency at a foreign exchange rate of 3.95. This interest rate and foreign exchange swap transactions are in effect for the term of the loan.

8. Share Capital

As at March 31, 2021, the Company’s authorized share capital consists of an unlimited number of common shares without par value. As at March 31, 2021, 88,151,909 common shares were outstanding.

(a) Options

On March 19, 2021, the Company granted 50,000 options to a new employee of the Company at an exercise price of CAD$24.45 per share with a term to expiry of five years. These stock options vest in three equal installments on each annual anniversary date from the date of grant. The total fair value of these options on the grant date was $0.3 million, which is recognized over the vesting period.

	Number of			Weighted Average
	Stock Options			Exercise Price
Outstanding stock options, December 31, 2020		4,641,763		$	8.00
Issued		50,000			19.44
Exercised		(205,982	)		5.03
Outstanding stock options, March 31, 2021		4,485,781		$	8.27

The weighted average share price on the date of exercise for options exercised during the three-month period ended March 31, 2021 was $17.56 (three-month period ended March 31, 2020 - $12.79).

Page 9

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

As at March 31, 2021, the following stock options were outstanding:

					Vested and		Weighted
					Exercisable		Average
	Number of		Weighted Average		Number of		Remaining
Expiry Date	Stock Options		Exercise Price		Stock Options		Life in Years
May 15, 2022		365,334	$	1.50	USD	365,334		1.12
July 10, 2022		60,000		1.50	USD	60,000		1.28
November 24, 2022		318,000		6.48	CAD	318,000		1.65
December 7, 2022		1,200,001		6.74	CAD	1,200,001		1.69
January 18, 2023		60,000		7.95	CAD	60,000		1.80
January 23, 2023		41,667		7.76	CAD	41,667		1.82
June 19, 2023		144,000		10.25	CAD	94,000		2.22
July 16, 2023		100,000		9.01	CAD	33,332		2.29
December 31, 2023		1,022,256		9.76	CAD	693,065		2.75
January 2, 2024		125,000		9.80	CAD	125,000		2.76
August 15, 2024		40,000		21.09	CAD	40,000		3.38
December 12, 2024		470,228		20.52	CAD	156,734		3.70
January 2, 2025		73,456		23.42	CAD	53,456		3.76
December 17, 2025		415,839		18.90	CAD	25,207		4.72
March 18, 2026		50,000		24.45	CAD	-		4.97
		4,485,781	$	8.27	USD	3,265,796		2.52

In determining the weighted average exercise price of all outstanding options in the tables above and below, the CAD prices were converted to USD at the March 31, 2021 exchange rate of 1.2575.

The fair value of options granted in the three-month period ended March 31, 2021 was determined using the Black-Scholes option pricing model. The weighted average inputs used in the measurement of fair values at grant date of the options are the following:

	2021
Expected term (years)		3.0
Forfeiture rate		0	%
Volatility		54	%
Dividend yield		0	%
Risk-free interest rate		0.77	%
Weighted-average fair value per option	$	6.32

For the three-month period ended March 31, 2021, the Company recorded share-based compensation of $0.7 million (three-month period ended March 31, 2021 - $1.2 million) with respect to its outstanding stock options.

Subsequent to March 31, 2021, 2,500 options were exercised for total proceeds of $15 thousand.

(b) Share Unit Plan

No share units were issued during the three-month period ended March 31, 2021. As at March 31, 2021 and December 31, 2020, 727,761 share units are outstanding. These share units will vest three years from the date of grant by the Compensation Committee and the number of share units that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain market and non-market performance conditions. Each vested share unit entitles the holder thereof to receive on or about the applicable date of vesting of such share unit (i) one common share; (ii) a cash amount equal to the fair market value of one common share as at the applicable date of vesting; or (iii) a combination of (i) and (ii), as determined by the Compensation Committee in its sole discretion. The Company currently intends to settle these share units using common shares. Accordingly, they are classified as equity settled instruments.

Page 10

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

For the share units with non-market performance conditions, the fair value of the share units granted was determined using the share price at the date of grant. For the share units with market performance conditions, the fair value of the share units granted was determined using a Geometric Brownian Motion model.

During the three-month period ended March 31, 2021, the Company recorded share-based compensation of $1.4 million (three-month period ended March 31, 2020 - $0.6 million) with respect to the share units.

(c) Deferred Share Unit Plan

During the three-month period ended March 31, 2021, 3,325 Deferred Share Units (“DSU”) (three-month period ended March 31, 2020 – 32,327) were issued to independent directors.

As at March 31, 2021, the fair value of the DSU liability was $1.5 million (December 31, 2020 - $1.3 million) which has been recognized in accounts payable and accrued liabilities, with $0.2 million recognized in share-based compensation expense for the three-month period ended March 31, 2021 (three-month period ended March 31, 2020 - $0.3 million).

(d) Warrants

As at March 31, 2021, 1,533,330 (December 31, 2020 – 1,599,996) common share purchase warrants were outstanding with a weighted average exercise price of $1.20 and a weighted average remaining contractual life of 0.70 years. 66,666 warrants were exercised during the three-month period ended March 31, 2021 for gross proceeds of $0.1 million (three-month period ended March 31, 2020 – no warrants were exercised).

(e) Net Income (loss) per Share

	Three months		Three months
	ended March 31,		ended March 31,
	2021		2020
Weighted average number of common shares outstanding		88,064,312		85,759,194
Dilutive effect of warrants		1,454,146		-
Dilutive effect of stock options		2,292,206		-
Dilutive effect of Share Units		1,091,642		-
Weighted average number of diluted common shares outstanding		92,902,306		85,759,194
Net income (loss) attributable to owners of the Company	$	31,749	$	(52,753	)
Basic net income (loss) per share attributable to owners of the Company		0.36		(0.62	)
Diluted net income per share attributable to owners of the Company		0.34		(0.62	)

Page 11

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

9. Revenue

	Three months ended		Three months ended
	March 31, 2021		March 31, 2020
Copper concentrate
- sales within Brazil	$	40,343	$	51,221
- export sales		63,139		8,843
- price adjustments on provisionally priced sales		1,280		(3,919	)
Gold
- export sales		17,781		11,600
	$	122,543	$	67,745

Under the terms of the Company’s contract with its primary customer, sales are provisionally priced on the date of sale based on the previous month’s average copper price.  The final sales price for all shipments in a month is based on the average copper price in the month of shipment and determined at the end of the month in which the sale is recognized.  Accordingly, no provisionally priced sales remain for this customer at March 31, 2021. During the three-month period ended March 31, 2021, the company entered into a contract with a new customer whereby provisionally priced sales are settled with a final sales price four months after shipment takes place. As at March 31, 2021, 16,364 tonnes of copper concentrate have been sold on a provisionally priced basis and are exposed to commodity price changes. During the three-month period ended March 31, 2021, the Company recognized $1.3 million (three-month period ended March 31, 2020 - $3.9 million) in price adjustments related to provisionally priced sales. 

10. Cost of Product Sold

	Three months ended		Three months ended
	March 31, 2021		March 31, 2020
Materials	$	5,857	$	4,982
Salaries and benefits		8,954		8,690
Depreciation and depletion		11,474		10,449
Contracted services		5,171		5,523
Maintenance costs		4,280		3,593
Utilities		2,473		2,403
Other costs		151		171
	$	38,360	$	35,811

Page 12

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

11. General and Administrative Expenses

	Three months ended			Three months ended
	March 31, 2021			March 31, 2020
Accounting and legal	$	366		$	198
Amortization and depreciation		37			32
Office and sundry		1,528			1,606
Provisions		(68	)		343
Salaries and consulting fees		5,413			4,427
Incentive payments		491			297
Transfer agent and filing fees		119			118
Travel and conference		615			482
	$	8,501		$	7,503

12. Finance Expense

	Three months ended			Three months ended
	March 31, 2021			March 31, 2020
Interest on loans and borrowings	$	1,679		$	2,708
Loss on interest rate swap derivatives		(38	)		1,823
Accretion of mine closure and rehabilitation provision		227			268
Commitment fees		142			280
Interest on lease liabilities		61			77
Other finance expenses		1,699			1,495
	$	3,770		$	6,651

13. Foreign Exchange Loss

The following foreign exchange gains (losses) arise as a result of balances and transactions in the Company’s Brazilian subsidiaries that are denominated in currencies other than the Brazilian Reais (BRL$), which is their functional currency.

	Three months ended			Three months ended
	March 31, 2021			March 31, 2020
Foreign exchange on USD denominated debt in Brazil	$	(7,831	)	$	(26,873	)
Realized foreign exchange on derivative contracts (note 15)		(5,711	)		(2,651	)
Unrealized foreign exchange on derivative contracts (note 15)		(16,951	)		(52,655	)
Other		1,868			257
	$	(28,625	)	$	(81,922	)

Page 13

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

14. Related Party Transactions

Key management personnel consist of the Company’s directors and officers and their compensation includes director retainer fees and management salaries paid to these individuals, as well as share-based compensation. The aggregate value of compensation paid to key management personnel for the three-month period ended March 31, 2021 was $1.9 million ($1.8 million for the three-month period ended March 31, 2020). In addition, 50,000 options and 3,325 DSUs were issued to key management personnel and non-executive directors during the three-month period ended March 31, 2021 (43,456 options and 32,327 DSUs for the three-month period ended March 31, 2020). For key management personnel, $1.4 million was recognized in share-based compensation expense for the three-month period ended March 31, 2021 for options, share units, and DSUs issued ($1.3 million for the three-month period ended March 31, 2020).

During the three-month period ended March 31, 2021, key management personnel exercised 50,000 options and 66,666 warrants for total cash proceeds to the Company of $0.2 million (25,000 options for total cash proceeds of $38 thousand for the three-month period ended March 31, 2020).

As at March 31, 2021, $0.9 million was payable to key management as incentive compensation and is included in accounts payable and accrued liabilities in the statement of financial position (December 31, 2020 - $3.7million). Such amounts are unsecured, non-interest bearing and will be paid under normal trade terms.

15. Financial Instruments

Fair value

Fair values of financial assets and liabilities are determined based on available market information and valuation methodologies appropriate to each situation. However, some judgments are required in the interpretation of the market data to produce the most appropriate fair value estimates. The use of different market information and/or evaluation methodologies may have a material effect on the fair value amounts.

As at March 31, 2021, derivatives were measured at fair value based on Level 2 inputs.

The carrying values of cash and cash equivalents, accounts receivable, deposits, and accounts payable and accrued liabilities approximate their fair values due to their short terms to maturity or market rates of interest used to discount amounts. The carrying value of value added, payroll and other taxes approximate fair value based on the discount rate applied. At March 31, 2021, the carrying value of loans and borrowings is $168.1 million while the fair value is approximately $169.9 million. The stated interest rates are a close approximation of market rates of interest at March 31, 2021 (Level 2 of the fair value hierarchy).

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers. The carrying amount of the financial assets below represents the maximum credit risk exposure as at March 31, 2021 and December 31, 2020:

	March 31, 2021		December 31, 2020
Cash and cash equivalents	$	84,574	$	62,508
Accounts receivable		30,877		20,353
Deposits and other non-current assets		519		595
	$	115,970	$	83,456

The Company invests cash and cash equivalents with financial institutions that are financially sound based on their credit rating. The Company’s exposure to credit risk associated with accounts receivable is influenced mainly by the individual characteristics of each customer. The Company currently has only four significant customers, all of which have no history of credit default with the Company. The Company has not incurred credit losses during the three-month period ended March 31, 2021 nor recognized a provision for credit losses.

Page 14

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

(i) Foreign exchange currency risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage market risks. At March 31, 2021, the Company has entered into foreign exchange collar contracts at zero cost for notional amounts of $270.7 million (December 31, 2020 - notional amount of $285.7 million) with an average floor rate of 4.07 BRL to US Dollar and an average cap rate of 4.73 BRL to US Dollar. The maturity dates of these contracts are from April 28, 2021 to September 28, 2022 and are financially settled on a net basis. The fair value of these contracts at March 31, 2021 was a liability of $48.5 million, (December 31, 2020 - $34.5 million) which is included in Derivatives in the statement of financial position. The fair value of these forward contracts as at March 31, 2021 was determined using an option pricing mode with the following assumptions: discount rate of 2.82% - 2.93%, foreign exchange rate of approximately 5.70, and volatility of 17.72% - 19.15%. The change in fair value of foreign exchange collar contracts was a loss of $17.0 million for the three-month period ended March 31, 2021 ($52.7 million for the three-month period ended March 31, 2020) and has been recognized in foreign exchange loss. In addition, during the three-month period ended March 31, 2021, the Company recognized a realized loss of $5.7 million ($2.7 million for the three-month period ended March 31, 2020) related to the settlement of foreign currency forward collar contracts.

(ii) Interest rate risk

The Company is principally exposed to the variation in interest rates on loans and borrowings with variable rates of interest. Management reduces interest rate risk exposure by entering into loans and borrowings with fixed rates of interest or by entering into derivative instruments that fix the ultimate interest rate paid.

The Company is principally exposed to interest rate risk through its New Revolving Credit Facility of $150.0 million, Brazilian Real denominated bank loans of $3.8 million, and Brazilian Real denominated equipment finance loans of $0.6 million. Based on the Company’s net exposure at March 31, 2021, a 1% change in the variable rates would have an impact of $1.5 million on pre-tax annual net income, without consideration of the effects of the interest rate swap contract below.

In order to mitigate the above volatility due to variable rates on loans, as at March 31, 2021, the Company has entered into an interest rate swap contract to manage interest rate risk (see note 7(a)). At March 31, 2021, the floating interest on a notional amount of $50.0 million was swapped for a fixed interest rate of 1.68%. This interest rate swap transaction is in effect until March 31, 2025, with settlements made on a monthly basis. The fair value of this contract at March 31, 2021 was a liability of $2.0 million (December 31, 2020 - $2.5 million) and was included in Derivatives in the statement of financial position. The Company recognized a realized loss of $0.4 million on the termination of the original interest rate swap from 2019 (see note 7) (realized loss of $0.1 million for the three-month period ended March 31, 2020) and an unrealized gain of $0.4 million for the three-month period ended March 31, 2021 (unrealized loss of $1.7 million for the three-month period ended March 31, 2020), which was included in finance expense.

Page 15

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

In addition, as at March 31, 2021, MCSA has entered into an interest rate and currency swap contract on the Plural Loan (see note 7(d)). At March 31, 2021, the floating interest on a notional amount of BRL $3.5 million was swapped for a fixed interest rate of 9.9% and the BRL currency on the loan was swapped for USD at a rate of 3.95. The fair value of this contract at March 31, 2021 was a liability of $0.3 million (December 31, 2020 – $0.3 million) and is included in Derivatives in the statement of financial position. The realized loss on this swap contract was $0.1 million for the three-month period ended March 31, 2021 and was included in finance expense.

(iii) Price risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage commodity price risks. At March 31, 2021, the Company has provisionally priced sales that are exposed to commodity price changes (note 9). Based on the Company’s net exposure at March 31, 2021, a 10% change in the price of copper would have an impact of $5.0 million on pre-tax net income.

16. Segment Disclosure

The Company’s operations are segmented by entity between MCSA, NX Gold and corporate head office, which is consistent with internal reporting purposes. The Company monitors the operating results of its operating segments separately for the purpose of making decisions about resource allocation and performance assessment.

Total revenue from MCSA is from two customers while total revenue from NX Gold is from one customer.

Segmented information is as follows:

Three months ended March 31, 2021	MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	104,762		$	17,781		$	-		$	122,543
Depreciation and depletion		(9,766	)		(1,708	)		-			(11,474	)
Other cost of product sold expenses		(21,802	)		(5,084	)		-			(26,886	)
Cost of product sold		(31,568	)		(6,792	)		-			(38,360	)
Sales expenses		(1,262	)		(112	)		-			(1,374	)
Gross profit		71,932			10,877			-			82,809
Expenses
General and administrative		(4,219	)		(464	)		(3,818	)		(8,501	)
Share-based compensation		-			-			(2,346	)		(2,346	)
Finance income		43			75			852			970
Finance expenses		(2,314	)		(148	)		(1,308	)		(3,770	)
Foreign exchange loss		(28,165	)		(537	)		77			(28,625	)
Other income		(491	)		(160	)		-			(651	)
Income (loss) before taxes		36,786			9,643			(6,543	)		39,886
Current tax expense		(3,361	)		(1,233	)		(2,496	)		(7,090	)
Deferred tax recovery		(726	)		(13	)		-			(739	)
Net Income (Loss)	$	32,699		$	8,397		$	(9,039	)	$	32,057
Assets
Current	$	97,235		$	33,775		$	19,760		$	150,770
Non-current		324,597			27,741			3,020			355,358
Total Assets	$	421,832		$	61,516		$	22,780		$	506,128
Total Liabilities	$	101,885		$	18,473		$	160,671		$	281,029

Page 16

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

Three months ended March 31, 2020	MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	56,145		$	11,600		$	-		$	67,745
Depreciation and depletion		(9,566	)		(883	)		-			(10,449	)
Other cost of product sold expenses		(20,388	)		(4,974	)		-			(25,362	)
Cost of product sold		(29,954	)		(5,857	)		-			(35,811	)
Sales expenses		(1,282	)		-			-			(1,282	)
Gross profit		24,909			5,743			-			30,652
Expenses
General and administrative		(4,748	)		(480	)		(2,275	)		(7,503	)
Share-based compensation		-			-			(2,049	)		(2,049	)
Finance income		117			40			310			467
Finance expenses		(2,641	)		(332	)		(3,678	)		(6,651	)
Foreign exchange gain (loss)		(79,649	)		(2,264	)		(9	)		(81,922	)
Other income		(550	)		(143	)		-			(693	)
Income (loss) before taxes		(62,562	)		2,564			(7,701	)		(67,699	)
Current tax expense		(417	)		(674	)		-			(1,091	)
Deferred tax recovery		15,424			371						15,795
Net Income (Loss)	$	(47,555	)	$	2,261		$	(7,701	)	$	(52,995	)
Assets
Current	$	56,831		$	11,947		$	15,915		$	84,693
Non-current		304,187			17,981			2,779			324,947
Total Assets	$	361,018		$	29,928		$	18,694		$	409,640
Total Liabilities	$	141,593		$	16,584		$	153,234		$	311,411

17. Contingencies

MCSA is subject to a number of claims (including claims related to tax, labour and social security matters and civil action) in the course of its business which individually are not material and have not been accrued for in the Company’s financial statements as it is not probable that a cash outflow will occur. While the Company believes that these claims are unlikely to be successful, if all such existing claims were decided against it, the Company could be exposed to a liability of up to approximately $19.9 million as at March 31, 2021 (December 31, 2020 - $21.8 million), which could have an adverse impact on the Company’s business, financial condition, results of operations, cash flows or prospects.

Page 17

EX-99.13

 Exhibit 99.13

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2020

 1050 – 625 Howe Street, Vancouver, B.C., Canada V6C 2T6
Phone: 604-449-9244 | Website: www.erocopper.com | Email: info@erocopper.com

MANAGEMENT’S DISCUSSION AND ANALYSIS

This Management’s Discussion and Analysis (“MD&A”) has been prepared as at November 5, 2020 and should be read in conjunction with the unaudited condensed consolidated interim financial statements of Ero Copper Corp. (“Ero”, the “Company”, or “we”) for the three and nine months ended September 30, 2020, and related notes thereto, which are prepared in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting as permitted by the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”). All references in this MD&A to “Q3 2020” and “Q3 2019” are to the three months ended September 30, 2020 and September 30, 2019, respectively, and all references to “YTD 2020” and “YTD 2019” are to the nine months ended September 30, 2020 and September 30, 2019, respectively. As well, this MD&A should be read in conjunction with the Company’s December 31, 2019 audited consolidated financial statements and MD&A. All dollar amounts are expressed in United States (“US”) dollars and tabular amounts are expressed in thousands of US dollars, unless otherwise indicated. References to “$”, “US$”, “dollars”, or “USD” are to US dollars, references to “C$” are to Canadian dollars, and references to “R$” or “BRL” are to Brazilian Reais.

This MD&A refers to various non-IFRS measures, such as C1 cash cost of copper produced (per lb), C1 cash cost of gold produced (per ounce), EBITDA, Adjusted EBITDA, Adjusted net income attributable to owners of the Company, Adjusted net income per share attributable to owners of the Company, Working Capital (Deficit), Available Liquidity, and Net Debt. Please refer to the section titled "NON-IFRS MEASURES" within this MD&A for a discussion of non-IFRS measures.

This MD&A contains “forward-looking information” that is subject to risk factors set out in a cautionary note contained at the end of this MD&A. The Company cannot assure investors that such information will prove to be accurate, and actual results and future events may differ materially from those anticipated in such information. The results for the periods presented are not necessarily indicative of the results that may be expected for any future period. Investors are cautioned not to place undue reliance on this forward-looking information. All information contained in this MD&A is current and has been approved by the Board of Directors of the Company (the “Board”) as of November 5, 2020, unless otherwise stated.

BUSINESS OVERVIEW

Ero, headquartered in Vancouver, B.C., is focused on copper production growth from the Vale do Curaçá Property, located in Bahia, Brazil. The Company’s primary asset is a 99.6% interest in the Brazilian copper mining company, Mineraҫão Caraíba S.A. (“MCSA”), 100% owner of the Vale do Curaçá Property with over 40 years of operating history in the region. The Company currently mines copper ore from the Pilar and Vermelhos underground mines. In addition to the Vale do Curaçá Property, MCSA owns 100% of the Boa Esperanҫa development project, an IOCG-type copper project located in Pará, Brazil and the Company owns 97.6% of the NX Gold Mine, an operating gold and silver mine located in Mato Grosso, Brazil. Additional information on the Company and its operations, including technical reports on the Vale do Curaçá, Boa Esperanҫa and NX Gold properties, can be found on the Company’s website (www.erocopper.com) and on SEDAR (www.sedar.com).

Ero Copper Corp. September 30, 2020 MD&A Page 1 

HIGHLIGHTS

Operating Information	2020 - Q3			2020 - Q2			2020 - YTD			2019 - Q3			2019 - YTD
Copper (MCSA Operations)
Ore Processed (tonnes)		553,148			627,071			1,788,178			587,915			1,835,527
Grade (% Cu)		2.18			1.98			2.03			1.84			1.86
Cu Production (tonnes)		10,961			11,178			32,796			9,674			30,792
Cu Production (lbs)		24,163,829			24,642,935			72,301,862			21,326,717			67,884,499
Cu Sold in Concentrate (tonnes)		11,530			10,586			32,549			10,200			31,164
Cu Sold in Concentrate (lbs)		25,420,164			23,338,581			71,757,880			22,486,742			68,704,889
C1 cash cost of copper produced (per lb)	$	0.63		$	0.65		$	0.66		$	1.01		$	0.99
Gold (NX Gold Operations)
Au Production (ounces)		9,436			8,739			26,041			4,356			24,391
C1 cash cost of gold produced (per ounce)	$	421		$	437		$	478		$	1,169		$	621
Financial information ($millions, except per share amounts)
Revenues	$	94.3		$	70.8		$	232.8		$	60.6		$	209.2
Gross profit	$	59.6		$	39.5		$	129.8		$	21.3		$	86.0
EBITDA	$	52.1		$	23.4		$	24.9		$	35.1		$	107.2
Adjusted EBITDA	$	62.5		$	42.4		$	138.4		$	27.3		$	102.9
Cash flow from operations	$	44.4		$	42.5		$	124.2		$	29.5		$	91.9
Net income (loss)	$	31.4		$	7.7		$	(13.8	)	$	16.3		$	47.0
Net income (loss) attributable to owners of the Company	$	31.1		$	7.5		$	(14.2	)	$	16.3		$	46.7
Net income (loss) per share attributable to owners of the Company
- Basic	$	0.36		$	0.09		$	(0.16	)	$	0.19		$	0.55
- Diluted	$	0.34		$	0.08		$	(0.16	)	$	0.18		$	0.51
Adjusted net income attributable to owners of the Company	$	36.7		$	20.3		$	77.8		$	10.2		$	41.2
Adjusted net income per share attributable to owners of the Company
- Basic	$	0.42		$	0.24		$	0.90		$	0.12		$	0.48
- Diluted	$	0.40		$	0.22		$	0.85		$	0.11		$	0.45
Cash and Cash Equivalents	$	54.3		$	51.6		$	54.3		$	21.7		$	21.7
Working Capital Deficit	$	(9.4	)	$	(25.7	)	$	(9.4	)	$	6.4		$	6.4
Net Debt	$	(118.4	)	$	(130.9	)	$	(118.4	)	$	(133.4	)	$	(133.4	)

Ero Copper Corp. September 30, 2020 MD&A Page 2 

Q3 2020 Highlights

Proactive mitigation of the potential impacts of the COVID-19 pandemic continued through Q3 2020

• The Company continues to have no disruption to operations, supply chains or sales channels as a result of the COVID-19 pandemic to date. Extensive mitigation measures implemented during the first quarter of 2020 at the onset of the pandemic have continued through Q3 2020. Some of these measures include:

(i) eliminating all non-essential travel to and from the Company’s mining operations;

(ii) routine engagement with all suppliers and active stockpiling of key consumables to protect against any supply chain disruptions;

(iii) reducing physical interaction throughout the organization as much as possible by closing administrative offices and moving to a work-from-home format, increasing social distancing by limiting the number of employees travelling on provided buses between the Company’s mining communities and mines, limiting the number of employees in the cafeteria at any given time, cancelling all group meetings, implementing social-distancing for essential line-out meetings and encouraging work-from-home and video/telephone conferencing where feasible;

(iv) establishing COVID-19 committees with senior leadership and local health administrators for the regions in which the Company operates;

(v) purchasing thousands of COVID-19 testing kits for the Company’s operations, with the donation of a portion of these test kits, as well as other personal protective equipment, to each of the Company’s local municipalities to facilitate rapid testing throughout each community; and,

(vi) implementing wellness education, health screenings, and self-isolation protocols along with enhanced sanitization throughout the Company’s operations.

• The Company bolstered its liquidity position at the onset of the pandemic, by drawing down its existing USD and BRL denominated credit facilities. At September 30, 2020, the Company has drawn down $14.0 million and R$57.0 million ($10.1 million) under various credit facilities as a proactive measure.

• The Company ended the period with a robust cash position of $54.3 million in cash and cash equivalents – a quarter-on-quarter improvement of $2.7 million and a $10 million improvement since Q1 2020.

• The Company continues to closely monitor the COVID-19 pandemic and is engaged in active operational and financial contingency planning to prudently manage the potential impact of the pandemic on its operations.

Strong operational performance at MCSA Operations – tracking full-year copper production guidance with 32,796 tonnes of copper produced YTD 2020

• 553,148 tonnes processed grading 2.18% copper producing 10,961 tonnes of copper in concentrate after metallurgical recoveries that averaged 90.8% during Q3 2020.

• Quarter-on-quarter increase in processed copper grades driven by higher grade ore mined at the Vermelhos mine, where 227,963 tonnes were mined grading 3.76% copper during the period, a 15% improvement in copper grades mined as compared to the second quarter of 2020.

• Another record quarterly C1 cash cost of $0.63 per pound of copper produced during Q3 2020, a quarter-on-quarter improvement of $0.02 per pound of copper produced (see Non-IFRS Measures).

Ero Copper Corp. September 30, 2020 MD&A Page 3 

MCSA exploration programs continued to deliver results ahead of cut-off date for the Company’s updated life-of-mine plan

• 26 drill rigs currently operating in the Curaçá Valley with an additional five drill rigs operating at the NX Gold Mine.

• Completion of the Deepening Extension Project drill program within the Pilar Mine in support of the Company’s upcoming 2020 mineral resource, mineral reserve and life-of-mine plan updates. Drilling during the period continued to confirm continuity of the high-grade ‘Superpod’ and further extend high-grade copper mineralization below the known extent of the mine. Results during the period were highlighted by hole FC5378 that intersected 12.4 meters grading 2.82% copper including 2.0 meters grading 8.39% copper, 14.0 meters grading 1.80% copper including 2.0 meters grading 6.05% copper, and 4.4 meters grading 1.66% copper, hole FC5513 that intersected 21.1 meters grading 2.02% copper including 3.0 meters grading 4.36% copper and hole FC5514 that intersected 22.0 meters grading 2.14% copper including 9.0 meters grading 3.22% copper.

• Within the Vermelhos District, two new zones of mineralization were discovered near the Vermelhos Mine during the period. These newly identified zones, when viewed in context with the previously identified Keel Zone of the Siriema deposit, suggest that multiple “stacked” mineralized structures may be present between the Siriema deposit and the Vermelhos Mine, representing a distance of approximately 700 meters on strike. Continuity is currently being evaluated within the target zone, which extends over 700 meters in a north-south direction between UG1 and Siriema, approximately 300 meters on east-west section and approximately 400 meters to depth. The new zones were highlighted during the period by hole FSI-40 at Siriema (a previously reported hole that was extended) that intersected 10.0 meters grading 4.50% copper, 0.68% nickel including 4.0 meters grading 8.53% copper, 1.25% nickel and hole FSI-99 that intersected 13.2 meters grading 1.92% copper, 0.78% nickel including 2.5 meters grading 5.73% copper, 3.33% nickel (Platinum Group Metals “PGM” assay results are pending). Beneath the UG1 mining area of the Vermelhos Mine, results were highlighted by hole FVS-608 that intersected 16.6 meters grading 0.95% copper and 7.0 meters grading 1.30% copper and FVS-905 that intersected 5.6 meters grading 0.84% copper and 3.1 meters grading 0.82% copper. Down-hole electromagnetic (“EM”) work and further drilling is ongoing with seven drill rigs being used to evaluate the full potential of these stacked structures to the north, south and to depth.

• Eight drill rigs continue to focus on advancing the Company’s regional exploration program. While the COVID-19 pandemic has adversely impacted the pace of regional programs, the Company’s exploration group continues to uncover opportunities that warrant additional work. These efforts continue to focus on four interpreted mineral systems within the portfolio of targets defined by the Company’s comprehensive targeting work. Each of the new systems has an average strike length of 5 kilometers and contains multiple priority drill targets. The majority of the Company’s drill meterage is expected to be allocated to regional exploration during the fourth quarter.

Exploration of the Santo Antonio Vein at the NX Gold Mine continues to demonstrate continuity of mineralization in advance of updated life-of-mine plan

• The Company continues to have success in demonstrating down-plunge continuity and extensions of the high-grade mineralization of the Santo Antonio Vein at the NX Gold Mine. The results were highlighted during the period by the best results drilled to date by the Company in hole SA85 that intersected 6.5 meters grading 17.11 grams per tonne gold, the highest grade-meter intercept drilled by the Company at the NX Gold Mine to date, further confirming continuity of a thicker core of high-grade mineralization at depth and hole SA83: 5.8 meters grading 17.79 grams per tonne gold, the deepest intercept drilled to date within the Santo Antonio Vein.

Ero Copper Corp. September 30, 2020 MD&A Page 4 

Q3 2020 Financial Report

• Record cash flows from operations: Q3 2020 cash flows from operations was a record $44.4 million, an increase of $14.9 million from $29.5 million in Q3 2019.

• Adjusted earnings per share (see Non-IFRS Measures): Q3 2020 adjusted earnings per share was $0.42 and $0.40, on a basic and diluted basis, respectively, compared with Q3 2019 adjusted earnings per share of $0.12 and $0.11, on a basic and diluted basis, respectively.

• Unrealized foreign exchange losses: Q3 2020 financial results were impacted by the decline of the BRL against the USD in comparison to the end of the first quarter of 2020, mainly through the change in the mark-to-market valuation of derivatives used to hedge BRL revenues. During Q3 2020, the Company recognized a $1.1 million non-cash valuation loss on its USD/BRL foreign exchange collars.

- The Company uses these structures to hedge Brazilian Real denominated revenues. As a result of the COVID-19 pandemic and its impact on macro-economic interrelationships, there was a continual decline of BRL versus USD from the end of the first quarter and an increase in implied volatility of the BRL versus USD.

- Generally accepted accounting standards dictate that the liability be recognized at fair value, which requires management to estimate fair value using a Black-Scholes valuation methodology and assumptions for the foreign exchange rate and volatility.

- The Company does not believe that this impact on the income statement reflects the underlying profitability of the Company as it provides no offset for the expected future benefits of a lower BRL/USD exchange rate on operating costs and capital expenditures of the Company’s underlying business. These benefits may outweigh the Company’s projected hedge losses that may result from these liabilities.

REVIEW OF OPERATIONS

Mineração Caraíba S.A. (Vale do Curaçá):

Operating Information	2020 - Q3		2020 - Q2		2020 - YTD		2019 - Q3		2019 - YTD
Copper (MCSA Operations)
Ore Processed (tonnes)		553,148		627,071		1,788,178		587,915		1,835,527
Grade (% Cu)		2.18		1.98		2.03		1.84		1.86
Cu Production (tonnes)		10,961		11,178		32,796		9,674		30,792
Cu Production (lbs)		24,163,829		24,642,935		72,301,862		21,326,717		67,884,499
Concentrate Grade (% Cu)		34.0		34.0		33.8		33.7		34.7
Recovery (%)		90.8		90.0		90.2		89.2		90.4
Concentrate Sales (tonnes)		34,324		31,138		96,591		29,142		89,040
Cu Sold in Concentrate (tonnes)		11,530		10,586		32,549		10,200		31,164
Cu Sold in Concentrate (lbs)		25,420,164		23,338,581		71,757,880		22,486,742		68,704,889
C1 cash cost of copper produced (per lb)	$	0.63	$	0.65	$	0.66	$	1.01	$	0.99

MCSA operations continued to perform well during Q3 2020, with stable quarter-on-quarter amounts of contained copper mined and processed, achieved as a result of higher copper grades mined and processed relative to the prior period, offsetting a decrease in tonnes. At the Pilar Mine, 375,296 tonnes of ore were mined grading 1.36% copper during Q3 2020 (as compared to 371,794 tonnes of ore mined grading 1.40% copper during the second quarter). At the Vermelhos Mine, 227,963 tonnes of ore were mined grading 3.76% copper during the third quarter (as compared to 253,349 tonnes of ore were mined grading 3.26% copper during the second quarter). In total, contributions from both mines during the period resulted in 603,259 tonnes of ore mined grading 2.27% copper. Year-to-date in 2020, a total of 1,810,427 tonnes of ore was mined grading 2.06% copper. Quarter-on-quarter changes in both tonnes and grades mined continue to reflect anticipated stope sequencing.

At the Company’s milling operations within the Curaçá Valley, 553,148 tonnes of ore grading 2.18% copper was processed during Q3 2020 with average metallurgical recoveries of 90.8%. Year-to-date in 2020, a total of 1,788,178 tonnes of ore grading 2.03% copper was processed, resulting in 32,796 tonnes of copper produced after average metallurgical recoveries of 90.2%. Improving metallurgical recoveries remains a priority of the Company in 2020. The Company’s high-intensity grinding (“HIG”) mill circuit arrived on site and installation was completed in Q2 2020. Commissioning of the new regrind mill circuit occurred during Q3 2020 using a combination of both on-site commissioning teams paired with virtual engineering support due to global travel restrictions. Hand-over to operations occurred in early September 2020 contributing to recoveries that averaged 92.0% during the month – a record in 2020. While optimization and feed system integration work remain ongoing, the Company continues to expect an improvement in metallurgical recoveries during the fourth quarter and in the future as a result of the successful, albeit preliminary indicative results to date.

Ero Copper Corp. September 30, 2020 MD&A Page 5 

C1 cash costs per pound of copper produced averaged a record low $0.63 per pound of copper produced during Q3 2020, reflecting strong operational performance at the Company’s MCSA operations, continued weakness of the BRL versus the US Dollar and strength in the prices of gold and silver produced as by-products. Combined, these factors contributed to a $0.02 decrease in C1 cash costs per pound of copper produced as compared to Q2 2020 and a $0.38 decrease as compared to Q3 2019. Year-to-date C1 cash costs have averaged $0.66 per pound of copper produced – a $0.33 decrease as compared to the same comparative period in 2019.

During Q3 2020, the Company completed its comprehensive ore sorting trial campaign highlighting excellent results for materials sources tested, and confirmatory testing of additional deposits remains ongoing. Since commissioning of the Company’s ore sorting unit in Q1 2020, approximately 29,000 tonnes of material from eight sources within the Curaçá Valley, representing a range of grade profiles, have been tested. The results are highlighted by upgrade ratios of up to 4.5x achieved for high-grade samples tested within the Vermelhos Mine and for high-grade samples from the Pilar Mine at minimal copper loss after sorting, averaging only 9.8% for screened sorter feed samples. In addition, upgrade ratios of approximately 1.4x to 2.0x were achieved for several open pit deposits throughout the Curaçá Valley with slightly higher copper losses, averaging 15.5% to 26.0%, for screened sorter feed samples tested at the Surubim and Suçuarana Mines, low-grade development material from within the Pilar Mine and material from a historic Angicos Mine stockpile. Based on the success of the trial campaign, ore sorting is expected to be integrated into the Company’s upcoming life-of-mine plan update with a focus on implementing the technology within the Vermelhos District due to the excellent response to ore sorting and potential savings in transport costs. Potential ancillary benefits of ore sorting implementation include reduced consumption of fresh-water, diesel and electricity and reduced flotation tailings generated per tonne of copper produced – substantially advancing towards achieving the Company’s long-term environmental and sustainability commitments within the Curaçá Valley. Please refer to the Company’s press release dated September 30^th, 2020 for complete results.

The Company’s organic growth strategy remains supported by one of the world’s largest exploration programs. 26 drill rigs are currently operating in the Curaçá Valley, including nine within the Pilar District, 11 in the Vermelhos District, and there are currently eight drill rigs operating on regional exploration targets in the Curaçá Valley, including regional exploration targets within the Pilar and Vermelhos Districts.

During Q3 2020, the Company continued to focus its exploration efforts on three primary exploration areas within the Curaçá Valley (please refer to the Company’s press release dated September 22, 2020). These areas include:

(i)	systematic drilling of a new ‘Superpod’ within the Pilar Mine Deepening zone that continues to demonstrate high-grade continuity outside the previously known limits of mineralization within the mine;
(ii)	extensional drilling of the Vermelhos System, both beneath the main deposits of the Vermelhos Mine and to depth within the Siriema deposit, both of which continue to demonstrate continuity of mineralization and the potential for multiple “stacked” high-grade lenses; and,
(iii)	regional work is progressing according to plan and is currently focused on four new systems within the Curaçá Valley.

Ero Copper Corp. September 30, 2020 MD&A Page 6 

In the Pilar Mine, exploration activities during the period focused on extending the limits of high-grade ‘Superpod’ mineralization of the Deepening Extension zone and upgrading mineral resources in preparation of the Company’s updated mine plan. Drilling during the period continued to demonstrate continuity of high-grade mineralization and wide-open potential at depth. The Company has identified a mineralized area within the Deepening Extension zone that extends over approximately 900 meters in strike length, over a total depth of approximately 525 meters and over an average thickness ranging from 10 to 20 meters with localized thickening throughout the zone. Within the total strike length, a higher-grade continuous zone with a strike-length of approximately 400 to 500 meters is emerging in the central and northern segments of the target area. The zone remains open to the north and to depth. There are currently five underground exploration drill rigs systematically drilling the defined exploration target area within the Deepening Extension zone. Due to the limits of underground infrastructure to the north, the Company has commenced a surface drill program utilizing directional drilling technology to evaluate the mineralized potential of the Deepening Project north of section 57, the most northern extent of known mineralization to date. Engineering studies to further progress the development of this new zone within the mine remain on track for inclusion into the Company’s updated mine plan, currently expected during the fourth quarter of 2020.

In the Vermelhos District, approximately 80 kilometers to the north of the Caraíba Mill complex, which includes the high-grade operating Vermelhos Mine, drilling is focused on both near-mine extensional drilling as well as new regional targets identified during the Company’s regional airborne survey and subsequent data compilation work of the broader Vermelhos System – a north-south trend encompassing the Vermelhos Mine, East Zone, Siriema N8/N9 deposit, and several high priority targets that extends over ten kilometers in strike length.

As a result of systematic near-mine drilling and ongoing downhole EM work and continued testing down-plunge of the previously announced Siriema Conduit, two new zones of mineralization were discovered – one to the northwest of the Siriema deposit and offset by approximately 120 meters, and the second to the southwest of the UG1 orebody of the Vermelhos Mine. These new zones, when viewed in context with the previously announced Keel Zone of Siriema and prior Siriema conduit drill results, suggest that multiple “stacked” mineralized structures may be present between the Siriema deposit and the Vermelhos Mine, a distance of approximately 700 meters in strike-length. Seven surface drill rigs are currently focused on evaluating continuity within this target zone, which extends approximately 700 meters in a north-south direction between Siriema and UG1, approximately 300 meters on east-west section and approximately 400 meters to depth. In addition, the Company continues to conduct wide-spaced, down-plunge, 200 meter step-out exploration drilling along the Siriema conduit to depth. To date, mineralization has now been encountered from surface to a depth of approximately 620 meters below surface and over variable thicknesses from sub 1 meter up to 20 meters.

The Siriema deposit, the newly identified zone beneath the UG1 orebody of the Vermelhos Mine, and the 700 meter structural corridor between Siriema and UG1 remains open to depth and along strike where drilling and down-hole EM work continue to evaluate the potential for higher-grade and thicker mineralization.

The Company’s multi-element inductively coupled plasma mass spectrometry (“ICP”) unit is operational and is in the process of ramping up daily sample volumes and ensuring quality-assurance quality-control (“QA/QC”) with third-party umpire assays, as scheduled. Once fully integrated, the addition to the laboratory is expected to significantly reduce cost and, more importantly, turn-around time for platinum group metal assay results.

Ero Copper Corp. September 30, 2020 MD&A Page 7 

NX Gold S.A.

Operating Information	2020 - Q3			2020 - Q2			2020 - YTD			2019 - Q3			2019 - YTD
Gold (NX Gold Operations)
Ore mined (tonnes)		41,749			39,108			117,067			33,601			113,818
Ore milled (tonnes)		41,749			39,108			117,067			34,813			115,068
Head grade (grams per tonne Au)		7.64			7.75			7.72			4.51			7.23
Recovery (%)		92.0	%		89.6	%		89.7	%		86.2	%		91.2	%
Gold ounces produced (oz)		9,436			8,739			26,041			4,356			24,391
Silver ounces produced (oz)		5,736			5,327			15,931			2,909			15,326
Gold sold (oz)		9,845			8,384			25,755			4,579			23,945
Silver sold (oz)		5,982			5,132			15,759			2,999			14,895
C1 cash cost of gold produced (per ounce)	$	421		$	437		$	478		$	1,169		$	621

At the NX Gold Mine, continued quarter-on-quarter improvement in tonnes mined, along with improved metallurgical performance, contributed to increased gold production during the period. Production during Q3 2020 totaled 9,436 ounces of gold and 5,736 ounces of silver (as by-product) from total mill feed of 41,749 tonnes grading 7.64 g/t gold after metallurgical recoveries of 92.0% during the period. Ore mined and gold production improved in Q3 2020 by 7% and 8%, respectively relative to the second quarter of 2020, and gold production increased by 20% as compared to the first quarter of 2020. These improvements are driven by both increases in the number of working faces in operation within the Santo Antonio Vein and improved metallurgical recoveries. The NX Gold Mine achieved record quarterly C1 cash costs during Q3 2020 of $421 per ounce of gold produced, resulting in year-to-date C1 cash costs of $478 per ounce of gold produced.

Year-to-date, the NX Gold Mine has produced 26,041 ounces of gold predominantly from the lower panel of the Santo Antonio Vein. Development and production stopes originally scheduled to be mined from the upper panel of the vein encountered sub-optimal ground conditions, and as a result only limited production in this area has been achieved due to inherited constraints associated with current mining methods and ground support capabilities. While some of this decline in production has been offset by increasing production from other areas within the vein, full year production is expected to be less than anticipated. In order to recover production from this area later in the mine’s life as well as enhance mine recovery in the future, paste-characterization testwork, engineering, and mine-design studies for integration of a modular paste-fill plant into the operations going forward were completed during the period. While a modest investment of approximately US$2 million, the Company views this investment as a significant step towards securing long-term production stability and extending the life of mine for NX Gold – initiatives that are expected to be reflected in the Company’s upcoming life-of-mine plan update which remains on track for completion in the fourth quarter of 2020. As a result of these constraints, the Company has revised its full-year guidance to reflect a delay in mining of these areas, pending installation and integration of paste-fill into the operations. The system is expected to be operational during the second half of 2021.

Exploration at the NX Gold Mine has continued to focus primarily on testing down-plunge extensions of the Santo Antonio Vein. Drill results during the period further extended the known extent of mineralization within the Santo Antonio Vein down-plunge. Results are highlighted by the best results drilled to date by the Company at NX Gold on a grade-meter intercept basis as well as the deepest intercept drilled within the Santo Antonio Vein drilled to date. In addition, the first regional exploration campaign continued to progress at the NX Gold Mine during the period. Currently, five drill rigs are operating on the property.

Ero Copper Corp. September 30, 2020 MD&A Page 8 

Financial Update

Revenue: Revenues from the Company’s copper operations at MCSA increased by 39.1% from $54.3 million in Q3 2019 to $75.6 million in Q3 2020. The increase in revenue was primarily attributed to higher average realized copper prices over the comparative period.

Revenues from the Company’s gold operations at NX Gold increased 197.9% from $6.3 million in Q3 2019 to $18.8 million in Q3 2020. The increase was a result of increased sales volume and increased gold prices over the comparative period.

Mine gross profit: Mine gross profit from the Company’s copper operations at MCSA totaled $46.3 million in Q3 2020 compared to $21.0 million in Q3 2019. The increase in mine gross profit was primarily driven by a decrease in cash costs over the comparative period as a result of a significant weakening of the BRL versus the USD. The Company also recognized mine gross profit of $13.3 million in Q3 2020 compared to $0.3 million in Q3 2019 from its gold operations at NX Gold.

Net income: The Company recognized net income of $31.4 million (basic net income per share of $0.36) in Q3 2020 compared to a net income of $16.3 million in Q3 2019 (basic net income per share of $0.19). The increase in net income was primarily attributable to an increase in revenues from higher sales volume and decrease in cash costs over the comparative period from the significant weakening of the BRL versus the USD.

2020 Guidance/Outlook

• The Company is reaffirming its 2020 production guidance for the Curaçá Valley operations of 41,000 to 43,000 tonnes of copper in concentrate.

• At the Curaçá Valley operations, the Company is maintaining its previously revised C1 cash costs guidance range^[1] of US$0.70 to US$0.85 per pound of copper produced, but expects C1 cash costs for the full year to be near or slightly below the low-end of the range.

• Non-exploration capital expenditure guidance of US$56 to US$68 million^[1] is maintained at the Curaçá Valley operations, and the Company expects full year capital to be near the high-end of the range as the Company prepares for a meaningful extension of the Company’s life-of-mine operating plan.

• 2020 exploration program expenditures^[2] have been increased by approximately US$5 million at the Curaçá Valley operations, to between US$25 million and US$30 million and by approximately US$2 million at the NX Gold Mine, to between US$3 million and US$5 million. These increases reflect continuity and expansions of its ongoing exploration campaigns at both MCSA and the NX Gold Mine during the fourth quarter of 2020.

• The Company is lowering its 2020 production guidance for the NX Gold Mine to 36,000 to 37,000 ounces of gold but is maintaining its previously revised C1 cash costs guidance range^[1] of US$425 to US$525 per ounce of gold produced. Capital expenditure guidance has been increased by a modest US$2 million to between US$9 and US$11 million for NX Gold as a result of the initiation of several growth projects, including the installation of a modular paste-fill plant.

[1]	Refer to the Company’s press release dated May 7, 2020 for complete details of previously revised operating and capital cost guidance.
[2]	Previous exploration capital expenditure guidance for 2020 was only forecast through September of 2020 whereas the Company’s newly revised exploration guidance includes expected exploration expenditures through the entirety of the year.

Ero Copper Corp. September 30, 2020 MD&A Page 9 

2020 Production Outlook

Production guidance for the Company’s Curaçá Valley operations remains unchanged. Copper production is expected to come from ore mined from the Pilar and Vermelhos underground mines. While the Company expects total recovered copper production to be within its guidance range, production is tracking to be slightly above forecast tonnes processed and slightly below forecast copper grades; however, these variances are expected to be within the levels of accuracy intrinsic to the Company’s annual operating guidance.

The Company is lowering its full year production guidance for its NX Gold operations as a result of difficult ground conditions encountered in the upper panel of the Santo Antonio Vein. The Company expects to recover this production later in the mine’s life through the installation of a modular paste-fill plant and associated infrastructure once operational during the second half of 2021.

	2020 Original Guidance			Revised 2020 Guidance[1]
Curaçá Valley Operations
Tonnes Processed		2,150,000			(no change)
Copper Grade (% Cu)		2.15	%		(no change)
Copper Recovery (%)		91.0	%		(no change)
Cu Production Guidance (000 tonnes)		41.0 – 43.0			(no change)
NX Gold Operations
Tonnes Processed		150,000			165,000
Gold Grade (gpt)		9.00			7.70
Gold Recovery (%)		90.0	%		90.0	%
Au Production Guidance (000 ounces)		38.0 – 40.0			36.0 – 37.0

Footnotes:

^[1] Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s SEDAR filings for complete risk factors, including the AIF (as defined herein) and Management of Risks and Uncertainties in this MD&A for complete risk factors.

2020 Cash Cost Guidance

The Company is maintaining its previously revised operating cost guidance ranges, but expects C1 cash costs for the full year to be near or slightly below the low-end of the range at its Curaçá Valley operations due to strong operational performance to date, prevailing foreign exchange rates and elevated gold and silver prices.

	2020 Guidance		2020 Revised Guidance
Curaçá Valley C1 Cash Cost Guidance (US$/lb)[1]		$0.85 - $0.95		$0.70 - $0.85
NX Gold Mine C1 Cash Cost Guidance (US$/oz)[1]		$475 - $575		$425 - $525

^[1] C1 Cash Costs of copper produced (per lb.) and C1 Cash Costs of gold produced (per oz.) are non-IFRS measures – Please refer to the section titled "NON-IFRS MEASURES" within this MD&A for a discussion of non-IFRS measures. Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s AIF (as defined herein) and Management of Risks and Uncertainties in this MD&A for complete risk factors.

Ero Copper Corp. September 30, 2020 MD&A    Page 10 

2020 Capital Expenditure Guidance

The Company is further revising its 2020 capital guidance to reflect the continuity and expansion of its ongoing exploration campaigns both at MCSA and at the NX Gold Mine during the fourth quarter. Non-exploration capital expenditures are expected to be at the high-end of the Company’s previously revised guidance ranges as the Company prepares for meaningful extensions of the Company’s life-of-mine operating plans at both MCSA and NX Gold as well as initiation of several growth projects, such as the installation of a modular paste-fill plant at NX Gold, which are expected to be included in these plans. Capital expenditure guidance is presented below in USD millions.

Curaçá Valley Operations	Original 2020 Guidance		Previously Revised 2020 Guidance		Newly Revised 2020 Guidance
Pilar Mine and Caraíba Mill Complex[1]	$	58.0		$45.0 – $55.0		(no change)
Vermelhos Mine	$	16.0		$11.0 – $13.0		(no change)
Boa Esperanҫa Project	$	0.2		$0.2 – $0.2		(no change)
Capital Expenditure Guidance	$	74.2		$56.2 – $68.2		(no change)
Curaçá Valley Exploration[2]	$	28.0		$20.0 – $25.0		$25.0 – $30.0
NX Gold Operations	Original 2020 Guidance		Previously Revised 2020 Guidance		Newly Revised 2020 Guidance
Capital Expenditure Guidance	$	5.7		$7.0 – $9.0		$9.0 – $11.0
Exploration[2]	$	3.5		$2.0 – $3.0		$3.0 – $5.0
Total, NX Gold	$	9.2		$9.0 – $12.0		$12.0 – $16.0

^[1] Pilar Mine and Caraíba Mill Complex capital expenditure guidance for 2020 includes completion of the high-intensity grinding mill and operation of the ore-sorting pilot plant.

^[2] Exploration capital expenditure guidance for 2020 in the original and previously revised guidance was only forecast through September of 2020, whereas the Company’s newly revised 2020 exploration guidance includes expected exploration expenditures through the entirety of the year.

Mineração Caraíba S.A.

Copper production from the Curaçá Valley operations for 2020 is expected to be between 41,000 and 43,000 tonnes, with ore fed solely from the Pilar and Vermelhos underground mines. Production from the Pilar Mine is expected to contribute a total of approximately 1.4 million tonnes grading 1.40% copper while production from the Vermelhos Mine is expected to contribute a total of approximately 750,000 tonnes grading 3.50% copper resulting in a blended mill head grade of approximately 2.15% copper. While the Company expects total recovered copper production to be within its guidance range, production is tracking to be slightly above forecast tonnes processed and slightly below forecast copper grades; however, these variances are expected to be within the levels of accuracy intrinsic to the Company’s annual operating guidance.

NX Gold S.A.

Approximately 165,000 tonnes of ore are expected to be mined and processed from the Santo Antonio Vein in 2020 at an average grade of 7.70 grams per tonne of gold. After average metallurgical recoveries of 90.0%, gold production from the NX Gold Mine is expected to be between 36,000 and 37,000 ounces.

Boa Esperança

A full review of the Boa Esperança Feasibility Study^[1] remains ongoing with the goal of extending the potential mine life and increasing copper production among other desktop optimization initiatives. As a result of an ongoing internal technical review, several potential opportunities were identified to optimize and further realize the potential of the Boa Esperança project, including, but not limited to:

Ero Copper Corp. September 30, 2020 MD&A    Page 11 

· Separating high-grade and low-grade copper domains within the mineral resource estimate to better optimize mining sequence, mineral reserve conversion and improve overall project economics;

· Increasing the overall size of the open pit, targeting an increase in in-pit mineral reserves, extension of mine life and an increase in life-of-mine copper production;

· Implementing bulk ore-sorting with the goal of enhancing mine selectivity; and,

· Re-designing processing plant reflecting optimization initiatives around selective mining and the implementation of ore-sorting.

The Company’s technical team continues to actively review these opportunities and is making headway in advancing them into actionable deliverables. Should this work continue to yield favorable results, the Company will commission an Optimized Feasibility Study (“OFS”), incorporating these initiatives. The Company expects to provide additional guidance on these developments during the first half of 2021.

^[1] As defined herein under “NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION”.

Ero Copper Corp. September 30, 2020 MD&A Page 12 

REVIEW OF FINANCIAL RESULTS

The following table provides a summary of the financial results of the Company for Q3 2020 and Q3 2019. Tabular amounts are in thousands of US dollars, except share and per share amounts.

			Three months ended			Three months ended
	Notes		September 30, 2020			September 30, 2019
Revenue		1	$	94,328		$	60,640
Cost of product sold		2		(33,337	)		(38,378	)
Sales expenses				(1,386	)		(953	)
Gross profit				59,605			21,309
Expenses
General and administrative		3		(6,186	)		(6,360	)
Share-based compensation				(1,743	)		(1,353	)
Income before the undernoted				51,676			13,596
Other income (expenses)
Finance income				204			101
Finance expense		4		(3,397	)		(5,206	)
Foreign exchange loss		5		(8,703	)		(10,866	)
Recovery of value added taxes		6		-			21,584
Other expense				(1,531	)		(77	)
Income before income taxes				38,249			19,132
Income tax expense
Current				(1,742	)		(1,517	)
Deferred				(5,064	)		(1,308	)
		7		(6,806	)		(2,825	)
Net income for the period				31,443			16,307
Other comprehensive income (loss)
Foreign currency translation loss		8		(5,272	)		(12,757	)
Comprehensive income			$	26,171		$	3,550
Net income attributable to:
Owners of the Company			$	31,063		$	16,280
Non-controlling interests				380			27
			$	31,443		$	16,307
Comprehensive income (loss) attributable to:
Owners of the Company			$	25,812		$	3,574
Non-controlling interests				359			(24	)
			$	26,171		$	3,550
Net income per share attributable to owners of the Company
Net income per share
Basic			$	0.36		$	0.19
Diluted			$	0.34		$	0.18
Weighted average number of common shares outstanding
Basic				86,448,318			85,505,675
Diluted				91,961,897			91,320,363
Cash and cash equivalents			$	54,341		$	21,716
Total assets			$	439,408		$	414,499
Non-current liabilities			$	201,336		$	200,323

Ero Copper Corp. September 30, 2020 MD&A Page 13 

Notes:

1. Revenues for Q3 2020 from copper sales was $75.6 million (Q3 2019 - $54.3 million), which included the sale of 11,530 copper tonnes in concentrate as compared to 10,200 copper tonnes for Q3 2019. The increase in revenues is primarily attributed to higher realized prices from higher grade of ore processed and higher volume of concentrate sold. Revenues for Q3 2020 from gold sales was $18.8 million (Q3 2019 - $6.3 million), which included the sale of 9,845 ounces of gold, compared to 4,579 ounces of gold for Q3 2019, at a significantly higher average gold price than in the comparative quarter.

2. Cost of product sold for Q3 2020 from copper sales was $28.2 million (Q3 2019 - $32.4 million) which consisted of $9.6 million (Q3 2019 - $9.7 million) in depreciation and depletion, $5.8 million (Q3 2019 - $7.5 million) in salaries and benefits, $3.9 million (Q3 2019 - $4.6 million) in materials and consumables, $3.6 million (Q3 2019 - $4.6 million) in contracted services, $3.6 million (Q3 2019 - $3.5 million) in maintenance costs, $1.6 million (Q3 2019 - $2.3 million) in utilities, and nominal (Q3 2019 - $0.2 million) other costs.

Cost of product sold for Q3 2020 from gold sales was $5.2 million (Q3 2019 - $6.0 million) which primarily comprised of $1.3 million (Q3 2019 - $1.7 million) in salaries and benefits, $1.0 million (Q3 2019 - $0.9 million) in materials and consumables, $1.0 million (Q3 2019 - $0.7 million) in contracted services, $0.8 million (Q3 2019 - $1.1 million) in depreciation and depletion, and $0.6 million (Q3 2019 - $1.0 million) in maintenance costs, $0.5 million (Q3 2019 - $0.6 million) in utilities.

The overall decrease in cost of product sold in Q3 2020 as compared to Q3 2019 is primarily attributable to the weakened BRL, in which cost is incurred, against the USD, in which cost is reported.

3. General and administrative expenses for Q3 2020 include $3.3 million (Q3 2019 - $3.6 million) with respect to MCSA for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, $0.5 million (Q3 2019 - $0.5 million) with respect to NX Gold for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, and $2.4 million (Q3 2019 - $2.3 million) with respect to the corporate head office in Vancouver. Corporate head office costs are primarily comprised of $1.6 million (Q3 2019 - $1.7 million) in salaries, incentive payments, and consulting fees, $0.4 million (Q3 2019 - $0.3 million) in travel-related costs, and $0.3 million (Q3 2019 - $0.2 million) in office and sundry costs. General and administrative expenses in Q3 2020 were comparable to that in Q3 2019, with certain cost increases reflecting the growth of operations being offset by the weakened BRL, in which cost is incurred, against the USD, in which cost is reported.

4. Finance expense for Q3 2020 was $3.4 million (Q3 2019 - $5.2 million) and is primarily comprised of interest on loans at the corporate head office of $1.7 million (Q3 2019 - $2.1 million), interest on loans and borrowings at MCSA and NX Gold of $0.9 million (Q3 2019 - $0.6 million), other finance expense of $0.6 million (Q3 2019 - $1.3 million), accretion of the asset retirement obligations of $0.2 million (Q3 2019 - $1.0 million), and a nominal loss on interest rate swap derivative (Q3 2019 - $0.2 million).

5. Foreign exchange loss for Q3 2020 was $8.7 million (Q3 2019 - $10.9 million). This amount is primarily comprised of a realized foreign exchange loss on derivative contracts of $6.0 million (Q3 2019 - $0.8 million), a foreign exchange loss on USD denominated debt of $2.0 million (Q3 2019 - $9.6 million) in MCSA for which the functional currency is the BRL, and a foreign exchange loss on unrealized derivative contracts of $1.1 million (Q3 2019 - $1.4 million). The foreign exchange losses were primarily a result of a strengthening of the USD against the Brazilian Real during a time of worldwide instability as a result of the COVID-19 pandemic. The foreign exchange loss on unrealized derivative contracts are a result of mark-to-market calculations at period end and may not represent the amount that will ultimately be realized, which will depend on future changes to the USD/BRL foreign exchange rates.

6. In Q3 2019, the Company recognized a recovery of $21.6 million in net income related to value added taxes previously paid on sales in Brazil. The recovery was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant taxing authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim, which approval was received in July 2019. These credits can be used to offset a variety of other taxes, including taxes on future sales.

7. In Q3 2020, the Company recognized $6.8 million in income tax expense (Q3 2019 - $2.8 million). Income taxes from operations are partially offset by the recognition of temporary deductible differences associated with MCSA’s unrealized foreign exchange losses on derivatives and loans and borrowings denominated in USD.

8. The foreign currency translation loss is a result of a strengthening of the USD against the BRL during a time of worldwide instability as a result of the COVID-19 pandemic when translating the net assets of the Company’s Brazilian subsidiaries to USD for presentation in the Company’s consolidated financial statements.

Ero Copper Corp. September 30, 2020 MD&A Page 14 

The following table provides a summary of the financial results of the Company for YTD 2020 and YTD 2019. Tabular amounts are in thousands of US dollars, except share and per share amounts.

			Nine months ended			Nine months ended
	Notes		September 30, 2020			September 30, 2019
Revenue		1	$	232,833		$	209,155
Cost of product sold		2		(99,262	)		(119,800	)
Sales expenses				(3,782	)		(3,367	)
Gross profit				129,789			85,988
Expenses
General and administrative		3		(19,762	)		(20,110	)
Share-based compensation				(6,515	)		(4,488	)
Income before the undernoted				103,512			61,390
Other income (expenses)
Finance income				1,201			343
Finance expense		4		(12,893	)		(18,414	)
Foreign exchange loss		5		(106,947	)		(9,571	)
Loss on debt settlement		6		-			(1,783	)
Recovery of value added taxes		7		-			21,584
Other income (expense)				(3,026	)		1,080
Income (loss) before income taxes				(18,153	)		54,629
Income tax recovery (expense)
Current				(5,631	)		(8,413	)
Deferred				9,940			830
		8		4,309			(7,583	)
Net income (loss) for the period				(13,844	)		47,046
Other comprehensive income (loss)
Foreign currency translation loss		9		(69,232	)		(11,469	)
Comprehensive income (loss)			$	(83,076	)	$	35,577
Net income (loss) attributable to:
Owners of the Company			$	(14,164	)	$	46,714
Non-controlling interests				320			332
			$	(13,844	)	$	47,046
Comprehensive income (loss) attributable to:
Owners of the Company			$	(83,119	)	$	35,291
Non-controlling interests				43			286
			$	(83,076	)	$	35,577
Net income (loss) per share attributable to owners of the Company
Net income (loss) per share
Basic			$	(0.16	)	$	0.55
Diluted			$	(0.16	)	$	0.51
Weighted average number of common shares outstanding
Basic				86,048,450			85,117,603
Diluted				86,048,450			91,006,581

Ero Copper Corp. September 30, 2020 MD&A Page 15 

Notes:

1. Revenues for YTD 2020 from copper sales was $188.3 million (YTD 2019 - $178.5 million), which included the sale of 32,549 copper tonnes in concentrate as compared to 31,164 copper tonnes for YTD 2019. The increase in revenues is primarily attributed to higher volume of concentrate sold. Revenues for YTD 2020 from gold sales was $44.6 million (YTD 2019 - $30.6 million), which included the sale of 25,755 ounces of gold, compared to 23,945 ounces of gold for YTD 2019, at a significantly higher average gold price than the preceding comparative period.

2. Cost of product sold for YTD 2020 from copper sales was $83.8 million (YTD 2019 - $100.0 million) which consisted of $27.7 million (YTD 2019 - $29.0 million) in depreciation and depletion, $18.4 million (YTD 2019 - $24.3 million) in salaries and benefits, $11.4 million (YTD 2019 - $13.3 million) in materials and consumables, $11.8 million (YTD 2019 - $16.2 million) in contracted services, $9.4 million (YTD 2019 - $10.2 million) in maintenance costs, $4.8 million (YTD 2019 - $6.5 million) in utilities, and $0.3 million (YTD 2019 - $0.5 million) in other costs.

Cost of product sold for YTD 2020 from gold sales was $15.5 million (YTD 2019 - $19.8 million) which primarily comprised of $4.1 million (YTD 2020 - $5.0 million) in salaries and benefits, $2.6 million (YTD 2019 - $2.0 million) in contracted services, $1.7 million (YTD 2019 - $3.1 million) in maintenance costs, $2.9 million (YTD 2019 - $2.8 million) in materials and consumables, $2.4 million (YTD 2019 - $5.0 million) in depreciation and depletion, $1.7 million (YTD 2019 - $1.7 million) in utilities, and $0.1 million (YTD 2019 - $0.2 million) in other costs.

The overall decrease in cost of product sold for YTD 2020 as compared to YTD 2019 is primarily attributable to the weakened BRL, in which cost is incurred, against the USD, in which cost is reported.

3. General and administrative expenses for YTD 2020 include $11.9 million (YTD 2019 - $10.7 million) with respect to MCSA for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, $1.1 million (YTD 2019 - $1.8 million) with respect to NX Gold for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, and $6.7 million (YTD 2019 - $7.6 million) with respect to the corporate head office in Vancouver. Corporate head office costs are primarily comprised of $4.8 million (YTD 2019 - $5.3 million) in salaries, incentive payments, and consulting fees, $0.7 million (YTD 2019 - $0.7 million) in office and sundry costs, and $0.6 million (YTD 2019 - $0.9 million) in travel-related costs. General and administrative expenses in YTD 2020 were comparable to that in YTD 2019, reflecting the growth of operations, particularly at MCSA, which included higher headcounts, incentive payments for exceeding board-mandated performance targets, as well as rate increases related to annual union contract negotiations at MCSA, partially offset by lower general and administrative expenses at the corporate head office from reduced consulting fees and travel-related costs during a period of pandemic-imposed travel restrictions, and the weakening of the BRL, in which cost is incurred, against the USD, in which cost is reported.

4. Finance expense for YTD 2020 was $12.9 million (YTD 2019 - $18.4 million) and was primarily comprised of interest on loans at the corporate head office of $5.2 million (YTD 2019 - $6.3 million), interest on loans and borrowings at MCSA and NX Gold of $2.6 million (YTD 2019 - $2.2 million), other finance expenses of $2.2 million (YTD 2019 - $3.8 million), loss on interest rate swap derivative of $2.0 million (YTD 2019 - $2.0 million), and accretion of asset retirement obligations of $0.7 million (YTD 2019 - $3.7 million).

5. Foreign exchange loss for YTD 2020 was $106.9 million (YTD 2019 - $9.6 million). This amount was primarily comprised of a foreign exchange loss on unrealized derivative contracts of $62.2 million (YTD 2019 - $1.7 million), a foreign exchange loss on USD denominated debt of $31.9 million (YTD 2019 - $8.2 million) in MCSA for which the functional currency is the BRL, and a realized foreign exchange loss on derivative contracts of $13.0 million (YTD 2019 - $0.1 million). The foreign exchange losses were primarily a result of a strengthening of the USD against the BRL during a time of worldwide instability as a result of the COVID-19 pandemic. The foreign exchange loss on unrealized derivative contracts are a result of mark-to-market calculations at period end and may not represent the amount that will ultimately be realized, which will depend on future changes to the USD/BRL foreign exchange rates.

6. In YTD 2019, the Company recognized a loss on debt settlement of $1.8 million, which represented the difference between the accounting fair value made to legally extinguish a bank loan held by MCSA and the carrying value of the loan at the time.

7. In YTD 2019, the Company recognized a recovery of $21.6 million in net income related to value added taxes previously paid on sales in Brazil. The recovery was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant taxing authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim, which approval was received in July 2019. These credits can be used to offset a variety of other taxes, including taxes on future sales.

8. In YTD 2020, the Company recognized a $4.3 million income tax recovery (YTD 2019 - income tax expense of $7.6 million), primarily resulting from the recognition of temporary deductible differences associated with MCSA’s unrealized foreign exchange losses on derivatives and loans and borrowings denominated in US dollars.

9. The foreign currency translation loss is a result of a strengthening of the USD against the BRL during a time of worldwide instability as a result of the COVID-19 pandemic when translating the net assets of the Company’s Brazilian subsidiaries to USD for presentation in the Company’s consolidated financial statements.

Ero Copper Corp. September 30, 2020 MD&A Page 16 

SUMMARY OF QUARTERLY RESULTS

The following table presents selected financial information for each of the most recent eight quarters. Tabular amounts are in millions of US Dollars, except share and per share amounts.

	2020									2019									2018
Selected Financial Information	Sept 30			June 30 (1)			Mar 31(2)			Dec 31 (3)			Sept 30 (4)			June 30			March 31			Dec 31(5)
Revenue	$	94.3		$	70.8		$	67.7		$	75.7		$	60.6		$	76.5		$	72.0		$	85.1
Cost of product sold	$	(33.3	)	$	(30.1	)	$	(35.8	)	$	(43.0	)	$	(38.4	)	$	(43.3	)	$	(38.1	)	$	(44.7	)
Gross profit	$	59.6		$	39.5		$	30.7		$	31.1		$	21.3		$	32.1		$	32.6		$	39.0
Net income (loss) for period	$	31.4		$	7.7		$	(53.0	)	$	45.4		$	16.3		$	15.3		$	15.5		$	11.3
Income (loss) per share attributable to
owners of the Company
- Basic	$	0.36		$	0.09		$	(0.62	)	$	0.53		$	0.19		$	0.18		$	0.18		$	0.13
- Diluted	$	0.34		$	0.08		$	(0.62	)	$	0.49		$	0.18		$	0.17		$	0.17		$	0.13
Weighted average number of common shares
outstanding
- Basic		86,448,318			85,933,443			85,759,194			85,620,168			85,505,675			85,032,841			84,804,389			84,736,476
- Diluted		91,961,897			91,428,969			85,759,194			91,670,988			91,320,363			90,696,926			89,917,828			89,191,707

Notes:

1. During the quarter ended June 30, 2020, the Company had an overall net income of $7.7 million, despite $16.3 million in foreign exchange losses. The foreign exchange losses were comprised of a foreign exchange loss on unrealized derivative contracts of $8.5 million, a foreign exchange loss on realized derivative contracts of $4.4 million, and a foreign exchange loss on USD denominated debt of $3.0 million in MCSA for which the functional currency is the BRL. As with the preceding quarter, the foreign exchange losses were unusually high this quarter due to volatility in the foreign exchange rates between the USD and BRL resulting from the worldwide instability in currency rates as a result of the COVID-19 pandemic.

2. During the quarter ended March 31, 2020, the Company recognized a $81.9 million in foreign exchange losses. The foreign exchange losses were mainly comprised of a $26.9 million loss associated with USD denominated debt held by MCSA, whose functional currency is the BRL, and $52.7 million losses associated with unrealized losses on foreign exchange currency collar contracts. These foreign exchange losses were unusually high this quarter due to volatility in the foreign exchange rates between the USD and the BRL resulting from the worldwide instability in currency rates as a result of the COVID-19 pandemic.

3. During the quarter ended December 31, 2019, the Company recognized a $25.2 million income tax recovery primarily resulting from the recognition of available tax losses and tax credits in MCSA. At December 31, 2019, the Company considered the taxable income generated since acquisition of MCSA and forecasted future taxable income and determined that it was now considered probable that the benefit of these losses and tax credits in MCSA would be realized.

4. During Q3 2019, the Company recognized a recovery of $21.6 million in net income related to value added taxes previously paid on sales in Brazil. The recovery was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant taxing authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim, for which approval was received in July 2019. These credits can be used to offset a variety of other taxes, including income taxes and taxes on future sales.

5. During the quarter ended December 31, 2018, MCSA began commercial production of the Vermelhos Mine. This resulted in increased sales this quarter, generating higher net income for the period.

LIQUIDITY, CAPITAL RESOURCES, AND CONTRACTUAL OBLIGATIONS

Liquidity

As at September 30, 2020, the Company held cash and cash equivalents of $54.3 million. Cash and cash equivalents are primarily comprised of cash held with reputable financial institutions and are invested in highly liquid short-term investments with maturities of three months or less. The funds are not exposed to liquidity risk and there are no restrictions on the ability of the Company to use these funds to meet its obligations.

Ero Copper Corp. September 30, 2020 MD&A Page 17 

Cash and cash equivalents have increased by $32.9 million since December 31, 2019. The Company’s cash flows from operating, investing, and financing activities during YTD 2020 are summarized as follows:

· Cash from operating activities of $124.2 million

· Cash from financing activities of $3.5 million, including:

o   $56.8 million proceeds from new loans and borrowings;

o   $3.1 million proceeds from exercise of stock options and warrants;

o   $1.5 million released from restricted cash

net of:

o   $44.6 million of repayment on loans and borrowings;

o   $7.9 million of payment of interest on loans and borrowings;

o   $3.2 million of lease payments;

o   $2.3 million of other finance expenses

Partially offset by:

· Cash used in investing activities of $85.3 million, including:

o   $85.8 million of additions to mineral property, plant and equipment;

o   $0.1 million of additions to exploration and evaluation assets

net of:

o $0.7 million from financial investments

As at September 30, 2020, the Company had working capital deficit of $9.4 million, arising primarily as a result of unrealized mark-to-market values associated with foreign currency derivative contracts.

Capital Resources

The Company’s primary sources of capital are comprised of cash from operations, and cash and cash equivalents on hand. The Company will continuously monitor its capital structure and, based on changes in operations and economic conditions, may adjust such structure by issuing new common shares or new debt as necessary. While the Company has been successful in securing financing to date, there are no guarantees that it will be able to secure such financing in the future on terms acceptable to the Company, if at all. Taking into consideration cash flow from existing operations, management believes that the Company has sufficient working capital and financial resources to maintain its planned operations and activities for the foreseeable future.

At September 30, 2020, we had unrestricted cash and cash equivalents of $54.3 million compared to $21.5 million at December 31, 2019. The increase is primarily due to an increase in cash from operations, and draw-downs under various credit facilities as a proactive measure in light of the uncertainty surrounding the COVID-19 pandemic. We have no immediate need for the funds; however, proceeds will be used for general corporate purposes as required.

Contractual Obligations and Commitments

Certain loan agreements contain operating and financial covenants that could restrict the ability of the Company and its subsidiaries, MCSA, Ero Gold, and NX Gold S.A., to, among other things, incur additional indebtedness needed to fund its respective operations, pay dividends or make other distributions, make investments, create liens, sell or transfer assets or enter into transactions with affiliates. There are no other restrictions or externally imposed capital requirements of the Company.

Ero Copper Corp. September 30, 2020 MD&A Page 18 

MANAGEMENT OF RISKS AND UNCERTAINTIES

The Company thoroughly examines the various financial instruments and risks to which it is exposed and assesses the impact and likelihood of those risks. These risks may include credit risk, liquidity risk, currency risk, commodity price risk and interest rate risk. Where material, these risks are reviewed and monitored by the Board.

COVID-19 Pandemic Risk

The outbreak of COVID-19 has had a significant impact on the volatility of commodity prices and USD/BRL exchange rates, and governmental actions to contain the outbreak may impact our ability to transport or market our concentrate or cause disruptions in our supply chains or interruption of production. A material spread of COVID-19 in jurisdictions where we operate could impact our ability to staff operations. A reduction in production or other COVID-19 related impacts, including but not limited to, low copper prices could cause a significant reduction in profitability of ongoing operations.

The global pandemic could cause temporary closure of businesses in regions that are significantly impacted by the health crises, or cause governments to take or continue to take preventative measures such as the closure of points of entry, including ports and borders.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers. The carrying amount of the financial assets below represents the maximum credit risk exposure as at September 30, 2020 and December 31, 2019:

	September 30, 2020		December 31, 2019
Cash and cash equivalents	$	54,341	$	21,485
Restricted cash		-		1,500
Accounts receivable		14,060		7,680
Deposits and other non-current assets		952		2,396
	$	69,353	$	33,061

The Company invests cash and cash equivalents with financial institutions that are financially sound based on their credit rating. The Company’s exposure to credit risk associated with accounts receivable is influenced mainly by the individual characteristics of each customer. The Company currently has only three significant customers, all of which have no history of credit default with the Company. The Company has not incurred credit losses during the three and nine months ended September 30, 2020 nor recognized a provision for credit losses.

Foreign exchange currency risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage market risks. At September 30, 2020, the Company has entered into foreign exchange collar contracts at zero cost for notional amounts of $341.4 million with an average floor rate of 4.02 BRL to 1.00 US Dollar and an average cap rate of 4.70 BRL to 1.00 US Dollar (December 31, 2019 - notional amount of $336.6 million in foreign exchange forward collar contracts). The maturity dates of these contracts are from October 28, 2020 to May 20, 2022 and are financially settled on a net basis. The fair value of these contracts at September 30, 2020 was a liability of $62.2 million (December 31, 2019 - $nil), which is included in Derivatives in the statement of financial position. The change in fair value of foreign exchange collar contracts was a loss of $1.1 million and $62.2 million for the three and nine months ended September 30, 2020, respectively, (a loss of $1.4 million and $1.7 million for the three and nine months ended September 30, 2019, respectively) and has been recognized in foreign exchange loss. In addition, during the three and nine months ended September 30, 2020, the Company recognized a realized loss of $6.0 million and $13.0 million, respectively (a realized loss of $0.8 million and $0.1 million for the three and nine months ended September 30, 2019, respectively) related to the settlement of foreign currency forward collar contracts.

Ero Copper Corp. September 30, 2020 MD&A Page 19 

Interest rate risk

The Company is principally exposed to the variation in interest rates on loans and borrowings with variable rates of interest. Management reduces interest rate risk exposure by entering into loans and borrowings with fixed rates of interest or by entering into derivative instruments that fix the ultimate interest rate paid.

The Company is principally exposed to interest rate risk through its term facilities of $150.0 million, Brazilian Real denominated bank loans of $4.3 million, Brazilian Real denominated lines of credit of $2.7 million, and Brazilian Real denominated equipment finance loans of $1.2 million. Based on the Company’s net exposure at September 30, 2020, a 1% change in the variable rates would have an impact of $1.6 million on pre-tax annual net income, without consideration of the effects of the interest rate swap contract below.

In order to mitigate the above volatility due to variable rates on loans, as at September 30, 2020, the Company has entered into an interest rate swap contract to manage interest rate risk. The floating interest on a notional amount of $65.0 million was swapped for a fixed interest rate of 2.69%. The fair value of this contract at September 30, 2020 was a liability of $2.8 million (December 31, 2019 - $1.7 million) and was included in derivatives in the statement of financial position. The realized loss on the interest rate swap contract was $0.4 million and $0.8 million for the three and nine months ended September 30, 2020, respectively, and was included in finance expense. In addition, the Company recognized an unrealized gain of $0.4 million and an unrealized loss of $1.2 million on the interest rate swap contract for the three and nine months ended September 30, 2020, respectively, which was included in finance expense.

For a discussion of additional risks applicable to the Company and its business and operations, including risks related to the Company’s foreign operations, the environment and legal proceedings, see “Risk Factors” in the Company’s Annual Information Form for the year ended December 31, 2019 and dated March 12, 2020 (the “AIF”).

OTHER FINANCIAL INFORMATION

Off-Balance Sheet Arrangements

As at September 30, 2020, the Company had no material off-balance sheet arrangements.

Contingencies

MCSA is subject to a number of claims (including claims related to tax, labour and social security matters and civil action) in the course of its business which individually are not material and have not been accrued for in the Company’s financial statements as it is not probable that a material cash outflow will occur. While the Company believes that the majority of these claims are unlikely to be successful, if all such existing claims were decided against it, the Company could be exposed to a liability of up to approximately $19.7 million as at September 30, 2020 (December 31, 2019 - $31.1 million), which could have an adverse impact on the Company’s business, financial condition, results of operations, cash flows or prospects.

Outstanding Share Data

At November 5, 2020, the Company had 86,842,593 common shares, 4,262,592 stock options, 2,599,996 warrants, and 438,463 performance share units issued and outstanding.

Ero Copper Corp. September 30, 2020 MD&A Page 20 

Related Party Disclosures

For the three months ended September 30, 2020, amounts paid to related parties were incurred in the normal course of business and measured at the exchange amount, which is the amount agreed upon by the transacting parties and on terms and conditions similar to non-related parties.

Key management personnel consist of the Company’s directors and officers and their compensation includes director retainer fees and management salaries paid to these individuals, as well as share-based compensation. The aggregate value of compensation paid to key management personnel for the three and nine months ended September 30, 2020 was $1.8 million and $5.4 million, respectively ($1.5 million and $4.4 million for the three and nine months ended September 30, 2019, respectively). In addition, nil options and 4,904 deferred share units (“DSUs”), and 43,456 options and 42,225 DSUs were issued to non-executive directors during the three and nine months ended September 30, 2020, respectively (40,000 options and 165,000 options for the three and nine months ended September 30, 2019, respectively). $1.1 million and $4.0 million was recognized in share-based compensation expense for the three and nine months ended September 30, 2020, respectively, for options, performance share units, and DSUs issued ($1.0 million and $3.3 million for the three and nine months ended September 30, 2019, respectively).

During the three and nine months ended September 30, 2020, key management personnel exercised 150,000 and 398,555 options, as well as 100,000 and 200,000 warrants, for cash proceeds to the Company of $0.9 million and $1.4 million, respectively (66,666 and 176,666 options, respectively, for cash proceeds of $0.1 million and $0.3 million for the three and nine months ended September 30, 2019, respectively).

ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

Critical Accounting Judgments and Estimates

The preparation of consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions about future events that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, events or actions, actual results may differ from these estimates.

The Company’s significant accounting policies and accounting estimates are contained in the Company’s December 31, 2019 consolidated financial statements. Certain of these policies, such as, capitalization and depreciation of property, plant and equipment and mining interests, derivative instruments, and decommissioning liabilities provisions involve critical accounting estimates because they require management of the Company to make subjective or complex judgments about matters that are inherently uncertain, and because of the likelihood that materially different amounts could be reported under different conditions or using different assumptions.

In preparing its financial statements, management has made judgments, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of the assets, liabilities, revenues, and expenses. Actual results may differ from these estimates.

The fair value of derivative instruments is determined using either present value techniques or option pricing models that utilize a variety of inputs that are a combination of quoted prices and market-corroborated inputs. The fair value of the Company’s derivative contracts includes an adjustment for credit risk. Derivative instruments are classified within Level 2 of the fair value hierarchy.

Ero Copper Corp. September 30, 2020 MD&A Page 21 

The estimates and assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively. For a description of the critical judgements in application of the accounting policies and information about assumptions and estimations uncertainties, refer to the Company’s MD&A for the year ended December 31, 2019, which is available on SEDAR at www.sedar.com.

Local Currency Operating Metrics – Presented in Brazilian Real

	2020 - Q3			2020 - Q2			2020 - YTD			2019 - Q3			2019 - YTD
Costs (MCSA Operations)
Mining[1] - UG (Pilar)	R$	35,661			35,146			99,803			38,218			116,756
- UG (Vermelhos)		32,421			30,190			93,801			24,920			70,740
- OP		-			-			-			761			8,492
Processing		22,703			19,496			61,248			21,309			60,792
Indirect		15,774			13,456			41,859			10,504			33,784
Production costs[1]		106,559			98,288			296,711			95,712			290,564
By-product credits		(27,128	)		(21,162	)		(64,082	)		(12,720	)		(33,947	)
Treatment, refining and other		2,367			8,751			9,491			2,622			3,463
C1 cash costs	R$	81,798			85,877			242,120			85,614			260,080
Breakdown Mined and Processed (tonnes)
UG Mined		647,281			672,679			1,932,470			677,535			1,852,128
OP Mined		-			-			-			15,259			727,578
Total Mined (t):		647,281			672,679			1,932,470			692,794			2,579,706
Total Processed (t)		553,148			627,071			1,788,178			587,915			1,835,527
Cu Production (t)		10,961			11,178			32,796			9,674			30,792
UG Mining Total - R$/tonne mined		105.18			97.13			100.18			93.19			101.23
Pilar - R$/tonne mined		87.16			87.47			84.95			87.91			96.09
Vermelhos - R$/tonne mined		136.14			111.45			123.81			102.63			111.05
OP Mining - R$/tonne mined[2]		n/a			n/a			n/a			49.89			11.67
Processing - R$/tonne processed		41.04			31.09			34.25			36.25			33.12
Indirect - R$/tonne processed		28.52			21.46			23.41			17.87			18.41

Footnotes

General - Above only includes amounts from MCSA. NX Gold operations are excluded.

[1] - Beginning in Q3 2020, production costs are presented net of capex development. Comparative figures have been adjusted to conform with the revised presentation.

[2] - There was no OP production in YTD 2020.

Ero Copper Corp. September 30, 2020 MD&A Page 22 

Capital Expenditures

The following table presents capital expenditures at the Company’s operations.

	2020 - Q3		2020 - Q2		2020 - YTD		2019 - Q3		2019 - YTD
MCSA Operations
Pilar Mine and Caraíba Mill Complex		14,283		17,859		43,838		13,945		28,412
Vermelhos Mine		3,804		4,240		10,667		4,692		15,512
Boa Esperanҫa Project		58		26		129		208		1,083
Capital Expenditure		18,145		22,125		54,634		18,845		45,007
Capex Development (included in above)		8,156		7,489		24,818		9,089		20,769
Exploration		9,446		7,887		24,696		10,442		24,617
NX Gold Operations
Capital Expenditure		3,028		2,990		9,444		2,314		7,102
Capex Development (included in above)		1,698		1,737		5,268		317		607
Exploration		965		977		3,145		1,269		4,008

NON-IFRS MEASURES

Financial results of the Company are prepared in accordance with IFRS. The Company utilizes certain non-IFRS measures, including C1 cash cost of copper produced (per lb), C1 cash cost of gold produced (per ounce), EBITDA, Adjusted EBITDA, Adjusted net income (loss) attributable to owners of the Company, Adjusted earnings (loss) per share, net debt and working capital, which are not measures recognized under IFRS. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The tables below provide a reconciliation of these non-IFRS measures to the most directly comparable IFRS measures as contained in the Company’s financial statements.

Unless otherwise noted, the non-IFRS measures presented below have been calculated on a consistent basis for the periods presented.

Ero Copper Corp. September 30, 2020 MD&A Page 23 

C1 Cash Cost of Copper Produced (per lb)

C1 cash cost of copper produced (per lb) is the sum of production costs, net of capital expenditure development costs and by-product credits, divided by the copper pounds produced. C1 cash costs reported by the Company include treatment, refining charges, offsite costs, and certain tax credits relating to sales invoiced to the Company’s Brazilian customer on sales. By-product credits are calculated based on actual precious metal sales (net of treatment costs) during the period divided by the total pounds of copper produced during the period. C1 cash cost of copper produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

The following table provides a reconciliation of C1 cash cost of copper produced per pound to cost of goods sold, its most directly comparable IFRS measure.

	2020 - Q3			2020 - Q2			2020 - YTD			2019 - Q3			2019 - YTD
Reconciliation:
Cost of Product Sold	$	28,168		$	25,645		$	83,767		$	32,396		$	99,987
Add (less):
Depreciation/amortization/depletion		(9,593	)		(8,565	)		(27,724	)		(9,675	)		(28,979	)
Incentive payments		(714	)		(672	)		(1,980	)		-			-
Net change in inventory		891			700			1,383			544			740
Transportation costs & other		1,043			844			2,907			902			3,119
By-product credits		(5,042	)		(3,927	)		(12,512	)		(3,202	)		(8,721	)
Treatment, refining, and other		469			1,645			1,746			632			879
Foreign exchange translation adjustments		11			288			300			(77	)		(143	)
C1 cash costs	$	15,233		$	15,958		$	47,887		$	21,520		$	66,881

	2020 - Q3			2020 - Q2			2020 - YTD			2019 - Q3			2019 - YTD
Costs
Mining[1]	$	12,654		$	12,125		$	38,280		$	16,083		$	50,629
Processing		4,220			3,618			12,111			5,363			15,629
Indirect		2,932			2,497			8,262			2,644			8,465
Production costs[1]		19,806			18,240			58,653			24,090			74,723
By-product credits		(5,042	)		(3,927	)		(12,512	)		(3,202	)		(8,721	)
Treatment, refining and other		469			1,645			1,746			632			879
C1 cash costs	$	15,233		$	15,958		$	47,887		$	21,520		$	66,881
Costs per pound
Payable copper produced (lb)		24,164			24,643			72,302			21,327			67,884
Mining[1]	$	0.52		$	0.49		$	0.53		$	0.75		$	0.75
Processing	$	0.17		$	0.15		$	0.17		$	0.25		$	0.23
Indirect	$	0.12		$	0.10		$	0.11		$	0.12		$	0.12
By-product credits	$	(0.21	)	$	(0.16	)	$	(0.17	)	$	(0.15	)	$	(0.13	)
Treatment, refining and other	$	0.02		$	0.07		$	0.02		$	0.03		$	0.01
C1 cash cost of copper produced (per lb)	$	0.63		$	0.65		$	0.66		$	1.01		$	0.99

[1] - Beginning in Q3 2020, production costs are presented net of capex development. Comparative figures have been adjusted to conform with the revised presentation.

Ero Copper Corp. September 30, 2020 MD&A Page 24 

C1 Cash Cost of Gold produced (per ounce)

C1 cash cost of gold produced (per ounce) is the sum of production costs, net of capital expenditure development costs and silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. C1 cash cost of gold produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

The following table provides a reconciliation of C1 cash cost of gold produced per ounce to cost of goods sold, its most directly comparable IFRS measure.

	2020 - Q3			2020 - Q2			2020 - YTD			2019 - Q3			2019 - YTD
Reconciliation:
Cost of Product Sold	$	5,169		$	4,469		$	15,495		$	5,982		$	19,813
Add (less):
Depreciation/amortization/depletion		(818	)		(663	)		(2,364	)		(1,051	)		(5,026	)
Incentive payments		(116	)		(103	)		(391	)		-			-
Net change in inventory		(134	)		90			(115	)		235			590
By-product credits		(134	)		(77	)		(283	)		(47	)		(214	)
Foreign exchange translation adjustments		3			102			114			(21	)		(28	)
C1 cash costs	$	3,970		$	3,818		$	12,456		$	5,098		$	15,135

	2020 - Q3			2020 - Q2			2020 - YTD			2019 - Q3			2019 - YTD
Costs
Mining[1]	$	1,980		$	1,790		$	5,914		$	2,474		$	7,551
Processing		1,544			1,496			4,838			1,821			5,314
Indirect		580			609			1,987			850			2,484
Production costs[1]		4,104			3,895			12,739			5,145			15,349
By-product credits		(134	)		(77	)		(283	)		(47	)		(214	)
C1 cash costs	$	3,970		$	3,818		$	12,456		$	5,098		$	15,135
Costs per ounce
Payable gold produced (ounces)		9,436			8,739			26,041			4,356			24,391
Mining[1]	$	210		$	205		$	227		$	568		$	309
Processing	$	164		$	171		$	186		$	418		$	218
Indirect	$	61		$	70		$	76		$	195		$	102
By-product credits	$	(14	)	$	(9	)	$	(11	)	$	(12	)	$	(8	)
C1 cash cost of gold produced (per ounce)	$	421		$	437		$	478		$	1,169		$	621

[1] - Beginning in Q3 2020, production costs are presented net of capex development. Comparative figures have been adjusted to conform with the revised presentation.

Ero Copper Corp. September 30, 2020 MD&A Page 25 

Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and Adjusted EBITDA

EBITDA represents earnings before interest expense, income taxes, depreciation, and amortization. Adjusted EBITDA includes further adjustments for non-recurring items and/or items not indicative to the future operating performance of the Company. The Company believes EBITDA and adjusted EBITDA are appropriate supplemental measures of debt service capacity and performance of its operations.

Adjusted EBITDA is calculated by removing the following income statement items:

- Recovery of valued added taxes

- Foreign exchange loss

- Loss on gold hedge contracts

- Share based compensation

- Loss on debt settlement

	2020 - Q3		2020 - Q2		2020 - YTD			2019 - Q3			2019 - YTD
Reconciliation:
Net income (loss)	$	31,443	$	7,708	$	(13,844	)	$	16,307		$	47,046
Adjustments:
Finance expenses		3,397		2,845		12,893			5,206			18,414
Tax expense (recovery)		6,806		3,589		(4,309	)		2,825			7,583
Depreciation/amortization/depletion		10,445		9,261		30,187			10,768			34,129
EBITDA		52,091		23,403		24,927			35,106			107,172
Recovery of value added taxes		-		-		-			(21,584	)		(21,584	)
Foreign exchange loss		8,703		16,322		106,947			10,866			9,571
Loss on gold hedge contracts		-		-		-			1,514			1,514
Share based compensation		1,743		2,723		6,515			1,353			4,488
Loss on debt settlement		-		-		-			-			1,783
Adjusted EBITDA	$	62,537	$	42,448	$	138,389		$	27,255		$	102,944

Adjusted net income attributable to owners of the Company and Adjusted net income per share attributable to owners of the Company

The Company uses the financial measure “Adjusted net income attributable to owners of the Company” and “Adjusted net income per share attributable to owners of the Company” (“Adjusted EPS”) to supplement information in its consolidated financial statements. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, the Company and certain investor and analysts use this information to evaluate the Company’s performance. The Company excludes the following items from net earnings to provide a measure which allows the Company and investors to evaluate the operating results of the underlying core operations: i) net recovery of value added taxes, ii) share based compensation, iii) unrealized foreign exchange loss on USD denominated debt in MCSA, iv) unrealized loss on foreign exchange derivative contracts, net of tax, v) unrealized loss (gain) on interest rate derivative contracts, vi) loss on debt settlement, and vii) unrealized loss on gold hedge contracts. The presentation of Adjusted EPS is not meant to substitute the net income (loss) per share attributable to owners of the Company (“EPS”) presented in accordance with IFRS, but rather it should be evaluated in conjunction with such IFRS measures.

The following table provides a detailed reconciliation of net income (loss) attributable to owners of the Company as reported in the Company’s consolidated financial statements to adjusted net income attributable to owners of the Company and Adjusted EPS.

Ero Copper Corp. September 30, 2020 MD&A Page 26 

	2020 - Q3			2020 - Q2			2020 - YTD			2019 - Q3			2019 - YTD
Reconciliation:
Net income (loss) as reported attributable to the owners of the Company	$	31,063		$	7,526		$	(14,164	)	$	16,280		$	46,714
Adjustments for:
Net recovery of value added taxes		-			-			-			(17,783	)		(17,783	)
Share based compensation		1,743			2,723			6,515			-			-
Unrealized foreign exchange loss on USD denominated debt in MCSA		2,026			2,984			31,775			9,559			8,126
Unrealized loss on foreign exchange derivative contracts, net of tax		2,256			7,151			52,488			1,398			1,653
Unrealized loss (gain) on interest rate derivative contracts		(386	)		(131	)		1,175			-			-
Loss on debt settlement		-			-			-			-			1,776
Unrealized loss on gold hedge contracts		-			-			-			719			719
Adjusted net income attributed to owners of the Company	$	36,702		$	20,253		$	77,789		$	10,173		$	41,205
Weighted average number of common shares - basic		86,448,318			85,933,443			86,048,450			85,505,675			85,117,603
Weighted average number of common shares - diluted		91,961,897			91,428,969			91,676,209			91,320,363			91,006,581
Adjusted earnings per share - basic	$	0.42		$	0.24		$	0.90		$	0.12		$	0.48
Adjusted earnings per share - diluted	$	0.40		$	0.22		$	0.85		$	0.11		$	0.45

Note - Starting in the fourth quarter of 2019, share based compensation is included as an adjustment to the calculation of Adjusted EPS.

Net Debt

Net debt is determined based on cash and cash equivalents, restricted cash and loans and borrowings as reported in the Company’s consolidated financial statements. The Company uses net debt as a measure of the Company’s ability to pay down its debt. The following table provides a calculation of net debt based on amounts presented in the Company’s consolidated financial statements as at September 30, 2020, June 30, 2020, December 31, 2019, and September 30, 2019.

	September 30,			June 30,			December 31,			September 30,
	2020			2020			2019			2019
Cash and cash equivalents	$	54,341		$	51,617		$	21,485		$	21,716
Restricted cash		-			750			1,500			1,875
Less: Current portion of loans and borrowings		(17,325	)		(25,793	)		(18,984	)		(10,648	)
Long-term portion of loans and borrowings		(155,403	)		(157,482	)		(140,386	)		(146,323	)
Net Debt	$	(118,387	)	$	(130,908	)	$	(136,385	)	$	(133,380	)

Working Capital (Deficit) and Available Liquidity

Working capital is determined based on current assets and current liabilities as reported in the Company’s consolidated financial statements. The Company uses working capital as a measure of the Company’s short-term financial health and operating efficiency. Available liquidity includes the Company’s working capital and undrawn revolving credit facilities in place. The following table provides a calculation for these based on amounts presented in the Company’s consolidated financial statements as at September 30, 2020 and December 31, 2019.

	September 30,			December 31,
	2020			2019
Current Assets	$	103,658		$	75,565
Less: Current Liabilities		(113,098	)		(80,481	)
Working Capital (Deficit)	$	(9,440	)	$	(4,916	)
Available undrawn revolving credit facilities		8,000			30,000
Available Liquidity	$	(1,440	)	$	25,084

Ero Copper Corp. September 30, 2020 MD&A Page 27 

Internal Control over Financial Reporting

The Company’s management, with the participation of the CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”). The Company’s ICFR is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Any system of ICFR, no matter how well designed, has inherent limitations and cannot provide absolute assurance that all misstatements and instances of fraud, if any, within the Company have been prevented or detected. The Company’s ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

The Company uses the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

There were no changes in the Company’s ICFR that materially affected, or are reasonably likely to materially affect, ICFR during Q3 2020.

NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION

Unless otherwise indicated, scientific and technical information in this MD&A relating to Ero’s properties (“Technical Information”) is based on information contained in the following reports:

The report prepared in accordance with National Instrument 43-101, Standards of Disclosure for Mineral Projects (“NI 43-101”) and entitled “2019 Updated Mineral Resources and Mineral Reserves Statements of Mineração Caraíba’s Vale do Curaçá Mineral Assets, Curaçá Valley”, dated November 25, 2019 with an effective date of September 18, 2019, prepared by Rubens Jose De Mendonça, MAusIMM, of Planminas – Projectos e Consultoria em Mineração Ltd. (“Planminas”), Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, and Bernardo Horta de Cerqueira Viana, MAIG, all of GE21 Consultoria Mineral Ltda. (“GE21”), and each a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “Vale do Curaçá Technical Report”).

The report prepared in accordance with NI 43-101 and entitled “Mineral Resource and Mineral Reserve Estimate of the NX Gold Mine, Nova Xavantina”, dated February 3, 2020 with an effective date of September 30, 2019, prepared by Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, and Paulo Roberto Bergmann, FAusIMM, each of GE21 and a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “NX Gold Technical Report”).

The report prepared in accordance with NI 43-101 and entitled “Feasibility Study, Technical Report for the Boa Esperança Copper Project, Pará State Brazil”, dated September 7, 2017 with an effective date of June 1, 2017, prepared by Rubens Mendonça, MAusIMM of SRK Consultores do Brasil Ltda. (“SRK” or “SRK Brazil”) as at the date of the report (now of Planminas) and Carlos Barbosa, MAIG and Girogio di Tomi, MAusIMM, both of SRK Brazil, and each a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “Boa Esperança Feasibility Study”).

Reference should be made to the full text of the Vale do Curaçá Technical Report, the NX Gold Technical Report and the Boa Esperança Technical Report, each of which is available for review under the Company’s profile on SEDAR at www.sedar.com.

The disclosure of Technical Information in this MD&A was reviewed and approved by Emerson Ricardo Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

Ero Copper Corp. September 30, 2020 MD&A Page 28 

Cautionary Note Regarding Forward-Looking Statements

This MD&A contains “forward-looking information” within the meaning of applicable Canadian securities laws. Forward-looking information includes statements that use forward-looking terminology such as “may”, “could”, “would”, “will”, “should”, “intend”, “target”, “plan”, “expect”, “budget”, “estimate”, “forecast”, “schedule”, “anticipate”, “believe”, “continue”, “potential”, “view” or the negative or grammatical variation thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, statements with respect to the Company's expected operations at the Vermelhos and Pilar Mines as well as at the NX Gold Property, the estimation of mineral reserves and mineral resources, the significance of any particular exploration program or result and the Company’s expectations for current and future exploration plans including, but not limited to, planned areas of additional exploration, the significance of any drill results or new discoveries and targets, including without limitation extensions of defined mineralized zones, possibilities for mine life extensions or continuity of high-grade mineralization, the recoverable value of any metals other than copper, further extensions and expansion of mineralization near the Company’s existing operations and throughout the Curaçá Valley or the NX Gold Mine, the impact of the COVID-19 pandemic on the Company’s planned drill programs, the timeline for issuance of updated mineral resource, mineral reserves, mine plans and associated technical reports for the Vale do Curaca Property and the NX Gold Mine, the significance of any potential optimization initiatives in connection with the Boa Esperanca development project and the potential issuance, and timing of, an OFS, the representativeness of the material tested in the Company’s ore sorting trial campaign to actual results of each of the mines tested during the campaign, the timing and expected outcome of the Company's updated life-of-mine plan including the potential implementation of ore sorting in those plans at any of the Company's operations including the Vermelhos District, any potential savings on transport costs, any potential reduction in water, diesel and electricity use, as well as any proposed reductions in flotation tailings as a result of ore sorting implementation, which may or may not occur in any capacity at the Company's operations or life-of-mine plans now or in the future, the Company's ability to service its ongoing obligations, the Company's future production outlook, cash costs, capital resources, expenditures, the impact of new accounting standards and amendments on the Company's financial statements, and current global macroeconomic uncertainty stemming from the COVID-19 pandemic and its impact on the Company’s business, financial condition, results of operations, cash flows and prospects.

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this MD&A including, without limitation, assumptions about: favourable equity and debt capital markets; the ability to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Company’s properties and assets; future prices of copper and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any mineral reserve and mineral resource estimates; the geology of the Vale do Curaçá Property, NX Gold Property and the Boa Esperanҫa Property being as described in the technical reports for these properties; production costs; the accuracy of budgeted exploration and development costs and expenditures; the price of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to operate in a safe, efficient and effective manner; work force conditions to remain healthy in the face of prevailing epidemics, pandemics or other health risks, political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favourable terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour stability; stability in financial and capital goods markets; availability of equipment and critical supplies, spare parts and consumables; positive relations with local groups and the Company’s ability to meet its obligations under its agreements with such groups; and satisfying the terms and conditions of the Company’s current loan arrangements. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive, global health, and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.

Ero Copper Corp. September 30, 2020 MD&A Page 29 

Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. Such risks include, without limitation the risk factors listed under the heading “Risk Factors” in the AIF.  

Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking information, there may be other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended.

The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained herein. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.

Forward-looking information contained herein is made as of the date of this MD&A and the Company disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.

Cautionary Notes Regarding Mineral Resource and Reserve Estimates

In accordance with applicable Canadian securities regulatory requirements, all mineral reserve and mineral resource estimates of the Company disclosed or incorporated by reference in this MD&A have been prepared in accordance with NI 43-101 and are classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards for Mineral Resources and Mineral Reserves, adopted by the CIM Council on May 10, 2014 (the “CIM Standards”).

Mineral resources which are not mineral reserves do not have demonstrated economic viability. Pursuant to the CIM Standards, mineral resources have a higher degree of uncertainty than mineral reserves as to their existence as well as their economic and legal feasibility. Inferred mineral resources, when compared with Measured or Indicated mineral resources, have the least certainty as to their existence, and it cannot be assumed that all or any part of an Inferred mineral resource will be upgraded to an Indicated or Measured mineral resource as a result of continued exploration. Pursuant to NI 43-101, Inferred mineral resources may not form the basis of any economic analysis. Accordingly, readers are cautioned not to assume that all or any part of a mineral resource exists, will ever be converted into a mineral reserve, or is or will ever be economically or legally mineable or recovered.

ADDITIONAL INFORMATION

Additional information about Ero and its business activities, including the AIF, is available under the Company’s profile at www.sedar.com.

Ero Copper Corp. September 30, 2020 MD&A Page 30 

EX-99.14

Exhibit 99.14

 

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2020 AND 2019

Ero Copper Corp.

Condensed Consolidated Statements of Financial Position

(Amounts in thousands of US Dollars)

(Unaudited)

				As at			As at
	Notes			September 30, 2020			December 31, 2019
ASSETS
Current
Cash and cash equivalents				$	54,341		$	21,485
Restricted cash		7	(b)		-			1,500
Accounts receivable					14,060			7,680
Inventories		3			20,856			19,377
Other current assets		4			14,401			25,523
					103,658			75,565
Non-Current
Mineral, property, plant and equipment		5			293,412			339,516
Exploration and evaluation assets		6			19,292			25,878
Deposits					449			1,200
Deferred income tax assets					21,985			13,099
Other non-current assets					612			7,416
					335,750			387,109
Total Assets				$	439,408		$	462,674
LIABILITIES
Current
Accounts payable and accrued liabilities				$	33,548		$	43,694
Current portion of loans and borrowings		7			17,325			18,984
Current portion of value added, payroll and other taxes payable					13,398			13,994
Current portion of derivatives		15			47,152			650
Current portion of lease liabilities					1,675			3,159
					113,098			80,481
Non-Current
Loans and borrowings		7			155,403			140,386
Provisions					23,436			33,581
Value added, payroll and other taxes					2,201			5,694
Derivatives		15			17,926			1,059
Lease liabilities					337			487
Other non-current liabilities					2,033			1,928
					201,336			183,135
Total Liabilities					314,434			263,616
SHAREHOLDERS’ EQUITY
Share capital		8			124,747			120,492
Equity reserves					(88,698	)		(24,489	)
Retained earnings					88,056			102,220
Equity attributable to owners of the Company					124,105			198,223
Non-controlling interests					869			835
					124,974			199,058
Total Liabilities and Equity				$	439,408		$	462,674

Nature of operations (Note 1); Contingencies (Note 17)

APPROVED ON BEHALF OF THE BOARD:

“David Strang” , CEO & Director  ”Matthew Wubs”  , Director

The accompanying notes are an integral part of these condensed consolidated interim financial statements

Page 1

Ero Copper Corp.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

			Three months			Three months			Nine months ended
			ended September			ended September			September 30,			Nine months ended
	Notes		30, 2020			30, 2019			2020			September 30, 2019
Revenue		9	$	94,328		$	60,640		$	232,833		$	209,155
Cost of product sold		10		(33,337	)		(38,378	)		(99,262	)		(119,800	)
Sales expenses				(1,386	)		(953	)		(3,782	)		(3,367	)
Gross profit				59,605			21,309			129,789			85,988
Expenses
General and administrative		11		(6,186	)		(6,360	)		(19,762	)		(20,110	)
Share-based compensation		8(a) to (c)		(1,743	)		(1,353	)		(6,515	)		(4,488	)
Income before the undernoted				51,676			13,596			103,512			61,390
Other income (expenses)
Finance income				204			101			1,201			343
Finance expense		12		(3,397	)		(5,206	)		(12,893	)		(18,414	)
Foreign exchange loss		13		(8,703	)		(10,866	)		(106,947	)		(9,571	)
Loss on debt settlement				-			-			-			(1,783	)
Recovery of value added taxes				-			21,584			-			21,584
Other income (expenses)				(1,531	)		(77	)		(3,026	)		1,080
Income (loss) before income taxes				38,249			19,132			(18,153	)		54,629
Income tax recovery (expense)
Current				(1,742	)		(1,517	)		(5,631	)		(8,413	)
Deferred				(5,064	)		(1,308	)		9,940			830
				(6,806	)		(2,825	)		4,309			(7,583	)
Net income (loss) for the period				31,443			16,307			(13,844	)		47,046
Other comprehensive income (loss)
Foreign currency translation loss				(5,272	)		(12,757	)		(69,232	)		(11,469	)
Comprehensive income (loss)			$	26,171		$	3,550		$	(83,076	)	$	35,577
Net income (loss) attributable to:
Owners of the Company				31,063			16,280			(14,164	)		46,714
Non-controlling interests				380			27			320			332
			$	31,443		$	16,307		$	(13,844	)	$	47,046
Comprehensive income (loss) attributable to:
Owners of the Company				25,812			3,574			(83,119	)		35,291
Non-controlling interests				359			(24	)		43			286
			$	26,171		$	3,550		$	(83,076	)	$	35,577
Net income (loss) per share attributable to
owners of the Company		8(e)
Net income (loss) per share
Basic			$	0.36		$	0.19		$	(0.16	)	$	0.55
Diluted			$	0.34		$	0.18		$	(0.16	)	$	0.51
Weighted average number of common shares
outstanding
Basic				86,448,318			85,505,675			86,048,450			85,117,603
Diluted				91,961,897			91,320,363			86,048,450			91,006,581

The accompanying notes are an integral part of these condensed consolidated interim financial statements

Page 2

Ero Copper Corp.

Condensed Consolidated Statement of Changes in Shareholders’ Equity

(Amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

			Share Capital				Equity Reserves
			Number of				Contributed			Foreign			Retained						Non-controlling
	Notes		shares		Amount		surplus			exchange			earnings			Total			interest			Total equity
Balance, December 31, 2019				85,703,646	$	120,492	$	9,084		$	(33,573	)	$	102,220		$	198,223		$	835		$	199,058
Loss for the period				-		-		-			-			(14,164	)		(14,164	)		320			(13,844	)
Other comprehensive loss for the period				-		-		-			(68,955	)		-			(68,955	)		(277	)		(69,232	)
Total comprehensive loss for the period				-		-		-			(68,955	)		(14,164	)		(83,119	)		43			(83,076	)
Shares issued for:
Exercise of options and warrants				1,062,281		4,255		(1,192	)		-			-			3,063			-			3,063
Share-based compensation		8(a) to (c)		-		-		5,938			-			-			5,938			-			5,938
Dividends to non-controlling interest				-		-		-			-						-			(9	)		(9	)
Balance, September 30, 2020				86,765,927	$	124,747	$	13,830		$	(102,528	)	$	88,056		$	124,105		$	869		$	124,974
Balance, December 31, 2018				84,738,650	$	117,944	$	3,897		$	(28,652	)	$	10,337		$	103,526		$	296		$	103,822
Income for the period				-		-		-			-			46,714			46,714			332			47,046
Other comprehensive loss for the period				-		-		-			(11,423	)		-			(11,423	)		(46	)		(11,469	)
Total comprehensive income (loss) for the period				-		-		-			(11,423	)		46,714			35,291			286			35,577
Shares issued for:
Exercise of options and warrants				834,996		2,083		(460	)		-			-			1,623			-			1,623
Share-based compensation				-		-		4,488			-			-			4,488			-			4,488
Balance, September 30, 2019				85,573,646	$	120,027	$	7,925		$	(40,075	)	$	57,051		$	144,928		$	582		$	145,510

The accompanying notes are an integral part of these condensed consolidated interim financial statements

Page 3

Ero Copper Corp.

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands of US Dollars)

(Unaudited)

				Three months			Nine months			Nine months
	Three months ended			ended September			ended September			ended September
	September 30, 2020			30, 2019			30, 2020			30, 2019
Cash Flows from / (used in) Operating Activities
Net income (loss) for the period	$	31,443		$	16,307		$	(13,844	)	$	47,046
Adjustments for:
Amortization and depreciation		10,445			10,768			30,187			34,129
Income tax expense (recovery)		6,806			2,825			(4,309	)		7,583
Loss on debt settlement		-			-			-			1,783
Recovery of value added taxes		-			(21,584	)		-			(21,584	)
Write-off of plant and equipment		127			1,030			175			2,298
Unrealized derivative contracts		-			1,514			-			1,514
Provisions		(710	)		(637	)		(155	)		(590	)
Share-based compensation		1,743			1,353			6,515			4,488
Finance income		(204	)		(101	)		(1,201	)		(343	)
Finance expenses		3,397			5,206			12,893			18,414
Foreign exchange loss		8,703			10,866			106,947			9,571
Changes in:
Accounts receivable		(13,274	)		(833	)		(7,510	)		(1,166	)
Inventories		(591	)		(1,123	)		(5,572	)		(4,490	)
Other assets		(1,840	)		(548	)		2,074			(1,636	)
Accounts payable and accrued liabilities		383			6,070			6,711			(387	)
Deferred revenue		-			(106	)		-			4,226
Value added, payroll and other taxes		4,354			35			5,417			(3,513	)
		50,782			31,042			138,328			97,343
Derivative contract settlements		(5,974	)		(828	)		(12,988	)		(119	)
Provision settlements		(378	)		(486	)		(1,126	)		(1,317	)
Income taxes paid		-			(200	)		-			(4,008	)
		44,430			29,528			124,214			91,899
Cash Flows from / (used in) Investing Activities
Additions to mineral property, plant and equipment		(27,104	)		(29,393	)		(85,846	)		(70,409	)
Additions to exploration and evaluation assets		(30	)		(230	)		(118	)		(834	)
Other investments		107			(501	)		672			(484	)
		(27,027	)		(30,124	)		(85,292	)		(71,727	)
Cash Flows from / (used in) Financing Activities
Restricted cash		750			375			1,500			1,125
Lease liability payments		(995	)		(1,258	)		(3,182	)		(3,077	)
New loans and borrowings, net of finance costs		5,809			612			56,807			18,151
Loans and borrowings paid		(15,481	)		(5,695	)		(44,565	)		(23,082	)
Interest paid on loans and borrowings		(4,171	)		(2,388	)		(7,903	)		(7,778	)
Other finance expenses		(956	)		(1,042	)		(2,262	)		(2,670	)
Issuance of share capital, net of issuance costs		1,407			490			3,063			1,623
		(13,637	)		(8,906	)		3,458			(15,708	)
Effect of exchange rate changes on cash and cash equivalents		(1,042	)		(2,263	)		(9,524	)		(1,689	)
Net increase in cash and cash equivalents		2,724			(11,765	)		32,856			2,775
Cash and cash equivalents - beginning of period		51,617			33,481			21,485			18,941
Cash and cash equivalents - end of period	$	54,341		$	21,716		$	54,341		$	21,716

The accompanying notes are an integral part of these condensed consolidated interim financial statements

Page 4

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

1. Nature of Operations

Ero Copper Corp. (“Ero" or the "Company") was incorporated on May 16, 2016 under the Business Corporations Act (British Columbia) and maintains its head office at Suite 1050, 625 Howe Street, Vancouver, BC, V6C 2T6. The Company’s shares are publicly traded on the Toronto Stock Exchange under the symbol “ERO”.

The Company’s principal asset is its 99.6% ownership interest in Mineração Caraíba S.A. (“MCSA”). The Company also currently owns a 97.6% ownership interest in NX Gold S.A. (“NX Gold”) indirectly through its wholly-owned subsidiary, Ero Gold Corp. (“Ero Gold”).

MCSA is a Brazilian company which holds a 100% interest in the Vale do Curaçá Property and the Boa Esperança Property (Note 6). MCSA’s predominant activity is the production and sale of copper concentrate from the Vale do Curaçá Property, located in Bahia, Brazil, with gold and silver produced and sold as by-products. The Company currently mines copper ore from the Pilar underground mine (“Pilar UG Mine”) and the Vermelhos underground mine (“Vermelhos UG Mine”). The Boa Esperança Property is located within the municipality of Tucumã in the southeastern part of the state of Pará, Brazil, and consists of a single mineral concession covering an area of 4,034 hectares (“ha”).

NX Gold is a Brazilian gold mining company focused on the exploration and commercialization of gold as its main product and silver as its by-product. NX Gold wholly owns a 31,096 ha property, located approximately 18 kilometers west of the town of Nova Xavantina, in southeastern Mato Grosso State, Brazil, consisting of a single mining concession covering an area of 620 ha, where all gold mining and processing activities occur.

On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. Although COVID-19 has not materially impacted the Company’s operations during the nine months ended September 30, 2020, the situation is dynamic and the ultimate duration and magnitude of the impact on the economy and our business are not known at this time. These impacts could include an impact on the Company’s ability to obtain debt and equity financing, impairment of investments, impairments in the value of long-lived assets, continued fluctuation in the value of the Brazilian Reais or potential future decreases in revenue or the profitability of ongoing operations. As at September 30, 2020, the Company and its subsidiaries have drawn down $14.0 million and BRL $57.0 million ($10.1 million) under various credit facilities as a proactive measure in light of the uncertainty surrounding the COVID-19 pandemic.

2. Basis of Preparation

a) Statement of Compliance

These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting and, except as disclosed in note 2(b) below, follow the same accounting policies and methods of application as the Company’s most recent annual consolidated financial statements for the year ended December 31, 2019. These condensed consolidated interim financial statements do not include all of the information required for full consolidated annual financial statements and should be read in conjunction with the consolidated financial statements of the Company as at and for the year ended December 31, 2019, prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee.

These condensed consolidated interim financial statements were authorized for issue by the Board of Directors of the Company (the “Board”) on November 5, 2020.

Page 5

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

b) New Accounting Standards and Interpretations Adopted in the Current Period

The following new and amended IFRS pronouncements were adopted effective January 1, 2020 and had no impact to the Company’s financial statements:

· Amendments to References to the Conceptual Framework in IFRS Standards

· In September 2019, the IASB issued first phase amendments IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Hedging and IFRS 7 Financial Instrument Disclosures to address the financial reporting impact of the reform on interest rate benchmarks, such as the discontinuance of the interbank offered rates. The first phase amendment is focused on the impact to hedge accounting requirements. The Company adopted the first phase amendment and there was no material impact on its consolidated financial statements. The Company will continue to assess the effect of amendments related to the interest rate benchmark reform on its consolidated financial statements.

The following amendment to accounting standards has been issued but not yet adopted in the financial statements:

· On May 14, 2020, the IASB published a narrow scope amendment to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use. The amendment prohibits deducting from the cost of property, plant and equipment amounts received from selling items produced while preparing the asset for its intended use. Instead, amounts received will be recognized as sales proceeds and related cost in profit or loss. The effective date is for annual periods beginning on or after January 1, 2022. The Company will not adopt this amendment until the effective date, but does not anticipate a material impact on its consolidated financial statements.

c) Use of Judgments and Estimates

In preparing these condensed consolidated interim financial statements, management has made judgments, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ. Significant judgments made by management in applying the Company’s accounting policies and key sources of estimation uncertainty were the same as those applied in the most recent annual audited consolidated financial statements for the year ended December 31, 2019, except for those applied for derivatives.

The fair value of derivative instruments is determined using either present value techniques or option pricing models that utilize a variety of inputs that are a combination of quoted prices and market-corroborated inputs. The fair value of the Company’s derivative contracts includes an adjustment for credit risk. Derivative instruments are classified within Level 2 of the fair value hierarchy.

3. Inventories

	September 30, 2020		December 31, 2019
Supplies and consumables	$	14,611	$	13,878
Stockpile		1,950		2,556
Work in progress		3,181		2,164
Finished goods		1,114		779
	$	20,856	$	19,377

Page 6

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

4. Other Current Assets

	September 30, 2020		December 31, 2019
Advances to suppliers	$	450	$	1,046
Prepaid expenses		1,726		4,779
Advances to employees (a)		2,050		2,829
Value added federal taxes recoverable (b)		10,175		16,869
	$	14,401	$	25,523

(a) Advances to employees include short term advances of salary, vacation and other benefits granted to employees of the Company’s subsidiaries MCSA and NX Gold.

(b) $6.7 million of this balance (December 31, 2019 - $12.2 million) relates to a 2019 favourable legal decision that recognizes MCSA’s right to a tax credit as a result of historical over-payments. MCSA is able to use these tax credits against a variety of taxes, including taxes on future sales. During the three and nine months ended September 30, 2020, the Company used $4.0 million and $7.2 million of these credits, respectively, to offset current income taxes payable.

5. Mineral, Property, Plant and Equipment

Additions to mineral, property, plant and equipment totaled $28.4 million and $89.9 million during the three and nine months ended September 30, 2020 respectively (three and nine months ended September 30, 2019 - $36.6 million and $86.3 million, respectively), of which $0.2 million and $6.6 million was obtained through financing arrangements with equipment suppliers, respectively (three and nine months ended September 30, 2019 – $6.1 million and $8.2 million, respectively).

Certain equipment has been provided as security for the equipment finance loans (note 7).

Included in mineral, property, plant and equipment is $5.2 million (December 31, 2019 - $7.3 million) related to the value of mineral resources beyond proven and probable reserves not currently being amortized. In addition, $60.5 million (December 31, 2019 - $52.7 million) related to projects in progress are not currently being amortized.

6. Exploration and Evaluation Assets

Exploration and evaluation assets relate to the Boa Esperança Property located in the Municipality of Tucumã, in the state of Pará, Brazil which consists of a single mineral concession. This prospective copper/gold property is in advanced stages of exploration with various geological mineral resource studies and is the subject of a completed feasibility study.

Page 7

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

7. Loans and Borrowings

								Carrying value, including
									accrued interest
							Principal to		September		December 31,
Description	Denomination	Security	Time to Maturity	Coupon rate			be repaid		30, 2020		2019
Bank loan (at acquisition)	BRL R$	Unsecured	75 months	CDI + 0.5%			4,292		3,805		5,941
Bank loan (MCSA)	USD	Unsecured	-	4.43	%		-		-		1,503
Bank loan (MCSA)	BRL R$	Unsecured	-	CDI + 3.7%			-		-		204
Line of credit (MCSA)	BRL R$	Unsecured	6 months	CDI + 9.0%			2,660		2,667		-
Line of credit (MCSA)	BRL R$	Unsecured	0 - 12 months	11.88%-14.30%			7,345		7,441		-
Lines of credit (NX Gold)	BRL R$	Unsecured	-	14.34%-14.98%			-		-		670
Equipment finance loan (Plural)	BRL R$	Secured	14 months	CDI + 7.0%			1,241		1,248		2,892
Equipment finance loans	BRL R$	Secured	8 - 45 months	11.88%-14.28%			1,446		1,590		5,585
Equipment finance loans	EURO	Secured	21 - 27 months	5.5%-7.0%			2,559		2,612		3,996
Equipment finance loans	USD	Secured	19-29 months	6.50%-7.95%			5,267		5,309		4,125
Senior non-revolving credit facility	USD	Secured	42 months	LIBOR + 2.50%-4.25%			75,000		74,028		79,091
Senior revolving credit facility	USD	Secured	42 months	LIBOR + 2.50%-4.25%			75,000		74,028		55,363
Total						$	174,810	$	172,728	$	159,370
Current portion:								$	17,325	$	18,984
Non-current portion:								$	155,403	$	140,386

	September 30, 2020			September 30, 2019
Balance, beginning of year	$	159,370		$	152,234
New senior revolving credit facility, net		13,653			10,572
New equipment finance loans		18,671			15,874
New lines of credit		31,093			-
Principal and interest payments		(52,468	)		(30,860	)
Interest accretion		7,827			8,401
Loss on debt modification		-			1,783
Effect of foreign exchange rate changes		(5,418	)		(1,033	)
Balance, end of period	$	172,728		$	156,971

(a) Senior credit facility

The Company has a $150 million facility from a syndicate of Canadian financial institutions. The facility is comprised of a $75 million (December 31, 2019 - $80 million) senior secured amortizing non-revolving credit facility (“Term Facility”) and a $75 million (December 31, 2019 - $70 million) senior secured revolving term credit facility (“Revolving Credit Facility”) (collectively the “Facilities”).

On March 31, 2020, the Company amended the Facilities to reduce its cost of borrowing by 25 to 50 basis points, depending on the consolidated leverage ratio, and to defer the scheduled principal payments for two years.

The Term Facility now matures on March 31, 2024 and requires principal repayments on a quarterly basis commencing on March 31, 2022, while the Revolving Credit Facility is now payable in full at maturity on March 31, 2024. The Facilities bear interest on a sliding scale at a rate of LIBOR plus 2.50% to 4.25% depending on the Company’s consolidated leverage ratio at the time. Commitment fees for any undrawn portion of the Revolving Credit Facility are also on a sliding scale between 0.63% to 1.06%. The Company determined that the amendments were a non-substantial modification. In March 2020, the Company drew down the remainder of the amount available under the Facilities totaling $14.0 million ($13.7 million net of transaction costs). The Term Facility previously had a five-year term with equal quarterly principal payments beginning on December 13, 2020, while the Revolving Credit Facility was payable at maturity on December 13, 2022. The Facilities previously bore interest on a sliding scale at a rate of LIBOR plus 2.75% to 4.75% depending on the Company’s consolidated leverage ratio at the time.

Page 8

Ero Copper Corp. 

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

The Facilities include standard and customary terms and conditions with respect to fees, representations, warranties, and financial covenants that remain unchanged from prior amendments.

The Facilities are secured by pledges of shares of MCSA, Ero Gold and NX Gold. The Company is required to comply with certain financial covenants. As of the date of these consolidated financial statements, the Company is in compliance with these covenants.

In January 2019, the Company entered into an interest rate swap transaction with a Canadian financial institution whereby the floating interest on a notional amount of $65.0 million of the Term Facility was swapped for a fixed interest rate of 2.69%. This interest rate swap transaction is in effect for the majority of term of the Term Facility, with the notional amount reduced as principal payments are made. Interest swap settlements are being made on a quarterly basis.

(b) Bank loan and equipment finance loans

The bank loan (at acquisition) relates to the Company’s subsidiary, MCSA, and was recognized at the date of acquisition at fair value and has subsequently been recognized at amortized cost, net of settlements. Interest is being recognized using the effective interest rate method at an interest rate of 11.29%.

As per the terms of one of MCSA’s bank loans, the Company was required to maintain a separate debt service bank account with sufficient funds to guarantee scheduled principal payments by MCSA. At September 30, 2020, this loan has been repaid and the separate debt service bank account has been closed. At December 31, 2019, $1.5 million was deposited in the designated debt service account and was presented as restricted cash in the statement of financial position.

MCSA is required to comply with certain financial covenants which MCSA is in compliance with at September 30, 2020. The equipment finance loans are secured by the corresponding equipment relating to them and a guarantee by the Company.

(c) MCSA and NX Gold lines of credit

At September 30, 2020, the Company’s subsidiaries, MCSA and NX Gold, have the following credit facilities available:

MCSA entered into a credit agreement in 2019 for a non-revolving line of credit of up to BRL $30.0 million at an interest rate of CDI (“Brazilian Interbank Deposit Rate”) + 9% per annum. The Company and NX Gold provide unsecured guarantees for this credit agreement. At September 30, 2020, BRL $15.0 million ($2.7 million) (December 31, 2019 - $nil) had been drawn from this credit facility, which represents the maximum remaining amount available under the credit facility at September 30, 2020.

During the three months ended June 30, 2020, MCSA entered into a credit agreement for a line of credit of up to BRL $14.9 million at an interest rate of 14.3% per annum. The Company provides an unsecured guarantee for this credit agreement. At September 30, 2020, BRL $14.9 million ($2.7 million) had been drawn from this credit facility.

During the three months ended June 30, 2020, MCSA entered into various credit agreements for lines of credit of up to a total of BRL $17.5 million at various interest rates. The interest rates on these credit agreements ranged from 13.20% to 24.34%. At June 30, 2020, BRL $17.5 million ($3.2 million) had been drawn from these credit facilities. During the three months ended September 30, 2020, MCSA entered into various new credit agreements for a further BRL $30.8 million of credit (for a total of $48.3 million) at various interest rates. During the quarter, the Company repaid a total of BRL $21.4 million in lines of credit. At September 30, 2020, BRL $26.9 million ($4.7 million) remains drawn from these credit facilities, which represents the maximum remaining amount available under these credit facilities.

Page 9

Ero Copper Corp. 

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

During the three months ended September 30, 2020, MCSA repaid and terminated a previous line of credit entered into in 2019 in the amount of BRL $30.0 million with an interest rate of 14.98%. MCSA replaced this line of credit during the three months ended September 30, 2020 by entering into a new credit agreement for a line of credit of up to BRL $30.0 million at an interest rate of CDI + 8.858%. MCSA may drawdown on this line of credit at any time until September 20, 2021. The Company and NX Gold provide unsecured guarantees for this credit agreement. At September 30, 2020, $nil has been drawn from this credit facility.

NX Gold entered into an agreement in 2019 for a line of credit of up to BRL $7.5 million at an interest rate of 14.98% per annum. At June 30, 2020, BRL $7.5 million ($1.4 million) had been drawn from this line of credit. During the three months ended September 30, 2020, this line of credit has been repaid and terminated.

During the three months ended March 31, 2020, NX Gold entered into a credit agreement for a line of credit of up to BRL $7.5 million at an interest rate of 14.34% per annum. NX Gold may drawdown on this line of credit at any time until February 22, 2021. The Company provides unsecured guarantees for these credit agreements. At September 30, 2020, $nil (December 31, 2019 - $nil) had been drawn from this line of credit.

During the three months ended September 30, 2020, NX Gold entered into a credit agreement for a line of credit of up to BRL $8.0 million at an interest rate of CDI + 8.858%. NX Gold may drawdown on this line of credit at any time until September 20, 2021. The Company and NX Gold provide unsecured guarantees for this credit agreement. At September 30, 2020, $nil has been drawn from this credit facility.

8. Share Capital

As at September 30, 2020, the Company’s authorized share capital consists of an unlimited number of common shares without par value. As at September 30, 2020, 86,765,927 common shares were outstanding.

(a) Options

As at September 30, 2020, the following stock options were outstanding:

					Vested and		Weighted
					Exercisable		Average
	Number of		Weighted Average		Number of		Remaining
Expiry Date	Stock Options		Exercise Price		Stock Options		Life in Years
May 15, 2022		445,334		1.50	USD	445,334		1.62
July 10, 2022		60,000		1.50	USD	60,000		1.78
November 24, 2022		318,000		6.48	CAD	212,000		2.15
December 7, 2022		1,316,669		6.74	CAD	870,002		2.19
January 18, 2023		60,000		7.95	CAD	40,000		2.30
January 23, 2023		41,667		7.76	CAD	41,667		2.32
June 19, 2023		144,000		10.25	CAD	94,000		2.72
July 16, 2023		100,000		9.01	CAD	33,332		2.79
December 31, 2023		1,078,238		9.76	CAD	307,892		3.25
January 2, 2024		125,000		9.80	CAD	125,000		3.26
August 15, 2024		40,000		21.09	CAD	40,000		3.88
December 12, 2024		470,228		20.52	CAD	-		4.20
January 2, 2025		73,456		23.42	CAD	43,456		4.26
		4,272,592		6.86	USD	2,312,683		2.73

Page 10

Ero Copper Corp. 

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

In determining the weighted average exercise price of all outstanding options in the tables above and below, the CAD prices were converted to USD at the September 30, 2020 exchange rate of 1.3339.

	Number of			Weighted Average
	Stock Options			Exercise Price
Outstanding stock options, December 31, 2019		5,061,417		$	6.23
Issued		73,456			17.56
Exercised		(862,281	)		3.01
Outstanding stock options, September 30, 2020		4,272,592		$	6.86

The fair value of options granted in the three and nine months ended September 30, 2020 was determined using the Black-Scholes option pricing model. The weighted average inputs used in the measurement of fair values at grant date of the options are the following:

Expected term (years)		3.0
Forfeiture rate		0	%
Volatility		50.6	%
Dividend yield		0	%
Risk-free interest rate		1.63	%
Weighted-average fair value per option	$	6.46

For the three and nine months ended September 30, 2020, the Company recorded share-based compensation of $0.8 million and $2.9 million (three and nine months ended September 30, 2019 - $1.1 million and $3.7 million), with respect to its outstanding stock options.

(b) Share Unit Plan

As at September 30, 2020, 438,463 share units (December 31, 2019 - 437,463 share units) have been issued to certain officers and employees of the Company pursuant to the Company’s Share Unit Plan and are outstanding. These share units will vest three years from the date of grant by the Board and the number of share units that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain market and non-market performance conditions. Each vested share unit entitles the holder thereof to receive on or about the applicable date of vesting of such share unit (i) one common share; (ii) a cash amount equal to the fair market value of one common share as at the applicable date of vesting; or (iii) a combination of (i) and (ii), as determined by the Board in its sole discretion. The Company currently intends to settle these share units using common shares. Accordingly, they are classified as equity settled instruments.

For the share units with non-market performance conditions, the fair value of the share units granted was determined using the share price at the date of grant. For the share units with market performance conditions, the fair value of the share units granted was determined using a Geometric Brownian Motion model. The weighted average inputs used in the measurement of fair values at grant date of the 1,000 Share Units granted during the nine months ended September 30, 2020 are as follows:

Expected term (years)		3.0
Forfeiture rate		0	%
Volatility		44.9	%
Dividend yield		0	%
Risk-free interest rate		1.82	%
Weighted-average fair value per Share Unit	$	18.38

During the three and nine months ended September 30, 2020, the Company recorded share-based compensation of $0.8 million and $3.0 million (three and nine months ended September 30, 2019 - $0.3 million and $0.8 million, respectively), with respect to the share units.

Page 11

Ero Copper Corp. 

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

(c) Deferred Share Unit Plan

On December 12, 2019, a Deferred Share Unit Plan (“DSU Plan”) was established by the Board as a component of our compensation for independent directors. Only independent directors are eligible to participate and to receive deferred share units (“DSUs”) under the DSU Plan.  DSUs may be awarded by the Board from time to time to provide independent directors with appropriate equity-based compensation for the services they render to the Company and may be subject to terms and conditions with respect to vesting of such DSUs.  In addition, independent directors may elect to receive a portion or all of their respective annual cash remuneration in the form of DSUs, which will be fully vested upon such grant.  The number of DSUs to be awarded to a participant under the DSU Plan is determined by dividing the portion of that participant’s annual cash remuneration by the fair market value of a common share on the last day of the quarter in which such portion of the annual cash remuneration was earned. Pursuant to the DSU Plan, DSUs may only be settled by way of cash payment. A participant is not entitled to payment in respect of the DSUs until his or her death, retirement or removal from the Board.  The settlement amount of each DSU is based on the fair market value of a common share on the DSU redemption date multiplied by the number of DSUs being redeemed.

During the three and nine months ended September 30, 2020, 4,904 DSUs and 42,225 DSUs, respectively, (three and nine months ended September 30, 2019 - nil) were issued to independent directors.

As at September 30, 2020, the fair value of the DSU liability was $0.6 million (December 31, 2019 - $nil) which has been recognized in other non-current liabilities with a corresponding $0.1 million and $0.6 million recognized in share-based compensation expense for the three and nine months ended September 30, 2020, respectively.

(d) Warrants

As at September 30, 2020, 2,666,662 (December 31, 2019 - 2,866,662) common share purchase warrants were outstanding with a weighted average exercise price of $1.20 and a weighted average remaining contractual life of 1.20 years. 200,000 warrants were exercised during the nine months ended September 30, 2020.

(e) Net Income (Loss) per Share

	Three months		Three months
	ended September		ended September
	30, 2020		30, 2019
Weighted average number of common shares outstanding		86,448,318		85,505,675
Dilutive effect of warrants		2,479,390		2,686,319
Dilutive effect of stock options		2,376,494		3,128,369
Dilutive effect of Share Units		657,695		-
Weighted average number of diluted common shares outstanding		91,961,897		91,320,363
Net income attributable to owners of the Company	$	31,063	$	16,280
Basic net income per share attributable to owners of the Company		0.36		0.19
Diluted net income per share attributable to owners of the Company		0.34		0.18

Page 12

Ero Copper Corp. 

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

	Nine months			Nine months
	ended September			ended September
	30, 2020			30, 2019
Weighted average number of common shares outstanding		86,048,450			85,117,603
Dilutive effect of warrants		-			2,935,852
Dilutive effect of stock options		-			2,953,126
Weighted average number of diluted common shares outstanding		86,048,450			91,006,581
Net income (loss) attributable to owners of the Company	$	(14,164	)	$	46,714
Basic net income (loss) per share attributable to owners of the Company		(0.16	)		0.55
Diluted net income (loss) per share attributable to owners of the Company		(0.16	)		0.51

For the nine months ended September 30, 2020, all of the potentially dilutive effect of warrants and stock options are excluded from the dilutive net loss per share calculation as the Company incurred a loss for the period and all dilutive instruments would be anti-dilutive.

9. Revenue

	Three months ended		Three months ended		Nine months ended		Nine months ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Copper concentrate
- sales within Brazil	$	36,871	$	37,778	$	113,831	$	130,934
- export sales		34,744		16,544		71,759		44,936
- price adjustments on provisionally priced sales		3,946		18		2,661		2,676
Gold
- export sales		18,767		6,300		44,582		30,609
	$	94,328	$	60,640	$	232,833	$	209,155

Under the terms of the Company’s contract with its primary customer, sales are provisionally priced on the date of sale based on the previous month’s average copper price.  The final sales price for all shipments in a month is determined at the end of the month in which the sale is recognized.  As at September 30, 2020, there were no sales subject to provisional pricing.  During the three and nine months ended September 30, 2020, the Company recognized $3.9 million and $2.7 million, respectively, (three and nine months ended September 30, 2019 - $nil and $2.7 million) in price adjustments related to provisionally priced sales. 

10. Cost of Product Sold

	Three months ended		Three months ended		Nine months ended		Nine months ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Materials	$	4,873	$	5,452	$	14,229	$	16,093
Salaries and benefits		7,046		9,121		22,503		29,276
Depreciation and depletion		10,411		10,726		30,088		34,005
Contracted services		4,600		5,345		14,452		18,133
Maintenance costs		4,116		4,530		11,131		13,358
Utilities		2,171		2,945		6,460		8,216
Other costs		120		259		399		719
	$	33,337	$	38,378	$	99,262	$	119,800

Page 13

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

11. General and Administrative Expenses

	Three months ended			Three months ended			Nine months ended			Nine months ended
	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
Accounting and legal	$	193		$	311		$	698		$	1,069
Amortization and depreciation		34			42			99			124
Office and sundry		1,879			1,573			4,916			4,461
Provisions		(710	)		(637	)		(155	)		(590	)
Salaries and consulting fees		2,495			2,437			9,351			10,008
Incentive payments		1,774			2,063			3,629			3,197
Transfer agent and filing fees		66			33			238			156
Travel and conference		455			538			986			1,685
	$	6,186		$	6,360		$	19,762		$	20,110

12. Finance Expense

	Three months ended		Three months ended		Nine months ended		Nine months ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Interest on loans and borrowings	$	2,555	$	2,668	$	7,829	$	8,541
Loss on interest rate swap derivative		5		213		2,023		2,041
Accretion of mine closure and rehabilitation provision		198		973		657		3,704
Interest on lease liabilities		52		88		189		289
Other finance expenses		587		1,264		2,195		3,839
	$	3,397	$	5,206	$	12,893	$	18,414

13. Foreign Exchange Loss

The following foreign exchange gains (losses) arise as a result of balances and transactions in the Company’s Brazilian subsidiaries that are denominated in currencies other than the Brazilian Reais (BRL$), which is their functional currency.

	Three months ended			Three months ended			Nine months ended			Nine months ended
	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
Foreign exchange on USD denominated debt in Brazil	$	(2,034	)	$	(9,597	)	$	(31,903	)	$	(8,159	)
Realized foreign exchange on derivative contracts (note 15)		(5,974	)		(828	)		(12,988	)		(119	)
Unrealized foreign exchange on derivative contracts (note 15)		(1,067	)		(1,404	)		(62,207	)		(1,660	)
Other		372			963			151			367
	$	(8,703	)	$	(10,866	)	$	(106,947	)	$	(9,571	)

Page 14

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

14. Related Party Transactions

Key management personnel consist of the Company’s directors and officers and their compensation includes director retainer fees and management salaries paid to these individuals, as well as share-based compensation. The aggregate value of compensation paid to key management personnel for the three and nine months ended September 30, 2020 was $1.8 million and $5.4 million, respectively ($1.5 million and $4.4 million for the three and nine months ended September 30, 2019, respectively). In addition, nil options and 4,904 DSUs, and 43,456 options and 42,225 DSUs were issued to non-executive directors during the three and nine months ended September 30, 2020, respectively (40,000 options and 165,000 options for the three and nine months ended September 30, 2019, respectively). $1.1 million and $4.0 million was recognized in share-based compensation expense for the three and nine months ended September 30, 2020, respectively, for options, Share Units, and DSUs issued ($1.0 million and $3.3 million for the three and nine months ended September 30, 2019, respectively).

During the three and nine months ended September 30, 2020, key management personnel exercised 150,000 and 398,555 options, as well as 100,000 and 200,000 warrants, for cash proceeds to the Company of $0.9 million and $1.4 million, respectively (66,666 and 176,666 options, respectively, for cash proceeds of $0.1 million and $0.3 million for the three and nine months ended September 30, 2019, respectively).

15. Financial Instruments

Fair value

Fair values of financial assets and liabilities are determined based on available market information and valuation methodologies appropriate to each situation. However, some judgments are required in the interpretation of the market data to produce the most appropriate fair value estimates. The use of different market information and/or evaluation methodologies may have a material effect on the fair value amounts.

As at September 30, 2020, derivatives were measured at fair value based on Level 2 inputs.

The carrying values of cash and cash equivalents, accounts receivable, deposits, financial investments and accounts payable and accrued liabilities approximate their fair values due to their short terms to maturity or market rates of interest used to discount amounts. The carrying value of value added, payroll and other taxes approximate fair value based on the discount rate applied. At September 30, 2020, the carrying value of loans and borrowings is $172.7 million while the fair value is approximately $174.8 million. The effective interest rates used to amortize these loans are a close approximation of market rates of interest at September 30, 2020 (Level 2 of the fair value hierarchy).

Page 15

Ero Copper Corp. 

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers. The carrying amount of the financial assets below represents the maximum credit risk exposure as at September 30, 2020 and December 31, 2019:

	September 30, 2020		December 31, 2019
Cash and cash equivalents	$	54,341	$	21,485
Restricted cash		-		1,500
Accounts receivable		14,060		7,680
Deposits and other non-current assets		952		2,396
	$	69,353	$	33,061

The Company invests cash and cash equivalents with financial institutions that are financially sound based on their credit rating. The Company’s exposure to credit risk associated with accounts receivable is influenced mainly by the individual characteristics of each customer. The Company currently has only three significant customers, all of which have no history of credit default with the Company. The Company has not incurred credit losses during the nine months ended September 30, 2020 nor recognized a provision for credit losses.

(i) Foreign exchange currency risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage market risks. At September 30, 2020, the Company has entered into foreign exchange collar contracts at zero cost for notional amounts of $341.4 million with an average floor rate of 4.02 BRL to US Dollar and an average cap rate of 4.70 BRL to US Dollar (December 31, 2019 - notional amount of $336.6 million in foreign exchange forward collar contracts). The maturity dates of these contracts are from October 28, 2020 to May 20, 2022 and are financially settled on a net basis. The fair value of these contracts at September 30, 2020 was a liability of $62.2 million, (December 31, 2019 - $nil) which is included in Derivatives in the statement of financial position. The change in fair value of foreign exchange collar contracts was a loss of $1.1 million and $62.2 million for the three and nine months ended September 30, 2020, respectively, (a loss of $1.4 million and $1.7 million for the three and nine months ended September 30, 2019, respectively) and has been recognized in foreign exchange loss. In addition, during the three and nine months ended September 30, 2020, the Company recognized a realized loss of $6.0 million and $13.0 million, respectively (a realized loss of $0.8 million and $0.1 million for the three and nine months ended September 30, 2019, respectively) related to the settlement of foreign currency forward collar contracts.

Page 16

Ero Copper Corp. 

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

(ii) Interest rate risk

The Company is principally exposed to the variation in interest rates on loans and borrowings with variable rates of interest. Management reduces interest rate risk exposure by entering into loans and borrowings with fixed rates of interest or by entering into derivative instruments that fix the ultimate interest rate paid.

The Company is principally exposed to interest rate risk through its Term Facilities of $150.0 million, Brazilian Real denominated bank loans of $4.3 million, Brazilian Real denominated lines of credit of $2.7 million, and Brazilian Real denominated equipment finance loans of $1.2 million. Based on the Company’s net exposure at September 30, 2020, a 1% change in the variable rates would have an impact of $1.6 million on pre-tax annual net income, without consideration of the effects of the interest rate swap contract below.

In order to mitigate the above volatility due to variable rates on loans, as at September 30, 2020, the Company has entered into an interest rate swap contract to manage interest rate risk (see note 7(a)). The floating interest on a notional amount of $65.0 million was swapped for a fixed interest rate of 2.69%. The fair value of this contract at September 30, 2020 was a liability of $2.8 million (December 31, 2019 - $1.7 million) and was included in Derivatives in the statement of financial position. The realized loss on the interest rate swap contract was $0.4 million and $0.8 million for the three and nine months ended September 30, 2020, respectively, and was included in finance expense. In addition, the company recognized an unrealized gain of $0.4 million and an unrealized loss of $1.2 million on the interest rate swap contract for the three and nine months ended September 30, 2020, respectively, which was included in finance expense.

(iii) Price risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage commodity price risks. At September 30, 2020, the Company has not entered into any commodity derivative contracts.

16. Segment Disclosure

The Company’s operations are segmented by entity between MCSA, NX Gold and corporate head office, which is consistent with internal reporting purposes. The Company monitors the operating results of its operating segments separately for the purpose of making decisions about resource allocation and performance assessment.

Total revenue from MCSA is from two customers while total revenue from NX Gold is from one customer.

Segmented information is as follows:

Three months ended September 30, 2020	MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	75,561		$	18,767		$	-		$	94,328
Depreciation and depletion		(9,593	)		(818	)		-			(10,411	)
Other cost of product sold expenses		(18,575	)		(4,351	)		-			(22,926	)
Cost of product sold		(28,168	)		(5,169	)		-			(33,337	)
Sales expenses		(1,101	)		(285	)		-			(1,386	)
Gross profit		46,292			13,313			-			59,605
Expenses
General and administrative		(3,327	)		(454	)		(2,405	)		(6,186	)
Share-based compensation		-			-			(1,743	)		(1,743	)
Finance income		84			30			90			204
Finance expenses		(1,564	)		(135	)		(1,698	)		(3,397	)
Foreign exchange loss		(8,368	)		(337	)		2			(8,703	)
Other income		(1,008	)		(523	)		-			(1,531	)
Income (loss) before taxes		32,109			11,894			(5,754	)		38,249
Current tax expense		(1,005	)		(737	)		-			(1,742	)
Deferred tax recovery		(5,018	)		(46	)		-			(5,064	)
Net Income (Loss)	$	26,086		$	11,111		$	(5,754	)	$	31,443

Page 17

Ero Copper Corp. 

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

Nine months ended September 30, 2020	MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	188,251		$	44,582		$	-		$	232,833
Depreciation and depletion		(27,724	)		(2,364	)		-			(30,088	)
Other cost of product sold expenses		(56,043	)		(13,131	)		-			(69,174	)
Cost of product sold		(83,767	)		(15,495	)		-			(99,262	)
Sales expenses		(3,497	)		(285	)		-			(3,782	)
Gross profit		100,987			28,802			-			129,789
Expenses
General and administrative		(11,892	)		(1,147	)		(6,723	)		(19,762	)
Share-based compensation		-			-			(6,515	)		(6,515	)
Finance income		369			88			744			1,201
Finance expenses		(4,985	)		(663	)		(7,245	)		(12,893	)
Foreign exchange loss		(103,878	)		(3,041	)		(28	)		(106,947	)
Other income		(1,971	)		(1,055	)		-			(3,026	)
Income (loss) before taxes		(21,370	)		22,984			(19,767	)		(18,153	)
Current tax expense		(2,928	)		(2,703	)		-			(5,631	)
Deferred tax recovery		9,557			383			-			9,940
Net Income (Loss)	$	(14,741	)	$	20,664		$	(19,767	)	$	(13,844	)
Assets
Current	$	62,242		$	21,209		$	20,207		$	103,658
Non-current		311,753			21,240			2,757			335,750
Total Assets	$	373,995		$	42,449		$	22,964		$	439,408
Total Liabilities	$	142,974		$	13,488		$	157,972		$	314,434

Three months ended September 30, 2019	MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	54,340		$	6,300		$	-		$	60,640
Depreciation and depletion		(9,675	)		(1,051	)		-			(10,726	)
Other cost of product sold expenses		(22,721	)		(4,931	)		-			(27,652	)
Cost of product sold		(32,396	)		(5,982	)		-			(38,378	)
Sales expenses		(953	)		-			-			(953	)
Gross profit		20,991			318			-			21,309
Expenses
General and administrative		(3,562	)		(472	)		(2,326	)		(6,360	)
Share-based compensation		-			-			(1,353	)		(1,353	)
Finance income		83			10			8			101
Finance expenses		(2,504	)		(364	)		(2,338	)		(5,206	)
Foreign exchange gain (loss)		(10,847	)		1			(20	)		(10,866	)
Recovery of value added taxes		21,584			-			-			21,584
Other income		625			(702	)		-			(77	)
Income (loss) before taxes		26,370			(1,209	)		(6,029	)		19,132
Current taxes		(1,537	)		20			-			(1,517	)
Deferred taxes		(1,346	)		38			-			(1,308	)
Net Income (Loss)	$	23,487		$	(1,151	)	$	(6,029	)	$	16,307

Page 18

Ero Copper Corp. 

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

Nine months ended September 30, 2019	MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	178,546		$	30,609		$	-		$	209,155
Depreciation and depletion		(28,979	)		(5,026	)		-			(34,005	)
Other cost of product sold expenses		(71,008	)		(14,787	)		-			(85,795	)
Cost of product sold		(99,987	)		(19,813	)		-			(119,800	)
Sales expenses		(3,367	)		-			-			(3,367	)
Gross profit		75,192			10,796			-			85,988
Expenses
General and administrative		(10,728	)		(1,763	)		(7,619	)		(20,110	)
Share-based compensation		-			-			(4,488	)		(4,488	)
Finance income		193			124			26			343
Finance expenses		(9,032	)		(1,011	)		(8,371	)		(18,414	)
Foreign exchange gain (loss)		(9,538	)		1			(34	)		(9,571	)
Loss on debt settlement		(1,783	)		-			-			(1,783	)
Recovery of value added taxes		21,584			-			-			21,584
Other income		1,447			(367	)		-			1,080
Income (loss) before taxes		67,335			7,780			(20,486	)		54,629
Current taxes		(6,341	)		(2,072	)		-			(8,413	)
Deferred taxes		421			409			-			830
Net Income (Loss)	$	61,415		$	6,117		$	(20,486	)	$	47,046
Assets
Current	$	63,003		$	7,506		$	4,518		$	75,027
Non-current		319,405			17,234			2,833			339,472
Total Assets	$	382,408		$	24,740		$	7,351		$	414,499
Total Liabilities	$	118,404		$	13,777		$	136,808		$	268,989

17. Contingencies

MCSA is subject to a number of claims (including claims related to tax, labour and social security matters and civil action) in the course of its business which individually are not material and have not been accrued for in the Company’s financial statements as it is not probable that a cash outflow will occur. While the Company believes that these claims are unlikely to be successful, if all such existing claims were decided against it, the Company could be exposed to a liability of up to approximately $19.7 million as at September 30, 2020 (December 31, 2019 - $31.1 million), which could have an adverse impact on the Company’s business, financial condition, results of operations, cash flows or prospects.

Page 19

EX-99.15

Exhibit 99.15 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2020

1050 – 625 Howe Street, Vancouver, B.C., Canada V6C 2T6
Phone: 604-449-9244 | Website: www.erocopper.com | Email: info@erocopper.com 

Ero Copper Corp. June 30, 2020 MD&A Page 1

MANAGEMENT’S DISCUSSION AND ANALYSIS

This Management’s Discussion and Analysis (“MD&A”) has been prepared as at August 6, 2020 and should be read in conjunction with the unaudited condensed consolidated interim financial statements of Ero Copper Corp. (“Ero”, the “Company”, or “we”) for the three and six months ended June 30, 2020, and related notes thereto, which are prepared in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting as permitted by the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”). All references in this MD&A to “Q2 2020” and “Q2 2019” are to the three months ended June 30, 2020 and June 30, 2019, respectively, and all references to “YTD 2020” and “YTD 2019” are to the six months ended June 30, 2020 and June 30, 2019, respectively. As well, this MD&A should be read in conjunction with the Company’s December 31, 2019 audited consolidated financial statements and MD&A. All dollar amounts are expressed in United States (“US”) dollars and tabular amounts are expressed in thousands of US dollars, unless otherwise indicated. References to “$”, “US$”, “dollars”, or “USD” are to US dollars, references to “C$” are to Canadian dollars, and references to “R$” or “BRL” are to Brazilian Reais.

This MD&A refers to various non-IFRS measures, such as C1 cash cost of copper produced (per lb), C1 cash cost of gold produced (per ounce), EBITDA, Adjusted EBITDA, Adjusted net income attributable to owners of the Company, Adjusted net income per share attributable to owners of the Company, Working Capital (Deficit), Available Liquidity, and Net Debt. Please refer to the section titled "NON-IFRS MEASURES" within this MD&A for a discussion of non-IFRS measures.

This MD&A contains “forward-looking information” that is subject to risk factors set out in a cautionary note contained at the end of this MD&A. The Company cannot assure investors that such information will prove to be accurate, and actual results and future events may differ materially from those anticipated in such information. The results for the periods presented are not necessarily indicative of the results that may be expected for any future period. Investors are cautioned not to place undue reliance on this forward-looking information. All information contained in this MD&A is current and has been approved by the Board of Directors of the Company (the “Board”) as of August 6, 2020, unless otherwise stated.

BUSINESS OVERVIEW

Ero, headquartered in Vancouver, B.C., is focused on copper production growth from the Vale do Curaçá Property, located in Bahia, Brazil. The Company’s primary asset is a 99.6% interest in the Brazilian copper mining company, Mineraҫão Caraíba S.A. (“MCSA”), 100% owner of the Vale do Curaçá Property with over 40 years of operating history in the region. The Company currently mines copper ore from the Pilar and Vermelhos underground mines. In addition to the Vale do Curaçá Property, MCSA owns 100% of the Boa Esperanҫa development project, an IOCG-type copper project located in Pará, Brazil and the Company owns 97.6% of the NX Gold Mine, an operating gold and silver mine located in Mato Grosso, Brazil. Additional information on the Company and its operations, including technical reports on the Vale do Curaçá, Boa Esperanҫa and NX Gold properties, can be found on the Company’s website (www.erocopper.com) and on SEDAR (www.sedar.com).

Ero Copper Corp. June 30, 2020 MD&A Page 2

HIGHLIGHTS

	2020 - Q2			2020 - Q1			2020 - YTD			2019 - Q2			2019 - YTD
Operating Information
Copper (MCSA Operations)
Ore Processed (tonnes)		627,071			607,959			1,235,030			717,479			1,247,612
Grade (% Cu)		1.98			1.95			1.97			1.62			1.86
Cu Production (tonnes)		11,178			10,657			21,835			10,473			21,118
Cu Production (lbs)		24,642,935			23,495,098			48,138,033			23,089,363			46,557,782
Cu Sold in Concentrate (tonnes)		10,586			10,432			21,018			10,931			20,964
Cu Sold in Concentrate (lbs)		23,338,581			22,999,136			46,337,717			24,099,753			46,218,147
C1 cash cost of copper produced (per lb)	$	0.65		$	0.71		$	0.68		$	1.04		$	0.97
Gold (NX Gold Operations)
Au Production (ounces)		8,739			7,866			16,605			9,917			20,036
C1 cash cost of gold produced (per ounce)	$	437		$	594		$	511		$	517		$	501
Financial information ($millions, except per share amounts)
Revenues	$	70.8		$	67.7		$	138.5		$	76.5		$	148.5
Gross profit	$	39.5		$	30.7		$	70.2		$	32.1		$	64.7
EBITDA	$	23.4		$	(50.6	)	$	(27.2	)	$	34.9		$	72.1
Adjusted EBITDA	$	42.4		$	33.4		$	75.9		$	36.4		$	75.7
Cash flow from operations	$	42.5		$	37.3		$	79.8		$	37.3		$	62.4
Net income (loss)	$	7.7		$	(53.0	)	$	(45.3	)	$	15.3		$	30.7
Net income (loss) attributable to owners of the Company	$	7.5		$	(52.8	)	$	(45.2	)	$	15.1		$	30.4
Net income (loss) per share attributable to owners of the Company
- Basic	$	0.09		$	(0.62	)	$	(0.53	)	$	0.18		$	0.36
- Diluted	$	0.08		$	(0.62	)	$	(0.53	)	$	0.17		$	0.34
Adjusted net income attributable to owners of the Company	$	20.3		$	20.8		$	41.1		$	15.3		$	31.0
Adjusted net income per share attributable to owners of the Company
- Basic	$	0.24		$	0.24		$	0.48		$	0.18		$	0.37
- Diluted	$	0.22		$	0.23		$	0.45		$	0.17		$	0.34
Cash and Cash Equivalents	$	51.6		$	44.3		$	51.6		$	33.5		$	33.5
Working Capital Deficit	$	(25.7	)	$	(12.4	)	$	(25.7	)	$	5.6		$	5.6
Net Debt	$	(130.9	)	$	(140.1	)	$	(130.9	)	$	(121.1	)	$	(121.1	)

Ero Copper Corp. June 30, 2020 MD&A Page 3

Q2 2020 Highlights

Proactive mitigation of the potential impacts of the COVID-19 pandemic

· While the Company continues to have no disruption to operations, supply chains or sales channels as a result of the COVID-19 pandemic to date, extensive mitigation measures implemented during Q1 2020 have continued through the second quarter. Some of these measures include:

(i) eliminated all non-essential travel to and from the Company’s mining operations;

(ii) weekly engagement with all suppliers and active stockpiling of key consumables to protect against any supply chain disruptions;

(iii) reduced physical interaction throughout the organization as much as possible by closing administrative offices and moving to a work-from-home format, increasing social distancing by limiting the number of employees travelling on provided buses between the Company’s mining communities and mines, limiting the number of employees in the cafeteria at any given time, cancelling all group meetings, implementing social-distancing for essential line-out meetings and encouraging work-from-home and video/telephone conferencing where feasible;

(iv) established COVID-19 committees with senior leadership and local health administrators for the regions in which the Company operates;

(v) purchased 5,000 COVID-19 testing kits for the Company’s operations, with the donation of a portion of these test kits, as well as other personal protective equipment, to each of the Company’s local municipalities to facilitate rapid testing throughout each community; and,

(vi) implemented wellness education, health screenings and self-isolation protocols along with enhanced sanitization throughout the Company’s operations.

· The Company bolstered its liquidity position at the onset of the pandemic, by drawing down its existing USD and BRL denominated credit facilities. YTD 2020, the Company has drawn down $14.0 million and R$97.6 million ($17.8 million) under various credit facilities as a proactive measure.

· The Company ended the period with a robust liquidity position of $51.6 million in cash and cash equivalents – a quarter-on-quarter improvement of $7.3 million.

· The Company continues to closely monitor the COVID-19 pandemic and is engaged in active operational and financial contingency planning to prudently manage the potential impact of the pandemic on its operations.

Positive operational momentum into H2 2020 at MCSA Operations

· 627,071 tonnes processed grading 1.98% copper producing 11,178 tonnes of copper in concentrate after metallurgical recoveries that averaged 90.0% during the period.

· Record C1 cash cost of $0.65 per pound of copper produced during Q2 2020, a quarter-on-quarter improvement of $0.06 per pound of copper produced (see Non-IFRS Measures).

Curaçá Valley exploration programs delivering record-setting results – shifting to more regional focus during H2 2020

· 28 drill rigs currently operating in the Curaçá Valley with an additional five drill rigs operating at the NX Gold Mine.

· Within the Pilar Underground Mine, drilling in the Deepening Extension zone continued to confirm continuity of the high-grade ‘Superpod’ and extend f high-grade copper mineralization below the known extent of the mine. Results during the period were highlighted by hole FC5625 that intersected 96.4 meters grading 3.97% copper including 60.6 meters grading 5.61% copper, the highest grade-meter intercepted drilled by the Company in the Curaçá Valley to date, and FC5367 that intersected 29.9 meters grading 5.90% copper, representing the deepest intercept drilled by the Company in the Pilar mine to date, approximately 100 meters below the Company’s previously announced deepest intercept.

Ero Copper Corp. June 30, 2020 MD&A Page 4

· Within the Vermelhos Mine, the first systematic fan drilling exploration program that commenced in Q1 2020 continued to progress during the period. Access for follow-up drilling in the central area of this program, where several high-grade intercepts were previously encountered, including FVS-465 (13.4 meters grading 5.86% copper including 8.4 meters grading 7.04% copper) and FVS-638 (7.2 meters grading 2.16% copper including 2.0 meters grading 4.62% copper), was not possible due to the prioritization of production activities in the same area during the period. As a result, drill rigs were moved to the northern and southern sections of the planned fan drill program and only several holes were drilled during the period. The program is now expected to run through the end of 2020.

· Eight drill rigs are focused on the Company’s regional exploration targets comprised of four newly interpreted mineral systems within the portfolio of targets defined by the Company’s comprehensive targeting work. Each of the new systems has an average strike length of 5 kilometers and contains multiple priority drill targets. While preliminary results continue to be encouraging, additional detail on these ongoing exploration programs continues to be expected during the second half of the year.

Exploration of the Santo Antonio Vein at the NX Gold Mine continues to demonstrate continuity of mineralization well outside of the current mineral resource

· Drill results at the NX Gold Mine continue to demonstrate down-plunge extension of high-grade mineralization within the Santo Antonio Vein. Drilling during the period is highlighted by SA77 that intersected 5.9 meters grading 5.09 grams per tonne gold, drilled approximately 30 to 50 meters down-plunge from the limits of the current mineral resource and SA81 that intersected 2.8 meters grading 11.29 grams per tonne gold, located approximately 210 meters down-plunge from the limits of the current mineral resource. SA81 is the deepest intercept drilled in the Santo Antonio Vein to date.

Q2 2020 Financial Report

· Record cash flows from operations: Q2 2020 cash flows from operations was a record $42.5 million, an increase of $5.2 million from $37.3 million in Q2 2019.

· Adjusted earnings per share (see Non-IFRS Measures): Q2 2020 adjusted earnings per share was $0.24 and $0.22, on a basic and diluted basis, respectively, compared with Q2 2019 adjusted earnings per share of $0.18 and $0.17, on a basic and diluted basis, respectively.

· Unrealized foreign exchange losses: Q2 2020 financial results were impacted by the decline of the BRL against the USD in comparison to the end of the first quarter of 2020, mainly through the change in the mark-to-market valuation of derivatives used to hedge BRL revenues. The Company recognized a $8.5 million non-cash valuation loss on its USD/BRL foreign exchange collars.

- The Company uses these structures to hedge Brazilian Real denominated revenues. As a result of the COVID-19 pandemic and its impact on macro-economic interrelationships, there was a continual decline of BRL versus USD from the end of the first quarter and an increase in implied volatility of the BRL versus USD.

- Generally accepted accounting standards dictate that the liability be recognized at fair value, which requires management to estimate fair value using a Black-Scholes valuation methodology and assumptions for the foreign exchange rate and volatility.

- The Company does not believe that this impact on the income statement reflects the underlying profitability of the Company as it provides no offset for the expected future benefits of a lower BRL/USD exchange rate on operating costs and capital expenditures of the Company’s underlying business. These benefits may outweigh the Company’s projected hedge losses that may result from these liabilities.

Ero Copper Corp. June 30, 2020 MD&A Page 5

REVIEW OF OPERATIONS

Mineração Caraíba S.A. (Vale do Curaçá):

	2020 - Q2		2020 - Q1		2020 - YTD		2019 - Q2		2019 - YTD
Operating Information
Copper (MCSA Operations)
Ore Processed (tonnes)		627,071		607,959		1,235,030		717,479		1,247,612
Grade (% Cu)		1.98		1.95		1.97		1.62		1.86
Cu Production (tonnes)		11,178		10,657		21,835		10,473		21,118
Cu Production (lbs)		24,642,935		23,495,098		48,138,033		23,089,363		46,557,782
Concentrate Grade (% Cu)		34.0		33.5		33.8		35.1		35.1
Recovery (%)		90.0		89.8		89.9		90.2		91.0
Concentrate Sales (tonnes)		31,138		31,129		62,267		31,233		59,898
Cu Sold in Concentrate (tonnes)		10,586		10,432		21,018		10,931		20,964
Cu Sold in Concentrate (lbs)		23,338,581		22,999,136		46,337,717		24,099,753		46,218,147
C1 cash cost of copper produced (per lb)	$	0.65	$	0.71	$	0.68	$	1.04	$	0.97

MCSA operations continued to perform well during the second quarter, with notable quarter-on-quarter increases in tonnes and grades mined from the Pilar and Vermelhos mines when compared to Q1 2020. At the Pilar Mine, 371,794 tonnes of ore were mined grading 1.40% copper during the second quarter (as compared to 347,125 tonnes of ore mined grading 1.39% copper during the first quarter). At the Vermelhos Mine, 253,349 tonnes of ore were mined grading 3.26% copper during the second quarter (as compared to 234,800 tonnes grading 2.26% copper during the first quarter). In total, contributions from both mines during the period resulted in 625,143 tonnes of ore mined grading 2.15% copper. During the first half of 2020, a total of 1,207,068 tonnes of ore was mined grading 1.95% copper. Quarter-on-quarter changes in both tonnes and grades mined reflect anticipated stope sequencing.

At the Company’s milling operations within the Curaçá Valley, 627,071 tonnes of ore grading 1.98% copper was processed during Q2 2020 with average metallurgical recoveries of 90.0%. During the first half of 2020, a total of 1,235,030 tonnes of ore grading 1.97% copper was processed, resulting in 21,835 tonnes of copper produced after average metallurgical recoveries of 89.9%. Improving metallurgical recoveries remains a priority of the Company in 2020. The Company’s high-intensity grinding (“HIG”) mill circuit arrived on site during the period and installation was completed in July of 2020. Commissioning of the new regrind mill circuit is progressing using a combination of both on-site commissioning teams paired with virtual engineering support due to global travel restrictions. Despite these challenges, the mill is expected to be fully commissioned in the third quarter and should meaningfully improve overall plant performance once operational.

C1 cash costs per pound of copper produced averaged a record low $0.65 per pound of copper produced during Q2 2020, reflecting strong operational performance at the Company’s MCSA operations, continued weakness of the BRL versus the US Dollar and increased prices of gold and silver produced as by-products during the period. Combined, these factors contributed to a $0.06 decrease in C1 cash costs per pound of copper produced as compared to Q1 2020 and a $0.39 decrease as compared to Q2 2019.

During Q2 2020, the Company continued to test ore-sorting over a variety of material sources and at varying grade profiles from deposits throughout the Curaçá Valley at its ore-sorting plant. To date, the Company has tested the performance of eight discrete orebodies, and results have been encouraging. The Company will continue to operate the test program through the third quarter on the last planned orebody while data analysis, process integration and operational optimization work continues to fully quantify the benefits of pre-concentration and increased mill head-grades. Based on the test work completed to date, the Company continues to believe that ore-sorting will be an integral component to further optimize the production portfolio for the various operations of the Curaçá Valley, as well as new discoveries in the future.

Ero Copper Corp. June 30, 2020 MD&A Page 6

The Company’s organic growth strategy remains supported by one of the world’s largest exploration programs. 28 drill rigs are currently operating in the Curaçá Valley, including nine within the Pilar District, 11 in the Vermelhos District, and there are currently eight drill rigs operating on regional exploration targets in the Curaçá Valley.

During the second quarter, the Company continued to focus its exploration efforts on three primary exploration areas within the Curaçá Valley (please refer to the Company’s press release dated June 23, 2020). These areas include:

(i)	Systematic drilling of a new ‘Superpod’ within the Pilar Mine Deepening zone that continues to demonstrate high-grade continuity outside the previously known limits of mineralization within the mine;
(ii)	extensional drilling of the Vermelhos System, both beneath the main deposits of the Vermelhos Mine and to depth within the Siriema deposit continue to demonstrate continuity of mineralization; and,
(iii)	regional work is progressing according to plan and is currently focused on four new systems within the Curaçá Valley.

In the Pilar Mine, exploration activities during the period focused on extending the limits of high-grade ‘Superpod’ mineralization of the Deepening Extension zone and upgrading resources within the zone. Drilling during the period continued to demonstrate the continuity of high-grade mineralization and wide-open potential at depth. The Company has identified a mineralized area within the Deepening Extension zone that extends over approximately 800 meters in strike length, over a total depth of approximately 500 meters and over an average thickness of approximately 15 to 20 meters with localized thicknesses of up to 50 meters. Within the total strike length, a higher-grade continuous zone with a strike-length of approximately 400 to 500 meters is emerging in the central and northern segments of the target area. The zone remains open to the north and to depth. There are currently five underground exploration drill rigs systematically drilling the defined exploration target area within the Deepening Extension zone. Due to the limits of underground infrastructure to the north, the Company has commenced a surface drill program utilizing directional drilling technology to evaluate the mineralized potential of the Deepening Project north of section 57, the most northern extent of known mineralization to date. The Company continues to be extremely pleased by the exploration results and potential to meaningfully extend the mine life while maintaining an elevated grade profile. Engineering studies to further progress the development of this new zone within the mine remain on track for inclusion into the Company’s updated mine plan, currently expected during fourth quarter of 2020.

Ongoing data compilation work combined with new drilling during the period has resulted in the delineation of a zone of thicker and continuous mineralization within the Pilar Mine at the northern extent of known mineralization in an area previously modeled as lower grade, discrete and discontinuous lenses. Mineralization in this area, known as West Limb North, runs parallel and in close proximity to the mineralization and planned mining stopes of P1P2W on the East Limb of the Pilar Mine. The potential significance of the new results within the West Limb North zone is that they define new extensions of the planned mining stopes of P1P2W, a portion of which are currently being prepared for mining. The proximity to surface and existing infrastructure in this area, allows for mined tonnages to be either hauled to surface via the primary ramp, or trucked down-hill to the underground crusher, both at relatively low transport cost and enhanced operational flexibility.

Ero Copper Corp. June 30, 2020 MD&A Page 7

In the Vermelhos District, approximately 80 kilometers to the north of the Caraíba Mill complex, which includes the high-grade operating Vermelhos Mine, drilling is focused on both near-mine extensional drilling as well as new regional targets identified during the Company’s regional airborne survey and subsequent data compilation work of the broader Vermelhos System – a north-south trend encompassing the Vermelhos Mine, East Zone, Siriema N8/N9 deposit, and several high priority targets that extends over ten kilometers in strike length.

The first systematic fan drilling exploration program that commenced in the first quarter of 2020 continued to progress during the period. To date, approximately 25% of the program has been completed and it is now expected to run through the end of 2020. Access for follow-up drilling in the central area of this program was not possible due to the prioritization of production activities in the same area during the period. As a result, drill rigs were moved to the northern and southern sections of the planned fan drill program and only several holes were drilled during the period.

The exploration drill program at Siriema is focused on continuing to understand the relationship between the previously identified Keel Zone – a massive-sulphide breccia zone of elevated copper, nickel, cobalt and PGMs within the Siriema deposit, and a north-plunging mineralized controlling structure, or conduit, and the potential for larger zones of copper, nickel and PGM massive sulphide mineralization down-plunge of the Keel Zone along the conduit. During the period, wide-spaced, down-plunge, 200 meter step-out exploration drilling at Siriema has continued to intercept the controlling mineralized Siriema conduit at depth. To date, mineralization has now been encountered from surface to a depth of approximately 620 meters below surface and over variable thicknesses from sub 1 meter up to 20 meters. The Siriema deposit remains open to depth and to the north where drilling and down-hole electromagnetic (“EM”) work continue to evaluate the potential for higher-grade and thicker mineralization.

The Company’s multi-element inductively coupled plasma mass spectrometry (“ICP”) unit was delivered and installed during the period. This project was completed at the end of the quarter and the Company is currently ramping up daily sample volumes over the next several weeks, as scheduled. Once fully integrated, the addition to the laboratory is expected to significantly reduce cost and, more importantly, turn-around time for platinum group metal assay results.

NX Gold S.A.

	2020 - Q2			2020 - Q1			2020 - YTD			2019 - Q2			2019 - YTD
Operating Information
Gold (NX Gold Operations)
Ore mined (tonnes)		39,108			36,211			75,319			41,446			80,217
Ore milled (tonnes)		39,108			36,211			75,319			41,538			80,255
Head grade (grams per tonne Au)		7.75			7.76			7.76			8.06			8.40
Recovery (%)		89.6	%		87.1	%		88.4	%		92.1	%		92.3	%
Gold ounces produced (oz)		8,739			7,866			16,605			9,917			20,036
Silver ounces produced (oz)		5,327			4,868			10,195			6,057			12,416
Gold sold (oz)		8,384			7,526			15,910			9,343			19,366
Silver sold (oz)		5,132			4,645			9,778			5,672			11,896
C1 cash cost of gold produced (per ounce)	$	437		$	594		$	511		$	517		$	501

Ero Copper Corp. June 30, 2020 MD&A Page 8

At the NX Gold Mine, significant quarter-on-quarter growth in tonnes mined highlights the successful ramp-up of production from the Santo Antonio Vein. Production during Q2 2020 totaled 8,739 ounces of gold and 5,327 ounces of silver (as by-product) from total mill feed of 39,108 tonnes grading 7.75 g/t gold after metallurgical recoveries of 89.6% during the period. Ore mined and gold production improved in Q2 2020 by 8% and 11%, respectively relative to the first quarter of 2020, driven by both increases in the number of working faces in operation and improved metallurgical recoveries. The NX Gold Mine achieved record C1 cash costs during Q2 2020 of $437 per ounce of gold produced, an improvement of $157 per ounce as compared to the first quarter of 2020. The Company continues to expect production to be weighted towards the second half of the year as operations continue to advance throughout the Santo Antonio Vein.

Exploration at the NX Gold Mine is primarily focused on testing down-plunge extensions of the Santo Antonio Vein. Drill results during the period continued to extend the known extent of mineralization within the Santo Antonio Vein down-plunge by a total of approximately 210 meters and over a strike length of approximately 160 meters. The vein remains open to depth. In addition, the first regional exploration campaign commenced at the NX Gold Mine during the period. Currently, five drill rigs are operating on the property.

Financial Update

Revenue: Revenues from the Company’s copper operations at MCSA decreased by 12.6% from $64.7 million in Q2 2019 to $56.5 million in Q2 2020. The decrease in revenue was primarily attributed to lower average copper prices.

Revenues from the Company’s gold operations at NX Gold increased 20.8% from $11.8 million in Q2 2019 to $14.2 million in Q2 2020. The increase was primarily a result of increased gold prices, partially offset by decreased production and decreased sales volumes.

Mine gross profit: Mine gross profit from the Company’s copper operations at MCSA totaled $29.8 million in Q2 2020 compared to $26.9 million in Q2 2019. The increase in mine gross profit was primarily driven by decrease in cash costs over the comparative period as a result of a significant weakening of the BRL versus the USD, partially offset by decreased copper prices. The Company also recognized mine gross profit of $9.7 million in Q2 2020 compared to $5.2 million in Q2 2019 from its gold operations at NX Gold.

Net income: The Company recognized net income of $7.7 million (net income per basic share of $0.09) in Q2 2020 compared to a net income of $15.3 million in Q2 2019 (net income per basic share of $0.18). The decrease was primarily attributable to the recognition of unrealized foreign exchange losses on foreign exchange currency collar contracts and foreign exchange losses on USD denominated debt of MCSA.

2020 Guidance/Outlook

· The Company is maintaining its 2020 production guidance for the Curaçá Valley operations of 41,000 to 43,000 tonnes of copper in concentrate.

· At the Curaçá Valley operations, the Company is maintaining its previously revised C1 cash costs guidance of US$0.70 to US$0.85 per pound of copper produced and capital expenditure guidance of US$56 to US$68 million^[1].

· The 2020 exploration program budget is maintained at the previously revised range of US$20 to US$25 million^[1,2] which continues to reflect 172,000 meters of planned exploration drilling through September 2020, an annualized rate of approximately 230,000 meters, of which the majority is planned for regional exploration including drill testing of new targets identified during the Company’s airborne geophysical survey and ongoing data analysis. This compares to approximately 235,000 meters drilled during 2019 of which only 23% was allocated to regional exploration.

· The Company is maintaining its 2020 production guidance for the NX Gold Mine of 38,000 to 40,000 ounces of gold at its previously revised C1 cash costs guidance of US$425 to US$525 per ounce of gold produced and capital expenditure guidance of US$7 and US$9 million plus US$2 to US$3 million^[1,2] in exploration expenditures.^[1]. Production continues to be weighted towards the second half of the year.

[1]	Refer to the Company’s press release dated May 7, 2020 for complete details of revised operating and capital cost guidance.
[2]	Exploration capital expenditure guidance for 2020 has been forecast through September of 2020 and, as with prior guidance, is dependent, in part, on future exploration success and subject to further review and revision.

Ero Copper Corp. June 30, 2020 MD&A Page 9

2020 Production Outlook

The Company’s production guidance for 2020 remains unchanged.

Curaçá Valley Operations	2020 Guidance[1]
Tonnes Processed		2,150,000
Copper Grade (% Cu)		2.15	%
Copper Recovery (%)		91.0	%
Cu Production (000 tonnes)		41.0 - 43.0

NX Gold Operations	2020 Guidance[1]
Tonnes Processed	150,000
Gold Grade (gpt)	9.00
Gold Recovery (%)	90.0	%
Au Production (000 ounces)	38.0 - 40.0
Ag Production (000 ounces)	n/a

⁽¹⁾ Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s AIF (as defined herein) and Management of Risks and Uncertainties in this MD&A for complete risk factors.

2020 Cash Cost Guidance

The Company’s original guidance for 2020 had assumed a USD:BRL foreign exchange rate of 4.00, gold price of $1,450 per ounce and silver price of $17.00 per ounce. In recognition of the significant change in foreign exchange rates and precious metal prices during the first quarter of 2020, the Company previously updated its operating cost guidance assuming a USD:BRL foreign exchange rate of 4.90, gold price of $1,700 per ounce and silver price of $15.00 per ounce.

	2020 Guidance	2020 Revised Guidance
Curaçá Valley C1 Cash Cost Guidance (US$/lb)[1]	$0.85 - $0.95	$0.70 - $0.85
NX Gold Mine C1 Cash Cost Guidance (US$/oz)[1]	$475 - $575	$425 - $525

⁽¹⁾ Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s AIF (as defined herein) and Management of Risks and Uncertainties in this MD&A for complete risk factors.

2020 Capital Expenditure Guidance

The Company’s original capital expenditure guidance for 2020 had assumed a USD:BRL foreign exchange rate of 4.00. In recognition of the significant change in foreign exchange rates during the first quarter of 2020, the Company previously updated its capital cost guidance assuming a USD:BRL foreign exchange rate of 4.90. Capital expenditures are presented below in USD millions.

Ero Copper Corp. June 30, 2020 MD&A Page 10

Curaçá Valley / Copper Operations	2020 Guidance		2020 Revised Guidance Range
Pilar Mine and Caraíba Mill Complex[1]	$	58.0	$45.0 - $55.0
Vermelhos Mine	$	16.0	$11.0 - $13.0
Boa Esperanҫa Project	$	0.2	$0.2 - $0.2
Capital Expenditure Guidance	$	74.2	$56.2 - $68.2
Curaçá Valley Exploration[2]	$	28.0	$20.0 - $25.0

NX Gold Operations		2020 Guidance	2020 Revised Guidance Range
Capital Expenditure Guidance	$	5.7	$7.0 - $9.0
Exploration[2]	$	3.5	$2.0 - $3.0
Total, NX Gold	$	9.2	$9.0 – $12.0

^[1] Pilar Mine and Caraíba Mill Complex capital expenditure guidance for 2020 includes completion of the high-intensity grinding mill and operation of the ore-sorting pilot plant.

^[2] Exploration capital expenditure guidance for 2020 has been forecast through September of 2020 and, as with prior guidance, is dependent, in part, on future exploration success and subject to further review and revision.

Mineração Caraíba S.A.

Copper production from the Curaçá Valley operations for 2020 is expected to be between 41,000 and 43,000 tonnes, with ore fed solely from the Pilar and Vermelhos underground mines. Production from the Pilar Mine is expected to contribute a total of approximately 1.4 million tonnes grading 1.40% copper while production from the Vermelhos Mine is expected to contribute a total of approximately 750,000 tonnes grading 3.50% copper resulting in a blended mill head grade of approximately 2.15% copper.

NX Gold S.A.

Approximately 150,000 tonnes of ore will be mined and processed from the Santo Antonio Vein in 2020 at an average grade of 9.00 grams per tonne of gold. Following average metallurgical recoveries of 90.0%, gold production from the NX Gold Mine is expected to reach 38,000 to 40,000 ounces. The Company expects production from the NX Gold Mine to be weighted to the second half of the year as working faces continue to be developed in the Santo Antonio Vein.

Boa Esperança

A full review of the Boa Esperança Feasibility Study^[1] remains ongoing with the goal of extending the potential mine life and increasing copper production among other desktop optimization initiatives. The Company expects to provide an update on these initiatives during the second half of 2020.

^[1] As defined herein under “NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION”.

Ero Copper Corp. June 30, 2020 MD&A Page 11

REVIEW OF FINANCIAL RESULTS

The following table provides a summary of the financial results of the Company for Q2 2020 and Q2 2019. Tabular amounts are in thousands of US dollars, except share and per share amounts.

			Three months ended			Three months ended
	Notes		June 30, 2020			June 30, 2019
Revenue		1	$	70,760		$	76,474
Cost of product sold		2		(30,114	)		(43,282	)
Sales expenses				(1,114	)		(1,107	)
Gross profit				39,532			32,085
Expenses
General and administrative		3		(6,073	)		(7,127	)
Share-based compensation				(2,723	)		(1,292	)
Income before the undernoted				30,736			23,666
Other income (expenses)
Finance income				530			106
Finance expense		4		(2,845	)		(6,398	)
Foreign exchange gain (loss)		5		(16,322	)		1,583
Loss on debt settlement		6		-			(1,783	)
Other income (expense)				(802	)		109
Income loss before income taxes				11,297			17,283
Income tax recovery (expense)
Current				(2,798	)		(2,678	)
Deferred				(791	)		651
		7		(3,589	)		(2,027	)
Net income for the period				7,708			15,256
Other comprehensive income (loss)
Foreign currency translation income (loss)		8		(14,041	)		2,701
Comprehensive income (loss)			$	(6,333	)	$	17,957
Net income attributable to:
Owners of the Company			$	7,526		$	15,111
Non-controlling interests				182			145
			$	7,708		$	15,256
Comprehensive income (loss) attributable to:
Owners of the Company			$	(6,459	)	$	17,801
Non-controlling interests				126			156
			$	(6,333	)	$	17,957
Net income per share attributable to owners of the Company
Net income per share
Basic			$	0.09		$	0.18
Diluted			$	0.08		$	0.17
Weighted average number of common shares outstanding
Basic				85,933,443			85,032,841
Diluted				91,428,969			90,696,926
Cash and cash equivalents			$	51,617		$	19,488
Total assets			$	420,330		$	387,860
Non-current liabilities			$	207,918		$	199,506

Ero Copper Corp. June 30, 2020 MD&A Page 12

Notes:

1. Revenues for Q2 2020 from copper sales was $56.5 million (Q2 2019 - $64.7 million), which included the sale of 10,586 copper tonnes in concentrate as compared to 10,931 copper tonnes for Q2 2019. The decrease in revenues is primarily attributed to lower average price of copper and lower volume of ore processed, partially offset by higher grade of ore processed. Revenues for Q2 2020 from gold sales was $14.2 million (Q2 2019 - $11.8 million), which included the sale of 8,384 ounces of gold, compared to 9,343 ounces of gold for Q2 2019, at a significantly higher average gold price than in the comparative quarter.

2. Cost of product sold for Q2 2020 from copper sales was $25.6 million (Q2 2019 - $36.7 million) which consisted of $8.6 million (Q2 2019 - $9.5 million) in depreciation and depletion, $5.6 million (Q2 2019 - $9.4 million) in salaries and benefits, $3.5 million (Q2 2019 - $5.1 million) in materials and consumables, $3.6 million (Q2 2019 - $6.4 million) in contracted services, $2.9 million (Q2 2019 - $3.7 million) in maintenance costs, $1.4 million (Q2 2019 - $2.4 million) in utilities, and insignificant (Q2 2019 - $0.2 million) other costs.

Cost of product sold for Q2 2020 from gold sales was $4.5 million (Q2 2019 - $6.5 million) which primarily comprised of $1.1 million (Q2 2019 - $1.7 million) in salaries and benefits, $0.9 million (Q2 2019 - $0.9 million) in materials and consumables, $0.7 million (Q2 2019 - $0.6 million) in contracted services, $0.7 million (Q2 2019 - $1.6 million) in depreciation and depletion, $0.5 million (Q2 2019 - $1.1 million) in maintenance costs, $0.5 million (Q2 2019 - $0.6 million) in utilities, and insignificant (Q2 2019 - insignificant) other costs.

The overall decrease in cost of product sold in Q2 2020 as compared to Q2 2019 is primarily attributable to the weakened BRL, in which cost is incurred, against the USD, in which cost is reported.

3. General and administrative expenses for Q2 2020 include $3.8 million (Q2 2019 - $3.7 million) with respect to MCSA for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, $0.2 million (Q2 2019 - $0.8 million) with respect to NX Gold for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, and $2.0 million (Q2 2019 - $2.6 million) with respect to the corporate head office in Vancouver. Corporate head office costs are primarily comprised of $1.6 million (Q2 2019 - $1.9 million) in salaries, incentive payments, and consulting fees, nominal (Q2 2019 - $0.3 million) travel-related costs, and $0.2 million (Q2 2019 - $0.2 million) in professional fees. Decrease in general and administrative expenses in Q2 2020 as compared to Q2 2019 reflect lower general and administrative expenses at the corporate head office from reduced consulting fees and travel-related costs during a period of pandemic-imposed travel restrictions, partially offset by increases from the growth of operations, particularly at MCSA, which included higher headcounts, incentive payments for exceeding board-mandated performance targets, as well as rate increases related to annual union contract negotiations at MCSA.

4. Finance expense for Q2 2020 was $2.8 million (Q2 2019 - $6.4 million) and is primarily comprised of interest on loans at the corporate head office of $1.7 million (Q2 2019 - $2.0 million), interest on loans and borrowings at MCSA and NX Gold of $0.8 million (Q2 2019 - $0.7 million), loss on an interest rate swap derivative of $0.2 million (Q2 2019 - $1.0 million), the accretion of the asset retirement obligations of $0.2 million (Q2 2019 - $1.4 million), and other finance income of $0.1 million (Q2 2019 - other finance expense of $1.2 million).

5. Foreign exchange loss for Q2 2020 was $16.3 million (Q2 2019 - $1.6 million). This amount is primarily comprised of a foreign exchange loss on unrealized derivative contracts of $8.5 million (Q2 2019 - nominal), a foreign exchange loss on realized derivative contracts of $4.4 million (Q2 2019 - nominal), and a foreign exchange loss on USD denominated debt of $3.0 million (Q2 2019 - $1.6 million gain) in MCSA for which the functional currency is the BRL. The foreign exchange losses were primarily a result of a strengthening of the USD against the Brazilian Real during a time of worldwide instability as a result of the Covid-19 pandemic. The foreign exchange loss on unrealized derivative contracts are a result of mark-to-market calculations at period end and may not represent the amount that will ultimately be realized, which will depend on future changes to the USD/BRL foreign exchange rates.

6. In Q2 2019, the Company recognized a loss on debt settlement of $1.8 million, which represented the difference between the accounting fair value made to legally extinguish a bank loan held by MCSA and the carrying value of the loan at the time.

7. In Q2 2020, the Company recognized $3.6 million in income tax expense (Q2 2019 - $2.0 million). Income taxes from operations are partially offset by the recognition of temporary deductible differences associated with MCSA’s unrealized foreign exchange losses on derivatives and loans and borrowings denominated in USD.

8. The foreign currency translation loss is a result of a strengthening of the USD against the BRL during a time of worldwide instability as a result of the Covid-19 pandemic when translating the net assets of the Company’s Brazilian subsidiaries to USD for presentation in the Company’s consolidated financial statements.

Ero Copper Corp. June 30, 2020 MD&A Page 13

The following table provides a summary of the financial results of the Company for YTD 2020 and YTD 2019. Tabular amounts are in thousands of US dollars, except share and per share amounts.

			Six months ended			Six months ended
	Notes		June 30, 2020			June 30, 2019
Revenue		1	$	138,505		$	148,515
Cost of product sold		2		(65,925	)		(81,422	)
Sales expenses				(2,396	)		(2,414	)
Gross profit				70,184			64,679
Expenses
General and administrative		3		(13,576	)		(13,750	)
Share-based compensation				(4,772	)		(3,135	)
Income before the undernoted				51,836			47,794
Other income (expenses)
Finance income				997			242
Finance expense		4		(9,496	)		(13,208	)
Foreign exchange gain (loss)		5		(98,244	)		1,295
Loss on debt settlement		6		-			(1,783	)
Other income (expense)				(1,495	)		1,157
Income (loss) before income taxes				(56,402	)		35,497
Income tax recovery (expense)
Current				(3,889	)		(6,896	)
Deferred				15,004			2,138
		7		11,115			(4,758	)
Net income (loss) for the period				(45,287	)		30,739
Other comprehensive income (loss)
Foreign currency translation income (loss)		8		(63,960	)		1,288
Comprehensive income (loss)			$	(109,247	)	$	32,027
Net income (loss) attributable to:
Owners of the Company			$	(45,227	)	$	30,434
Non-controlling interests				(60	)		305
			$	(45,287	)	$	30,739
Comprehensive income (loss) attributable to:
Owners of the Company			$	(108,931	)	$	31,717
Non-controlling interests				(316	)		310
			$	(109,247	)	$	32,027
Net income (loss) per share attributable to owners of the Company
Net income (loss) per share
Basic			$	(0.53	)	$	0.36
Diluted			$	(0.53	)	$	0.34
Weighted average number of common shares outstanding
Basic				85,846,319			84,920,351
Diluted				85,846,319			90,401,277

Ero Copper Corp. June 30, 2020 MD&A Page 14

Notes:

1. Revenues for YTD 2020 from copper sales was $112.7 million (YTD 2019 - $124.2 million), which included the sale of 21,018 copper tonnes in concentrate as compared to 20,964 copper tonnes for YTD 2019. The decrease in revenues is primarily attributed to lower average price of copper and lower volume of ore processed, partially offset by higher grade of ore processed. Revenues for YTD 2020 from gold sales was $25.8 million (YTD 2019 - $24.3 million), which included the sale of 15,910 ounces of gold, compared to 19,366 ounces of gold for YTD 2019, at a significantly higher average gold price than the preceding comparative period.

2. Cost of product sold for YTD 2020 from copper sales was $55.6 million (YTD 2019 - $67.6 million) which consisted of $18.1 million (YTD 2019 - $19.3 million) in depreciation and depletion, $12.6 million (YTD 2019 - $16.9 million) in salaries and benefits, $7.5 million (YTD 2019 - $8.7 million) in materials and consumables, $8.2 million (YTD 2019 - $11.5 million) in contracted services, $5.8 million (YTD 2019 - $6.7 million) in maintenance costs, $3.2 million (YTD 2019 - $4.1 million) in utilities, and $0.2 million (YTD 2019 - $0.3 million) in other costs.

Cost of product sold for YTD 2020 from gold sales was $10.3 million (YTD 2019 - $13.8 million) which primarily comprised of $2.9 million (YTD 2020 - $3.3 million) in salaries and benefits, $1.7 million (YTD 2019 - $1.2 million) in contracted services, $1.2 million (YTD 2019 - $2.1 million) in maintenance costs, $1.9 million (YTD 2019 - $1.9 million) in materials and consumables, $1.5 million (YTD 2019 - $4.0 million) in depreciation and depletion, $1.1 million (YTD 2019 - $1.1 million) in utilities, and $0.1 million (YTD 2019 - $0.1 million) in other costs.

The overall decrease in cost of product sold for YTD 2020 as compared to YTD 2019 is primarily attributable to the weakened BRL, in which cost is incurred, against the USD, in which cost is reported.

3. General and administrative expenses for YTD 2020 include $8.6 million (YTD 2019 - $7.2 million) with respect to MCSA for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, $0.7 million (YTD 2019 - $1.3 million) with respect to NX Gold for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, and $4.3 million (YTD 2019 - $5.3 million) with respect to the corporate head office in Vancouver. Corporate head office costs are primarily comprised of $3.2 million (YTD 2019 - $3.6 million) in salaries, incentive payments, and consulting fees, $0.2 million (YTD 2019 - $0.7 million) in travel-related costs, and $0.2 million (YTD 2019 - $0.3 million) in professional fees. General and administrative expenses in YTD 2020 were comparable to that in YTD 2019, reflecting the growth of operations, particularly at MCSA, which included higher headcounts, incentive payments for exceeding board-mandated performance targets, as well as rate increases related to annual union contract negotiations at MCSA, partially offset by lower general and administrative expenses at the corporate head office from reduced consulting fees and travel-related costs during a period of pandemic-imposed travel restrictions.

4. Finance expense for YTD 2020 was $9.5 million (YTD 2019 - $13.2 million) and was primarily comprised of interest on loans at the corporate head office of $3.5 million (YTD 2019 - $4.2 million), interest on loans and borrowings at MCSA and NX Gold of $1.8 million (YTD 2019 - $1.7 million), loss on an interest rate swap derivative of $2.0 million (YTD 2019 - $1.8 million), the accretion of the asset retirement obligations of $0.5 million (YTD 2019 - $2.7 million), and other finance expenses of $1.6 million (YTD 2019 - $2.6 million).

5. Foreign exchange loss for YTD 2020 was $98.2 million (YTD 2019 - $1.3 million gain). This amount was primarily comprised of a foreign exchange loss on unrealized derivative contracts of $61.1 million (YTD 2019 - $0.3 million), a foreign exchange loss on USD denominated debt of $29.9 million (YTD 2019 - $1.4 million gain) in MCSA for which the functional currency is the BRL, and a foreign exchange loss on realized derivative contracts of $7.0 million (YTD 2019 - $0.7 million gain). The foreign exchange losses were primarily a result of a strengthening of the USD against the BRL during a time of worldwide instability as a result of the Covid-19 pandemic. The foreign exchange loss on unrealized derivative contracts are a result of mark-to-market calculations at period end and may not represent the amount that will ultimately be realized, which will depend on future changes to the USD/BRL foreign exchange rates.

6. In YTD 2019, the Company recognized a loss on debt settlement of $1.8 million, which represented the difference between the accounting fair value made to legally extinguish a bank loan held by MCSA and the carrying value of the loan at the time.

7. In YTD 2020, the Company recognized a $11.1 million income tax recovery (YTD 2019 - income tax expense of $4.8 million), primarily resulting from the recognition of temporary deductible differences associated with MCSA’s unrealized foreign exchange losses on derivatives and loans and borrowings denominated in US dollars.

8. The foreign currency translation loss is a result of a strengthening of the USD against the BRL during a time of worldwide instability as a result of the Covid-19 pandemic when translating the net assets of the Company’s Brazilian subsidiaries to USD for presentation in the Company’s consolidated financial statements.

Ero Copper Corp. June 30, 2020 MD&A Page 15

SUMMARY OF QUARTERLY RESULTS

The following table presents selected financial information for each of the most recent eight quarters. Tabular amounts are in millions of US Dollars, except share and per share amounts.

	2020						2019									2018
Selected Financial Information	June 30 (1)			Mar 31 (2)			Dec 31 (3)			Sept 30 (4)			June 30			March 31			Dec 31 (5)			Sept 30
Revenue	$	70.8		$	67.7		$	75.7		$	60.6		$	76.5		$	72.0		$	85.1		$	47.3
Cost of product sold	$	(30.1	)	$	(35.8	)	$	(43.0	)	$	(38.4	)	$	(43.3	)	$	(38.1	)	$	(44.7	)	$	(27.9	)
Gross profit	$	39.5		$	30.7		$	31.1		$	21.3		$	32.1		$	32.6		$	39.0		$	18.8
Net income (loss) for period	$	7.7		$	(53.0	)	$	45.4		$	16.3		$	15.3		$	15.5		$	11.3		$	5.2
Income (loss) per share attributable to owners of the Company
- Basic	$	0.09		$	(0.62	)	$	0.53		$	0.19		$	0.18		$	0.18		$	0.13		$	0.06
- Diluted	$	0.08		$	(0.62	)	$	0.49		$	0.18		$	0.17		$	0.17		$	0.13		$	0.06
Weighted average number of common shares
outstanding
- Basic		85,933,443			85,759,194			85,620,168			85,505,675			85,032,841			84,804,389			84,736,476			84,504,954
- Diluted		91,428,969			85,759,194			91,670,988			91,320,363			90,696,926			89,917,828			89,191,707			88,638,656

Notes:

1. During Q2 2020, the Company had an overall net income of $7.7 million, despite $16.3 million in foreign exchange losses. The foreign exchange losses were comprised of a foreign exchange loss on unrealized derivative contracts of $8.5 million, a foreign exchange loss on realized derivative contracts of $4.4 million, and a foreign exchange loss on USD denominated debt of $3.0 million in MCSA for which the functional currency is the BRL. As with the preceding quarter, the foreign exchange losses were unusually high this quarter due to volatility in the foreign exchange rates between the USD and BRL resulting from the worldwide instability in currency rates as a result of the Covid-19 pandemic.

2. During the quarter ended March 31, 2020, the Company recognized a $81.9 million in foreign exchange losses. The foreign exchange losses were mainly comprised of a $26.9 million loss associated with USD denominated debt held by MCSA, whose functional currency is the BRL, and $52.7 million losses associated with unrealized losses on foreign exchange currency collar contracts. These foreign exchange losses were unusually high this quarter due to volatility in the foreign exchange rates between the USD and the BRL resulting from the worldwide instability in currency rates as a result of the Covid-19 pandemic.

3. During the quarter ended December 31, 2019, the Company recognized a $25.2 million income tax recovery primarily resulting from the recognition of available tax losses and tax credits in MCSA. At December 31, 2019, the Company considered the taxable income generated since acquisition of MCSA and forecasted future taxable income and determined that it was now considered probable that the benefit of these losses and tax credits in MCSA would be realized.

4. During the quarter ended September 30, 2019, the Company recognized a recovery of $21.6 million in net income related to value added taxes previously paid on sales in Brazil. The recovery was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant taxing authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim, for which approval was received in July 2019. These credits can be used to offset a variety of other taxes, including income taxes and taxes on future sales.

5. During the quarter ended December 31, 2018, MCSA began commercial production of the Vermelhos Mine. This resulted in increased sales this quarter, generating higher net income for the period.

LIQUIDITY, CAPITAL RESOURCES, AND CONTRACTUAL OBLIGATIONS

Liquidity

As at June 30, 2020, the Company held cash and cash equivalents of $51.6 million. Cash and cash equivalents are primarily comprised of cash held with reputable financial institutions and are invested in highly liquid short-term investments with maturities of three months or less. The funds are not exposed to liquidity risk and there are no restrictions on the ability of the Company to use these funds to meet its obligations.

Cash and cash equivalents has increased by $30.1 million since December 31, 2019. The Company’s cash flows from operating, investing, and financing activities during YTD 2020 are summarized as follows:

· Cash from operating activities of $79.8 million

· Cash from financing activities of approximately $17.1 million, including:

o $51.0 million proceeds from new loans and borrowings;

Ero Copper Corp. June 30, 2020 MD&A Page 16

o $1.7 million proceeds from exercise of stock options and warrants;

o $0.8 million released from restricted cash

net of:

o $29.1 million of repayment on loans and borrowings;

o $3.7 million of payment of interest on loans and borrowings;

o $2.2 million of lease payments;

o $1.3 million of other finance expenses

Partially offset by:

· Cash used in investing activities of $58.3 million, including:

o $58.7 million of additions to mineral property, plant and equipment;

o $0.1 million of additions to exploration and evaluation assets

net of:

o $0.6 million from financial investments

As at June 30, 2020, the Company had working capital deficit of $25.7 million, arising primarily as a result of unrealized mark-to-market values associated with foreign currency derivative contracts.

Capital Resources

The Company’s primary sources of capital are comprised of cash from operations, and cash and cash equivalents on hand. The Company will continuously monitor its capital structure and, based on changes in operations and economic conditions, may adjust such structure by issuing new common shares or new debt as necessary. While the Company has been successful in securing financing to date, there are no guarantees that it will be able to secure such financing in the future on terms acceptable to the Company, if at all. Taking into consideration cash flow from existing operations, management believes that the Company has sufficient working capital and financial resources to maintain its planned operations and activities for the foreseeable future.

At June 30, 2020, we had unrestricted cash and cash equivalents of $51.6 million compared to $21.5 million at December 31, 2019. The increase is primarily due to an increase in cash from operations, and draw-downs under various credit facilities as a proactive measure in light of the uncertainty surrounding the COVID-19 pandemic. We have no immediate need for the funds; however, proceeds will be used for general corporate purposes as required.

Contractual Obligations and Commitments

Certain loan agreements contain operating and financial covenants that could restrict the ability of the Company and its subsidiaries, MCSA, Ero Gold, and NX Gold S.A., to, among other things, incur additional indebtedness needed to fund its respective operations, pay dividends or make other distributions, make investments, create liens, sell or transfer assets or enter into transactions with affiliates. There are no other restrictions or externally imposed capital requirements of the Company.

Ero Copper Corp. June 30, 2020 MD&A Page 17

MANAGEMENT OF RISKS AND UNCERTAINTIES

The Company thoroughly examines the various financial instruments and risks to which it is exposed and assesses the impact and likelihood of those risks. These risks may include credit risk, liquidity risk, currency risk, commodity price risk and interest rate risk. Where material, these risks are reviewed and monitored by the Board.

COVID-19 Pandemic Risk

The recent outbreak of COVID-19 has had a significant impact on the volatility of commodity prices and USD/BRL exchange rates, and governmental actions to contain the outbreak may impact our ability to transport or market our concentrate or cause disruptions in our supply chains or interruption of production. A material spread of COVID-19 in jurisdictions where we operate could impact our ability to staff operations. A reduction in production or other COVID-19 related impacts, including but not limited to, low copper prices could cause a significant reduction in profitability of ongoing operations.

The global pandemic could cause temporary closure of businesses in regions that are significantly impacted by the health crises, or cause governments to take or continue to take preventative measures such as the closure of points of entry, including ports and borders.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers. The carrying amount of the financial assets below represents the maximum credit risk exposure as at June 30, 2020 and December 31, 2019:

	June 30, 2020		December 31, 2019
Cash and cash equivalents	$	51,617	$	21,485
Restricted cash		750		1,500
Accounts receivable		1,538		7,680
Deposits and other non-current assets		1,011		2,396
	$	54,916	$	33,061

The Company invests cash and cash equivalents as well as restricted cash with financial institutions that are financially sound based on their credit rating. The Company’s exposure to credit risk associated with accounts receivable is influenced mainly by the individual characteristics of each customer. The Company currently has only three significant customers, all of which have no history of credit default with the Company. The Company has not incurred credit losses during the three and six months ended June 30, 2020 nor recognized a provision for credit losses.

Foreign exchange currency risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage market risks. At June 30, 2020, the Company has entered into foreign exchange collar contracts at zero cost for notional amounts of $399.4 million with an average floor rate of 4.00 BRL to 1.00 USD and an average cap rate of 4.67 BRL to 1.00 USD (December 31, 2019 - notional amount of $336.6 million in foreign exchange forward collar contracts). The maturity dates of these contracts are from July 1, 2020 to March 29, 2022 and are financially settled on a net basis. The fair value of these contracts at June 30, 2020 was a liability of $61.2 million, (December 31, 2019 - $nil) which was included in derivatives in the statement of financial position. The change in fair value of foreign exchange collar contracts was a loss of $8.5 million and $61.1 million for the three and six months ended June 30, 2020, respectively, (a nominal gain and a loss of $0.3 million for the three and six months ended June 30, 2019, respectively) and has been recognized in foreign exchange loss. In addition, during the three and six months ended June 30, 2020, the Company recognized a realized loss of $4.4 million and $7.0 million, respectively (a nominal loss and a realized gain of $0.7 million for the three and six months ended June 30, 2019, respectively) related to the settlement of foreign currency forward collar contracts.

Ero Copper Corp. June 30, 2020 MD&A Page 18

Interest rate risk

The Company is principally exposed to the variation in interest rates on loans and borrowings with variable rates of interest. Management reduces interest rate risk exposure by entering into loans and borrowings with fixed rates of interest or by entering into derivative instruments that fix the ultimate interest rate paid.

The Company is principally exposed to interest rate risk through its term facilities of $150.0 million, Brazilian Real denominated bank loans of $4.6 million, Brazilian Real denominated lines of credit of $4.1 million, and Brazilian Real denominated equipment finance loans of $2.1 million. Based on the Company’s net exposure at June 30, 2020, a 1% change in the variable rates would have an impact of $1.6 million on pre-tax annual net income, without consideration of the effects of the interest rate swap contract below.

In order to mitigate the above volatility due to variable rates on loans, as at June 30, 2020, the Company has entered into an interest rate swap contract to manage interest rate risk. The floating interest on a notional amount of $65 million was swapped for a fixed interest rate of 2.69%. The fair value of this contract at June 30, 2020 was a liability of $3.2 million (December 31, 2019 - $1.7 million) and was included in derivatives in the statement of financial position. The change in fair value of $0.2 million and $2.0 million for the three and six months ended June 30, 2020, respectively, was included in finance expense.

For a discussion of additional risks applicable to the Company and its business and operations, including risks related to the Company’s foreign operations, the environment and legal proceedings, see “Risk Factors” in the Company’s Annual Information Form for the year ended December 31, 2019 and dated March 12, 2020 (the “AIF”).

OTHER FINANCIAL INFORMATION

Off-Balance Sheet Arrangements

As at June 30, 2020, the Company had no material off-balance sheet arrangements.

Contingencies

MCSA is subject to a number of claims (including claims related to tax, labour and social security matters and civil action) in the course of its business which individually are not material and have not been accrued for in the Company’s financial statements as it is not probable that a material cash outflow will occur. While the Company believes that the majority of these claims are unlikely to be successful, if all such existing claims were decided against it, the Company could be exposed to a liability of up to approximately $20.4 million as at June 30, 2020 (December 31, 2019 - $31.1 million), which could have an adverse impact on the Company’s business, financial condition, results of operations, cash flows or prospects.

Outstanding Share Data

At August 6, 2020, the Company had 86,317,959 common shares, 4,660,560 stock options, 2,766,662 warrants, and 438,463 performance share units issued and outstanding.

Ero Copper Corp. June 30, 2020 MD&A Page 19

Related Party Disclosures

For the three months ended June 30, 2020, amounts paid to related parties were incurred in the normal course of business and measured at the exchange amount, which is the amount agreed upon by the transacting parties and on terms and conditions similar to non-related parties.

Key management personnel consist of the Company’s directors and officers and their compensation includes director retainer fees and management salaries paid to these individuals, as well as share-based compensation. The aggregate value of compensation paid to key management personnel for the three and six months ended June 30, 2020 was $1.8 million and $3.6 million, respectively ($1.5 million and $2.9 million for the three and six months ended June 30, 2019, respectively). In addition, 43,456 options and 37,321 DSUs were issued to non-executive directors during the six months ended June 30, 2020, respectively (125,000 options for the six months ended June 30, 2019). $1.6 million and $2.9 million was recognized in share-based compensation expense for the three and six months ended June 30, 2020, respectively, for options, Share Units, and DSUs issued ($1.3 million and $3.1 million for the three and six months ended June 30, 2019, respectively).

During the three and six months ended June 30, 2020, key management personnel exercised 223,555 and 248,555 options, as well as 100,000 warrants, for cash proceeds to the Company of $0.5 million and $0.6 million, respectively (110,000 options for cash proceeds of $0.2 million for the three and six months ended June 30, 2019, respectively).

ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

Critical Accounting Judgments and Estimates

The preparation of consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions about future events that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, events or actions, actual results may differ from these estimates.

The Company’s significant accounting policies and accounting estimates are contained in the Company’s December 31, 2019 consolidated financial statements. Certain of these policies, such as, capitalization and depreciation of property, plant and equipment and mining interests, derivative instruments, and decommissioning liabilities provisions involve critical accounting estimates because they require management of the Company to make subjective or complex judgments about matters that are inherently uncertain, and because of the likelihood that materially different amounts could be reported under different conditions or using different assumptions.

In preparing its financial statements, management has made judgments, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of the assets, liabilities, revenues, and expenses. Actual results may differ from these estimates.

The fair value of derivative instruments is determined using either present value techniques or option pricing models that utilize a variety of inputs that are a combination of quoted prices and market-corroborated inputs. The fair value of the Company’s derivative contracts includes an adjustment for credit risk. Derivative instruments are classified within Level 2 of the fair value hierarchy.

The estimates and assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively. For a description of the critical judgements in application of the accounting policies and information about assumptions and estimations uncertainties, refer to the Company’s MD&A for the year ended December 31, 2019, which is available on SEDAR at www.sedar.com.

Ero Copper Corp. June 30, 2020 MD&A Page 20

Local Currency Operating Metrics – Presented in Brazilian Real

		2020 - Q2			2020 - Q1			2020 - YTD			2019 - Q2			2019 - YTD
Costs (MCSA Operations)
Mining - UG (Pilar)	R$		63,499			60,657			124,156			55,963			107,850
- UG (Vermelhos)			42,186			40,421			82,607			32,256			61,308
- OP			-			-			-			5,452			7,731
Processing			19,496			19,049			38,545			20,937			39,483
Indirect			13,456			12,629			26,085			10,917			23,280
Production costs			138,637			132,756			271,394			125,525			239,652
Capex development			(40,351	)		(40,892	)		(81,242	)		(20,129	)		(44,800	)
By-product credits			(21,162	)		(15,792	)		(36,954	)		(11,487	)		(21,227	)
Treatment, refining and other			8,751			(1,627	)		7,124			238			841
C1 cash costs	R$		85,876			74,445			160,321			94,147			174,466
Breakdown Mined and Processed (tonnes)
UG Mined			672,679			612,510			1,285,189			632,716			1,174,593
OP Mined			-			-			-			478,108			712,319
Total Mined (t):			672,679			612,510			1,285,189			1,110,824			1,886,912
Total Processed (t)			627,071			607,959			1,235,030			717,479			1,247,612
Cu Production (t)			11,178			10,657			21,835			10,473			21,118
UG Mining Total - R$/tonne mined			97.13			98.26			97.67			107.62			105.87
Pilar - R$/tonne mined			87.47			79.68			83.77			102.04			100.64
Vermelhos - R$/tonne mined			111.45			125.46			118.16			117.40			116.24
OP Mining - R$/tonne mined [1]			n/a			n/a			n/a			11.40			10.85
Processing - R$/tonne processed			31.09			31.33			31.21			29.18			31.65
Indirect - R$/tonne processed			21.46			20.77			21.12			15.22			18.66

Footnotes

General - Above only includes amounts from MCSA. NX Gold operations are excluded.

^[1] - There was no OP production in YTD 2020.

NON-IFRS MEASURES

Financial results of the Company are prepared in accordance with IFRS. The Company utilizes certain non-IFRS measures, including C1 cash cost of copper produced (per lb), C1 cash cost of gold produced (per ounce), EBITDA, Adjusted EBITDA, Adjusted net income (loss) attributable to owners of the Company, Adjusted earnings (loss) per share, net debt and working capital, which are not measures recognized under IFRS. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The tables below provide a reconciliation of these non-IFRS measures to the most directly comparable IFRS measures as contained in the Company’s financial statements.

Unless otherwise noted, the non-IFRS measures presented below have been calculated on a consistent basis for the periods presented.

Ero Copper Corp. June 30, 2020 MD&A Page 21

C1 Cash Cost of Copper Produced (per lb)

C1 cash cost of copper produced (per lb) is the sum of production costs, net of capital expenditure development costs and by-product credits, divided by the copper pounds produced. C1 cash costs reported by the Company include treatment, refining charges, offsite costs, and certain tax credits relating to sales invoiced to the Company’s Brazilian customer on sales. By-product credits are calculated based on actual precious metal sales (net of treatment costs) during the period divided by the total pounds of copper produced during the period. C1 cash cost of copper produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

The following table provides a reconciliation of C1 cash cost of copper produced per pound to cost of goods sold, its most directly comparable IFRS measure.

	2020 - Q2			2020 - Q1			2020 - YTD			2019 - Q2			2019 - YTD
Reconciliation:
Cost of Product Sold	$	25,645		$	29,954		$	55,599		$	36,740		$	67,591
Add (less):
Depreciation/amortization/depletion		(8,565	)		(9,566	)		(18,131	)		(9,542	)		(19,304	)
Incentive payments		(672	)		(594	)		(1,266	)		-			-
Net change in inventory		700			(208	)		492			(1,201	)		196
Transportation costs & other		844			1,020			1,864			979			2,217
By-product credits		(3,927	)		(3,543	)		(7,470	)		(2,936	)		(5,519	)
Treatment, refining, and other		1,645			(368	)		1,277			82			247
Foreign exchange translation
adjustments		288			1			289			(72	)		(67	)
C1 cash costs	$	15,958		$	16,696		$	32,654		$	24,050		$	45,361

	2020 - Q2			2020 - Q1			2020 - YTD			2019 - Q2			2019 - YTD
Costs
Mining	$	19,614		$	22,674		$	42,288		$	23,913		$	46,226
Processing		3,618			4,273			7,891			5,345			10,266
Indirect		2,497			2,833			5,330			2,789			5,821
Production costs		25,729			29,780			55,509			32,047			62,313
Capex development		(7,489	)		(9,173	)		(16,662	)		(5,143	)		(11,680	)
By-product credits		(3,927	)		(3,543	)		(7,470	)		(2,936	)		(5,519	)
Treatment, refining and other		1,645			(368	)		1,277			82			247
C1 cash costs	$	15,958		$	16,696		$	32,654		$	24,050		$	45,361

Costs per pound
Payable copper produced (lb)		24,643			23,495			48,138			23,089			46,558
Mining	$	0.80		$	0.97		$	0.88		$	1.04		$	0.99
Processing	$	0.15		$	0.18		$	0.16		$	0.23		$	0.22
Indirect	$	0.10		$	0.12		$	0.11		$	0.12		$	0.13
Capex development	$	(0.30	)	$	(0.39	)	$	(0.35	)	$	(0.22	)	$	(0.25	)
By-product credits	$	(0.16	)	$	(0.15	)	$	(0.16	)	$	(0.13	)	$	(0.12	)
Treatment, refining and other	$	0.07		$	(0.02	)	$	0.03		$	0.00		$	(0.00	)
C1 cash cost of copper produced (per lb)	$	0.65		$	0.71		$	0.68		$	1.04		$	0.97

Ero Copper Corp. June 30, 2020 MD&A Page 22

C1 Cash Cost of Gold produced (per ounce)

C1 cash cost of gold produced (per ounce) is the sum of production costs, net of capital expenditure development costs and silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. C1 cash cost of gold produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

The following table provides a reconciliation of C1 cash cost of gold produced per ounce to cost of goods sold, its most directly comparable IFRS measure.

	2020 - Q2			2020 - Q1			2020 - YTD			2019 - Q2			2019 - YTD
Reconciliation:
Cost of Product Sold	$	4,469		$	5,857		$	10,326		$	6,542		$	13,831
Add (less):
Depreciation/amortization/depletion		(663	)		(883	)		(1,546	)		(1,639	)		(3,975	)
Incentive payments		(103	)		(172	)		(275	)		-			-
Net change in inventory		90			(71	)		19			306			355
By-product credits		(77	)		(72	)		(149	)		(78	)		(167	)
Foreign exchange translation adjustments		102			9			111			(7	)		(7	)
C1 cash costs	$	3,818		$	4,668		$	8,486		$	5,124		$	10,037

	2020 - Q2			2020 - Q1			2020 - YTD			2019 - Q2			2019 - YTD
Costs
Mining	$	3,527		$	3,977		$	7,504		$	2,700		$	5,367
Processing		1,496			1,798			3,294			1,826			3,493
Indirect		609			798			1,407			818			1,634
Production costs		5,632			6,573			12,205			5,344			10,494
Capex development		(1,737	)		(1,833	)		(3,570	)		(142	)		(290	)
By-product credits		(77	)		(72	)		(149	)		(78	)		(167	)
C1 cash costs	$	3,818		$	4,668		$	8,486		$	5,124		$	10,037
Costs per ounce
Payable gold produced (ounces)		8,739			7,866			16,605			9,917			20,036
Mining	$	404		$	506		$	452		$	272		$	268
Processing	$	171		$	229		$	198		$	184		$	174
Indirect	$	70		$	101		$	85		$	82		$	82
Capex development	$	(199	)	$	(233	)	$	(215	)	$	(14	)	$	(14	)
By-product credits	$	(9	)	$	(9	)	$	(9	)	$	(8	)	$	(8	)
C1 cash cost of gold produced (per ounce)	$	437		$	594		$	511		$	517		$	501

Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and Adjusted EBITDA

EBITDA represents earnings before interest expense, income taxes, depreciation, and amortization. Adjusted EBITDA includes further adjustments for non-recurring items and/or items not indicative to the future operating performance of the Company. The Company believes EBITDA and adjusted EBITDA are appropriate supplemental measures of debt service capacity and performance of its operations.

Adjusted EBITDA is calculated by removing the following income statement items:

- Foreign exchange loss (gain)

- Share based compensation

- Loss on debt settlement

Ero Copper Corp. June 30, 2020 MD&A Page 23

	2020 - Q2		2020 - Q1			2020 - YTD			2019 - Q2			2019 - YTD
Reconciliation:
Net income (loss)	$	7,708	$	(52,995	)	$	(45,287	)	$	15,256		$	30,739
Adjustments:
Finance expenses		2,845		6,651			9,496			6,398			13,208
Tax expense (recovery)		3,589		(14,704	)		(11,115	)		2,027			4,758
Depreciation/amortization/depletion		9,261		10,481			19,742			11,222			23,361
EBITDA		23,403		(50,567	)		(27,164	)		34,903			72,066
Foreign exchange loss (gain)		16,322		81,922			98,244			(1,583	)		(1,295	)
Share based compensation		2,723		2,049			4,772			1,292			3,135
Loss on debt settlement		-		-			-			1,783			1,783
Adjusted EBITDA	$	42,448	$	33,404		$	75,852		$	36,395		$	75,689

Adjusted net income attributable to owners of the Company and Adjusted net income per share attributable to owners of the Company

The Company uses the financial measure “Adjusted net income attributable to owners of the Company” and “Adjusted net income per share attributable to owners of the Company” (“Adjusted EPS”) to supplement information in its consolidated financial statements. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, the Company and certain investor and analysts use this information to evaluate the Company’s performance. The Company excludes the following items from net earnings to provide a measure which allows the Company and investors to evaluate the operating results of the underlying core operations: i) share based compensation ii) unrealized foreign exchange loss (gain) on USD denominated debt in MCSA, iii) net unrealized loss (gain) on foreign exchange derivative contracts, iv) loss on debt settlement, and vi) unrealized loss (gain) on interest rate derivative contracts. The presentation of Adjusted EPS is not meant to substitute the net income (loss) per share attributable to owners of the Company (“EPS”) presented in accordance with IFRS, but rather it should be evaluated in conjunction with such IFRS measures.

The following table provides a detailed reconciliation of net income (loss) attributable to owners of the Company as reported in the Company’s consolidated financial statements to adjusted net income attributable to owners of the Company and Adjusted EPS.

	2020 - Q2			2020 - Q1			2020 - YTD			2019 - Q2			2019 - YTD
Reconciliation:
Net income (loss) as reported attributable to the owners of the Company	$	7,526		$	(52,753	)	$	(45,227	)	$	15,111		$	30,434
Adjustments for:
Share based compensation		2,723			2,049			4,772			-			-
Unrealized foreign exchange loss (gain) on USD denominated debt in MCSA		2,984			26,766			29,750			(1,568	)		(1,432	)
Unrealized loss (gain) on foreign exchange derivative contracts, net of tax		7,151			43,081			50,232			(9	)		255
Loss on debt settlement		-			-			-			1,776			1,776
Unrealized loss (gain) on interest rate derivative contracts		(131	)		1,691			1,560			-			-
Adjusted net income attributed to owners of the Company	$	20,253		$	20,834		$	41,087		$	15,310		$	31,033
Weighted average number of common shares - basic		85,933,443			85,759,194			85,846,319			85,032,841			84,920,351
Weighted average number of common shares - diluted		91,428,969			91,409,738			91,517,140			90,696,926			90,401,277
Adjusted earnings per share - basic	$	0.24		$	0.24		$	0.48		$	0.18		$	0.37
Adjusted earnings per share - diluted	$	0.22		$	0.23		$	0.45		$	0.17		$	0.34

Note - Starting in the fourth quarter of 2019, share based compensation is included as an adjustment to the calculation of Adjusted EPS.

Ero Copper Corp. June 30, 2020 MD&A Page 24

Net Debt

Net debt is determined based on cash and cash equivalents, restricted cash and loans and borrowings as reported in the Company’s consolidated financial statements. The Company uses net debt as a measure of the Company’s ability to pay down its debt. The following table provides a calculation of net debt based on amounts presented in the Company’s consolidated financial statements as at June 30, 2020, March 31, 2020, December 31, 2019, and June 30, 2019.

	June 30,			March 31,			December 31,			June 30,
	2020			2020			2019			2019
Cash and cash equivalents	$	51,617		$	44,338		$	21,485		$	33,481
Restricted cash		750			1,125			1,500			2,250
Less: Current portion of loans and borrowings		(25,793	)		(19,821	)		(18,984	)		(10,481	)
Long-term portion of loans and borrowings		(157,482	)		(165,760	)		(140,386	)		(146,379	)
Net Debt	$	(130,908	)	$	(140,118	)	$	(136,385	)	$	(121,129	)

Working Capital (Deficit) and Available Liquidity

Working capital is determined based on current assets and current liabilities as reported in the Company’s consolidated financial statements. The Company uses working capital as a measure of the Company’s short-term financial health and operating efficiency. Available liquidity includes the Company’s working capital and undrawn revolving credit facilities in place. The following table provides a calculation for these based on amounts presented in the Company’s consolidated financial statements as at June 30, 2020 and December 31, 2019.

	June 30,			December 31,
	2020			2019
Current Assets	$	90,954		$	75,565
Less: Current Liabilities		(116,687	)		(80,481	)
Working Capital (Deficit)	$	(25,733	)	$	(4,916	)
Available undrawn revolving credit facilities		-			30,000
Available Liquidity	$	(25,733	)	$	25,084

Internal Control over Financial Reporting

The Company’s management, with the participation of the CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”). The Company’s ICFR is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Any system of ICFR, no matter how well designed, has inherent limitations and cannot provide absolute assurance that all misstatements and instances of fraud, if any, within the Company have been prevented or detected. The Company’s ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

The Company uses the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

There were no changes in the Company’s ICFR that materially affected, or are reasonably likely to materially affect, ICFR during Q2 2020.

Ero Copper Corp. June 30, 2020 MD&A Page 25

NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION

Unless otherwise indicated, scientific and technical information in this MD&A relating to Ero’s properties (“Technical Information”) is based on information contained in the following reports:

The report prepared in accordance with National Instrument 43-101, Standards of Disclosure for Mineral Projects (“NI 43-101”) and entitled “2019 Updated Mineral Resources and Mineral Reserves Statements of Mineração Caraíba’s Vale do Curaçá Mineral Assets, Curaçá Valley”, dated November 25, 2019 with an effective date of September 18, 2019, prepared by Rubens Jose De Mendonça, MAusIMM, of Planminas – Projectos e Consultoria em Mineração Ltd. (“Planminas”), Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, and Bernardo Horta de Cerqueira Viana, MAIG, all of GE21 Consultoria Mineral Ltda. (“GE21”), and each a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “Vale do Curaçá Technical Report”).

The report prepared in accordance with NI 43-101 and entitled “Mineral Resource and Mineral Reserve Estimate of the NX Gold Mine, Nova Xavantina”, dated February 3, 2020 with an effective date of September 30, 2019, prepared by Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, and Paulo Roberto Bergmann, FAusIMM, each of GE21 and a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “NX Gold Technical Report”).

The report prepared in accordance with NI 43-101 and entitled “Feasibility Study, Technical Report for the Boa Esperança Copper Project, Pará State Brazil”, dated September 7, 2017 with an effective date of June 1, 2017, prepared by Rubens Mendonça, MAusIMM of SRK Consultores do Brasil Ltda. (“SRK” or “SRK Brazil”) as at the date of the report (now of Planminas) and Carlos Barbosa, MAIG and Girogio di Tomi, MAusIMM, both of SRK Brazil, and each a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “Boa Esperança Feasibility Study”).

Reference should be made to the full text of the Vale do Curaçá Technical Report, the NX Gold Technical Report and the Boa Esperança Technical Report, each of which is available for review under the Company’s profile on SEDAR at www.sedar.com.

The disclosure of Technical Information in this MD&A was reviewed and approved by Emerson Ricardo Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

Cautionary Note Regarding Forward-Looking Statements

This MD&A contains “forward-looking information” within the meaning of applicable Canadian securities laws. Forward-looking information includes statements that use forward-looking terminology such as “may”, “could”, “would”, “will”, “should”, “intend”, “target”, “plan”, “expect”, “budget”, “estimate”, “forecast”, “schedule”, “anticipate”, “believe”, “continue”, “potential”, “view” or the negative or grammatical variation thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, statements with respect to the Company's expected operations at the Vermelhos and Pilar Mines as well as at the NX Gold Property, drilling plans, plans for the Company's exploration program, timing of any updated mineral resource and reserve updates and technical reports, the Company's ability to service its ongoing obligations, the Company's future production outlook, cash costs, capital resources, expenditures, the impact of new accounting standards and amendments on the Company's financial statements, and current global macroeconomic uncertainty stemming from the Covid-19 pandemic and its impact on the Company’s business, financial condition, results of operations, cash flows and prospects.

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this MD&A including, without limitation, assumptions about: favourable equity and debt capital markets; the ability to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Company’s properties and assets; future prices of copper and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any mineral reserve and mineral resource estimates; the geology of the Vale do Curaçá Property, NX Gold Property and the Boa Esperanҫa Property being as described in the technical reports for these properties; production costs; the accuracy of budgeted exploration and development costs and expenditures; the price of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to operate in a safe, efficient and effective manner; work force conditions to remain healthy in the face of prevailing epidemics, pandemics or other health risks, political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favourable terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour stability; stability in financial and capital goods markets; availability of equipment and critical supplies, spare parts and consumables; positive relations with local groups and the Company’s ability to meet its obligations under its agreements with such groups; and satisfying the terms and conditions of the Company’s current loan arrangements. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive, global health, and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.

Ero Copper Corp. June 30, 2020 MD&A Page 26

Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. Such risks include, without limitation the risk factors listed under the heading “Risk Factors” in the AIF.  

Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking information, there may be other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended.

The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained herein. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.

Forward-looking information contained herein is made as of the date of this MD&A and the Company disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.

Cautionary Notes Regarding Mineral Resource and Reserve Estimates

In accordance with applicable Canadian securities regulatory requirements, all mineral reserve and mineral resource estimates of the Company disclosed or incorporated by reference in this MD&A have been prepared in accordance with NI 43-101 and are classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards for Mineral Resources and Mineral Reserves, adopted by the CIM Council on May 10, 2014 (the “CIM Standards”).

Mineral resources which are not mineral reserves do not have demonstrated economic viability. Pursuant to the CIM Standards, mineral resources have a higher degree of uncertainty than mineral reserves as to their existence as well as their economic and legal feasibility. Inferred mineral resources, when compared with Measured or Indicated mineral resources, have the least certainty as to their existence, and it cannot be assumed that all or any part of an Inferred mineral resource will be upgraded to an Indicated or Measured mineral resource as a result of continued exploration. Pursuant to NI 43-101, Inferred mineral resources may not form the basis of any economic analysis. Accordingly, readers are cautioned not to assume that all or any part of a mineral resource exists, will ever be converted into a mineral reserve, or is or will ever be economically or legally mineable or recovered.

ADDITIONAL INFORMATION

Additional information about Ero and its business activities, including the AIF, is available under the Company’s profile at www.sedar.com.

Ero Copper Corp. June 30, 2020 MD&A Page 27

EX-99.16

Exhibit 99.16

 

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2020 AND 2019

Ero Copper Corp.

Condensed Consolidated Statements of Financial Position

(Amounts in thousands of US Dollars)

(Unaudited)

			As at			As at
ASSETS	Notes		June 30, 2020			December 31, 2019
Current
Cash and cash equivalents			$	51,617		$	21,485
Restricted cash		7(b)		750			1,500
Accounts receivable				1,538			7,680
Inventories		3		20,563			19,377
Other current assets		4		16,486			25,523
				90,954			75,565
Non-Current
Mineral, property, plant and equipment		5		285,169			339,516
Exploration and evaluation assets		6		19,771			25,878
Deposits				493			1,200
Deferred income tax assets				23,316			13,099
Other non-current assets				627			7,416
				329,376			387,109
Total Assets			$	420,330		$	462,674
LIABILITIES
Current
Accounts payable and accrued liabilities			$	33,779		$	43,694
Current portion of loans and borrowings		7		25,793			18,984
Current portion of value added, payroll and other taxes payable				10,902			13,994
Current portion of derivatives		15		43,907			650
Current portion of lease liabilities				2,306			3,159
				116,687			80,481
Non-Current
Loans and borrowings		7		157,482			140,386
Provisions				24,955			33,581
Value added, payroll and other taxes				2,726			5,694
Derivatives		15		20,489			1,059
Lease liabilities				460			487
Other non-current liabilities				1,806			1,928
				207,918			183,135
Total Liabilities				324,605			263,616
SHAREHOLDERS’ EQUITY
Share capital		8		122,819			120,492
Equity reserves				(84,596	)		(24,489	)
Retained earnings				56,993			102,220
Equity attributable to owners of the Company				95,216			198,223
Non-controlling interests				509			835
				95,725			199,058
Total Liabilities and Equity			$	420,330		$	462,674

Nature of operations (Note 1); Contingencies (Note 17)

APPROVED ON BEHALF OF THE BOARD:

“David Strang” , CEO & Director                         ”Matthew Wubs”                     , Director

The accompanying notes are an integral part of these condensed consolidated interim financial statements

Page 1 

Ero Copper Corp.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

			Three months ended			Three months ended			Six months ended			Six months ended
	Notes		June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Revenue		9	$	70,760		$	76,474		$	138,505		$	148,515
Cost of product sold		10		(30,114	)		(43,282	)		(65,925	)		(81,422	)
Sales expenses				(1,114	)		(1,107	)		(2,396	)		(2,414	)
Gross profit				39,532			32,085			70,184			64,679
Expenses
General and administrative		11		(6,073	)		(7,127	)		(13,576	)		(13,750	)
Share-based compensation		8(a) to (c)		(2,723	)		(1,292	)		(4,772	)		(3,135	)
Income before the undernoted				30,736			23,666			51,836			47,794
Other income (expenses)
Finance income				530			106			997			242
Finance expense		12		(2,845	)		(6,398	)		(9,496	)		(13,208	)
Foreign exchange gain (loss)		13		(16,322	)		1,583			(98,244	)		1,295
Loss on debt settlement				-			(1,783	)		-			(1,783	)
Other income (expenses)				(802	)		109			(1,495	)		1,157
Income (loss) before income taxes				11,297			17,283			(56,402	)		35,497
Income tax recovery (expense)
Current				(2,798	)		(2,678	)		(3,889	)		(6,896	)
Deferred				(791	)		651			15,004			2,138
				(3,589	)		(2,027	)		11,115			(4,758	)
Net income (loss) for the period				7,708			15,256			(45,287	)		30,739
Other comprehensive income (loss)
Foreign currency translation income (loss)				(14,041	)		2,701			(63,960	)		1,288
Comprehensive income (loss)			$	(6,333	)	$	17,957		$	(109,247	)	$	32,027
Net income (loss) attributable to:
Owners of the Company				7,526			15,111			(45,227	)		30,434
Non-controlling interests				182			145			(60	)		305
			$	7,708		$	15,256		$	(45,287	)	$	30,739
Comprehensive income (loss) attributable to:
Owners of the Company				(6,459	)		17,801			(108,931	)		31,717
Non-controlling interests				126			156			(316	)		310
			$	(6,333	)	$	17,957		$	(109,247	)	$	32,027
Net income (loss) per share attributable to
owners of the Company		8(e)
Net income (loss) per share
Basic			$	0.09		$	0.18		$	(0.53	)	$	0.36
Diluted			$	0.08		$	0.17		$	(0.53	)	$	0.34
Weighted average number of common shares
outstanding
Basic				85,933,443			85,032,841			85,846,319			84,920,351
Diluted				91,428,969			90,696,926			85,846,319			90,401,277

The accompanying notes are an integral part of these condensed consolidated interim financial statements

Page 2 

Ero Copper Corp.

Condensed Consolidated Statement of Changes in Shareholders’ Equity

(Amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

		Share Capital			Equity Reserves
		Number of			Contributed			Foreign			Retained						Non-controlling
	Notes	shares	Amount		surplus			exchange			earnings			Total			interest			Total equity
Balance, December 31, 2019		85,703,646	$	120,492	$	9,084		$	(33,573	)	$	102,220		$	198,223		$	835		$	199,058
Loss for the period		-		-		-			-			(45,227	)		(45,227	)		(60	)		(45,287	)
Other comprehensive loss for the period		-		-		-			(63,704	)		-			(63,704	)		(256	)		(63,960	)
Total comprehensive loss for the period		-		-		-			(63,704	)		(45,227	)		(108,931	)		(316	)		(109,247	)
Shares issued for:
Exercise of options and warrants		594,313		2,327		(671	)		-			-			1,656			-			1,656
Share-based compensation	8(a) to (c)	-		-		4,268			-			-			4,268			-			4,268
Dividends to non-controlling interest		-		-		-			-						-			(10	)		(10	)
Balance, June 30, 2020		86,297,959	$	122,819	$	12,681		$	(97,277	)	$	56,993		$	95,216		$	509		$	95,725
Balance, December 31, 2018		84,738,650	$	117,944	$	3,897		$	(28,652	)	$	10,337		$	103,526		$	296		$	103,822
Income for the period		-		-		-			-			30,434			30,434			305			30,739
Other comprehensive income for the period		-		-		-			1,283			-			1,283			5			1,288
Total comprehensive income for the period		-		-		-			1,283			30,434			31,717			310			32,027
Shares issued for:
Exercise of options and warrants		448,330		1,529		(396	)		-			-			1,133			-			1,133
Share-based compensation		-		-		3,135			-			-			3,135			-			3,135
Balance, June 30, 2019		85,186,980	$	119,473	$	6,636		$	(27,369	)	$	40,771		$	139,511		$	606		$	140,117

The accompanying notes are an integral part of these condensed consolidated interim financial statements

Page 3 

Ero Copper Corp.

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands of US Dollars)

(Unaudited)

	Three months ended			Three months ended			Six months ended June			Six months ended June
	June 30, 2020			June 30, 2019			30, 2020			30, 2019
Cash Flows from / (used in) Operating Activities
Net income (loss) for the period	$	7,708		$	15,256		$	(45,287	)	$	30,739
Adjustments for:
Amortization and depreciation		9,261			11,222			19,742			23,361
Income tax expense (recovery)		3,589			2,027			(11,115	)		4,758
Loss on debt settlement		-			1,783			-			1,783
Write-off of plant and equipment		48			940			48			1,268
Provisions		212			(113	)		555			47
Share-based compensation		2,723			1,292			4,772			3,135
Finance income		(530	)		(106	)		(997	)		(242	)
Finance expenses		2,845			6,398			9,496			13,208
Foreign exchange loss		16,322			(1,583	)		98,244			(1,295	)
Changes in:
Accounts receivable		(98	)		11,568			5,764			(333	)
Inventories		(3,044	)		3,392			(4,981	)		(3,367	)
Other assets		2,473			(1,106	)		3,914			(1,088	)
Accounts payable and accrued liabilities		7,386			(1,976	)		6,328			(6,457	)
Deferred revenue		-			21			-			4,332
Value added, payroll and other taxes		(1,724	)		(7,174	)		1,063			(3,548	)
		47,171			41,841			87,546			66,301
Derivative contract settlements		(4,363	)		(14	)		(7,014	)		709
Provision settlements		(338	)		(715	)		(748	)		(831	)
Income taxes paid		-			(3,808	)		-			(3,808	)
		42,470			37,304			79,784			62,371
Cash Flows from / (used in) Investing Activities
Additions to mineral property, plant and equipment		(30,375	)		(19,065	)		(58,742	)		(41,016	)
Additions to exploration and evaluation assets		(34	)		(429	)		(88	)		(604	)
Other investments		47			-			565			17
		(30,362	)		(19,494	)		(58,265	)		(41,603	)
Cash Flows from / (used in) Financing Activities
Restricted cash		375			372			750			750
Lease liability payments		(1,016	)		(917	)		(2,187	)		(1,819	)
New loans and borrowings, net of finance costs		5,309			12,865			50,998			17,539
Loans and borrowings paid		(7,854	)		(14,403	)		(29,084	)		(17,387	)
Interest paid on loans and borrowings		(1,284	)		(2,570	)		(3,732	)		(5,390	)
Other finance expenses		(540	)		(765	)		(1,306	)		(1,628	)
Issuance of share capital, net of issuance costs		1,357			590			1,656			1,133
		(3,653	)		(4,828	)		17,095			(6,802	)
Effect of exchange rate changes on cash and cash
equivalents		(1,176	)		1,011			(8,482	)		574
Net increase in cash and cash equivalents		7,279			13,993			30,132			14,540
Cash and cash equivalents - beginning of period		44,338			19,488			21,485			18,941
Cash and cash equivalents - end of period	$	51,617		$	33,481		$	51,617		$	33,481

The accompanying notes are an integral part of these condensed consolidated interim financial statements

Page 4 

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

1. Nature of Operations

Ero Copper Corp. (“Ero" or the "Company") was incorporated on May 16, 2016 under the Business Corporations Act (British Columbia) and maintains its head office at Suite 1050, 625 Howe Street, Vancouver, BC, V6C 2T6. The Company’s shares are publicly traded on the Toronto Stock Exchange under the symbol “ERO”.

The Company’s principal asset is its 99.6% ownership interest in Mineração Caraíba S.A. (“MCSA”). The Company also currently owns a 97.6% ownership interest in NX Gold S.A. (“NX Gold”) indirectly through its wholly-owned subsidiary, Ero Gold Corp. (“Ero Gold”).

MCSA is a Brazilian company which holds a 100% interest in the Vale do Curaçá Property and the Boa Esperança Property (Note 6). MCSA’s predominant activity is the production and sale of copper concentrate from the Vale do Curaçá Property, with gold and silver produced and sold as by-products. The Company currently mines copper ore from the Pilar underground mine (“Pilar UG Mine”) and the Vermelhos underground mine (“Vermelhos UG Mine”). The Boa Esperança Property is located within the municipality of Tucumã in the southeastern part of the state of Pará, Brazil, and consists of a single mineral concession covering an area of 4,034 hectares (“ha”).

NX Gold is a Brazilian gold mining company focused on the exploration and commercialization of gold as its main product and silver as its sub-product. NX Gold wholly owns a 31,096 ha property, located approximately 18 kilometers west of the town of Nova Xavantina, southeastern Mato Grosso State, Brazil, consisting of a single mining concession covering an area of 620 ha, where all gold mining and processing activities occur.

On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. Although COVID-19 has not materially impacted the Company’s operations during the six months ended June 30, 2020, the situation is dynamic and the ultimate duration and magnitude of the impact on the economy and our business are not known at this time. These impacts could include an impact on the Company’s ability to obtain debt and equity financing, impairment of investments, impairments in the value of long-lived assets, continued fluctuation in the value of the Brazilian Reais or potential future decreases in revenue or the profitability of ongoing operations. During the six months ended June 30, 2020, the Company and its subsidiaries have drawn down $14.0 million and BRL $97.6 million ($17.8 million) under various credit facilities as a proactive measure in light of the uncertainty surrounding the COVID-19 pandemic.

2. Basis of Preparation

a) Statement of Compliance

These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting and, except as disclosed in note 2(b) below, follow the same accounting policies and methods of application as the Company’s most recent annual consolidated financial statements for the year ended December 31, 2019. These condensed consolidated interim financial statements do not include all of the information required for full consolidated annual financial statements and should be read in conjunction with the consolidated financial statements of the Company as at and for the year ended December 31, 2019, prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee.

These condensed consolidated interim financial statements were authorized for issue by the Board of Directors of the Company (the “Board”) on August 6, 2020.

Page 5 

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

b) New Accounting Standards and Interpretations Adopted in the Current Period

The following new and amended IFRS pronouncements were adopted effective January 1, 2020 and had no impact to the Company’s financial statements:

· Amendments to References to the Conceptual Framework in IFRS Standards

· In September 2019, the IASB issued first phase amendments IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Hedging and IFRS 7 Financial Instrument Disclosures to address the financial reporting impact of the reform on interest rate benchmarks, such as the discontinuance of the interbank offered rates. The first phase amendment is focused on the impact to hedge accounting requirements. The Company adopted the first phase amendment and there was no material impact on its consolidated financial statements. The Company will continue to assess the effect of amendments related to the interest rate benchmark reform on its consolidated financial statements.

The following amendment to accounting standards has been issued but not yet adopted in the financial statements:

· On May 14, 2020, the IASB published a narrow scope amendment to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use. The amendment prohibits deducting from the cost of property, plant and equipment amounts received from selling items produced while preparing the asset for its intended use. Instead, amounts received will be recognized as sales proceeds and related cost in profit or loss. The effective date is for annual periods beginning on or after January 1, 2022. The Company is assessing the effect of the narrow scope amendment on its consolidated financial statements.

c) Use of Judgments and Estimates

In preparing these condensed consolidated interim financial statements, management has made judgments, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ. Significant judgments made by management in applying the Company’s accounting policies and key sources of estimation uncertainty were the same as those applied in the most recent annual audited consolidated financial statements for the year ended December 31, 2019, except for those applied for derivatives.

The fair value of derivative instruments is determined using either present value techniques or option pricing models that utilize a variety of inputs that are a combination of quoted prices and market-corroborated inputs. The fair value of the Company’s derivative contracts includes an adjustment for credit risk. Derivative instruments are classified within Level 2 of the fair value hierarchy.

3. Inventories

	June 30, 2020		December 31, 2019
Supplies and consumables	$	15,286	$	13,878
Stockpile		1,368		2,556
Work in progress		1,474		2,164
Finished goods		2,435		779
	$	20,563	$	19,377

Page 6 

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

4. Other Current Assets

	June 30, 2020		December 31, 2019
Advances to suppliers	$	797	$	1,046
Prepaid expenses		2,530		4,779
Advances to employees (a)		793		2,829
Value added federal taxes recoverable (b)		12,366		16,869
	$	16,486	$	25,523

(a) Advances to employees include short term advances of salary, vacation and other benefits granted to employees of the Company’s subsidiary MCSA.

(b) $9.2 million of this balance (December 31, 2019 - $12.2 million) relates to a 2019 favourable legal decision that recognizes MCSA’s right to a tax credit as a result of historical over-payments. MCSA is able to use these tax credits against a variety of taxes, including taxes on future sales. During the three and six months ended June 30, 2020, the Company used $1.6 million and $4.8 million of these credits, respectively, to offset current income taxes payable.

5. Mineral, Property, Plant and Equipment

Additions to mineral, property, plant and equipment totaled $33.7 million and $61.5 million during the three and six months ended June 30, 2020 respectively (three and six months ended June 30, 2019 - $22.5 million and $49.7 million, respectively), of which $0.1 million and $6.4 million was obtained through financing arrangements with equipment suppliers, respectively (three and six months ended June 30, 2019 – nil and $2.1 million, respectively).

Certain equipment is secured by the equipment finance loans (note 7).

Included in mineral, property, plant and equipment is $5.4 million (December 31, 2019 - $7.3 million) related to the value of mineral resources beyond proven and probable reserves not currently being amortized. In addition, $61.8 million (December 31, 2019 - $52.7 million) related to projects in progress are not currently being amortized.

6. Exploration and Evaluation Assets

Exploration and evaluation assets relate to the Boa Esperança Property located in the Municipality of Tucumã, in the state of Pará, Brazil which consists of a single mineral concession. This prospective copper/gold property is in advanced stages of exploration with various geological mineral resource studies and is the subject of a completed feasibility study.

Page 7 

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

7. Loans and Borrowings

											Carrying value, including accrued interest
Description	Denomination	Security		Time to Maturity		Coupon rate			Principal to be repaid		June 30, 2020		December 31, 2019
Bank loan (at acquisition)	BRL R$		Unsecured		79 months		CDI + 0.5	%		4,599		4,060		5,941
Bank loan (MCSA)	USD		Unsecured		6 months		4.43	%		750		752		1,503
Bank loan (MCSA)	BRL R$		Unsecured		-		CDI + 3.7	%		-		-		204
Line of credit (MCSA)	BRL R$		Unsecured		9 months		CDI + 9.0	%		4,109		4,121		-
Line of credit (MCSA)	BRL R$		Unsecured		0 - 12 months		13.20%-24.34	%		11,360		11,480		-
Lines of credit (NX Gold)	BRL R$		Unsecured		0 - 8 months		14.34%-14.98	%		2,739		2,769		670
Equipment finance loan (Plural)	BRL R$		Secured		17 months		CDI + 7.0	%		1,552		1,562		2,892
Equipment finance loans	BRL R$		Secured		12 - 49 months		12.95%-16.49	%		1,251		1,374		5,585
Equipment finance loans	EURO		Secured		25 - 31 months		5.5%-7.0	%		2,784		2,816		3,996
Equipment finance loans	USD		Secured		23 - 39 months		6.50%-7.95	%		5,142		5,213		4,125
Senior non-revolving credit facility	USD		Secured		45 months		LIBOR + 2.50%-4.25	%		75,000		74,564		79,091
Senior revolving credit facility	USD		Secured		45 months		LIBOR + 2.50%-4.25	%		75,000		74,564		55,363
Total									$	184,286	$	183,275	$	159,370

Current portion:	$	25,793	$18,984
Non-current portion:	$	157,482	$140,386

	June 30, 2020			June 30, 2019
Balance, beginning of year	$	159,370		$	152,234
New senior revolving credit facility, net		13,668			10,623
New equipment finance loans		8,134			9,089
New lines of credit		35,584			-
Principal and interest payments		(32,816	)		(22,777	)
Interest accretion		5,273			5,860
Loss on debt settlement		-			1,783
Effect of foreign exchange rate changes		(5,938	)		48
Balance, end of period	$	183,275		$	156,860

(a) Senior credit facility

The Company has a $150 million facility from a syndicate of Canadian financial institutions. The facility is comprised of a $75 million (December 31, 2019 - $80 million) senior secured amortizing non-revolving credit facility (“Term Facility”) and a $75 million (December 31, 2019 - $70 million) senior secured revolving term credit facility (“Revolving Credit Facility”) (collectively the “Facilities”).

Page 8 

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

On March 31, 2020, the Company amended the Facilities to reduce its cost of borrowing by 25 to 50 basis points, depending on the consolidated leverage ratio, and to defer the scheduled principal payments for two years.

The Term Facility now matures on March 31, 2024 and requires principal repayments on a quarterly basis commencing on March 31, 2022, while the Revolving Credit Facility is now payable in full at maturity on March 31, 2024. The Facilities bear interest on a sliding scale at a rate of LIBOR plus 2.50% to 4.25% depending on the Company’s consolidated leverage ratio at the time. Commitment fees for any undrawn portion of the Revolving Credit Facility are also on a sliding scale between 0.63% to 1.06%. The Company determined that the amendments were a non-substantial modification. In March 2020, the Company drew down the remainder of the amount available under the Facilities totaling $14.0 million ($13.7 million net of transaction costs). The Term Facility previously had a five-year term with equal quarterly principal payments beginning on December 13, 2020, while the Revolving Credit Facility was payable at maturity on December 13, 2022. The Facilities previously bore interest on a sliding scale at a rate of LIBOR plus 2.75% to 4.75% depending on the Company’s consolidated leverage ratio at the time.

The Facilities include standard and customary terms and conditions with respect to fees, representations, warranties, and financial covenants that remain unchanged from prior amendments.

The Facilities are secured by pledges of shares of MCSA, Ero Gold and NX Gold. The Company is required to comply with certain financial covenants. As of the date of these consolidated financial statements, the Company is in compliance with these covenants.

In January 2019, the Company entered into an interest rate swap transaction with a Canadian financial institution whereby the floating interest on a notional amount of $65.0 million of the Term Facility was swapped for a fixed interest rate of 2.69%. This interest rate swap transaction is in effect for the majority of term of the Term Facility, with the notional amount reduced as principal payments are made. Interest swap settlements are being made on a quarterly basis.

(b) Bank loan and equipment finance loans

The bank loan (at acquisition) relates to the Company’s subsidiary, MCSA, and was recognized at the date of acquisition at fair value and has subsequently been recognized at amortized cost, net of settlements. Interest is being recognized using the effective interest rate method at an interest rate of 11.29%.

As per the terms of one of MCSA’s bank loans, the Company is required to maintain a separate debt service bank account with sufficient funds to guarantee scheduled principal payments by MCSA. At June 30, 2020, $0.8 million was on deposit (December 31, 2019 - $1.5 million) in the designated debt service account and is presented as restricted cash in the statement of financial position.

MCSA is required to comply with certain financial covenants which MCSA is in compliance with at June 30, 2020. The equipment finance loans are secured by the corresponding equipment relating to them and a guarantee by the Company.

(c) MCSA and NX Gold lines of credit

At June 30, 2020, the Company’s subsidiaries, MCSA and NX Gold, have the following credit facilities available:

MCSA entered into a credit agreement in 2019 for a non-revolving line of credit of up to BRL $30.0 million at an interest rate of CDI (“Brazilian Interbank Deposit Rate”) + 9% per annum. MCSA may drawdown on this line of credit at any time until November 30, 2020. In addition, in 2019 MCSA also entered into a second credit agreement for a total of up to BRL $30.0 million at an interest rate of 14.98% per annum. MCSA may drawdown on this line of credit at any time until August 27, 2020. The Company and NX Gold provide unsecured guarantees for these credit agreements. At June 30, 2020, BRL $52.9 million ($9.7 million) (December 31, 2019 - $nil) had been drawn from these credit facilities, which represents the maximum amount available under the credit facilities at June 30, 2020.

During the three months ended June 30, 2020, MCSA entered into a credit agreement for a line of credit of up to BRL $14.9 million at an interest rate of 14.3% per annum. MCSA may drawdown on this line of credit at any time until November 23, 2020. The Company provides an unsecured guarantee for this credit agreement. At June 30, 2020, BRL $14.9 million ($2.7 million) had been drawn from this credit facility.

Page 9 

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

During the three months ended June 30, 2020, MCSA entered into various credit agreements for lines of credit of up to a total of BRL $17.5 million at various interest rates. The interest rates on these credit agreements range from 13.20% to 24.34%. At June 30, 2020, BRL $17.5 million ($3.2 million) has been drawn from these credit facilities.

NX Gold entered into an agreement in 2019 for a line of credit of up to BRL $7.5 million at an interest rate of 14.98% per annum. NX Gold may drawdown on this line of credit at any time until August 27, 2020. As at June 30, 2020, BRL $7.5 million ($1.4 million) (December 31, 2019 - BRL $2.7 million ($0.7 million)) has been drawn from NX Gold’s line of credit.

In addition, during the six months ended June 30, 2020, NX Gold entered into a second credit agreement for a line of credit of up to BRL $7.5 million at an interest rate of 14.34% per annum. NX Gold may drawdown on this line of credit at any time until February 22, 2021. NX Gold is using BRL $1.5 million of this line of credit to provide a letter of credit to a supplier until January 31, 2022. The Company provides unsecured guarantees for these credit agreements. At June 30, 2020, BRL $7.5 million ($1.4 million) (December 31, 2019 - $nil) had been drawn from this line of credit.

8. Share Capital

As at June 30, 2020, the Company’s authorized share capital consists of an unlimited number of common shares without par value. As at June 30, 2020, 86,297,959 common shares were outstanding.

(a) Options

As at June 30, 2020, the following stock options were outstanding:

	Number of		Weighted Weighted Average		Vested and Exercisable Number of		Weighted Average Remaining
Expiry Date	Stock Options		Exercise Price		Stock Options		Life in Years
May 15, 2022		683,890		1.50	USD	683,890		1.87
July 10, 2022		60,000		1.50	USD	26,666		2.03
November 24, 2022		318,000		6.48	CSD	212,000		2.40
December 7, 2022		1,338,336		6.74	CSD	891,669		2.44
January 18, 2023		60,000		7.95	CSD	40,000		2.55
January 23, 2023		41,667		7.76	CSD	41,667		2.57
June 19, 2023		144,000		10.25	CSD	94,000		2.97
July 16, 2023		200,000		9.01	CSD	66,666		3.04
December 31, 2023		1,085,983		9.76	CSD	315,637		3.50
January 2, 2024		125,000		9.80	CSD	125,000		3.51
August 15, 2024		40,000		21.09	CSD	40,000		4.13
December 12, 2024		470,228		20.52	CSD	-		4.45
January 2, 2025		73,456		23.42	CSD	43,456		4.51
		4,640,560		6.44	USD	2,580,651		2.92

In determining the weighted average exercise price of all outstanding options in the tables above and below, the CAD prices were converted to USD at the June 30, 2020 exchange rate of 1.3628.

	Number of		Weighted Average
	Stock Options		Exercise Price
Outstanding stock options, December 31, 2019		5,061,417	$	6.23
Issued		73,456		17.19

Exercised	(494,313	)		3.01
Outstanding stock options, June 30, 2020	4,640,560		$	6.44

Page 10 

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

The fair value of options granted in the three and six months ended June 30, 2020 was determined using the Black-Scholes option pricing model. The weighted average inputs used in the measurement of fair values at grant date of the options are the following:

Expected term (years)		3.0
Forfeiture rate		0	%
Volatility		50.6	%
Dividend yield		0	%
Risk-free interest rate		1.63	%
Weighted-average fair value per option	$	6.46

For the three and six months ended June 30, 2020, the Company recorded share-based compensation of $0.9 million and $2.1 million (three and six months ended June 30, 2019 - $1.0 million and $2.6 million), with respect to its outstanding stock options.

(b) Share Unit Plan

As at June 30, 2020, 438,463 share units (December 31, 2019 - 437,463 share units) have been issued to certain officers and employees of the Company pursuant to the Company’s Share Unit Plan and are outstanding. These share units will vest three years from the date of grant by the Board and the number of share units that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain market and non-market performance conditions. Each vested share unit entitles the holder thereof to receive on or about the applicable date of vesting of such share unit (i) one common share; (ii) a cash amount equal to the fair market value of one common share as at the applicable date of vesting; or (iii) a combination of (i) and (ii), as determined by the Board in its sole discretion. The Company currently intends to settle these share units using common shares. Accordingly, they are classified as equity settled instruments.

For the share units with non-market performance conditions, the fair value of the share units granted was determined using the share price at the date of grant. For the share units with market performance conditions, the fair value of the share units granted was determined using a Geometric Brownian Motion model. The weighted average inputs used in the measurement of fair values at grant date of the 1,000 Share Units granted during the six months ended June 30, 2020 are as follows:

Expected term (years)		3.0
Forfeiture rate		0	%
Volatility		44.9	%
Dividend yield		0	%
Risk-free interest rate		1.82	%
Weighted-average fair value per Share Unit	$	18.38

During the three and six months ended June 30, 2020, the Company recorded share-based compensation of $1.6 million and $2.2 million (three and six months ended June 30, 2019 - $0.3 million and $0.5 million, respectively), with respect to the share units.

Page 11 

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

(c) Deferred Share Unit Plan

On December 12, 2019, a Deferred Share Unit Plan (“DSU Plan”) was established by the Board as a component of our compensation for independent directors. Only independent directors are eligible to participate and to receive deferred share units (“DSUs”) under the DSU Plan.  DSUs may be awarded by the Board from time to time to provide independent directors with appropriate equity-based compensation for the services they render to the Company and may be subject to terms and conditions with respect to vesting of such DSUs.  In addition, independent directors may elect to receive a portion or all of their respective annual cash remuneration in the form of DSUs, which will be fully vested upon such grant.  The number of DSUs to be awarded to a participant under the DSU Plan is determined by dividing the portion of that participant’s annual cash remuneration by the fair market value of a common share on the last day of the quarter in which such portion of the annual cash remuneration was earned. Pursuant to the DSU Plan, DSUs may only be settled by way of cash payment. A participant is not entitled to payment in respect of the DSUs until his or her death, retirement or removal from the Board.  The settlement amount of each DSU is based on the fair market value of a common share on the DSU redemption date multiplied by the number of DSUs being redeemed.

During the three and six months ended June 30, 2020, 4,994 DSUs and 37,321 DSUs, respectively, (three and six months ended June 30, 2019 - nil) were issued to independent directors.

As at June 30, 2020, the fair value of the DSU liability was $0.5 million (December 31, 2019 - $nil) which has been recognized in other non-current liabilities with a corresponding $0.2 million and $0.5 million recognized in share-based compensation expense for the three and six months ended June 30, 2020, respectively.

(d) Warrants

As at June 30, 2020, 2,766,662 (December 31, 2019 - 2,866,662) common share purchase warrants were outstanding with a weighted average exercise price of $1.20 and a weighted average remaining contractual life of 1.45 years.

(e) Net Income (Loss) per Share

	Three months		Three months
	ended		ended
	June 30, 2020		June 30, 2019
Weighted average number of common shares outstanding		85,933,443		85,032,841
Dilutive effect of warrants		2,540,190		2,876,266
Dilutive effect of stock options		2,297,641		2,787,819
Dilutive effect of Share Units		657,695		-
Weighted average number of diluted common shares outstanding		91,428,969		90,696,926
Net income attributable to owners of the Company	$	7,526	$	15,111
Basic net income per share attributable to owners of the Company		0.09		0.18
Diluted net income per share attributable to owners of the Company		0.08		0.17

Page 12 

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

	Six months ended		Six months ended
	June 30, 2020		June 30, 2019
Weighted average number of common shares outstanding		85,846,319		84,920,351
Dilutive effect of warrants		-		2,902,700

Dilutive effect of stock options		-			2,578,226
Weighted average number of diluted common shares outstanding		85,846,319			90,401,277
Net income (loss) attributable to owners of the Company	$	(45,227	)	$	30,434
Basic net income (loss) per share attributable to owners of the Company		(0.53	)		0.36
Diluted net income (loss) per share attributable to owners of the Company		(0.53	)		0.34

For the six months ended June 30, 2020, the potentially dilutive effect of warrants and stock options are excluded from the dilutive net loss per share calculation as the Company incurred a loss for the period and all dilutive instruments would be anti-dilutive.

9. Revenue

	Three months ended		Three months ended		Six months ended			Six months ended
	June 30, 2020		June 30, 2019		June 30, 2020			June 30, 2019
Copper concentrate
- sales within Brazil	$	26,315	$	44,924	$	77,536		$	93,156
- export sales		27,596		19,414		36,439			28,392
- price adjustments on provisionally priced sales		2,634		373		(1,285	)		2,658
Gold
- export sales		14,215		11,763		25,815			24,309
	$	70,760	$	76,474	$	138,505		$	148,515

Under the terms of the Company’s contract with its primary customer, sales are provisionally priced on the date of sale based on the previous month’s average copper price.  The final sales price for all shipments in a month is determined at the end of the month in which the sale is recognized.  As at June 30, 2020, there were no sales subject to provisional pricing.  During the three and six months ended June 30, 2020, the Company recognized $2.6 million and $(1.3 million), respectively, (three and six months ended June 30, 2019 - $0.4 million and $2.7 million) in price adjustments related to provisionally priced sales. 

10. Cost of Product Sold

	Three months ended		Three months ended		Six months ended		Six months ended
	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Materials	$	4,374	$	6,024	$	9,356	$	10,641
Salaries and benefits		6,767		11,042		15,457		20,155
Depreciation and depletion		9,228		11,181		19,677		23,279
Contracted services		4,329		7,086		9,852		12,788
Maintenance costs		3,422		4,734		7,015		8,828
Utilities		1,886		2,958		4,289		5,271
Other costs		108		257		279		460
	$	30,114	$	43,282	$	65,925	$	81,422

Page 13 

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

11. General and Administrative Expenses

	Three months ended		Three months ended			Six months ended		Six months ended
	June 30, 2020		June 30, 2019			June 30, 2020		June 30, 2019
Accounting and legal	$	307	$	421		$	505	$	758
Amortization and depreciation		33		41			65		82
Office and sundry		1,431		1,562			3,037		2,888
Provisions		212		(113	)		555		47
Salaries and consulting fees		3,305		3,997			6,856		7,571
Incentive payments		682		567			1,855		1,134
Transfer agent and filing fees		54		38			172		123
Travel and conference		49		614			531		1,147
	$	6,073	$	7,127		$	13,576	$	13,750

12. Finance Expense

	Three months ended			Three months ended		Six months ended		Six months ended
	June 30, 2020			June 30, 2019		June 30, 2020		June 30, 2019
Interest on loans and borrowings	$	2,542		$	2,740	$	5,274	$	5,873
Loss on interest rate swap derivative		195			992		2,018		1,828
Accretion of mine closure and rehabilitation provision		191			1,440		459		2,731
Interest on lease liabilities		60			72		137		201
Other finance expenses		(143	)		1,154		1,608		2,575
	$	2,845		$	6,398	$	9,496	$	13,208

13. Foreign Exchange Loss

The following foreign exchange gains (losses) arise as a result of balances and transactions in the Company’s Brazilian subsidiaries that are denominated in currencies other than the Brazilian Reais (BRL$), which is their functional currency.

	Three months ended			Three months ended			Six months ended			Six months ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Foreign exchange on USD denominated debt in Brazil	$	(2,996	)	$	1,574		$	(29,869	)	$	1,438
Realized foreign exchange on derivative contracts (note 15)		(4,363	)		(14	)		(7,014	)		709
Unrealized foreign exchange on derivative contracts (note 15)		(8,485	)		9			(61,140	)		(256	)
Other		(478	)		14			(221	)		(596	)
	$	(16,322	)	$	1,583		$	(98,244	)	$	1,295

Page 14 

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

14. Related Party Transactions

Key management personnel consist of the Company’s directors and officers and their compensation includes director retainer fees and management salaries paid to these individuals, as well as share-based compensation. The aggregate value of compensation paid to key management personnel for the three and six months ended June 30, 2020 was $1.8 million and $3.6 million, respectively ($1.5 million and $2.9 million for the three and six months ended June 30, 2019, respectively). In addition, 43,456 options and 37,321 DSUs were issued to non-executive directors during the six months ended June 30, 2020, respectively (125,000 options for the six months ended June 30, 2019). $1.6 million and $2.9 million was recognized in share-based compensation expense for the three and six months ended June 30, 2020, respectively, for options, Share Units, and DSUs issued ($1.3 million and $3.1 million for the three and six months ended June 30, 2019, respectively).

During the three and six months ended June 30, 2020, key management personnel exercised 223,555 and 248,555 options, as well as 100,000 warrants, for cash proceeds to the Company of $0.5 million and $0.6 million, respectively (110,000 options for cash proceeds of $0.2 million for the three and six months ended June 30, 2019, respectively).

15. Financial Instruments

Fair value

Fair values of financial assets and liabilities are determined based on available market information and valuation methodologies appropriate to each situation. However, some judgments are required in the interpretation of the market data to produce the most appropriate fair value estimates. The use of different market information and/or evaluation methodologies may have a material effect on the fair value amounts.

As at June 30, 2020, derivatives were measured at fair value based on Level 2 inputs.

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, deposits, financial investments and accounts payable and accrued liabilities approximate their fair values due to their short terms to maturity or market rates of interest used to discount amounts. The carrying value of value added, payroll and other taxes approximate fair value based on the discount rate applied. At June 30, 2020, the carrying value of loans and borrowings is $183.3 million while the fair value is approximately $184.3 million. The effective interest rates used to amortize these loans are a close approximation of market rates of interest at June 30, 2020 (Level 2 of the fair value hierarchy).

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers. The carrying amount of the financial assets below represents the maximum credit risk exposure as at June 30, 2020 and December 31, 2019:

	June 30, 2020		December 31, 2019
Cash and cash equivalents	$	51,617	$	21,485
Restricted cash		750		1,500
Accounts receivable		1,538		7,680
Deposits and other non-current assets		1,011		2,396
	$	54,916	$	33,061

Page 15 

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

The Company invests cash and cash equivalents as well as restricted cash with financial institutions that are financially sound based on their credit rating. The Company’s exposure to credit risk associated with accounts receivable is influenced mainly by the individual characteristics of each customer. The Company currently has only three significant customers, all of which have no history of credit default with the Company. The Company has not incurred credit losses during the six months ended June 30, 2020 nor recognized a provision for credit losses.

(i) Foreign exchange currency risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage market risks. At June 30, 2020, the Company has entered into foreign exchange collar contracts at zero cost for notional amounts of $399.4 million with an average floor rate of 4.00 BRL to US Dollar and an average cap rate of 4.67 BRL to US Dollar (December 31, 2019 - notional amount of $336.6 million in foreign exchange forward collar contracts). The maturity dates of these contracts are from July 1, 2020 to March 29, 2022 and are financially settled on a net basis. The fair value of these contracts at June 30, 2020 was a liability of $61.2 million, (December 31, 2019 - $nil) which was included in Derivatives in the statement of financial position. The change in fair value of foreign exchange collar contracts was a loss of $8.5 million and $61.1 million for the three and six months ended June 30, 2020, respectively, (a nominal gain and a loss of $0.3 million for the three and six months ended June 30, 2019, respectively) and has been recognized in foreign exchange loss. In addition, during the three and six months ended June 30, 2020, the Company recognized a realized loss of $4.4 million and $7.0 million, respectively (a nominal loss and a realized gain of $0.7 million for the three and six months ended June 30, 2019, respectively) related to the settlement of foreign currency forward collar contracts.

(ii) Interest rate risk

The Company is principally exposed to the variation in interest rates on loans and borrowings with variable rates of interest. Management reduces interest rate risk exposure by entering into loans and borrowings with fixed rates of interest or by entering into derivative instruments that fix the ultimate interest rate paid.

The Company is principally exposed to interest rate risk through its Term Facilities of $150.0 million, Brazilian Real denominated bank loans of $4.6 million, Brazilian Real denominated lines of credit of $4.1 million, and Brazilian Real denominated equipment finance loans of $2.1 million. Based on the Company’s net exposure at June 30, 2020, a 1% change in the variable rates would have an impact of $1.6 million on pre-tax annual net income, without consideration of the effects of the interest rate swap contract below.

In order to mitigate the above volatility due to variable rates on loans, as at June 30, 2020, the Company has entered into an interest rate swap contract to manage interest rate risk (see note 7). The floating interest on a notional amount of $65 million was swapped for a fixed interest rate of 2.69%. The fair value of this contract at June 30, 2020 was a liability of $3.2 million (December 31, 2019 - $1.7 million) and was included in Derivatives in the statement of financial position. The change in fair value of $0.2 million and $2.0 million for the three and six months ended June 30, 2020, respectively, was included in finance expense.

(iii) Price risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage commodity price risks. At June 30, 2020, the Company has not entered into any commodity derivative contracts.

Page 16 

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

16. Segment Disclosure

The Company’s operations are segmented by entity between MCSA, NX Gold and corporate head office, which is consistent with internal reporting purposes. The Company monitors the operating results of its operating segments separately for the purpose of making decisions about resource allocation and performance assessment.

Total revenue from MCSA is from two customers while total revenue from NX Gold is from one customer.

Segmented information is as follows:

Three months ended June 30, 2020	MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	56,545		$	14,215		$	-		$	70,760
Depreciation and depletion		(8,565	)		(663	)		-			(9,228	)
Other cost of product sold expenses		(17,080	)		(3,806	)		-			(20,886	)
Cost of product sold		(25,645	)		(4,469	)		-			(30,114	)
Sales expenses		(1,114	)		-			-			(1,114	)
Gross profit		29,786			9,746			-			39,532
Expenses
General and administrative		(3,817	)		(213	)		(2,043	)		(6,073	)
Share-based compensation		-			-			(2,723	)		(2,723	)
Finance income		168			18			344			530
Finance expenses		(780	)		(196	)		(1,869	)		(2,845	)
Foreign exchange loss		(15,861	)		(440	)		(21	)		(16,322	)
Other income		(413	)		(389	)		-			(802	)
Income (loss) before taxes		9,083			8,526			(6,312	)		11,297
Current taxes		(1,506	)		(1,292	)		-			(2,798	)
Deferred taxes		(849	)		58			-			(791	)
Net Income (Loss)	$	6,728		$	7,292		$	(6,312	)	$	7,708

Page 17 

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

Six months ended June 30, 2020	MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	112,690		$	25,815		$	-		$	138,505
Depreciation and depletion		(18,131	)		(1,546	)		-			(19,677	)
Other cost of product sold expenses		(37,468	)		(8,780	)		-			(46,248	)
Cost of product sold		(55,599	)		(10,326	)		-			(65,925	)
Sales expenses		(2,396	)		-			-			(2,396	)
Gross profit		54,695			15,489			-			70,184
Expenses
General and administrative		(8,565	)		(693	)		(4,318	)		(13,576	)
Share-based compensation		-			-			(4,772	)		(4,772	)
Finance income		285			58			654			997
Finance expenses		(3,421	)		(528	)		(5,547	)		(9,496	)
Foreign exchange loss		(95,510	)		(2,704	)		(30	)		(98,244	)
Other income		(963	)		(532	)		-			(1,495	)
Income (loss) before taxes		(53,479	)		11,090			(14,013	)		(56,402	)
Current tax expense		(1,923	)		(1,966	)		-			(3,889	)
Deferred tax recovery		14,575			429			-			15,004
Net Income (Loss)	$	(40,827	)	$	9,553		$	(14,013	)	$	(45,287	)
Assets
Current	$	53,789		$	16,238		$	20,927		$	90,954
Non-current		306,776			19,830			2,770			329,376
Total Assets	$	360,565		$	36,068		$	23,697		$	420,330
Total Liabilities	$	149,855		$	16,590		$	158,160		$	324,605

Three months ended June 30, 2019		MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	64,711		$	11,763		$	-		$	76,474
Depreciation and depletion		(9,542	)		(1,639	)		-			(11,181	)
Other cost of product sold expenses		(27,198	)		(4,903	)		-			(32,101	)
Cost of product sold		(36,740	)		(6,542	)		-			(43,282	)
Sales expenses		(1,107	)		-			-			(1,107	)
Gross profit		26,864			5,221			-			32,085
Expenses
General and administrative		(3,671	)		(784	)		(2,672	)		(7,127	)
Share-based compensation		-			-			(1,292	)		(1,292	)
Finance income		93			4			9			106
Finance expenses		(3,069	)		(362	)		(2,967	)		(6,398	)
Foreign exchange gain (loss)		1,601			-			(18	)		1,583
Loss on debt settlement		(1,783	)		-			-			(1,783	)
Other income		140			(31	)		-			109
Income (loss) before taxes		20,175			4,048			(6,940	)		17,283
Current taxes		(1,778	)		(900	)		-			(2,678	)
Deferred taxes		490			161			-			651
Net Income (Loss)	$	18,887		$	3,309		$	(6,940	)	$	15,256

Page 18 

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

Six months ended June 30, 2019	MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	124,206		$	24,309		$	-		$	148,515
Depreciation and depletion		(19,304	)		(3,975	)		-			(23,279	)
Other cost of product sold expenses		(48,287	)		(9,856	)		-			(58,143	)
Cost of product sold		(67,591	)		(13,831	)		-			(81,422	)
Sales expenses		(2,414	)		-			-			(2,414	)
Gross profit		54,201			10,478			-			64,679
Expenses
General and administrative		(7,166	)		(1,291	)		(5,293	)		(13,750	)
Share-based compensation		-			-			(3,135	)		(3,135	)
Finance income		110			114			18			242
Finance expenses		(6,528	)		(647	)		(6,033	)		(13,208	)
Foreign exchange gain (loss)		1,309			-			(14	)		1,295
Loss on debt settlement		(1,783	)		-			-			(1,783	)
Other income		822			335			-			1,157
Income (loss) before taxes		40,965			8,989			(14,457	)		35,497
Current taxes		(4,804	)		(2,092	)		-			(6,896	)
Deferred taxes		1,767			371			-			2,138
Net Income (Loss)	$	37,928		$	7,268		$	(14,457	)	$	30,739
Assets
Current	$	56,321		$	9,472		$	5,151		$	70,944
Non-current		314,697			19,493			2,871			337,061
Total Assets	$	371,018		$	28,965		$	8,022		$	408,005
Total Liabilities	$	115,392		$	13,996		$	138,500		$	267,888

17. Contingencies

MCSA is subject to a number of claims (including claims related to tax, labour and social security matters and civil action) in the course of its business which individually are not material and have not been accrued for in the Company’s financial statements as it is not probable that a cash outflow will occur. While the Company believes that these claims are unlikely to be successful, if all such existing claims were decided against it, the Company could be exposed to a liability of up to approximately $20.4 million as at June 30, 2020 (December 31, 2019 - $31.1 million), which could have an adverse impact on the Company’s business, financial condition, results of operations, cash flows or prospects.

Page 19 

EX-99.17

Exhibit 99.17

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE MONTH PERIOD ENDED
MARCH 31, 2020

1050 – 625 Howe Street, Vancouver, B.C., Canada V6C 2T6
Phone: 604-449-9244 | Website: www.erocopper.com | Email: info@erocopper.com 

MANAGEMENT’S DISCUSSION AND ANALYSIS

This Management’s Discussion and Analysis (“MD&A”) has been prepared as at May 7, 2020 and should be read in conjunction with the unaudited condensed consolidated interim financial statements of Ero Copper Corp. (“Ero”, the “Company”, or “we”) as at, and for the three months ended March 31, 2020, and related notes thereto, which are prepared in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting as permitted by the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”). All references in this MD&A to “Q1 2020” and “Q1 2019” are to the three months ended March 31, 2020 and March 31, 2019, respectively. All dollar amounts are expressed in United States (“US”) dollars and tabular amounts are expressed in thousands of US dollars, unless otherwise indicated. References to “$” or “dollars” are to US dollars, references to “C$” are to Canadian dollars, and references to “R$” are to Brazilian Reais.

This MD&A refers to various non-IFRS measures, such as C1 cash cost of copper produced (per lb), C1 cash cost of gold produced (per ounce), EBITDA, Adjusted EBITDA, Adjusted net income attributable to owners of the Company, Adjusted net income per share attributable to owners of the Company, Working Capital (Deficit), Available Liquidity, and Net Debt. Please refer to the section titled "NON-IFRS MEASURES" within this MD&A for a discussion of non-IFRS measures.

This MD&A contains “forward-looking information” that is subject to risk factors set out in a cautionary note contained at the end of this MD&A. The Company cannot assure investors that such information will prove to be accurate, and actual results and future events may differ materially from those anticipated in such information. The results for the periods presented are not necessarily indicative of the results that may be expected for any future period. Investors are cautioned not to place undue reliance on this forward-looking information.  All information contained in this MD&A is current and has been approved by the Board of Directors of the Company (the “Board”) as of May 7, 2020, unless otherwise stated.

BUSINESS OVERVIEW

Ero, headquartered in Vancouver, B.C., is focused on copper production growth from the Vale do Curaçá Property, located in Bahia, Brazil. The Company’s primary asset is a 99.6% interest in the Brazilian copper mining company, Mineraҫão Caraíba S.A. (“MCSA”), 100% owner of the Vale do Curaçá Property with over 40 years of operating history in the region. The Company currently mines copper ore from the Pilar and Vermelhos underground mines. In addition to the Vale do Curaçá Property, MCSA owns 100% of the Boa Esperanҫa development project, an IOCG-type copper project located in Pará, Brazil and the Company, directly and indirectly, owns 97.6% of the NX Gold Mine, an operating gold and silver mine located in Mato Grosso, Brazil. Additional information on the Company and its operations, including technical reports on the Vale do Curaçá, Boa Esperanҫa and NX Gold properties, can be found on the Company’s website (www.erocopper.com) and on SEDAR (www.sedar.com).

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HIGHLIGHTS

	2020 - Q1			2019 - Q4			2019 - Q1
Operating Information
Copper (MCSA Operations)
Ore Processed (tonnes)		607,959			589,065			530,133
Grade (% Cu)		1.95			2.16			2.19
Cu Production (tonnes)		10,657			11,526			10,645
Cu Production (lbs)		23,495,098			25,411,100			23,468,419
Cu Sold in Concentrate (tonnes)		10,432			11,595			10,033
Cu Sold in Concentrate (lbs)		22,999,136			25,562,212			22,118,394
C1 cash cost of copper produced (per lb)	$	0.71		$	0.80		$	0.91
Gold (NX Gold Operations)
Au Production (ounces)		7,866			6,043			10,119
C1 cash cost of gold produced (per ounce)	$	594		$	980		$	486
Financial information ($millions, except per share amounts)
Revenues	$	67.7		$	75.7		$	72.0
Gross profit	$	30.7		$	31.1		$	32.6
EBITDA	$	(50.6	)	$	34.3		$	37.2
Adjusted EBITDA	$	33.4		$	31.2		$	39.3
Cash flow from operations	$	37.3		$	35.9		$	25.1
Net income (loss)	$	(53.0	)	$	16.3		$	15.5
Net income (loss) attributable to owners of
the Company	$	(52.8	)	$	45.2		$	15.3
Net income (loss) per share attributable to
owners of the Company
- Basic	$	(0.62	)	$	0.53		$	0.18
- Diluted	$	(0.62	)	$	0.49		$	0.17
Adjusted net income attributable to owners
of the Company	$	20.8		$	40.7		$	15.7
Adjusted net income per share attributable to
owners of the Company
- Basic	$	0.24		$	0.47		$	0.19
- Diluted	$	0.23		$	0.44		$	0.17
Cash and Cash Equivalents	$	44.3		$	21.5		$	19.5
Working Capital Deficit	$	(12.4	)	$	(4.9	)	$	(0.7	)
Net Debt	$	(140.1	)	$	(136.4	)	$	(133.1	)

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Q1 2020 Highlights

Proactive response to mitigate impacts of COVID-19 pandemic

· While the Company has had no disruption to operations, supply chains or sales channels as a result of the COVID-19 pandemic to date, the Company has implemented extensive mitigation measures, which include:

(i) eliminated all non-essential travel to and from the Company’s mining operations;

(ii) weekly engagement with all suppliers and active stockpiling of key consumables to protect against any supply chain disruptions;

(iii) reduced human interaction throughout the organization as much as possible by closing administrative offices and moving to a work-from-home format, increasing social distancing by limiting the number of employees travelling on provided buses between the Company’s mining communities and mines, limiting the number of employees in the cafeteria at any given time, cancelling all group meetings, implementing social-distancing for essential line-out meetings and encouraging work-from-home and video/telephone conferencing where feasible;

(iv) established COVID-19 committees with senior leadership and local health administrators for the regions in which the Company operates;

(v) Purchased 5,000 COVID-19 testing kits for the Company’s operations, and has donated a portion of these test kits, as well as other personal protective equipment, to each of the Company’s local municipalities to facilitate rapid testing throughout each community if required; and,

(vi) implemented wellness education, health screenings and self-isolation protocols along with enhanced sanitization throughout the Company’s operations.

· The Company bolstered its liquidity position during the period by drawing down its existing USD and BRL denominated credit facilities of $14.0 million and R$72.3 million, respectively.

· The Company is closely monitoring the COVID-19 pandemic and continues to engage in active operational and financial contingency planning to prudently manage the potential impact of the pandemic on its operations.

Strong start to 2020 at MCSA Operations

· 607,959 tonnes processed grading 1.95% copper producing 10,657 tonnes of copper in concentrate after metallurgical recoveries that averaged 89.8% during the period.

· Record C1 cash cost of $0.71 per pound of copper produced during Q1 2020, an improvement of $0.09 per pound of copper produced over the fourth quarter of 2019.

Curaçá Valley exploration programs continue to deliver in and near-mine – increasing focus on regional targets during second half of 2020

· One of the most comprehensive exploration programs underway globally with 26 drill rigs operating within the Curaçá Valley and an additional five drill rigs operating at the NX Gold Mine.

· Within the Pilar Underground Mine, drilling in the Deepening Extension zone continues to demonstrate continuity of the high-grade ‘Superpod’ mineralization below the known extent of the mine. The Deepening Extension zone now extends over approximately 800 meters in strike-length and to depth over 400 meters below the current level of the primary ramp, highlighted during the period by hole FC47163 that intersected 22.8 meters grading 3.18% copper including 10.6 meters grading 5.29% copper and hole FC5623, located approximately 400 meters north of hole FC47163, that intersected 21.8 meters grading 2.27% copper including 2.8 meters grading 7.76% copper. The Deepening Extension zone remains open to the north and to depth.

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· In the Vermelhos Mine, drilling continues to be focused on both infill drilling for mine planning and extensions to the limits of known mineralization beneath the main orebodies of Toboggan and Sombrero. The first systematic fan drilling exploration program surrounding the Vermelhos Mine, including immediately below the deposit, commenced during the period and the program is in its infancy. Preliminary results of the systematic fan drill program are highlighted by FVS-709 that intersected 7.6 meters grading 11.48% copper including 4.6 meters grading 17.39% copper and holes FVS-585 that intersected 10.0 meters grading 2.98% copper including 3.4 meters grading 4.79% copper. Beneath the main orebodies of Toboggan and Sombrero, where drilling to date has been limited, results are highlighted by hole FVS-638 that intersected 7.2 meters grading 2.16% copper including 2.0 meters grading 4.62% copper and hole FVS-634 that intersected 2.5 meters grading 3.52% copper, located approximately 96 meters and 125 meters beneath the main Vermelhos orebodies, respectively, and are the deepest holes drilled beneath the main orebodies to date.

· At Siriema, drilling during the period continued to extend the known limits of mineralization beneath the current inferred mineral resource limit with wide-spaced, down-plunge, 200 meter step-out exploration drilling resulting in a series of deeper intercepts. Results are highlighted by hole FSI-89 that intercepted 6.0 meters grading 2.21% copper including 3.0 meters grading 3.12% copper. The Siriema conduit has now been encountered from surface to a depth of approximately 550 meters below surface and over variable thicknesses from sub 1 meter up to 20 meters. Siriema remains open to depth and to the north where drilling and down-hole electromagnetic work continues to evaluate this potential.

· Regional work comprised of both exploration drilling and ground-based geophysical work is currently focused on four newly interpreted mineral systems within the portfolio of targets defined during the Company’s comprehensive targeting work. Each of the new systems has an average strike length of 5 kilometers and contain multiple priority drill targets. Seven drill rigs (including four within the Vermelhos District) are currently operating on regional exploration targets in the Curaçá Valley. While preliminary results are encouraging, additional detail on these ongoing exploration programs is expected during the second half of 2020.

· The closure of many third-party laboratories due to COVID-19 has limited the ability over the near-term to analyze for cobalt, gold and PGMs. The ability to test for these elements in the Company’s laboratory is currently in process.

Ramping up exploration efforts to extend mine life at the NX Gold Mine

· Early success in programs focused on upgrading the current inferred mineral resource and testing down-plunge extensions of the high-grade mineralization of the Santo Antonio vein, highlighted during the period by high-grade intercepts drilled at the limit of the current inferred mineral resource and up to 125 meters down-plunge from the limits of the current mineral resource.

· Commenced the first regional exploration campaign at the NX Gold Mine property.

Q1 2020 Financial Report

· Debt Amendment: Ero amended its existing $80 million senior secured amortizing non-revolving credit facility and its $70 million senior secured revolving credit facility. Benefits of the amendment include a 25 to 50 basis point reduction in the Company’s cost of borrowing, depending on the consolidated leverage ratio, and the deferral of scheduled principal payments for two years, now commencing March 2022.

· Strong cash flows from operations: Q1 2020 cash flows from operations was $37.3 million, an increase of $12.2 million from $25.1 million in Q1 2019.

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· Adjusted earnings per share (see Non-IFRS Measures): Q1 2020 adjusted earnings per share was $0.24 and $0.23, on a basic and diluted basis, respectively, compared with Q1 2019 adjusted earnings per share of $0.19 and $0.17, on a basic and diluted basis, respectively.

· Unrealized foreign exchange losses: Q1 2020 financial results were impacted by the decline of the Brazilian real in comparison to Q4 2019, mainly through the change in the mark-to-market valuation of derivatives used to hedge BRL revenues. The Company recognized a US$52.7 million non-cash valuation loss on its USD/BRL foreign exchange collars.

The Company uses these structures to hedge Brazilian real denominated revenues. As a result of the COVID-19 pandemic and its impact on macro-economic interrelationships, there was a rapid decline of BRL at the end of the period and an increase in implied volatility of the BRL versus USD.

The BRL/USD devalued 29.0% to 5.1987 on March 31, 2020 compared 4.0307 on December 31, 2019, while the average exchange rate for Q1 2020 was only 8.5% higher at 4.4657 in compared to 4.1158 in Q4 2019.

Generally accepted accounting practices dictate that the liability be recognized with reference to the spot rate at period-end using a Black-Scholes valuation methodology. Using the same methodology with the average exchange rate for the quarter would have resulted in a materially lower impact on the income statement.

The Company does not believe that this impact on the income statement reflects the underlying profitability of the Company as it provides no offset for the expected future benefits of a lower BRL/USD exchange rate on operating costs and capital expenditures of the Company’s underlying business. These benefits outweigh the Company’s projected hedge losses that may result from these liabilities.

REVIEW OF OPERATIONS

Mineração Caraíba S.A. (Vale do Curaçá):

	2020 - Q1		2019 - Q4		2019 - Q1
Operating Information
Copper (MCSA Operations)
Ore Processed (tonnes)		607,959		589,065		530,133
Grade (% Cu)		1.95		2.16		2.19
Cu Production (tonnes)		10,657		11,526		10,645
Cu Production (lbs)		23,495,098		25,411,100		23,468,419
Concentrate Grade (% Cu)		33.5		35.0		35.2
Recovery (%)		89.8		90.7		91.8
Concentrate Sales (tonnes)		31,129		33,926		28,665
Cu Sold in Concentrate (tonnes)		10,432		11,595		10,033
Cu Sold in Concentrate (lbs)		22,999,136		25,562,212		22,118,394
C1 cash cost of copper produced (per lb)	$	0.71	$	0.80	$	0.91

MCSA operations continued to perform well during the first quarter and in-line with expectations. During the first quarter, 347,125 tonnes of ore was mined grading 1.39% copper from the Pilar Mine (as compared to 433,258 tonnes of ore mined grading 1.73% copper during the fourth quarter) and 234,800 tonnes of ore was mined grading 2.26% copper from the Vermelhos Mine (as compared to 185,045 tonnes grading 3.39% copper during the fourth quarter). In total, contributions from both mines resulted in 581,925 tonnes grading 1.75% copper mined during the period. Quarter on quarter changes in both tonnes and grades mined reflect anticipated stope sequencing during the first quarter.

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At the Company’s milling operations within the Curaçá Valley, 607,959 tonnes of ore grading 1.95% copper was processed during the period with average metallurgical recoveries of 89.8%. Mill feed tonnes and grade reflect the contribution from high-grade stockpiles that accumulated prior to year-end as part of the Company’s operating plan. Improving metallurgical recoveries remains a key focus of the Company and recoveries are expected to meaningfully improve with the commissioning of the high-intensity regrind mill circuit which remains on track for delivery and installation during the second quarter of 2020. The commissioning timeline, post installation, of the new regrind mill is uncertain due to global travel restrictions as a result of COVID-19.

C1 cash cost averaged a record low $0.71 per pound of copper produced during the period. C1 cash costs during the first quarter reflect both strong operational performance at the Company’s MCSA operations and a significant weakening of the BRL versus the USD during the period. Together, this resulted in a $0.09 decrease in C1 cash costs as compared to fourth quarter of 2019.

During the period, the Company continued to test ore-sorting over a variety of material sources and at varying grade profiles from deposits throughout the Curaçá Valley at its recently commissioned ore-sorting plant. This test work is expected to continue throughout the first half of 2020 with the objective of fully evaluating the potential for pre-concentration to increase mill head-grades. The ongoing ore-sorting project represents a potential value-enhancing opportunity to optimize known deposits within the Company’s existing portfolio as well as drive incremental value from new discoveries within the Curaçá Valley.

The Company has an extensive and comprehensive exploration program underway at its MCSA operations underpinning its overall organic growth strategy and its focus on the delivery of high returns on invested capital. Twenty-six drill rigs are currently operating in the Curaçá Valley, including twelve within the Pilar District, eleven in the Vermelhos District, and there are currently seven drill rigs (including four within the Vermelhos District) operating on regional exploration targets in the Curaçá Valley.

Three primary exploration areas within the Curaçá Valley were a focus of the Company’s exploration efforts during the first quarter (please refer to the Company’s press release dated April 22, 2020). These areas include:

(i) Systematic drilling of a new ‘Superpod’ within the Pilar Mine Deepening zone that continues to demonstrate high-grade continuity outside the previously known limits of mineralization within the mine;

(ii) extensional drilling of the Vermelhos System, both beneath the main deposits of the Vermelhos Mine and to depth within the Siriema deposit continue to demonstrate continuity of mineralization; and,

(iii) regional work is progressing according to plan and is currently focused on four new systems within the Curaçá Valley.

In the Pilar Mine, exploration activities during the period focused on extending the limits of high-grade ‘Superpod’ mineralization of the Deepening Extension zone. The Company has now identified a mineralized area within the Deepening Extension zone that extends over approximately 800 meters in strike length, over a total depth of approximately 400 meters and over an average thickness of approximately 15 to 20 meters with localized thicknesses of up to 50 meters. Within the total strike length, a higher-grade continuous zone with a strike-length of approximately 400 to 500 meters is emerging in the central and northern segments of the target area. The zone remains open to the north and to depth. These results support the potential to meaningfully extend the mine life while maintaining an elevated grade profile. Five drill rigs will continue to systematically drill the Deepening Extension zone through the balance of the year. In addition, the Company’s pre-feasibility study on developing this new zone within the mine is well underway for inclusion in the Company’s updated mine plan currently expected during fourth quarter of 2020.

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In the Vermelhos District, approximately 80 kilometers to the north of the Caraíba Mill complex, which includes the high-grade operating Vermelhos Mine, drilling is focused on both near-mine extensional drilling as well as new regional targets identified during the Company’s regional airborne survey and subsequent data compilation work of the broader Vermelhos System – a north-south trend encompassing the Vermelhos Mine, East Zone, Siriema N8/N9 deposit, and several high priority targets that extends over ten kilometers in strike length.

The first systematic fan drilling exploration program surrounding the Vermelhos Mine, including immediately below the deposit, commenced in Q1 2020 and is in its infancy. Results during the period are highlighted by new mineralized intercepts up to 125 meters beneath the main orebodies of Toboggan and Sombrero and, in addition, new extensions of the known limits of mineralization to the east and to the north of the main orebodies.

The exploration drill program at Siriema is focused on continuing to understand the relationship between the previously identified Keel Zone – a massive-sulphide breccia zone of elevated copper, nickel, cobalt and PGMs within the Siriema deposit, and a north-plunging mineralized controlling structure, or conduit, and the potential for larger zones of copper, nickel and PGM massive sulphide mineralization down-plunge of the Keel Zone along the conduit. During the period, wide-spaced, down-plunge, 200 meter step-out exploration drilling at Siriema has continued to intercept the controlling mineralized Siriema conduit at depth. To date, the Siriema conduit has now been encountered from surface to a depth of approximately 550 meters below surface and over variable thicknesses from sub 1 meter up to 20 meters. Siriema remains open to depth and to the north where drilling and down-hole electromagnetic work continues to evaluate this potential.

NX Gold S.A.

	2020 - Q1			2019 - Q4			2019 - Q1
Operating Information
Gold (NX Gold Operations)
Ore mined (tonnes)		36,211			40,453			38,771
Ore milled (tonnes)		36,211			43,207			38,717
Head grade (grams per tonne Au)		7.76			6.32			8.76
Recovery (%)		87.1	%		68.9	%		92.8	%
Gold ounces produced (oz)		7,866			6,043			10,119
Silver ounces produced (oz)		4,868			4,315			6,359
Gold sold (oz)		7,526			5,810			10,023
Silver sold (oz)		4,645			4,247			6,224
C1 cash cost of gold produced (per ounce)	$	594		$	980		$	486

At the NX Gold Mine, ramp-up of mining activity continues to accelerate within the Santo Antonio Vein following the successful transition from the Brás and Buracão veins in late 2019. Production totaled 7,866 ounces of gold and 4,868 ounces of silver (as by-product) from total mill feed of 36,211 tonnes grading 7.76 g/t gold after metallurgical recoveries of 87.1% during the period. Gold production, mill head-grade and recovery improved by 30%, 23% and 26%, respectively relative to the fourth quarter of 2019 and reflect the continued development of working faces within the new vein. C1 Cash costs averaged $594 per ounce of gold produced during the first quarter, an improvement of approximately 39% as compared to the fourth quarter of 2019. The Company continues to expect production to improve throughout 2020 as operations reach planned capacity from the Santo Antonio vein and, as a result, expects production to be weighted towards the second half of the year.

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Exploration at the NX Gold Mine is primarily focused on both resource upgrade programs within the inferred mineral resource and testing down-plunge extensions of the Santo Antonio Vein. Drill results during the period continued to extend the known extent of mineralization within the Santo Antonio Vein down-plunge by a total of approximately 125 meters and over a strike length of approximately 160 meters. The vein remains open to depth. In addition, the first regional exploration campaign commenced at the NX Gold Mine during the period. Currently, five drill rigs are operating on the property.

Financial Update

Revenue: Revenues from the Company’s copper operations at MCSA decreased by 5.7% from $59.5 million in Q1 2019 to $56.1 million in Q1 2020. The decrease in revenue was attributed to a decrease in ore grade and lower average copper prices.

Revenues from the Company’s gold operations at NX Gold decreased 7.2% from $12.5 million in Q1 2019 to $11.6 million in Q1 2020. The decline was primarily a result of decreased production and sales volumes, partially offset by increased gold prices.

Mine gross profit: Mine gross profit from the Company’s copper operations at MCSA totaled $27.3 million in Q1 2019 compared to $24.9 million in Q1 2020. The decrease in mine gross profit was primarily driven by decreased revenues from decreased copper prices, partially offset by a decrease in cash costs over the comparative period as a result of a significant weakening of the BRL versus the USD during the period. The Company also recognized mine gross profit of $5.7 million in Q1 2020 compared to $5.3 million in Q1 2019 from its gold operations at NX Gold.

Net income: The Company recognized net income of $15.5 million (net income per share of $0.18) in Q1 2019 compared to a net loss of $53.0 million in Q1 2020 (net loss per share of $0.62), primarily attributable to the recognition of unrealized foreign exchange losses on foreign exchange currency collar contracts and foreign exchange losses on USD denominated debt.

2020 Guidance/Outlook

· The Company is maintaining its 2020 production guidance for the Curaçá Valley operations of 41,000 to 43,000 tonnes of copper in concentrate.

· Revised C1 cash cost guidance of US$0.70 to US$0.85 per pound of copper produced and capital expenditure guidance of US$56 to US$68 million^[1] to reflect the depreciation of the BRL against the USD in Q1 2020.

· While the work program remains unchanged, the capital estimate of the Company’s 2020 exploration campaign has been revised to US$20 to US$25 million^[1,2] to fund the 2020 exploration program in the Curaçá Valley, also reflecting the depreciation of the BRL against the USD and reduced drilling costs per meter in USD terms.  The program is highlighted by 172,000 meters of planned exploration drilling through September 2020, an annualized rate of approximately 230,000 meters, of which more than 50% is planned for regional exploration including drill testing of new greenfield targets identified during the Company’s airborne geophysical survey and ongoing data analysis. This compares to approximately 235,000 meters drilled during 2019 of which only 23% was allocated to regional exploration.

· Annual production guidance for the NX Gold Mine remains unchanged at 38,000 to 40,000 ounces of gold at revised C1 cash costs of US$425 to US$525 per ounce of gold produced, with revised operating guidance costs similarly reflecting the depreciation of the BRL against the USD. Production continues to be weighted towards the second half of the year. Annual capital expenditure guidance for the NX Gold Mine has been revised to between US$7 and US$9 million plus US$2 to US$3 million^[1,2] in exploration expenditures.

[1]	Revised capital and operating cost guidance presented in USD assuming a R$ / $ foreign exchange rate of 4.90 for 2020.
[2]	Exploration capital expenditure guidance for 2020 has been forecast through September of 2020 and, as with prior guidance, is dependent, in part, on future exploration success and subject to further review and revision.

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2020 Production Outlook

The Company’s production guidance for 2020 remains unchanged.

Curaçá Valley Operations	2020 Guidance[1]
Tonnes Processed		2,150,000
Copper Grade (% Cu)		2.15	%
Copper Recovery (%)		91.0	%
Cu Production (000 tonnes)		41.0 - 43.0
NX Gold Operations		2020 Guidance[1]
Tonnes Processed		150,000
Gold Grade (gpt)		9.00
Gold Recovery (%)		90.0	%
Au Production (000 ounces)		38.0 - 40.0
Ag Production (000 ounces)		n/a

⁽¹⁾ Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s AIF (as defined herein) and Management of Risks and Uncertainties in this MD&A for complete risk factors.

2020 Cash Cost Guidance

The Company’s original guidance for 2020 had assumed a USD:BRL foreign exchange rate of 4.00, gold price of $1,450 per ounce and silver price of $17.00 per ounce. In recognition of the significant change in foreign exchange rates and precious metals during the first quarter of 2020, the Company has updated its operating cost guidance assuming a USD:BRL foreign exchange rate of 4.90, gold price of $1,700 per ounce and silver price of $15.00 per ounce.

	2020 Guidance	2020 Revised Guidance
Curaçá Valley C1 Cash Cost Guidance (US$/lb)[1]	$0.85 - $0.95	$0.70 - $0.85
NX Gold Mine C1 Cash Cost Guidance (US$/oz)[1]	$475 - $575	$425 – $525

⁽¹⁾ Guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations and metallurgical performance. Please refer to the Company’s SEDAR filings for complete risk factors.

2020 Capital Expenditure Guidance

The Company’s original capital expenditure guidance for 2020 had assumed a USD:BRL foreign exchange rate of 4.00. In recognition of the significant change in foreign exchange rates during the first quarter of 2020, the Company has updated its operating cost guidance assuming a USD:BRL foreign exchange rate of 4.90. Capital expenditures are presented below in USD millions.

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Curaçá Valley / Copper Operations	2020 Guidance		2020 Revised Guidance Range
Pilar Mine and Caraíba Mill Complex[1]	$	58.0		$45.0 - $55.0
Vermelhos Mine	$	16.0		$11.0 - $13.0
Boa Esperanҫa Project	$	0.2		$0.2 - $0.2
Capital Expenditure Guidance	$	74.2		$56.2 - $68.2
Curaçá Valley Exploration[2]	$	28.0		$20.0 - $25.0
NX Gold Operations		2020 Guidance		2020 Revised Guidance Range
Capital Expenditure Guidance	$	5.7		$7.0 - $9.0
Exploration[2]	$	3.5		$2.0 - $3.0
Total, NX Gold	$	9.2		$9.0 – $12.0

^[1]  Pilar Mine and Caraíba Mill Complex capital expenditure guidance for 2020 includes completion of the high-intensity grinding mill and operation of the ore-sorting pilot plant.

^[2] Exploration capital expenditure guidance for 2020 has been forecast through September of 2020 and, as with prior guidance, is dependent, in part, on future exploration success and subject to further review and revision.

Mineração Caraíba S.A.

Copper production from the Curaçá Valley operations for 2020 is expected to be between 41,000 and 43,000 tonnes, with ore fed solely from the Pilar and Vermelhos underground mines. Production from the Pilar Mine is expected to contribute a total of approximately 1.4 million tonnes grading 1.40% copper while production from the Vermelhos Mine is expected to contribute a total of approximately 750,000 tonnes grading 3.50% copper resulting in a blended mill head grade of approximately 2.15% copper.

NX Gold S.A.

Approximately 150,000 tonnes of ore will be mined and processed from the Santo Antonio vein in 2020 at an average grade of 9.00 grams per tonne of gold. Following average metallurgical recoveries of 90.0%, gold production from the NX Gold Mine is expected to reach 38,000 to 40,000 ounces. The Company expects production from the NX Gold Mine to be weighted to the second half of the year as working faces continue to be developed in the Santo Antonio vein.

Boa Esperança

A full review of the Boa Esperança Feasibility Study¹ remains ongoing with the goal of extending the potential mine life and increasing copper production among other desktop optimization initiatives. The Company expects to provide an update on these initiatives during the first half of 2020.

^1. As defined herein under “NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION”.

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REVIEW OF FINANCIAL RESULTS

The following table provides a summary of the financial results of the Company for Q1 2020 and Q1 2019. Tabular amounts are in thousands of US dollars, except share and per share amounts.

			Three months ended			Three months ended
	Notes		March 31, 2020			March 31, 2019
Revenue		1	$	67,745		$	72,041
Cost of product sold		2		(35,811	)		(38,140	)
Sales expenses				(1,282	)		(1,307	)
Gross profit				30,652			32,594
Expenses
General and administrative		3		(7,503	)		(6,623	)
Share-based compensation				(2,049	)		(1,843	)
Income before the undernoted				21,100			24,128
Other income (expenses)
Finance income				467			136
Finance expense		4		(6,651	)		(6,810	)
Foreign exchange loss		5		(81,922	)		(288	)
Other income (expense)				(693	)		1,048
Income loss) before income taxes				(67,699	)		18,214
Income tax recovery (expense)
Current				(1,091	)		(4,218	)
Deferred				15,795			1,487
		6		14,704			(2,731	)
Net income (loss) for the period				(52,995	)		15,483
Other comprehensive loss
Foreign currency translation loss		7		(49,919	)		(1,413	)
Comprehensive income (loss)			$	(102,914	)	$	14,070
Net income (loss) attributable to:
Owners of the Company			$	(52,753	)	$	15,323
Non-controlling interests				(242	)		160
			$	(52,995	)	$	15,483
Comprehensive income (loss) attributable to:
Owners of the Company			$	(102,472	)	$	13,916
Non-controlling interests				(442	)		154
			$	(102,914	)	$	14,070
Net income (loss) per share attributable to owners of the Company
Net income (loss) per share
Basic			$	(0.62	)	$	0.18
Diluted			$	(0.62	)	$	0.17
Weighted average number of common shares outstanding
Basic				85,759,194			84,804,389
Diluted				85,759,194			89,917,828
Cash and cash equivalents			$	44,338		$	19,488
Total assets			$	409,640		$	387,860
Non-current liabilities			$	214,335		$	199,506

Ero Copper Corp. March 31, 2020 MD&A                                                                    Page 11

Notes:

1. Revenues for Q1 2020 from copper sales was $56.1 million (Q1 2019 - $59.5 million), which included the sale of 10,432 copper tonnes in concentrate as compared to 10,033 copper tonnes for Q1 2019. Although the Company processed more ore during Q1 2020 compared to Q1 2019, it was at a lower grade and the average price of copper decreased. Revenues for Q1 2020 from gold sales was $11.6 million (Q1 2019 - $12.5 million), which included the sale of 7,526 ounces of gold, compared to 10,023 ounces of gold for Q1 2019.

2. Cost of product sold for Q1 2020 from copper sales was $30.0 million (Q1 2019 - $30.9 million) which consisted of $9.6 million (Q1 2019 - $9.8 million) in depreciation and depletion, $7.0 million (Q1 2019 - $7.5 million) in salaries and benefits, $4.0 million (Q1 2019 - $3.6 million) in materials and consumables, $4.6 million (Q1 2019 - $5.1 million) in contracted services, $3.0 million (Q1 2019 - $3.0 million) in maintenance costs, $1.7 million (Q1 2019 - $1.8 million) in utilities, and $0.1 million (Q1 2019 - $0.1 million) in other costs.

Cost of product sold for Q1 2020 from gold sales was $5.8 million (Q1 2019 - $7.3 million) which primarily comprised of $1.7 million (Q1 2020 - $1.6 million) in salaries and benefits, $0.9 million (Q1 2019 - $0.6 million) in contracted services, $0.6 million (Q1 2019 - $1.1 million) in maintenance costs, $1.0 million (Q1 2019 - $1.0 million) in materials and consumables, $0.9 million (Q1 2019 - $2.3 million) in depreciation and depletion, $0.6 million (Q1 2019 - $0.6 million) in utilities, and $0.1 million (Q1 2019 – $0.1 million) in other costs

3. General and administrative expenses for Q1 2020 include $4.7 million (Q1 2019 - $3.5 million) with respect to MCSA for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, $0.5 million (Q1 2019 - $0.5 million) with respect to NX Gold for salaries and incentive payments, professional fees, office and sundry and provisions for tax, legal and labour claims, and $2.3 million (Q1 2019 - $2.6 million) with respect to the corporate head office in Vancouver. Corporate head office costs are primarily comprised of $1.6 million (Q1 2019 - $1.7 million) in salaries, incentive payments, and consulting fees, $0.3 million (Q1 2019 - $0.4 million) in travel-related costs, and $0.1 million (Q1 2019 - $0.2 million) in professional fees. Increases in general and administrative expenses in Q1 2020 as compared to Q1 2019 reflect the growth of operations, particularly at MCSA, which included higher headcounts, incentive payments for exceeding board-mandated performance targets, as well as rate increases related to annual union contract negotiations at MCSA.

4. Finance expense for Q1 2020 was $6.7 million (Q1 2019 - $6.8 million) and is primarily comprised of interest on loans at the corporate head office of $1.8 million (Q1 2019 - $3.1 million), interest on loans and borrowings at MCSA and NX Gold of $0.9 million (Q1 2019 - $0.9 million), loss on an interest rate swap derivative of $1.8 million (Q1 2019 - $nil), the accretion of the asset retirement obligations of $0.3 million (Q1 2019 - $1.3 million), and other finance expenses of $1.8 million (Q1 2019 - $1.5 million).

5. Foreign exchange loss for Q1 2020 was $81.9 million (Q1 2019 - $0.3 million). This amount is primarily comprised of a foreign exchange loss on USD denominated debt of $26.9 million (Q1 2019 - $0.1 million) in MCSA for which the functional currency is the Brazilian Real, and a foreign exchange loss on unrealized derivative contracts of $52.7 million (Q1 2019 - $0.3 million). The foreign exchange losses were primarily a result of a strengthening of the US dollar against the Brazilian Real during this time of worldwide instability as a result of the Covid-19 pandemic. The foreign exchange loss on unrealized derivative contracts are a result of mark-to-market calculations at period end and may not represent the amount that will ultimately be realized, which will depend on future changes to the Brazilian Real/US dollar foreign exchange rates.

6. In Q1 2020, the Company recognized a $14.7 million income tax recovery (Q1 2019 - income tax expense of $2.7 million), primarily resulting from the recognition of temporary deductible differences associated with MCSA’s losses in the current period which resulted primarily from the unrealized foreign exchange losses on derivatives and loans and borrowings denominated in US dollars.

Ero Copper Corp. March 31, 2020 MD&A                                                                    Page 12

7. The foreign currency translation loss is a result of a strengthening of the US dollar against the Brazilian Real during this time of worldwide instability as a result of the Covid-19 pandemic. This foreign currency translation loss is mainly due to the debt denominated in USD.

SUMMARY OF QUARTERLY RESULTS

The following table presents selected financial information for each of the most recent eight quarters. Tabular amounts are in millions of US Dollars, except share and per share amounts.

	2020									2019									2018
Selected Financial Information	Mar 31(1)			Dec 31(2)			Sept 30(3)			June 30			March 31			Dec 31(4)			Sept 30			June 30(5)
Revenue	$	67.7		$	75.7		$	60.6		$	76.5		$	72.0		$	85.1		$	47.3		$	61.0
Cost of product sold	$	(35.8	)	$	(43.0	)	$	(38.4	)	$	(43.3	)	$	(38.1	)	$	(44.7	)	$	(27.9	)	$	(44.2	)
Gross profit	$	30.7		$	31.1		$	21.3		$	32.1		$	32.6		$	39.0		$	18.8		$	15.9
Net income (loss) for period	$	(53.0	)	$	45.4		$	16.3		$	15.3		$	15.5		$	11.3		$	5.2		$	(18.2	)
Income (loss) per share attributable to
owners of the Company
- Basic	$	(0.62	)	$	0.53		$	0.19		$	0.18		$	0.18		$	0.13		$	0.06		$	(0.22	)
- Diluted	$	(0.62	)	$	0.49		$	0.18		$	0.17		$	0.17		$	0.13		$	0.06		$	(0.22	)
Weighted average number of common shares
outstanding
- Basic		85,759,194			85,620,168			85,505,675			85,032,841			84,804,389			84,736,476			84,504,954			84,458,914
- Diluted		85,759,194			91,670,988			91,320,363			90,696,926			89,917,828			89,191,707			88,638,656			84,458,914

Notes:

1. During Q1 2020, the Company recognized a $81.9 million in foreign exchange losses. The foreign exchange losses were mainly comprised of a $26.9 million loss associated with US dollar denominated debt held by MCSA, whose functional currency is the Brazilian Real, and $52.7 million losses associated with unrealized losses on foreign exchange currency collar contracts. These foreign exchange losses were unusually high this quarter due to volatility in the foreign exchange rates between the US dollar and the Brazilian Real resulting from the worldwide instability in currency rates as a result of the Covid-19 pandemic.

2. During Q4 2019, the Company recognized a $25.2 million income tax recovery primarily resulting from the recognition of available tax losses and tax credits in MCSA. At December 31, 2019, the Company considered the taxable income generated since acquisition of MCSA and forecasted future taxable income and determined that it was now considered probable that the benefit of these losses and tax credits in MCSA would be realized.

3. During the quarter ended September 30, 2019, the Company recognized a recovery of $21.6 million in net income related to value added taxes previously paid on sales in Brazil. The recovery was recognized as a result of a Brazil Supreme Court ruling in 2017 that concluded that the relevant taxing authorities had historically used an incorrect methodology to determine such taxes. The ruling set a precedent for all companies in Brazil but was required to be confirmed for the Company’s specific claim, for which approval was received in July 2019. These credits can be used to offset a variety of other taxes, including income taxes and taxes on future sales.

4. During Q4 2018, MCSA began commercial production of the Vermelhos Mine. This resulted in increased sales this quarter, generating higher net income for the period.

5. During the quarter ended June 30, 2018, the Company had an overall net loss of $18.2 million, which included $26.4 million in foreign exchange losses. The foreign exchange losses were comprised of a $12.2 million loss associated with US dollar denominated debt held by MCSA, whose functional currency is the Brazilian Real, $11.4 million loss on foreign exchange forward contracts and $2.8 million related to other operational exchange losses. The foreign exchange losses were unusually high this quarter due to volatility in the foreign exchange rates between the US dollar and the Brazilian Real.

Ero Copper Corp. December 31, 2020 MD&A                                           Page 13 

LIQUIDITY, CAPITAL RESOURCES, AND CONTRACTUAL OBLIGATIONS

Liquidity

As at March 31, 2020, the Company held cash and cash equivalents of $44.3 million. Cash and cash equivalents are primarily comprised of cash held with reputable financial institutions and are invested in highly liquid short-term investments with maturities of three months or less. The funds are not exposed to liquidity risk and there are no restrictions on the ability of the Company to use these funds to meet its obligations.

Cash and cash equivalents increased by $22.8 million during Q1 2020. The Company’s cash flows from operating, investing and financing activities during Q1 2020 are summarized as follows:

· Cash from operating activities of $37.3 million

· Cash from financing activities of approximately $20.7 million, including:

o   $45.7 million proceeds from new loans and borrowings;

o   $0.4 million released from restricted cash;

o   $0.3 million proceeds from exercise of stock options and warrants

net of:

o   $21.2 million of repayment on loans and borrowings;

o   $2.4 million of payment of interest on loans and borrowings;

o   $1.2 million of lease payments;

o $0.8 million of other finance expenses

Partially offset by:

· Cash used in investing activities of $27.9 million, including:

o   $28.4 million of additions to mineral property, plant and equipment;

o   $0.1 million of additions to exploration and evaluation assets

net of:

o $0.5 million from financial investments

As at March 31, 2020, the Company had working capital deficit of $12.4 million, arising primarily as a result of unrealized mark-to-market values associated with foreign currency derivative contracts.

Capital Resources

The Company’s primary sources of capital are comprised of cash from operations, and cash and cash equivalents on hand. The Company will continuously monitor its capital structure and, based on changes in operations and economic conditions, may adjust such structure by issuing new common shares or new debt as necessary. While the Company has been successful in securing financing to date, there are no guarantees that it will be able to secure such financing in the future on terms acceptable to the Company, if at all. Taking into consideration cash flow from existing operations, management believes that the Company has sufficient working capital and financial resources to maintain its planned operations and activities for the foreseeable future.

Ero Copper Corp. December 31, 2020 MD&A                                           Page 14 

At March 31, 2020, we had unrestricted cash and cash equivalents of $44.3 million compared to $19.5 million at March 31, 2019. The increase is primarily due to draw-downs under various credit facilities as a proactive measure in light of the uncertainty surrounding the COVID-19 pandemic. We have no immediate need for the funds; however, proceeds will be used for general corporate purposes as required.

Contractual Obligations and Commitments

Certain loan agreements contain operating and financial covenants that could restrict the ability of the Company and its subsidiaries, MCSA and NX Gold S.A., to, among other things, incur additional indebtedness needed to fund its respective operations, pay dividends or make other distributions, make investments, create liens, sell or transfer assets or enter into transactions with affiliates. There are no other restrictions or externally imposed capital requirements of the Company.

MANAGEMENT OF RISKS AND UNCERTAINTIES

The Company thoroughly examines the various financial instruments and risks to which it is exposed and assesses the impact and likelihood of those risks. These risks may include credit risk, liquidity risk, currency risk, commodity price risk and interest rate risk. Where material, these risks are reviewed and monitored by the Board.

COVID-19 Pandemic Risk

The recent outbreak of the COVID-19 has had a negative impact on commodity prices and governmental actions to contain the outbreak may impact our ability to transport or market our concentrate or cause disruptions in our supply chains or interruption of production. A material spread of COVID-19 in jurisdictions where we operate could impact our ability to staff operations. A reduction in production or other COVID-19 related impacts, including but not limited to, low copper prices could cause a significant reduction in profitability of ongoing operations.

Global pandemic could cause temporary closure of businesses in regions that are significantly impacted by the health crises, or cause governments to take preventative measures such as the closure of points of entry, including ports and borders.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers. The carrying amount of the financial assets below represents the maximum credit risk exposure as at March 31, 2020 and December 31, 2019:

	March 31, 2020		December 31, 2019
Cash and cash equivalents	$	44,338	$	21,485
Restricted cash		1,125		1,500
Accounts receivable		4,268		7,680
Deposits and other non-current assets		546		2,396
	$	50,277	$	33,061

The Company invests cash and cash equivalents as well as restricted cash with financial institutions that are financially sound based on their credit rating. The Company’s exposure to credit risk associated with accounts receivable is influenced mainly by the individual characteristics of each customer. The Company currently has only three significant customers, all of which have no history of credit default with the Company. The Company has not incurred credit losses during the three month period ended March 31, 2020 nor has a provision for credit losses been recognized.

Ero Copper Corp. December 31, 2020 MD&A                                           Page 15 

Foreign exchange currency risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage market risks. At March 31, 2020, the Company has entered into foreign exchange collar contracts at zero cost for notional amounts of $381.6 million with an average floor rate of 3.92 BRL to US Dollar and an average cap rate of 4.56 BRL to US Dollar (December 31, 2019 – notional amount of $336.6 million in foreign exchange forward collar contracts). The maturity dates of these contracts are from April 28, 2020 to December 1, 2021 and are financially settled on a net basis. The fair value of these contracts at March 31, 2020 was a liability of $52.7 million, (December 31, 2019 – nil) which was included in Derivatives in the statement of financial position. The change in fair value of foreign exchange collar contracts was a loss of $52.7 million for the three months ended March 31, 2020 ($0.3 million for the three months ended March 31, 2019) and has been recognized in foreign exchange loss. In addition, during the three months ended March 31, 2020, the Company recognized a realized loss of $2.8 million (a gain of $0.7 million for the three months ended March 31, 2019) related to the settlement of foreign currency forward collar contracts.

Interest rate risk

The Company is principally exposed to the variation in interest rates on loans and borrowings with variable rates of interest. Management reduces interest rate risk exposure by entering into loans and borrowings with fixed rates of interest or by entering into derivative instruments that fix the ultimate interest rate paid.

The Company is principally exposed to interest rate risk through its Term Facilities of $150.0 million, Brazilian Real denominated bank loans of $6.5 million, Brazilian Real denominated lines of credit of $5.8 million, and Brazilian Real denominated equipment finance loans of $1.9 million. Based on the Company’s net exposure at March 31, 2020, a 1% change in the variable rates would have an impact of $1.6 million on pre-tax annual net income, without consideration of the effects of the swap contracts below.

In order to mitigate the above volatility due to variable rates on loans, as at March 31, 2020, the Company has entered into an interest rate swap contract to manage interest rate risk. The floating interest on a notional amount of $65 million was swapped for a fixed interest rate of 2.69%. The fair value of this contract at March 31, 2020 was a liability of $3.4 million (December 1, 2019 - $1.7 million) and was included in Derivatives in the statement of financial position. The change in fair value of $1.7 million is included in finance expense.

For a discussion of additional risks applicable to the Company and its business and operations, including risks related to the Company’s foreign operations, the environment and legal proceedings, see “Risk Factors” in the Company’s Annual Information Form for the year ended December 31, 2019 and dated March 12, 2020 (the “AIF”).

OTHER FINANCIAL INFORMATION

Off-Balance Sheet Arrangements

As at March 31, 2020, the Company had no material off-balance sheet arrangements.

Ero Copper Corp. December 31, 2020 MD&A                                           Page 16 

Contingencies

MCSA is subject to a number of claims (including claims related to tax, labour and social security matters and civil action) in the course of its business which individually are not material and have not been accrued for in the Company’s financial statements as it is not probable that a cash outflow will occur. While the Company believes that these claims are unlikely to be successful, if all such existing claims were decided against it, the Company could be exposed to a liability of up to approximately $21.8 million as at March 31, 2020 (December 31, 2019 - $31.1 million), which could have an adverse impact on the Company’s business, financial condition, results of operations, cash flows or prospects.

Outstanding Share Data

At May 7, 2020, the Company had 85,798,644 common shares, 5,039,875 stock options, 2,866,662 warrants, and 438,463 performance share units issued and outstanding.

Related Party Disclosures

For the three month period ended March 31, 2020, amounts paid to related parties were incurred in the normal course of business and measured at the exchange amount, which is the amount agreed upon by the transacting parties and on terms and conditions similar to non-related parties.

Key management personnel consist of the Company’s directors and officers and their compensation includes director retainer fees and management salaries paid to these individuals, as well as share-based compensation. The aggregate value of compensation paid to key management personnel for the three month period ended March 31, 2020 was $1.8 million ($1.4 million for the three month period ended March 31, 2019). In addition, 43,456 options and 32,327 deferred share units were issued to non-executive directors during the three month period ended March 31, 2020 (1,100,155 options and 130,636 share units for the three month period ended March 31, 2019), with $1.3 million recognized in share-based compensation expense for the three month period ended March 31, 2020 ($1.4 million for the three month period ended March 31, 2019).

During the three month period ended March 31, 2020, key management personnel exercised 25,000 for cash proceeds to the Company of $38 thousand (nil options for the three month period ended March 31, 2019).

ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

Critical Accounting Judgments and Estimates

The preparation of consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions about future events that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, events or actions, actual results may differ from these estimates.

The Company’s significant accounting policies and accounting estimates are contained in the Company’s December 31, 2019 consolidated financial statements. Certain of these policies, such as, capitalization and depreciation of property, plant and equipment and mining interests, derivative instruments, and decommissioning liabilities provisions involve critical accounting estimates because they require management of the Company to make subjective or complex judgments about matters that are inherently uncertain, and because of the likelihood that materially different amounts could be reported under different conditions or using different assumptions.

In preparing its financial statements, management has made judgments, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of the assets, liabilities, revenues and expenses. Actual results may differ from these estimates.

Ero Copper Corp. December 31, 2020 MD&A                                           Page 17 

The fair value of derivative instruments is determined using either present value techniques or option pricing models that utilize a variety of inputs that are a combination of quoted prices and market-corroborated inputs. The fair value of the Company’s derivative contracts includes an adjustment for credit risk. Derivative instruments are classified within Level 2 of the fair value hierarchy.

The estimates and assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively. For a description of the critical judgements in application of the accounting policies and information about assumptions and estimations uncertainties, refer to the Company’s MD&A for the year ended December 31, 2019, which is available on SEDAR at www.sedar.com.

Local Currency Operating Metrics – Presented in Brazilian Real

		2020 - Q1			2019 - Q4			2019 - Q1
Costs (MCSA Operations)
Mining - UG (Pilar)	R$		60,657			66,743			51,887
- UG (Vermelhos)			40,421			39,864			29,052
- OP			-			29			2,279
Processing			19,049			22,250			18,546
Indirect			12,629			12,822			12,363
Production costs			132,756			141,708			114,127
Capex development			(40,892	)		(45,009	)		(24,671	)
By-product credits			(15,792	)		(16,876	)		(9,740	)
Treatment, refining and other			(1,627	)		3,895			603
C1 cash costs	R$		74,445			83,717			80,319
Breakdown Mined and Processed (tonnes)
UG Mined			612,510			675,258			541,877
OP Mined			-			-			234,211
Total Mined (t):			612,510			675,258			776,088
Total Processed (t)			607,959			589,065			530,133
Cu Production (t)			10,657			11,526			10,645
UG Mining Total - R$/tonne mined			98.26			91.22			103.84
Pilar - R$/tonne mined(1)			79.68			78.56			99.14
Vermelhos - R$/tonne mined(1)			125.46			118.52			114.63
OP Mining - R$/tonne mined(2)			n/a			n/a			9.73
Processing - R$/tonne processed			31.33			37.77			34.98
Indirect - R$/tonne processed			20.77			21.77			23.32

Footnotes

General - Above only includes amounts from MCSA. NX Gold operations are excluded.

[1] Starting 2019, the Company breaks out the cost metrics for underground mining between Pilar and Vermelhos.

[2] There was no OP production in Q4 2019 and Q1 2020.

Ero Copper Corp. December 31, 2020 MD&A                                           Page 18 

NON-IFRS MEASURES

Financial results of the Company are prepared in accordance with IFRS. The Company utilizes certain non-IFRS measures, including C1 cash cost of copper produced (per lb), C1 cash cost of gold produced (per ounce), EBITDA, Adjusted EBITDA, Adjusted net income (loss) attributable to owners of the Company, Adjusted earnings (loss) per share, net debt and working capital, which are not measures recognized under IFRS. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The tables below provide a reconciliation of these non-IFRS measures to the most directly comparable IFRS measures as contained in the Company’s financial statements.

Unless otherwise noted, the non-IFRS measures presented below have been calculated on a consistent basis for the periods presented.

C1 Cash Cost of Copper Produced (per lb)

C1 cash cost of copper produced (per lb) is the sum of production costs, net of capital expenditure development costs and by-product credits, divided by the copper pounds produced. C1 cash costs reported by the Company include treatment, refining charges, offsite costs, and certain tax credits relating to sales invoiced to the Company’s Brazilian customer on sales. By-product credits are calculated based on actual precious metal sales (net of treatment costs) during the period divided by the total pounds of copper produced during the period. C1 cash cost of copper produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

The following table provides a reconciliation of C1 cash cost of copper produced per pound to cost of goods sold, its most directly comparable IFRS measure.

	2020 - Q1			2019 - Q4			2019 - Q1
Reconciliation:
Cost of Product Sold	$	29,954		$	35,620		$	30,851
Add (less):
Depreciation/amortization/depletion		(9,566	)		(11,128	)		(9,762	)
Incentive payments		(594	)		(2,870	)		-
Net change in inventory		(208	)		322			1,397
Transportation costs & other		1,020			1,479			1,238
By-product credits		(3,543	)		(4,101	)		(2,583	)
Treatment, refining, and other		(368	)		935			165
Foreign exchange translation adjustments		1			74			5
C1 cash costs	$	16,696		$	20,330		$	21,311

Ero Copper Corp. December 31, 2020 MD&A                                           Page 19 

	2020 - Q1			2019 - Q4			2019 - Q1
Costs
Mining	$	22,674		$	25,910		$	22,313
Processing		4,273			5,406			4,921
Indirect		2,833			3,116			3,032
Production costs		29,780			34,432			30,266
Capex development		(9,173	)		(10,936	)		(6,537	)
By-product credits		(3,543	)		(4,101	)		(2,583	)
Treatment, refining and other		(368	)		935			165
C1 cash costs	$	16,696		$	20,330		$	21,311
Costs per pound
Payable copper produced (lb)		23,495			25,411			23,468
Mining	$	0.97		$	1.02		$	0.95
Processing	$	0.18		$	0.21		$	0.21
Indirect	$	0.12		$	0.12		$	0.13
Capex development	$	(0.39	)	$	(0.43	)	$	(0.28	)
By-product credits	$	(0.15	)	$	(0.16	)	$	(0.11	)
Treatment, refining and other	$	(0.02	)	$	0.04		$	0.01
C1 cash cost of copper produced (per lb)	$	0.71		$	0.80		$	0.91

C1 Cash Cost of Gold produced (per ounce)

C1 cash cost of gold produced (per ounce) is the sum of production costs, net of capital expenditure development costs and silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. C1 cash cost of gold produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

The following table provides a reconciliation of C1 cash cost of gold produced per ounce to cost of goods sold, its most directly comparable IFRS measure.

	2020 - Q1			2019 - Q4			2019 - Q1
Reconciliation:
Cost of Product Sold	$	5,857		$	7,397		$	7,289
Add (less):
Depreciation/amortization/depletion		(883	)		(881	)		(2,336	)
Incentive payments		(172	)		-			-
Net change in inventory		(71	)		120			49
By-product credits		(72	)		(67	)		(89	)
Foreign exchange translation adjustments		9			(18	)		-
C1 cash costs	$	4,668		$	5,917		$	4,913

Ero Copper Corp. December 31, 2020 MD&A                                           Page 20 

	2020 - Q1			2019 - Q4			2019 - Q1
Costs
Mining	$	3,977		$	3,255		$	2,667
Processing		1,798			2,274			1,667
Indirect		798			995			816
Production costs		6,573			6,524			5,150
Capex development		(1,833	)		(540	)		(148	)
By-product credits		(72	)		(67	)		(89	)
C1 cash costs	$	4,668		$	5,917		$	4,913
Costs per ounce
Payable gold produced (ounces)		7,866			6,043			10,119
Mining	$	506		$	539		$	264
Processing	$	229		$	376		$	165
Indirect	$	101		$	165		$	81
Capex development	$	(233	)	$	(89	)	$	(15	)
By-product credits	$	(9	)	$	(11	)	$	(9	)
C1 cash cost of gold produced (per ounce)	$	594		$	980		$	486

Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and Adjusted EBITDA

EBITDA represents earnings before interest expense, income taxes, depreciation, and amortization. Adjusted EBITDA includes further adjustments for non-recurring items and/or items not indicative to the future operating performance of the Company. The Company believes EBITDA and adjusted EBITDA are appropriate supplemental measures of debt service capacity and performance of its operations.

Adjusted EBITDA is calculated by removing the following income statement items:

- Foreign exchange loss (gain)

- Loss on gold hedge contracts

- Share based compensation

	2020 - Q1			2019 - Q4			2019 - Q1
Reconciliation:
Net income (loss)	$	(52,995	)	$	45,409		$	15,483
Adjustments:
Finance expenses		6,651			2,014			6,810
Tax expense (recovery)		(14,704	)		(25,209	)		2,731
Depreciation/amortization/depletion		10,481			12,042			12,139
EBITDA		(50,567	)		34,256			37,163
Foreign exchange loss (gain)		81,922			(4,423	)		288
Loss on gold hedge contracts		-			15			-
Share based compensation		2,049			1,304			1,843
Adjusted EBITDA	$	33,404		$	31,152		$	39,294

Ero Copper Corp. March 31, 2020 MD&A Page 21

Adjusted net income attributable to owners of the Company and Adjusted net income per share attributable to owners of the Company

The Company uses the financial measure “Adjusted net income attributable to owners of the Company” and “Adjusted net income per share attributable to owners of the Company” (“Adjusted EPS”) to supplement information in its consolidated financial statements. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, the Company and certain investor and analysts use this information to evaluate the Company’s performance. The Company excludes the following items from net earnings to provide a measure which allows the Company and investors to evaluate the operating results of the underlying core operations: i) net recovery of value added taxes, ii) share based compensation iii) unrealized foreign exchange loss (gain) on USD denominated debt in MCSA, iv) unrealized loss (gain) on foreign exchange derivative contracts, v) unrealized loss on gold hedge contracts, and vi) loss on debt settlement. The presentation of Adjusted EPS is not meant to substitute the net income (loss) per share attributable to owners of the Company (“EPS”) presented in accordance with IFRS, but rather it should be evaluated in conjunction with such IFRS measures.

The following table provides a detailed reconciliation of net income (loss) attributable to owners of the Company as reported in the Company’s consolidated financial statements to adjusted net income attributable to owners of the Company and Adjusted EPS.

	2020 - Q1			2019 - Q4			2019 - Q1
Reconciliation:
Net income (loss) as reported attributable to the owners of the Company	$	(52,753	)	$	45,169		$	15,323
Adjustments for:
Share based compensation		2,049			1,304			-
Unrealized foreign exchange loss (gain) on USD denominated debt in MCSA		26,766			(3,738	)		135
Net unrealized loss (gain) on foreign exchange derivative contracts		43,081			(1,404	)		264
Unrealized loss (gain) on gold hedge contracts		-			(677	)		-
Unrealized loss (gain) on interest rate derivative		1,691			-			-
Adjusted net income attributed to owners of the Company	$	20,834		$	40,654		$	15,722
Weighted average number of common shares - basic		85,759,194			85,620,168			84,804,389
Weighted average number of common shares - diluted		91,409,738			91,670,988			89,917,828
Adjusted earnings per share - basic	$	0.24		$	0.47		$	0.19
Adjusted earnings per share - diluted	$	0.23		$	0.44		$	0.17

Note - Starting in 2019 Q4, share based compensation is included as an adjustment to the calculation of Adjusted EPS.

Net Debt

Net debt is determined based on cash and cash equivalents, restricted cash and loans and borrowings as reported in the Company’s consolidated financial statements. The Company uses net debt as a measure of the Company’s ability to pay down its debt. The following table provides a calculation of net debt based on amounts presented in the Company’s consolidated financial statements as at March 31, 2020 and December 31, 2019.

Ero Copper Corp. March 31, 2020 MD&A Page 22

	March 31			December 31,
	2020			2019
Cash and cash equivalents	$	44,338		$	21,485
Restricted cash		1,125			1,500
Less: Current portion of loans and borrowings		(19,821	)		(18,984	)
Long-term portion of loans and borrowings		(165,760	)		(140,386	)
Net Debt	$	(140,118	)	$	(136,385	)

Working Capital and Available Liquidity

Working capital is determined based on current assets and current liabilities as reported in the Company's consolidated financial statements. The Company uses working capital as a measure of the Company’s short-term financial health and operating efficiency. Available liquidity includes the Company’s working capital and undrawn revolving credit facilities in place. The following table provides a calculation for these based on amounts presented in the Company’s consolidated financial statements as at March 31, 2020 and December 31, 2019.

	March 31			December 31,
	2020			2019
Current Assets	$	84,693		$	75,565
Less: Current Liabilities		(97,076	)		(80,481	)
Working Capital (Deficit)	$	(12,383	)	$	(4,916	)
Available undrawn revolving credit facilities		-			30,000
Available Liquidity	$	(12,383	)	$	25,084

Internal Control over Financial Reporting

The Company’s management, with the participation of the CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”). The Company’s ICFR is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Any system of ICFR, no matter how well designed, has inherent limitations and cannot provide absolute assurance that all misstatements and instances of fraud, if any, within the Company have been prevented or detected. The Company’s ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

The Company uses the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

There were no changes in the Company’s ICFR that materially affected, or are reasonably likely to materially affect, ICFR during Q1 2020.

NOTE REGARDING SCIENTIFIC AND TECHNICAL INFORMATION

Unless otherwise indicated, scientific and technical information in this MD&A relating to Ero’s properties (“Technical Information”) is based on information contained in the following reports:

The report prepared in accordance with National Instrument 43-101, Standards of Disclosure for Mineral Projects (“NI 43-101”) and entitled “2019 Updated Mineral Resources and Mineral Reserves Statements of Mineração Caraíba’s Vale do Curaçá Mineral Assets, Curaçá Valley”, dated November 25, 2019 with an effective date of September 18, 2019, prepared by Rubens Jose De Mendonça, MAusIMM, of Planminas – Projectos e Consultoria em Mineração Ltd. (“Planminas”), Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, and Bernardo Horta de Cerqueira Viana, MAIG, all of GE21 Consultoria Mineral Ltda. (“GE21”), and each a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “Vale do Curaçá Technical Report”).

Ero Copper Corp. March 31, 2020 MD&A Page 23

The report prepared in accordance with NI 43-101 and entitled “Mineral Resource and Mineral Reserve Estimate of the NX Gold Mine, Nova Xavantina”, dated February 3, 2020 with an effective date of September 30, 2019, prepared by Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, and Paulo Roberto Bergmann, FAusIMM, each of GE21 and a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “NX Gold Technical Report”).

The report prepared in accordance with NI 43-101 and entitled “Feasibility Study, Technical Report for the Boa Esperança Copper Project, Pará State Brazil”, dated September 7, 2017 with an effective date of June 1, 2017, prepared by Rubens Mendonça, MAusIMM of SRK Consultores do Brasil Ltda. (“SRK” or “SRK Brazil”) as at the date of the report (now of Planminas) and Carlos Barbosa, MAIG and Girogio di Tomi, MAusIMM, both of SRK Brazil, and each a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “Boa Esperança Feasibility Study”).

Reference should be made to the full text of the Vale do Curaçá Technical Report, the NX Gold Technical Report and the Boa Esperança Technical Report, each of which is available for review under the Company’s profile on SEDAR at www.sedar.com.

The disclosure of Technical Information in this MD&A was reviewed and approved by Emerson Ricardo Re, MSc, MBA, MAusIMM (CP) (No. 305892), Registered Member (No. 0138) (Chilean Mining Commission) and Resource Manager of the Company who is a “qualified person” within the meanings of NI 43-101.

Cautionary Note Regarding Forward-Looking Statements

This MD&A contains “forward-looking information” within the meaning of applicable Canadian securities laws. Forward-looking information includes statements that use forward-looking terminology such as “may”, “could”, “would”, “will”, “should”, “intend”, “target”, “plan”, “expect”, “budget”, “estimate”, “forecast”, “schedule”, “anticipate”, “believe”, “continue”, “potential”, “view” or the negative or grammatical variation thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, statements with respect to the Company's expected operations at the Vermelhos and Pilar Mines as well as at the NX Gold Property, drilling plans, plans for the Company's exploration program, timing of any updated mineral resource and reserve updates and technical reports, the Company's ability to service its ongoing obligations, the Company's future production outlook, cash costs, capital resources, expenditures, the impact of new accounting standards and amendments on the Company's financial statements, and current global macroeconomic uncertainty stemming from the Covid-19 pandemic and its impact on the Company’s business, financial condition, results of operations, cash flows and prospects.

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this MD&A including, without limitation, assumptions about: favourable equity and debt capital markets; the ability to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Company’s properties and assets; future prices of copper and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any mineral reserve and mineral resource estimates; the geology of the Vale do Curaçá Property, NX Gold Property and the Boa Esperanҫa Property being as described in the technical reports for these properties; production costs; the accuracy of budgeted exploration and development costs and expenditures; the price of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to operate in a safe, efficient and effective manner; work force conditions to remain healthy in the face of prevailing epidemics, pandemics or other health risks, political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favourable terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour stability; stability in financial and capital goods markets; availability of equipment and critical supplies, spare parts and consumables; positive relations with local groups and the Company’s ability to meet its obligations under its agreements with such groups; and satisfying the terms and conditions of the Company’s current loan arrangements. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive, global health, and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.

Ero Copper Corp. March 31, 2020 MD&A Page 24

Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. Such risks include, without limitation the risk factors listed under the heading “Risk Factors” in the AIF.  

Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking information, there may be other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended.

The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained herein. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.

Forward-looking information contained herein is made as of the date of this MD&A and the Company disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.

Cautionary Notes Regarding Mineral Resource and Reserve Estimates

In accordance with applicable Canadian securities regulatory requirements, all mineral reserve and mineral resource estimates of the Company disclosed or incorporated by reference in this MD&A have been prepared in accordance with NI 43-101 and are classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards for Mineral Resources and Mineral Reserves, adopted by the CIM Council on May 10, 2014 (the “CIM Standards”).

Mineral resources which are not mineral reserves do not have demonstrated economic viability. Pursuant to the CIM Standards, mineral resources have a higher degree of uncertainty than mineral reserves as to their existence as well as their economic and legal feasibility. Inferred mineral resources, when compared with Measured or Indicated mineral resources, have the least certainty as to their existence, and it cannot be assumed that all or any part of an Inferred mineral resource will be upgraded to an Indicated or Measured mineral resource as a result of continued exploration. Pursuant to NI 43-101, Inferred mineral resources may not form the basis of any economic analysis. Accordingly, readers are cautioned not to assume that all or any part of a mineral resource exists, will ever be converted into a mineral reserve, or is or will ever be economically or legally mineable or recovered.

ADDITIONAL INFORMATION

Additional information about Ero and its business activities, including the AIF, is available under the Company’s profile at www.sedar.com.

Ero Copper Corp. March 31, 2020 MD&A Page 25

EX-99.18

Exhibit 99.18

 

CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED

MARCH 31, 2020 AND 2019

Ero Copper Corp.

Condensed Consolidated Statements of Financial Position

(Amounts in thousands of US Dollars)

(Unaudited)

		As at			As at
ASSETS	Notes	March 31, 2020			December 31, 2019
Current
Cash and cash equivalents		$	44,338		$	21,485
Restricted cash	7(b)		1,125			1,500
Accounts receivable			4,268			7,680
Inventories	3		16,490			19,377
Other current assets	4		18,472			25,523
			84,693			75,565
Non-Current
Mineral, property, plant and equipment	5		279,176			339,516
Exploration and evaluation assets	6		20,672			25,878
Deposits			544			1,200
Deferred income tax assets			23,900			13,099
Other non-current assets			655			7,416
			324,947			387,109
Total Assets		$	409,640		$	462,674
LIABILITIES
Current
Accounts payable and accrued liabilities		$	24,799		$	43,694
Current portion of loans and borrowings	7		19,821			18,984
Current portion of value added, payroll and other taxes payable			10,266			13,994
Current portion of derivatives	15		39,361			650
Current portion of lease liabilities			2,829			3,159
			97,076			80,481
Non-Current
Loans and borrowings	7		165,760			140,386
Provisions			26,210			33,581
Value added, payroll and other taxes			4,201			5,694
Derivatives	15		16,648			1,059
Lease liabilities			201			487
Other non-current liabilities			1,315			1,928
			214,335			183,135
Total Liabilities			311,411			263,616
SHAREHOLDERS’ EQUITY
Share capital	8		120,921			120,492
Equity reserves			(72,542	)		(24,489	)
Retained earnings			49,467			102,220
Equity attributable to owners of the Company			97,846			198,223
Non-controlling interests			383			835
			98,229			199,058
Total Liabilities and Equity		$	409,640		$	462,674

Nature of operations (Note 1); Contingencies (Note 17)

APPROVED ON BEHALF OF THE BOARD:

“David Strang” , CEO & Director      ”Matthew Wubs”      , Director

The accompanying notes are an integral part of these condensed consolidated interim financial statements Page 1

Ero Copper Corp.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

		Three months ended			Three months ended
	Notes	March 31, 2020			March 31, 2019
Revenue	9	$	67,745		$	72,041
Cost of product sold	10		(35,811	)		(38,140	)
Sales expenses			(1,282	)		(1,307	)
Gross profit			30,652			32,594
Expenses
General and administrative	11		(7,503	)		(6,623	)
Share-based compensation	8(a) to (c)		(2,049	)		(1,843	)
Income before the undernoted			21,100			24,128
Other income (expenses)
Finance income			467			136
Finance expense	12		(6,651	)		(6,810	)
Foreign exchange loss	13		(81,922	)		(288	)
Other income (expenses)			(693	)		1,048
Income (loss) before income taxes			(67,699	)		18,214
Income tax recovery (expense)
Current			(1,091	)		(4,218	)
Deferred			15,795			1,487
			14,704			(2,731	)
Net income (loss) for the period			(52,995	)		15,483
Other comprehensive income (loss)
Foreign currency translation loss			(49,919	)		(1,413	)
Comprehensive income (loss)		$	(102,914	)	$	14,070
Net income (loss) attributable to:
Owners of the Company			(52,753	)		15,323
Non-controlling interests			(242	)		160
		$	(52,995	)	$	15,483
Comprehensive income (loss) attributable to:
Owners of the Company			(102,472	)		13,916
Non-controlling interests			(442	)		154
		$	(102,914	)	$	14,070
Net income (loss) per share attributable to owners of the Company	8(e)
Net income (loss) per share
Basic		$	(0.62	)	$	0.18
Diluted		$	(0.62	)	$	0.17
Weighted average number of common shares outstanding
Basic			85,759,194			84,804,389
Diluted			85,759,194			89,917,828

The accompanying notes are an integral part of these condensed consolidated interim financial statements Page 2

Ero Copper Corp.

Condensed Consolidated Statement of Changes in Shareholders’ Equity

(Amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

		Share Capital				Equity Reserves
		Number of				Contributed			Foreign			Retained						Non-controlling
	Notes	shares		Amount		surplus			exchange			earnings			Total			interest			Total equity
Balance, December 31, 2019			85,703,646	$	120,492	$	9,084		$	(33,573	)	$	102,220		$	198,223		$	835		$	199,058
Loss for the period			-		-		-			-			(52,753	)		(52,753	)		(242	)		(52,995	)
Other comprehensive loss for the period			-		-		-			(49,719	)		-			(49,719	)		(200	)		(49,919	)
Total comprehensive loss for the period			-		-		-			(49,719	)		(52,753	)		(102,472	)		(442	)		(102,914	)
Shares issued for:
Exercise of options			94,998		429		(130	)		-			-			299			-			299
Share-based compensation	8(a) to (c)		-		-		1,796			-			-			1,796			-			1,796
Dividends to non-controlling interest			-		-		-			-						-			(10	)		(10	)
Balance, March 31, 2020			85,798,644	$	120,921	$	10,750		$	(83,292	)	$	49,467		$	97,846		$	383		$	98,229
Balance, December 31, 2018			84,738,650	$	117,944	$	3,897		$	(28,652	)	$	10,337		$	103,526		$	296		$	103,822
Income for the period			-		-		-			-			15,323			15,323			160			15,483
Other comprehensive loss for the period			-		-		-			(1,407	)		-			(1,407	)		(6	)		(1,413	)
Total comprehensive income (loss) for the period			-		-		-			(1,407	)		15,323			13,916			154			14,070
Shares issued for:
Exercise of options and warrants			233,331		682		(139	)		-			-			543			-			543
Share-based compensation			-		-		1,843			-			-			1,843			-			1,843
Balance, March 31, 2019			84,971,981	$	118,626	$	5,601		$	(30,059	)	$	25,660		$	119,828		$	450		$	120,278

The accompanying notes are an integral part of these condensed consolidated interim financial statements Page 3

Ero Copper Corp.

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands of US Dollars)

(Unaudited)

	Three months ended			Three months ended
	March 31, 2020			March 31, 2019
Cash Flows from Operating Activities
Net income (loss) for the period	$	(52,995	)	$	15,483
Adjustments for:
Amortization and depreciation		10,481			12,139
Income tax expense (recovery)		(14,704	)		2,731
Write-off of plant and equipment		-			328
Provisions		343			160
Share-based compensation		2,049			1,843
Finance income		(467	)		(136	)
Finance expenses		6,651			6,810
Foreign exchange loss		81,922			288
Changes in:
Accounts receivable		5,862			(11,901	)
Inventories		(1,937	)		(6,759	)
Other assets		1,441			18
Accounts payable and accrued liabilities		(1,058	)		(4,481	)
Deferred revenue		-			4,311
Value added, payroll and other taxes		2,787			3,626
		40,375			24,460
Derivative contract settlements		(2,651	)		723
Provision settlements		(410	)		(116	)
		37,314			25,067
Cash Flows used in Investing Activities
Additions to mineral property, plant and equipment		(28,367	)		(21,951	)
Additions to exploration and evaluation assets		(54	)		(175	)
Other investments		518			17
		(27,903	)		(22,109	)
Cash Flows from / (used in) Financing Activities
Restricted cash		375			378
Lease liability payments		(1,171	)		(902	)
New loans and borrowings, net of finance costs		45,689			4,674
Loans and borrowings paid		(21,230	)		(2,984	)
Interest paid on loans and borrowings		(2,448	)		(2,820	)
Other finance expenses		(766	)		(863	)
Issuance of share capital, net of issuance costs		299			543
		20,748			(1,974	)
Effect of exchange rate changes on cash and cash
equivalents		(7,306	)		(437	)
Net increase in cash and cash equivalents		22,853			547
Cash and cash equivalents - beginning of period		21,485			18,941
Cash and cash equivalents - end of period	$	44,338		$	19,488

The accompanying notes are an integral part of these condensed consolidated interim financial statements Page 4

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

1. Nature of Operations and Going Concern

Ero Copper Corp. (“Ero" or the "Company") was incorporated on May 16, 2016 under the Business Corporations Act (British Columbia) and maintains its head office at Suite 1050, 625 Howe Street, Vancouver, BC, V6C 2T6. The Company’s shares are publicly traded on the Toronto Stock Exchange under the symbol “ERO”.

The Company’s principal asset is its 99.6% ownership interest in Mineração Caraíba S.A. (“MCSA”). The Company also currently owns, directly and indirectly, a 97.6% ownership interest in NX Gold S.A. (“NX Gold”).

MCSA is a Brazilian company which holds a 100% interest in the Vale do Curaçá Property and the Boa Esperança Property (Note 6). MCSA’s predominant activity is the production and sale of copper concentrate from the Vale do Curaçá Property, with gold and silver produced and sold as by-products. The Company currently mines copper ore from the Pilar underground mine (“Pilar UG Mine”) and the Vermelhos underground mine (“Vermelhos UG Mine”). The Boa Esperança Property is located within the municipality of Tucumã in the southeastern part of the state of Pará, Brazil, and consists of a single mineral concession covering an area of 4,034 hectares (“ha”).

NX Gold is a Brazilian gold mining company focused on the exploration and commercialization of gold as its main product and silver as its sub-product. NX Gold wholly owns a 31,096 ha property, located approximately 18 kilometers west of the town of Nova Xavantina, southeastern Mato Grosso State, Brazil, consisting of a single mining concession covering an area of 620 ha, where all gold mining and processing activities occur.

On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. Although COVID-19 has not materially impacted the Company’s operations during the three months ended March 31, 2020, the situation is dynamic and the ultimate duration and magnitude of the impact on the economy and our business are not known at this time. These impacts could include an impact on the Company’s ability to obtain debt and equity financing, impairment of investments, impairments in the value of long-lived assets, or potential future decreases in revenue or the profitability of ongoing operations. During the three months ended March 31, 2020, the Company has drawn down $14.0 million and BRL $72.3 million ($13.9 million) under various credit facilities as a proactive measure in light of the uncertainty surrounding the COVID-19 pandemic.

2. Basis of Preparation

a) Statement of Compliance

These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting and, except as disclosed in note 2(b) below, follow the same accounting policies and methods of application as the Company’s most recent annual consolidated financial statements for the year ended December 31, 2019. These condensed consolidated interim financial statements do not include all of the information required for full consolidated annual financial statements and should be read in conjunction with the consolidated financial statements of the Company as at and for the year ended December 31, 2019, prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee.

These condensed consolidated interim financial statements were authorized for issue by the Board of Directors of the Company (the “Board”) on May 7, 2020.

Page 5

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

b) New Accounting Standards and Interpretations Adopted in the Current Period

The following new and amended IFRS pronouncements were adopted effective January 1, 2020 and had no impact to the Company’s financial statements:

· Amendments to References to the Conceptual Framework in IFRS Standards

· Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)

c) Use of Judgments and Estimates

In preparing these condensed consolidated interim financial statements, management has made judgments, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ. Significant judgments made by management in applying the Company’s accounting policies and key sources of estimation uncertainty were the same as those applied in the most recent annual audited consolidated financial statements for the year ended December 31, 2019, except for those applied for derivatives.

The fair value of derivative instruments is determined using either present value techniques or option pricing models that utilize a variety of inputs that are a combination of quoted prices and market-corroborated inputs. The fair value of the Company’s derivative contracts includes an adjustment for credit risk. Derivative instruments are classified within Level 2 of the fair value hierarchy.

3. Inventories
	March 31, 2020		December 31, 2019
Supplies and consumables	$	12,580	$	13,878
Stockpile		1,168		2,556
Work in progress		1,446		2,164
Finished goods		1,296		779
	$	16,490	$	19,377

4. Other Current Assets
	March 31, 2020		December 31, 2019
Advances to suppliers	$	862	$	1,046
Prepaid expenses		3,494		4,779
Advances to employees (a)		646		2,829
Value added federal taxes recoverable (b)		13,470		16,869
	$	18,472	$	25,523

(a) Advances to employees include short term advances of salary, vacation and other benefits granted to employees of the Company’s subsidiary MCSA.

(b) $11.4 million of this balance (December 31, 2019 - $12.2 million) relates to a 2019 favourable legal decision that recognizes MCSA’s right to a tax credit as a result of historical over-payments. MCSA is able to use these tax credits against a variety of taxes, including taxes on future sales.

Page 6

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

5. Mineral, Property, Plant and Equipment

Additions to mineral, property, plant and equipment totaled $27.8 million during the three months ended March 31, 2020 (three months ended March 31, 2019 - $27.2 million), of which $7.8 million was obtained through financing arrangements with equipment suppliers.

Certain equipment is secured by the equipment finance loans (note 7).

Included in mineral, property, plant and equipment is $5.7 million (December 31, 2019 - $7.3 million) related to the value of mineral resources beyond proven and probable reserves not currently being amortized. In addition, $46.3 million (December 31, 2019 - $52.7 million) related to projects in progress are not currently being amortized.

6. Exploration and Evaluation Assets

Exploration and evaluation assets relate to the Boa Esperança Property located in the Municipality of Tucumã, in the state of Pará, Brazil which consists of a single mineral concession. This prospective copper/gold property is in advanced stages of exploration with various geological mineral resource studies and is the subject of a completed feasibility study.

7. Loans and Borrowings

									Carrying value, including
									accrued interest
						Principal to			March 31,	December 31,
Description	Denomination	Security	Time to Maturity	Coupon rate		be repaid			2020	2019
Bank loan (at acquisition)	BRL R$	Unsecured	82 months		CDI + 0.5%		6,493		4,457		5,941
Bank loan (MCSA)	USD	Unsecured	9 months		4.43%		1,125		1,128		1,503
Bank loan (MCSA)	BRL R$	Unsecured	-		CDI + 3.7%		-		-		204
Line of credit (MCSA)	BRL R$	Unsecured	1 - 12 months		CDI + 9.0%		5,772		5,856		-
Line of credit (MCSA)	BRL R$	Unsecured	1 - 12 months		14.98%		5,772		5,799		-
Lines of credit (NX Gold)	BRL R$	Unsecured	1 - 12 months		14.34%-14.98%		2,886		2,921		670
Equipment finance loan (Plural)	BRL R$	Secured	20 months		CDI + 7.0%		1,924		1,939		2,892
Equipment finance loans	BRL R$	Secured	1 - 52 months		11.88%-16.49%		6,500		6,674		5,585
Equipment finance loans	EURO	Secured	28 - 35 months		5.5%-7.0%		3,542		3,615		3,996
Equipment finance loans	USD	Secured	26 - 42 months		6.50%-7.95%		5,261		5,298		4,125
Senior non-revolving credit facility	USD	Secured	48 months		LIBOR + 2.50%-4.25%		75,000		73,947		79,091
Senior revolving credit facility	USD	Secured	48 months		LIBOR + 2.50%-4.25%		75,000		73,947		55,363
Total						$	189,275	$	185,581	$	159,370
Current portion:								$	19,821	$	18,984
Non-current portion:								$	165,760	$	140,386

Balance, beginning of year	March 31, 2020			March 31, 2019
New senior revolving credit facility, net	$	159,370		$	152,234
New equipment finance loans		13,680			-
New bank loans		9,305			6,070
Principal and interest payments		30,517			-
Interest accretion		(23,678	)		(5,804	)
Effect of foreign exchange rate changes		2,732			3,115
Balance, end of period		(6,345	)		(381	)
	$	185,581		$	155,234

Page 7

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

(a) Senior credit facility

The Company has a $150 million facility from a syndicate of Canadian financial institutions. The facility was comprised of an $75 million (December 31, 2019 - $80 million) senior secured amortizing non-revolving credit facility (“Term Facility”) and a $75 million (December 31, 2019 - $70 million) senior secured revolving term credit facility (“Revolving Credit Facility”) (collectively the “Facilities”).

On March 31, 2020, the Company amended the Facilities to reduce its cost of borrowing by 25 to 50 basis points, depending on the consolidated leverage ratio, and to defer the scheduled principal payments for two years.

The Term Facility now matures on March 31, 2024 and requires principal repayments on a quarterly basis commencing on March 31, 2022, while the Revolving Credit Facility is now payable in full at maturity on March 31, 2024. The Facilities bear interest on a sliding scale at a rate of LIBOR plus 2.50% to 4.25% depending on the Company’s consolidated leverage ratio at the time. Commitment fees for any undrawn portion of the Revolving Credit Facility are also on a sliding scale between 0.63% to 1.06%. The Company determined that the amendments were a non-substantial modification. During the three months ended March 31, 2020, the Company also drew down the remainder of the amount available under the Facilities totaling $14.0 million ($13.7 million net of transaction costs). The Term Facility previously had a five-year term with equal quarterly principal payments beginning on December 13, 2020, while the Revolving Credit Facility was payable at maturity on December 13, 2022. The Facilities previously bore interest on a sliding scale at a rate of LIBOR plus 2.75% to 4.75% depending on the Company’s consolidated leverage ratio at the time.

The Facilities include standard and customary terms and conditions with respect to fees, representations, warranties, and financial covenants that remain unchanged from prior amendments.

The Facilities are secured by pledges of shares of MCSA and NX Gold. The Company is required to comply with certain financial covenants. As of the date of these consolidated financial statements, the Company is in compliance with these covenants.

In January 2019, the Company entered into an interest rate swap transaction with a Canadian financial institution whereby the floating interest on a notional amount of $65.0 million of the Term Facility was swapped for a fixed interest rate of 2.69%. This interest rate swap transaction is in effect for the majority of term of the Term Facility, with the notional amount reduced as principal payments are made. Interest payments are being made on a quarterly basis.

Page 8

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

(b) Bank loans and equipment finance loans

The bank loans (at acquisition) relate to the Company’s subsidiary, MCSA, and were recognized at the date of acquisition at fair value and have subsequently been recognized at amortized cost, net of settlements. Interest is being recognized using the effective interest rate method at an interest rate of 11.29%.

As per the terms of one of MCSA’s bank loans, the Company is required to maintain a separate debt service bank account with sufficient funds to guarantee scheduled principal payments by MCSA. At March 31, 2020, $1.1 million was on deposit (December 31, 2019 - $1.5 million) in the designated debt service account and is presented as restricted cash in the statement of financial position.

MCSA is required to comply with certain financial covenants which MCSA is in compliance with at March 31, 2020. The equipment finance loans are secured by the corresponding equipment relating to them and a guarantee by the Company.

(c) MCSA and NX Gold lines of credit

At March 31, 2020, the Company’s subsidiaries MCSA and NX Gold have the following credit facilities available:

MCSA entered into a credit agreement in 2019 for a line of credit of up to BRL $30.0 million at an interest rate of CDI (“Brazilian Interbank Deposit Rate”) + 9% per annum. MCSA may drawdown on this line of credit at any time until November 30, 2020. In addition, in 2019 MCSA also entered into a second credit agreement for a total of up to BRL $30.0 million at an interest rate of 14.98% per annum. MCSA may drawdown on this line of credit at any time until August 27, 2020. The Company and NX Gold provide unsecured guarantees for these credit agreements. At March 31, 2020, BRL $60.0 million ($11.5 million) (December 31, 2019 - $nil) had been drawn from these credit facilities.

NX Gold entered into an agreement in 2019 for a line of credit of up to BRL $7.5 million at an interest rate of 14.98% per annum. NX Gold may drawdown on this line of credit at any time until August 27, 2020. As at March 31, 2020, BRL $7.5 million ($1.4 million) (December 31, 2019 - BRL $2.7 million ($0.7 million)) has been drawn from NX Gold’s line of credit.

In addition, during the three months ended March 31, 2020, NX Gold entered into a second credit agreement for a line of credit of up to BRL $7.5 million at an interest rate of 14.34% per annum. NX Gold may drawdown on this line of credit at any time until February 22, 2021. NX Gold is using BRL $1.5 million of this line of credit to provide a letter of credit to a supplier until January 31, 2022. The Company provides unsecured guarantees for these credit agreements. At March 31, 2020, BRL $7.5 million ($1.4 million) (December 31, 2019 - $nil) had been drawn from this line of credit.

Page 9

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

8. Share Capital

As at March 31, 2020, the Company’s authorized share capital consists of an unlimited number of common shares without par value. As at March 31, 2020, 85,798,644 common shares were outstanding.

(a) Options

As at March 31, 2020, the following stock options were outstanding:

						Vested and		Weighted
						Exercisable		Average
	Number of		Weighted Average			Number of		Remaining
Expiry Date	Stock Options		Exercise Price			Stock Options		Life in Years
May 15, 2022		910,335		1.50	USD		371,999		2.12
July 10, 2022		100,000		1.50	USD		66,666		2.28
November 24, 2022		318,000		6.48	CAD		212,000		2.65
December 7, 2022		1,376,669		6.74	CAD		929,998		2.69
January 18, 2023		60,000		7.95	CAD		40,000		2.80
January 23, 2023		83,334		7.76	CAD		41,667		2.82
June 19, 2023		144,000		10.25	CAD		44,000		3.22
July 16, 2023		200,000		9.01	CAD		66,666		3.29
December 31, 2023		1,138,853		9.76	CAD		368,499		3.75
January 2, 2024		125,000		9.80	CAD		125,000		3.76
August 15, 2024		40,000		21.09	CAD		23,828		4.38
December 12, 2024		470,228		20.52	CAD		-		4.70
January 2, 2025		73,456		23.42	CAD		43,456		4.76
		5,039,875		5.94	USD		2,333,779		3.12

In determining the weighted average exercise price of all outstanding options in the tables above and below, the CAD prices were converted to USD at the March 31, 2020 exchange rate of 1.4186.

	Number of			Weighted Average
	Stock Options			Exercise Price
Outstanding stock options, December 31, 2019		5,061,417		$	6.23
Issued		73,456			16.51
Exercised		(94,998	)		3.01
Outstanding stock options, March 31, 2020		5,039,875		$	5.94

The fair value of options granted in the three months ended March 31, 2020 was determined using the Black-Scholes option pricing model. The weighted average inputs used in the measurement of fair values at grant date of the options are the following:

Expected term (years)		3.0
Forfeiture rate		0	%
Volatility		50.6	%
Dividend yield		0	%
Risk-free interest rate		1.63	%
Weighted-average fair value per option	$	6.46

Page 10

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

For the three months ended March 31, 2020, the Company recorded share-based compensation of $1.2 million (three months ended March 31, 2019 - $1.5 million), with respect to its outstanding stock options.

(b) Share Unit Plan

As at March 31, 2020, 438,463 share units (December 31, 2019 - 437,463 share units) have been issued to certain officers and employees of the Company pursuant to the Company’s Share Unit Plan and are outstanding. These share units will vest three years from the date they were approved for granting by the Board and the number of share units that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain market and non-market performance conditions. Each vested share unit entitles the holder thereof to receive on or about the applicable date of vesting of such share unit (i) one common share; (ii) a cash amount equal to the fair market value of one common share as at the applicable date of vesting; or (iii) a combination of (i) and (ii), as determined by the Board in its sole discretion. The Company currently intends to settle these share units using common shares. Accordingly, they are classified as equity settled instruments.

For the share units with non-market performance conditions, the fair value of the share units granted was determined using the share price at the date of grant. For the share units with market performance conditions, the fair value of the share units granted was determined using a Geometric Brownian Motion model. The weighted average inputs used in the measurement of fair values at grant date of the 1,000 Share Units granted during the three months ended March 31, 2020 are as follows:

Expected term (years)		3.0
Forfeiture rate		0	%
Volatility		44.9	%
Dividend yield		0	%
Risk-free interest rate		1.82	%
Weighted-average fair value per Share Unit	$	18.38

During the three months ended March 31, 2020, the Company recorded share-based compensation of $0.6 million (three months ended March 31, 2019 - $0.3 million), respectively, with respect to the share units.

(c) Deferred Share Unit Plan

On December 12, 2019, a Deferred Share Unit Plan (“DSU Plan”) was established by the Board as a component of our compensation for independent directors. Only independent directors are eligible to participate and to receive deferred share units (“DSUs”) under the DSU Plan.  DSUs may be awarded by the Board from time to time to provide independent directors with appropriate equity-based compensation for the services they render to the Company and may be subject to terms and conditions with respect to vesting of such DSUs.  In addition, independent directors may elect to receive a portion or all of their respective annual cash remuneration in the form of DSUs, which will be fully vested upon such grant.  The number of DSUs to be awarded to a participant under the DSU Plan is determined by dividing the portion of that participant’s annual cash remuneration by the fair market value of a common share on the last day of the quarter in which such portion of the annual cash remuneration was earned. Pursuant to the DSU Plan, DSUs may only be settled by way of cash payment. A participant is not entitled to payment in respect of the DSUs until his or her death, retirement or removal from the Board.  The settlement amount of each DSU is based on the fair market value of a common share on the DSU redemption date multiplied by the number of DSUs being redeemed.

During the three months ended March 31, 2020, 32,327 DSUs (three months ended March 31, 2019 - nil) were issued to independent directors.

Page 11

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

As at March 31, 2020, the fair value of the DSU liability was $0.3 million (December 31, 2019 - $nil) which has been recognized in other non-current liabilities with a corresponding $0.3 million recognized in share-based compensation expense.

(d) Warrants

As at March 31, 2020, 2,866,662 (December 31, 2019 - 2,866,662) common share purchase warrants were outstanding with a weighted average exercise price of $1.20 and a weighted average remaining contractual life of 1.70 years.

(e) Net Income (Loss) per Share

	Three months			Three months
	ended March 31,			ended March 31,
	2020			2019
Weighted average number of common shares outstanding		85,759,194			84,804,389
Dilutive effect of warrants		-			2,802,871
Dilutive effect of stock options		-			2,310,568
Weighted average number of diluted common shares outstanding		85,759,194			89,917,828
Net income attributable to owners of the Company	$	(52,753	)	$	15,323
Basic net income per share attributable to owners of the Company		(0.62	)		0.18
Diluted net income per share attributable to owners of the Company		(0.62	)		0.17

For the three months ended March 31, 2020, the potentially dilutive effect of warrants and stock options are excluded from the dilutive net loss per share calculation as the Company incurred a loss for the period and all dilutive instruments would be anti-dilutive.

9. Revenue

	Three months ended			Three months ended
	March 31, 2020			March 31, 2019
Copper concentrate
- sales within Brazil	$	51,221		$	48,232
- export sales		8,843			8,978
- price adjustments on provisionally priced sales		(3,919	)		2,285
Gold
- export sales		11,600			12,546
	$	67,745		$	72,041

Under the terms of the Company’s contract with its primary customer, sales are provisionally priced on the date of sale based on the previous month’s average copper price.  The final sales price for all shipments in a month is determined at the end of the month in which the sale is recognized.  As at March 31, 2020, there were no sales subject to provisional pricing.  During the three months ended March 31, 2020, the Company recognized $3.9 million (three months ended March 31, 2019 - $2.3 million) in price adjustments related to provisionally priced sales.

Page 12

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

10. Cost of Product Sold

	Three months ended		Three months ended
	March 31, 2020		March 31, 2019
Materials	$	4,982	$	4,617
Salaries and benefits		8,690		9,113
Depreciation and depletion		10,449		12,098
Contracted services		5,523		5,702
Maintenance costs		3,593		4,094
Utilities		2,403		2,313
Other costs		171		203
	$	35,811	$	38,140

11. General and Administrative Expenses
	Three months ended		Three months ended
	March 31, 2020		March 31, 2019
Accounting and legal	$	198	$	337
Amortization and depreciation		32		41
Office and sundry		1,606		1,313
Provisions		343		173
Salaries and consulting fees		4,427		3,574
Incentive payments		297		567
Transfer agent and filing fees		118		85
Travel and conference		482		533
	$	7,503	$	6,623

12. Finance Expense
	Three months ended		Three months ended
	March 31, 2020		March 31, 2019
Interest on loans and borrowings	$	2,732	$	3,133
Loss on interest rate swap derivative		1,823		836
Accretion of mine closure and rehabilitation provision		268		1,291
Interest on lease liabilities		77		129
Other finance expenses		1,751		1,421
	$	6,651	$	6,810

Page 13

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

13. Foreign Exchange Loss

The following foreign exchange gains (losses) arise as a result of balances and transactions in the Company’s Brazilian subsidiaries that are denominated in currencies other than the Brazilian Reais (BRL$), which is their functional currency.

	Three months ended			Three months ended
	March 31, 2020			March 31, 2019
Foreign exchange on USD denominated debt in Brazil	$	(26,873	)	$	(136	)
Realized foreign exchange on derivative contracts (note 15)		(2,651	)		723
Unrealized foreign exchange on derivative contracts (note 15)		(52,655	)		(265	)
Other		257			(610	)
	$	(81,922	)	$	(288	)

14. Related Party Transactions

Key management personnel consist of the Company’s directors and officers and their compensation includes director retainer fees and management salaries paid to these individuals, as well as share-based compensation. The aggregate value of compensation paid to key management personnel for the three months ended March 31, 2020 was $1.8 million ($1.4 million for the three months ended March 31, 2019). In addition, 43,456 options and 32,327 DSUs were issued to non-executive directors during the three months ended March 31, 2020 (1,100,155 options and 130,636 share units for the three months ended March 31, 2019). $1.3 million was recognized in share-based compensation expense for the three months ended March 31, 2020 for options, Share Units, and DSUs issued ($1.4 million for the three months ended March 31, 2019).

During the three months ended March 31, 2020, key management personnel exercised 25,000 options for cash proceeds to the Company of $38 thousand (nil options for the three months ended March 31, 2019).

15. Financial Instruments

Fair value

Fair values of financial assets and liabilities are determined based on available market information and valuation methodologies appropriate to each situation. However, some judgments are required in the interpretation of the market data to produce the most appropriate fair value estimates. The use of different market information and/or evaluation methodologies may have a material effect on the fair value amounts.

As at March 31, 2020, derivatives were measured at fair value based on Level 2 inputs.

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, deposits, financial investments and accounts payable and accrued liabilities approximate their fair values due to their short terms to maturity or market rates of interest used to discount amounts. The carrying value of value added, payroll and other taxes approximate fair value based on the discount rate applied. At March 31, 2020, the carrying value of loans and borrowings is $185.6 million while the fair value is approximately $189.3 million. The effective interest rates used to amortize these loans are a close approximation of market rates of interest at March 31, 2020 (Level 2 of the fair value hierarchy).

Page 14

Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers. The carrying amount of the financial assets below represents the maximum credit risk exposure as at March 31, 2020 and December 31, 2019:

	March 31, 2020		December 31, 2019
Cash and cash equivalents	$	44,338	$	21,485
Restricted cash		1,125		1,500
Accounts receivable		4,268		7,680
Deposits and other non-current assets		546		2,396
	$	50,277	$	33,061

The Company invests cash and cash equivalents as well as restricted cash with financial institutions that are financially sound based on their credit rating. The Company’s exposure to credit risk associated with accounts receivable is influenced mainly by the individual characteristics of each customer. The Company currently has only three significant customers, all of which have no history of credit default with the Company. The Company has not incurred credit losses during the three months ended March 31, 2020 nor recognized a provision for credit losses.

(i) Foreign exchange currency risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage market risks. At March 31, 2020, the Company has entered into foreign exchange collar contracts at zero cost for notional amounts of $381.6 million with an average floor rate of 3.92 BRL to US Dollar and an average cap rate of 4.56 BRL to US Dollar (December 31, 2019 - notional amount of $336.6 million in foreign exchange forward collar contracts). The maturity dates of these contracts are from April 28, 2020 to December 1, 2021 and are financially settled on a net basis. The fair value of these contracts at March 31, 2020 was a liability of $52.7 million, (December 31, 2019 - $nil) which was included in Derivatives in the statement of financial position. The change in fair value of foreign exchange collar contracts was a loss of $52.7 million for the three months ended March 31, 2020 ($0.3 million for the three months ended March 31, 2019) and has been recognized in foreign exchange loss. In addition, during the three months ended March 31, 2020, the Company recognized a realized loss of $2.8 million (a gain of $0.7 million for the three months ended March 31, 2019) related to the settlement of foreign currency forward collar contracts.

(ii) Interest rate risk

The Company is principally exposed to the variation in interest rates on loans and borrowings with variable rates of interest. Management reduces interest rate risk exposure by entering into loans and borrowings with fixed rates of interest or by entering into derivative instruments that fix the ultimate interest rate paid.

The Company is principally exposed to interest rate risk through its Term Facilities of $150.0 million, Brazilian Real denominated bank loans of $6.5 million, Brazilian Real denominated lines of credit of $5.8 million, and Brazilian Real denominated equipment finance loans of $1.9 million. Based on the Company’s net exposure at March 31, 2020, a 1% change in the variable rates would have an impact of $1.6 million on pre-tax annual net income, without consideration of the effects of the swap contracts below.

In order to mitigate the above volatility due to variable rates on loans, as at March 31, 2020, the Company has entered into an interest rate swap contract to manage interest rate risk (see note 7). The floating interest on a notional amount of $65 million was swapped for a fixed interest rate of 2.69%. The fair value of this contract at March 31, 2020 was a liability of $3.4 million (December 31, 2019 - $1.7 million) and was included in Derivatives in the statement of financial position. The change in fair value of $1.7 million was included in finance expense.

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Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

(iii) Price risk

The Company may use derivatives, including forward contracts, collars and swap contracts, to manage commodity price risks. At March 31, 2020, the Company has not entered into any commodity derivative contracts.

16. Segment Disclosure

The Company’s operations are segmented by entity between MCSA, NX Gold and corporate head office, which is consistent with internal reporting purposes. The Company monitors the operating results of its operating segments separately for the purpose of making decisions about resource allocation and performance assessment.

Total revenue from MCSA is from two customers while total revenue from NX Gold is from one customer.

Segmented information is as follows:

Three months ended March 31, 2020	MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	56,145		$	11,600		$	-		$	67,745
Depreciation and depletion		(9,566	)		(883	)		-			(10,449	)
Other cost of product sold expenses		(20,388	)		(4,974	)		-			(25,362	)
Cost of product sold		(29,954	)		(5,857	)		-			(35,811	)
Sales expenses		(1,282	)		-			-			(1,282	)
Gross profit		24,909			5,743			-			30,652
Expenses
General and administrative		(4,748	)		(480	)		(2,275	)		(7,503	)
Share-based compensation		-			-			(2,049	)		(2,049	)
Finance income		117			40			310			467
Finance expenses		(2,641	)		(332	)		(3,678	)		(6,651	)
Foreign exchange gain (loss)		(79,649	)		(2,264	)		(9	)		(81,922	)
Other income		(550	)		(143	)		-			(693	)
Income (loss) before taxes		(62,562	)		2,564			(7,701	)		(67,699	)
Current tax expense		(417	)		(674	)		-			(1,091	)
Deferred tax recovery		15,424			371						15,795
Net Income (Loss)	$	(47,555	)	$	2,261		$	(7,701	)	$	(52,995	)
Assets
Current	$	56,831		$	11,947		$	15,915		$	84,693
Non-current		304,187			17,981			2,779			324,947
Total Assets	$	361,018		$	29,928		$	18,694		$	409,640
Total Liabilities	$	141,593		$	16,584		$	153,234		$	311,411

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Ero Copper Corp.

Notes to Condensed Consolidated Interim Financial Statements

(Tabular amounts in thousands of US Dollars, except share and per share amounts)

(Unaudited)

Three months ended March 31, 2019		MCSA (Brazil)			NX Gold (Brazil)			Corporate (Canada)			Consolidated
Revenue	$	59,495		$	12,546		$	-		$	72,041
Depreciation and depletion		(9,762	)		(2,336	)		-			(12,098	)
Other cost of product sold expenses		(21,089	)		(4,953	)		-			(26,042	)
Cost of product sold		(30,851	)		(7,289	)		-			(38,140	)
Sales expenses		(1,307	)		-			-			(1,307	)
Gross profit		27,337			5,257			-			32,594
Expenses
General and administrative		(3,495	)		(507	)		(2,621	)		(6,623	)
Share-based compensation		-			-			(1,843	)		(1,843	)
Finance income		17			110			9			136
Finance expenses		(3,459	)		(285	)		(3,066	)		(6,810	)
Foreign exchange loss		(292	)		-			4			(288	)
Other income		682			366			-			1,048
Income (loss) before taxes		20,790			4,941			(7,517	)		18,214
Current taxes		(3,026	)		(1,192	)		-			(4,218	)
Deferred taxes		1,277			210			-			1,487
Net Income (Loss)	$	19,041		$	3,959		$	(7,517	)	$	15,483
Assets
Current	$	54,019		$	8,178		$	5,131		$	67,328
Non-current		300,228			17,406			2,898			320,532
Total Assets	$	354,247		$	25,584		$	8,029		$	387,860
Total Liabilities	$	125,377		$	14,193		$	128,012		$	267,582

17. Contingencies

MCSA is subject to a number of claims (including claims related to tax, labour and social security matters and civil action) in the course of its business which individually are not material and have not been accrued for in the Company’s financial statements as it is not probable that a cash outflow will occur. While the Company believes that these claims are unlikely to be successful, if all such existing claims were decided against it, the Company could be exposed to a liability of up to approximately $21.8 million as at March 31, 2020 (December 31, 2019 - $31.1 million), which could have an adverse impact on the Company’s business, financial condition, results of operations, cash flows or prospects.

Page 17

EX-99.19

Exhibit 99.19

 

REPORT ON VOTING RESULTS

In accordance with section 11.3 of National Instrument 51-102 – Continuous Disclosure Obligations, the following sets out the voting results on the items of business submitted at the Annual General Meeting of Shareholders (the “Meeting”) of Ero Copper Corp. (“Ero” or the “Company”) held in a virtual-only format conducted by live audio teleconference on May 4, 2021. Each item of business voted upon at the Meeting is described in detail in the Management Information Circular dated March 16, 2021 (the “Circular”), which is available on the Company’s website (www.erocopper.com) and on SEDAR (www.sedar.com).

Common Shares represented at the Meeting:	78,557,201
Total issued and outstanding Common Shares as at March 12, 2021 (Record Date):	88,101,909
Percentage of issued and outstanding Common Shares represented:	89.17	%

1. Election of Directors

Each of the nine nominees in the Circular were re-elected as directors of the Company for the ensuing year, and the outcome of the valid proxies received was as follows:

	Number of Common Shares Voted				Percentage of Votes Cast
Director Nominee	For		Withheld		For			Withheld
Christopher Noel Dunn		75,310,588		1,035,648		98.64	%		1.36	%
David Strang		76,344,465		1,771		100.00	%		0.00	%
Lyle Braaten		66,142,633		10,203,604		86.64	%		13.36	%
Steven Busby		75,311,095		1,035,141		98.64	%		1.36	%
Dr. Sally Eyre		75,705,308		640,928		99.16	%		0.84	%
Robert Getz		75,311,541		1,034,695		98.64	%		1.36	%
Chantal Gosselin		76,344,858		1,378		100.00	%		0.00	%
John Wright		69,918,984		6,427,253		91.58	%		8.42	%
Matthew Wubs		76,339,701		6,535		99.99	%		0.01	%

2. Appointment of Auditor

KPMG LLP, Chartered Professional Accountants, was re-appointed as the auditor of the Company for the ensuing year, and the directors of the Company were authorized to fix the remuneration to be paid to the auditor, and the outcome of the valid proxies received was as follows:

Number of Common Shares Voted				Percentage of Votes Cast
For		Withheld		For			Withheld
	78,556,201		1,000		100.00	%		0.00	%

3. Advisory Vote on Executive Compensation

The non-binding advisory “say on pay” resolution accepting the Company’s approach to executive compensation as described in the Circular was approved, and the outcome of the valid proxies received was as follows:

Number of Common Shares Voted				Percentage of Votes Cast
For		Against		For			Against
	76,179,262		166,974		99.78	%		0.22	%

Dated this 4th day of May, 2021.
	ERO COPPER CORP.
	“Deepk Hundal”
	Deepk Hundal
	VP, General Counsel and Corporate Secretary

Ero Copper Corp

625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

EX-99.20

Exhibit 99.20

NOTICE OF
2021 ANNUAL GENERAL MEETING
OF SHAREHOLDERS

_______________

MANAGEMENT INFORMATION circular
MARCH 16, 2021

These materials are important and require your immediate attention. They require the shareholders of Ero Copper Corp. to make important decisions. If you are in doubt as to how to make such decisions, please contact your financial, legal or other professional advisors.

NOTICE OF ANNUAL GENERAL
MEETING OF SHAREHOLDERS

NOTICE IS HEREBY GIVEN that the annual general meeting (the “Meeting”) of the shareholders of ERO COPPER CORP. (the “Company” or “Ero”) will be held in a virtual-only format conducted via live audio teleconference on Tuesday, May 4, 2021 at 4:00 p.m. (Vancouver time) for the following purposes:

1. receive the audited consolidated financial statements of the Company for the financial year ended December 31, 2020, and the auditor’s report thereon;

2. re-elect nine directors to hold office for the ensuing year;

3. reappoint KPMG LLP, Chartered Professional Accountants, as the auditor of the Company for the ensuing year, and authorize the directors to fix the remuneration to be paid to the auditor;

4. authorize and approve a non-binding advisory “say on pay” resolution accepting the Company’s approach to executive compensation; and

5. transact such other business as may be properly brought before the Meeting.

The accompanying management information circular (the “Circular”) provides additional information relating to the matters to be addressed at the Meeting and is deemed to form part of this Notice.

If you owned common shares of Ero as of the close of business on March 12, 2021 (the record date for the Meeting), you are entitled to receive notice of and vote at the Meeting or at any adjournments or postponement thereof.

This year, in light of the ongoing public health impact of the COVID-19 pandemic and Ero’s commitment to support the health, safety and wellness of our communities, shareholders, directors, employees and other stakeholders, Ero will hold the Meeting in a virtual-only format, which will be conducted via live audio teleconference. Ero intends to hold the virtual Meeting in a manner that affords its shareholders opportunities to participate, substantially similar to those shareholders would have at an in-person meeting. Shareholders will not be able to attend the Meeting in person. At the virtual Meeting, registered shareholders and duly appointed proxyholders, including non-registered shareholders who have duly appointed themselves or a third-party as proxyholder, regardless of geographic location and equity ownership, will have an equal opportunity to participate, vote during the Meeting and ask questions in respect of each of the matters to be voted upon as such matters are brought forward to the Meeting, all in real time, through the teleconference system, provided they have properly pre-registered before the Meeting in accordance with directions set out in the accompanying Circular under the heading “Solicitation of Proxies and Voting Instructions”. Any questions unrelated to a matter at hand will be deferred until the matter is brought forward for approval or until the end of the Meeting, as applicable.

Registered shareholders of Ero are entitled to vote at the Meeting either via live teleconference, provided they have properly pre-registered before the Meeting, or by proxy. Registered Shareholders who are unable to attend the Meeting via teleconference are encouraged to read, complete, sign, date and return the enclosed proxy form in accordance with the instructions set out in the proxy form and in the Circular. In order to be valid for use at the Meeting, proxies must be received by Computershare Investor Services Inc. (“Computershare”), Proxy Dept., 100 University Avenue, 8th Floor, Toronto, Ontario, M5J 2Y1 in the envelope provided for that purpose, or vote using the telephone or internet based on instructions provided in the enclosed proxy form no later than 4:00 p.m. (Vancouver time) on April 30, 2021, or in the case of any adjournment or postponement of the Meeting, at least 48 hours (excluding Saturdays, Sundays and holidays), before the Meeting is reconvened. Please advise the Company of any change in your mailing address. The time limit for deposit of proxies may be waived or extended by the Chairman of the Meeting at his discretion, without notice. Ero intends to resume holding in-person or hybrid shareholder meetings upon return to normal conditions.

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If you are a non-registered shareholder of Ero, please refer to the section in the Circular entitled “Solicitation of Proxies and Voting Instructions” for information on how to vote your common shares.

For all other shareholders and stakeholders, including non-registered shareholders who have not duly appointed themselves or a third party as proxyholder, wishing to attend the Meeting by live audio teleconference, but without the ability to vote or ask questions during the Meeting, you are not required to pre-register with Chorus Call. Simply attend as a guest by dialing the following toll free or international toll number approximately five minutes prior to the commencement of the Meeting and ask the operator to join the Annual General Meeting of the Ero Copper Corp. Shareholders:

Toll-free (Canada/U.S.):            1-800-319-4610
Toll (International):                   +1-604-638-5340

Guests may listen to the Meeting but will not be entitled to vote or ask questions.

Even if you currently plan to participate in the virtual Meeting, Ero strongly encourages you to consider voting by proxy in advance so that your vote will be counted if you later decide not to attend the Meeting or if you are unable to access the Meeting for any reason. If you access and vote on any matter at the Meeting during the live teleconference, you will revoke any previously submitted proxy.

Shareholders who have questions or need assistance should contact:

Deepk Hundal, Vice President, General Counsel and Corporate Secretary of the Company	Mail: 625 Howe Street, Suite 1050, Vancouver BC, V6C 2T6 Phone: (604) 449-9236 Email: info@erocopper.com
Computershare, (the Company’s transfer agent)	Mail: 100 University Avenue, 8th Floor, Toronto, ON M5J 2Y1 Phone: 1-800-564-6253 (toll-free in Canada and the United States) or 514-982-7555 (from outside Canada and the United States) Fax: 1-888-453 0330 (toll-free in Canada and the United States) or 514-982 7635 (from outside Canada and the United States) E-mail: Service@Computershare.com

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Chorus Call
(teleconference voting service provider) Phone: 1-855-658-2584. Please ask for G. Van Dusen. If not available, please leave your name and phone number for a call back. Email: canada@choruscall.com Attention: G. Van Dusen

DATED at Vancouver, British Columbia, this 16^th day of March, 2021.

BY ORDER OF THE BOARD OF DIRECTORS

“Christopher Noel Dunn” 

Executive Chairman

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MANAGEMENT INFORMATION CIRCULAR

About This Management Information Circular

This management information circular (the “Circular”) is furnished in connection with the solicitation of proxies by the management of Ero for use at the annual general meeting of the Company to be held at 4:00 p.m. (Vancouver time) on Tuesday, May 4, 2021 and at any adjournments or postponement thereof (the “Meeting”) for the purposes set forth in the accompanying Notice of Annual General Meeting of Shareholders (the “Notice of Meeting”).

Management’s solicitation of proxies will be conducted by mail and may be supplemented by telephone or other personal contact to be made by our directors, officers and employees, without special compensation. All costs of the solicitation for the Meeting will be borne by the Company.   Unless otherwise specified, the information contained in this Circular is current as of March 16, 2021. In this Circular, unless otherwise indicated, all dollar amounts represented by “$” are references to Canadian dollars and all dollar amounts represented by “US$” are references to United States dollars. In this Circular, “we”, “us”, “our”, “Ero” and the “Company” means Ero Copper Corp.   “You”, “your” and “shareholder” means holders of Shares of Ero as of the
March 12, 2021 record date.   Your vote is important. You can vote by completing the proxy form included with this package or by attending the Meeting in person.

Solicitation of Proxies and Voting Instructions

Who Can Vote

Each holder of common shares of the Company (the “Shares”) is entitled to one vote for each Share registered in his, her or its name held at the close of business on March 12, 2021, the date fixed by the board of directors of the Company (the “Board”) as the record date for determining who is entitled to receive notice of and to vote at the Meeting.

The voting process is different depending on whether you are a registered or non-registered shareholder.

Registered shareholders

You are a registered shareholder if your name appears on your share certificate or appears as the registered shareholder in the records of our transfer agent, Computershare Investor Services Inc. (“Computershare”).

Non-registered (beneficial) shareholder

You are a non-registered (beneficial) shareholder if your Shares are not registered in your name, but are instead registered in the name of either:

· an intermediary that you deal with in respect of your Shares, such as, among others, your brokerage firm, bank, trust company, securities dealer or broker, or trustee or administrator of a self-administered RRSP, RRIF, RESP, RDSPs, TFSAs or similar plans (your nominee); or

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· a clearing agency (such as, among others, CDS & Co.) that acts on behalf of your nominee.

Please be sure to follow the appropriate voting procedure set out below.

How to Vote

Registered Shareholders

You can vote by proxy or virtually at the Meeting via live audio teleconference.

Voting by proxy

Voting by proxy is the easiest way to vote because you can appoint any person or company to be your proxyholder to attend the Meeting and vote your Shares according to your instructions. This proxyholder does not need to be a shareholder.

The executive officers of the Company named in the proxy form (the “Ero proxyholders”) can act as your proxyholder and vote your Shares according to your instructions. If you appoint the Ero proxyholders and do not indicate your voting instructions, they will vote your Shares:

· for the re-election of the nominated directors listed in the proxy form and in this Circular;

· for the reappointment of KPMG LLP, Chartered Professional Accountants, of Vancouver, British Columbia (“KPMG”) as the independent auditor of the Company, at a remuneration to be set by the Board; and

· for the authorization and approval of a non-binding advisory “say on pay” resolution accepting the Company’s approach to executive compensation.

This is consistent with the voting recommendations of the Board and management of Ero. If there are other items of business that properly come before the Meeting, or amendments or variations to the items of business set out in the Notice of Meeting, the Ero proxyholders will vote according to management’s recommendations.

You have the right to appoint as proxyholder a person or company other than the Ero proxyholders to attend and act on your behalf at the Meeting. You can do so by inserting the name of the person or company in the blank space provided in the enclosed proxy form or by completing another form of proxy.

By completing and returning the proxy, you are authorizing your proxyholder to vote your Shares or withhold your vote in accordance with your instructions on any ballot that may be called for at the Meeting and if you specify a choice on a matter, your Shares will be voted accordingly. If there are other items of business that property come before the Meeting, or amendments or variations to the items of business, your proxyholder has the discretion to vote your Shares as he or she sees fit.

If you appoint someone other than the Ero proxyholders to be your proxyholder, he or she must attend (virtually) and vote at the Meeting for your vote to be counted.

You can mail your completed proxy form to Computershare, Proxy Dept., 100 University Avenue, 8th Floor, Toronto, Ontario, M5J 2Y1 in the envelope provided for that purpose, or you can vote using the telephone or internet based on instructions provided in the enclosed proxy form.

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To be effective, Computershare must receive your completed proxy form by no later than 4:00 p.m. (Vancouver time) on April 30, 2021. If the Meeting is adjourned or postponed, Computershare must receive your completed proxy form at least 48 hours (excluding Saturdays, Sundays and holidays) before the Meeting is reconvened. The time limit for deposit of proxies may be waived or extended by the Chairman of the Meeting at his discretion, without notice.

Questions? Call Computershare at 1-800-564-6253 (outside North America 514-982-7555).

Voting Virtually at the Meeting via Live Audio Teleconference

If you want to attend the Meeting or appoint a person other than the Ero proxyholder to attend the Meeting on your behalf and vote and be permitted to ask questions during the Meeting, you must pre-register with Chorus Call (our teleconference voting service provider) via the following link no later than 4:00 p.m. (Vancouver time) on April 30, 2021, or in the case of any adjournment or postponement of the Meeting, at least 48 hours (excluding Saturdays, Sundays and holidays) before the Meeting is reconvened:

http://services.choruscall.ca/DiamondPassRegistration/register?confirmationNumber=10013450&linkSecurityString=d220ba70a

After pre-registration has been completed, you will see on screen a unique PIN you or your duly appointed proxyholder, as applicable, have been assigned and dial-in phone numbers you or your duly proxyholder, as applicable, will use to join the Meeting. These details will also be sent to you by email in the form of a calendar invite. If applicable, please forward these details to your duly appointed proxyholder.

It is recommended that you or your duly appointed proxyholder, as applicable, attempt to connect at least ten minutes prior to the scheduled start time of the Meeting. If you or your duly appointed proxyholder, as applicable, have been assigned pre-registration details by Chorus Call, you or your duly appointed proxyholder, as applicable, will be able to vote and ask questions during the Meeting using the assigned teleconference number and PIN.

You or your duly appointed proxyholder, as applicable, will be given the opportunity to ask questions via the conference call in respect of each of the matters to be voted upon as such matters are brought forward to the meeting. Any questions unrelated to a matter at hand will be deferred until the matter is brought forward for approval or until the end of the Meeting, as applicable.

It is important that you or your duly appointed proxyholder, as applicable, are connected to the teleconference at all times during the Meeting in order to vote. It is your responsibility to ensure connectivity for the duration of the Meeting.

Even if you or your duly appointed proxyholder, as applicable, currently plan to participate in the virtual Meeting, Ero strongly encourages you to consider voting by proxy in advance (see “Voting by Proxy” above for directions) so that your vote will be counted if you or your duly appointed proxyholder, as applicable, later decide not to attend the Meeting or if you or your duly appointed proxyholder, as applicable, are unable to access the Meeting for any reason. If you or your duly appointed proxyholder, as applicable, access and vote on any matter at the Meeting during the live teleconference, you will revoke any previously submitted proxy.

For all other shareholders and stakeholders wishing to attend the Meeting by live audio teleconference, but without the ability to vote or ask questions during the Meeting, you are not required to pre-register with Chorus Call. Simply attend as a guest by dialing the following toll free or international toll number approximately five minutes prior to the commencement of the Meeting and ask the operator to join the Annual General Meeting of the Ero Copper Corp. Shareholders:

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Toll-free (Canada/U.S.):            1-800-319-4610
Toll (International):                   +1-604-638-5340

Please note that guests may listen to the Meeting but will not be entitled to vote or ask questions.

Non-Registered (Beneficial) Shareholders

You can also vote by proxy or virtually at the Meeting via live audio teleconference.

Voting by proxy

There are two types of non-registered (beneficial) shareholders:

· a non-objecting beneficial owner (“NOBO”) who does not object to us knowing their identity; and

· an objecting beneficial owner (“OBO”) who does not want us to know their identity.

In accordance with the requirements of National Instrument 54-101 – Communication with Beneficial Owners of Securities of a Reporting Issuer (“NI 54-101”), we have elected to deliver the proxy-related materials, including a voting instruction form (“VIF”) (collectively, the “Meeting Materials”) indirectly through intermediaries for onward distribution to the NOBOs and the OBOs (unless such shareholder has waived the right to receive such materials). We do not intend to pay for the distribution of the Meeting Materials by intermediaries and clearing agencies to OBOs, and OBOs will not receive the materials unless the OBOs’ intermediaries and clearing agencies assume the cost of delivery. Intermediaries often use a service company (such as Broadridge Investor Communication Solutions, Inc.) to deliver the Meeting Materials.

Securities regulatory policies require intermediaries that you deal with in respect of your Shares (such as, among others, your brokerage firm, bank, trust company, securities dealer or broker, or trustee or administrator of a self-administered RRSP, RRIF, RESP, RDSPs, TFSAs or similar plans (your nominee)) to seek voting instructions from non-registered (beneficial) shareholders in advance of shareholder meetings. Generally, non-registered (beneficial) shareholders who have not waived the right to receive the Meeting Materials will be given a VIF which must be completed and signed by the non-registered shareholder in accordance with the directions on the VIF. Each intermediary has its own mailing procedures and provides its own return instructions to clients, which should be carefully followed by non-registered (beneficial) shareholders to ensure that their Shares are voted at the Meeting. Often the form of proxy or VIF supplied to a non-registered (beneficial) shareholder by its intermediary is identical to the form of proxy provided by the Company to registered shareholders. However, its purpose is limited to instructing the registered shareholder (i.e., the intermediary) on how to vote on behalf of the non-registered (beneficial) shareholder.

A non-registered (beneficial) shareholder who receives a VIF or form of proxy cannot use that form to vote Shares directly at the Meeting. The VIF or form of proxy must be returned following the instructions set out on the form well in advance of the Meeting to have the Shares voted at the Meeting on your behalf. The purpose of these procedures is to permit non-registered shareholders to direct the voting of the Shares they beneficially own. Accordingly, each non-registered (beneficial) shareholder should carefully review the VIF or form of proxy and voting procedures that your intermediary has furnished with this Circular, and provide instructions as to the voting of your Shares to the appropriate persons, in accordance with those voting procedures.

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Voting Virtually at the Meeting via Live Audio Teleconference

If you want to attend the Meeting or appoint a person other than the Ero proxyholder to attend the Meeting on your behalf and vote and be permitted to ask questions during the Meeting, you must take the following steps:

1. Submit your Instrument of Proxy or VIF: Follow the instructions provided on the VIF and/or by your intermediary to appoint such proxyholder and submit the VIF. You cannot use a VIF to vote and be permitted to ask questions during the Meeting.

2. Submit your Legal Proxy: You must request a legal proxy form from your intermediary, granting you or your proxyholder, as the case may be, the right to attend the Meeting and vote and be permitted to ask questions during the Meeting, and return the legal proxy to Computershare by email at uslegalproxy@computershare.com by no later than 4:00 p.m. (Vancouver time) on April 30, 2021, or in the case of any adjournment or postponement of the Meeting, at least 48 hours (excluding Saturdays, Sundays and holidays) before the Meeting is reconvened.

3. Pre-Register your Proxyholder with Chorus Call (our teleconference voting service provider): Duly appointed proxyholders must pre-register with Chorus Call via the following link no later than 4:00 p.m. (Vancouver time) on April 30, 2021, or in the case of any adjournment or postponement of the Meeting, at least 48 hours (excluding Saturdays, Sundays and holidays) before the Meeting is reconvened:

http://services.choruscall.ca/DiamondPassRegistration/register?confirmationNumber=10013450&linkSecurityString=d220ba70a

After pre-registration has been completed, the duly appointed proxyholder will see on screen a unique PIN they have been assigned and dial-in phone numbers they will use to join the Meeting. These details will also be sent to the duly appointed proxyholder by email in the form of a calendar invite.

Failure to pre-register the proxyholder with Chorus Call will result in the proxyholder not receiving a PIN to participate in the Meeting and only being able to attend as a guest. Guests will be able to listen to the Meeting but will not be able to vote or ask questions during the Meeting via live audio teleconference.

It is recommended that the proxyholder attempt to connect at least ten minutes prior to the scheduled start time of the Meeting. If the proxyholder has been assigned pre-registration details by Chorus Call, he or she will be able to vote and ask questions during the Meeting using the assigned teleconference number and PIN.

You or your duly appointed proxyholder, as applicable, will be given the opportunity to ask questions via the conference call in respect of each of the matters to be voted upon as such matters are brought forward to the meeting. Any questions unrelated to a matter at hand will be deferred until the matter is brought forward for approval or until the end of the Meeting, as applicable.

It is important that the proxyholder is connected to the teleconference at all times during the Meeting in order to vote. It is the proxyholder’s responsibility to ensure connectivity for the duration of the Meeting.

9

Even if you or your duly appointed proxyholder, as applicable, currently plan to participate in the virtual Meeting, Ero strongly encourages you to consider voting by proxy in advance (see “Voting by Proxy” above for directions) so that your vote will be counted if you or your proxyholder, as applicable, later decide not to attend the Meeting or if you or your proxyholder, as applicable, are unable to access the Meeting for any reason. If the duly appointed proxyholder accesses and votes on any matter at the Meeting during the live teleconference, they will revoke any previously submitted proxy.

Attending the Virtual Meeting as a Guest

For all other shareholders and stakeholders, including non-registered (beneficial) shareholders who have not duly appointed themselves or a third party as proxyholder, wishing to attend the Meeting by live audio teleconference, but without the ability to vote or ask questions during the Meeting, you are not required to pre-register with Chorus Call. Simply attend as a guest by dialing the following toll free or international toll number approximately five minutes prior to the commencement of the Meeting and ask the operator to join the Annual General Meeting of the Ero Copper Corp. Shareholders:

Toll-free (Canada/U.S.):            1-800-319-4610
Toll (International):                   +1-604-638-5340

Please note that guests may listen to the Meeting but will not be entitled to vote or ask questions.

Changing your Vote

Registered Shareholders

You can revoke your proxy by sending a new completed proxy form with a later date, or a written notice signed by you or by your personal representative, if he or she has your written authorization. If you represent a registered shareholder that is a corporation, your written notice must have the seal of the corporation, if applicable, and must be executed by an officer or an attorney who has their written authorization. The written authorization must accompany the revocation notice. The new completed proxy form or written revocation notice must be received at our head office at Suite 1050, 625 Howe Street, Vancouver, British Columbia, V6C 2T6 at any time up to and including the last business day before the day of the Meeting, or in the case of any adjournment or postponement of the Meeting, the last business day before the Meeting is reconvened, or with the Chairman of the Meeting on the day of, and prior to the start of, the Meeting, subject to compliance with all restrictions and limitations imposed pursuant to any applicable laws, regulations and policies relating to, or in connection with, COVID-19. You can also revoke your proxy in any other manner permitted by law.

Non-Registered (Beneficial) Shareholders

Follow the instructions provided on the VIF and or/ by your intermediary to revoke your proxy.

10

Shareholder Questions

Shareholders who have technical questions or need assistance should contact:

Deepk Hundal, Vice President, General Counsel and Corporate Secretary of the Company	Mail: 625 Howe Street, Suite 1050, Vancouver BC, V6C 2T6 Phone: (604) 449-9236 Email: info@erocopper.com
Computershare, (the Company’s transfer agent)	Mail: 100 University Avenue, 8th Floor, Toronto, ON M5J 2Y1 Phone: 1-800-564-6253 (toll-free in Canada and the United States) or 514-982-7555 (from outside Canada and the United States) Fax: 1-888-453 0330 (toll-free in Canada and the United States) or 514-982 7635 (from outside Canada and the United States) E-mail: Service@Computershare.com
Chorus Call (teleconference voting service provider)	Phone: 1-855-658-2584. Please ask for G. Van Dusen. If not available, please leave your name and phone number for a call back. Email: canada@choruscall.com Attention: G. Van Dusen

Votes Necessary to Pass Resolutions

A simple majority of affirmative votes cast at the Meeting is required to pass each of the resolutions described in this Circular. If there are more nominees for election as directors or appointment of the Company’s auditor than there are vacancies to fill, the nominees receiving the greatest number of votes will be elected or appointed, as the case may be, until all such vacancies have been filled. If the number of nominees for election or appointment is equal to the number of vacancies to be filled, all such nominees will be declared elected or appointed by acclamation.

Interest Of Certain Persons in Matters to be Acted Upon

Other than as disclosed elsewhere in this Circular, none of the directors or executive officers of the Company, no proposed nominee for election as a director of the Company, none of the persons who have been directors or executive officers of the Company since the commencement of the Company's most recently completed financial year and no associate or affiliate of any of the foregoing persons has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon at the Meeting other than the election of directors.

Particulars of Matters to be Acted Upon

We will cover the following items of business at the Meeting:

1. Financial Statements

The audited consolidated financial statements and management’s discussion and analysis (“MD&A”) of the Company for the financial year ended December 31, 2020 are available on our website at www.erocopper.com or under our profile on SEDAR at www.sedar.com.

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The audited consolidated financial statements of the Company for financial year ended December 31, 2020, and the auditor’s report thereon, will be placed before the shareholders at the Meeting. No shareholder vote is required for this item.

2. Election of Directors

The Board currently consists of the following nine directors, being Christopher Noel Dunn (Executive Chairman), David Strang (Chief Executive Officer (“CEO”)), Lyle Braaten, Steven Busby, Dr. Sally Eyre, Robert Getz, Chantal Gosselin, John Wright and Matthew Wubs. Each director will be standing for re-election at the Meeting.

Majority Voting Policy

The Company has adopted a majority voting policy (the “Majority Voting Policy”). See “Corporate Governance Practices – The Board – Majority Voting Policy” below.

Nominees for Election as Directors

Each current director’s term of office shall expire immediately prior to the Meeting. Persons named below will be presented for re-election at the Meeting as management’s nominees
(the “Nominees”):

· Christopher Noel Dunn;

· David Strang;

· Lyle Braaten;

· Steven Busby;

· Dr. Sally Eyre;

· Robert Getz;

· Chantal Gosselin;

· John Wright; and

· Matthew Wubs.

In the absence of instructions to the contrary, the person(s) designated by management of the Company in the enclosed form of proxy intend to vote FOR the re-election of the Nominees.

We do not contemplate that any of the Nominees will be unable to serve as a director. If that should occur for any reason prior to the Meeting, it is intended that discretionary authority shall be exercised by the persons named in the accompanying proxy to vote for the election of any other person or persons, unless you specify that your Shares are to be withheld from voting on the election of directors.

Each director elected at the Meeting will hold office until the next annual meeting of shareholders or until their successor is elected or appointed, unless their office is earlier vacated in accordance with the Articles of the Company or with the provision of the Business Corporation Act (British Columbia).

Set out below is the name of each Nominee, their province or state and country of residence, their current position(s) and office(s) held with the Company, their principal occupation(s) during the preceding five years, the date they became a director of the Company, and the number of Shares they beneficially own, or control or direct, directly or indirectly, as at the date of this Circular.

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Christopher Noel Dunn, Executive Chairman
	Age: 61 Massachusetts, USA Director since May 16, 2016 / Non-Independent	Areas of Expertise · Finance / Accounting · Treasury / Derivatives · Capital Markets · Risk Management · Governance · Regulatory · Human Resources and Compensation · International Business
Messrs. Dunn and Strang formed Ero in May 2016. Mr. Dunn has served as the Executive Chairman and as a director of the Company since May 16, 2016. Mr. Dunn has over 25 years’ experience in the investment banking industry, primarily with Goldman Sachs managing a capital underwriting business in London. In later years he worked with Bear Stearns and JP Morgan as a leader of their respective investment banking practices in mining and metals.  Mr. Dunn is a former director of Pan American Silver Corp. and Pretivm Resources Inc.  Prior to forming Ero Resource Partners LLC in February 2014 with Mr. Strang, he was a Managing Director of Liberty Mining & Metals LLC, a subsidiary of Liberty Mutual Investments from 2011 to 2013. Mr. Dunn holds a Master of Arts degree from the University of Edinburgh and a Master of Science degree from the University of Durham.
Share Ownership as at March 16, 2021		Voting Results
Shares Target Requirement(2) Meets Requirement	2,627,281(1) US$1,650,000 Yes	2020	For:         99.22%	Withheld:        0.78%
		2019	For:         98.80%	Withheld:        1.20%
		2018	For:         98.78%	Withheld:        1.22%
Committee Membership		Other Directorships with Reporting Issuers
None		None

Notes:

⁽¹⁾ Mr. Dunn also holds 1,000,000 Share purchase warrants (“Founder Warrants”), 525,185 stock options (“Options”) to purchase Shares issued pursuant to the stock option plan of the Company (the “Stock Option Plan”) and 118,404 performance share units (“PSUs”) issued pursuant to the share unit plan of the Company (the “Share Unit Plan”), entitling him to acquire in the aggregate an additional 1,643,589 Shares, assuming that 100% of the PSUs vest. The PSUs will vest three years from the date of grant and the actual number of PSUs that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain performance conditions, as more particularly described below under “Compensation Committee Decisions Relating to 2020 Compensation – Options and Share Based Awards”.

⁽²⁾ Pursuant to the Share Ownership Policy adopted by the Board, Mr. Dunn, as the Executive Chairman of the Company, is required to beneficially own, control or direct, directly or indirectly, at least three times his annual base salary of US$550,000 in Shares and/or restricted share units (“RSUs”) issued pursuant to the Share Unit Plan, within five years of his appointment. Please see “Share Ownership Policy” below for further details.

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David Strang, Chief Executive Officer
	Age: 52 British Columbia, Canada Director since May 16, 2016 / Non-Independent	Areas of Expertise · Mining Operations · Exploration / Geology · Capital Markets · Finance · Risk Management · Governance · Regulatory · Environment, Safety and Sustainability · International Business
Messrs. Strang and Dunn formed Ero in May 2016. Mr. Strang has served as the Chief Executive Officer and as a director of the Company since May 16, 2016. Mr. Strang also served as the President of the Company from May 16, 2016 until January 4, 2020. Mr. Strang served as a director, President and Chief Executive Officer of Lumina Copper Corp. from August 2008 until its sale to First Quantum Minerals Limited in August 2014.  He then formed Ero Resource Partners LLC in February 2014 with Mr. Dunn. Mr. Strang also served as a director, President and Chief Executive Officer of Lumina Royalty Corp. (sold to Franco Nevada Corporation in 2011), Global Copper Corp. (sold to Teck Resources in 2008), and Lumina Resources Corp. (sold to Western Copper Corp. in 2006).  Prior to this, Mr. Strang served as President of Regalito Copper Corp. (sold to Pan Pacific in 2006), and Vice President, Corporate Development of Northern Peru Copper Corp. (sold to China Minmetals and Jiangxi Copper in 2008) and (the original) Lumina Copper Corp. Mr. Strang has over 25 years of corporate finance experience, particularly in the areas of corporate and asset valuation, and has over 12 years of experience as an officer and director. Mr. Strang holds a Bachelor of Science degree in Applied Earth Sciences from Stanford University.
Share Ownership as at March 16, 2021		Voting Results
Shares Target Requirement(2) Meets Requirement	5,846,936(1) US$1,650,000 Yes	2020	For:       100.00%	Withheld:              Nil
		2019	For:       100.00%	Withheld:              Nil
		2018	For:       100.00%	Withheld:              Nil
Committee Membership		Other Directorships with Reporting Issuers
None		None

Notes:

⁽¹⁾ Mr. Strang also holds 525,185 Options and 118,404 PSUs, entitling him to acquire in the aggregate an additional 643,589 Shares, assuming that 100% of the PSUs vest. The PSUs will vest three years from the date of grant and the actual number of PSUs that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain performance conditions, as more particularly described below under “Compensation Committee Decisions Relating to 2020 Compensation – Options and Share Based Awards”.

⁽²⁾ Pursuant to the Share Ownership Policy adopted by the Board, Mr. Strang, as the Chief Executive Officer of the Company, is required to beneficially own, control or direct, directly or indirectly, at least three times his annual base salary of US$550,000 in Shares and/or RSUs, within five years of his appointment. Please see “Share Ownership Policy” below for further details.

14

Lyle Braaten
	Age: 57 British Columbia, Canada Director since July 27, 2016 / Independent			Areas of Expertise · Legal · Finance / Accounting · Capital Markets · Risk Management · Governance · Regulatory · International Business
Mr. Braaten is the President and Chief Executive Officer of Miedzi Copper Corp. (since 2012), a private Canadian corporation involved in mineral exploration in Poland.  Mr. Braaten is currently Vice President, Legal Counsel and a director of Lumina Gold Corp. (since June 2014) and Vice President, Legal Counsel and a director of Luminex Resources Corp. (since August 2018). Mr. Braaten joined the Lumina Group in 2008 and assisted in the creation of Magma Energy Corp., a renewable energy company focused on international geothermal energy development. In 2011, Magma and Plutonic Power merged to create Alterra Power Corp. In 2018, Alterra was acquired by Innergex Renewable Energy for $1.1 billion.  Mr. Braaten is a former director of Anfield Gold Corp and Lumina Royalty Corp. Mr. Braaten received a law degree from the University of British Columbia in 1989 and a Bachelor of Science from the University of Calgary in 1986. Mr. Braaten is a member of the Law Societies of British Columbia and the Yukon.
Share Ownership as at March 16, 2021				Voting Results
Shares DSUs(2) Target Requirement(3) Meets Requirement	316,666(1) 8,059 US$210,000 Yes			2020	For:         96.29%	Withheld:          3.71%
				2019	For:         75.97%	Withheld:        24.03%
				2018	For:         96.75%	Withheld:          3.25%
Committee Membership		Attendance		Other Directorships with Reporting Issuers
Nominating and Corporate Governance Committee (Chair) Audit Committee		4 of 4 4 of 4	100% 100%	Lumina Gold Corp. Luminex Resources Corp.

Notes:

⁽¹⁾ Mr. Braaten also holds 64,809 Options, entitling him to acquire an additional 64,809 Shares.

⁽²⁾ Pursuant to the terms of the Company’s Deferred Share Unit Plan (the “DSU Plan”), Deferred Share Units (“DSUs”) may only be settled in cash. Please see “Director Compensation - Deferred Share Unit Plan” below for further details.

⁽³⁾ Pursuant to the Share Ownership Policy adopted by the Board, Mr. Braaten, as an independent director of the Company, is required to beneficially own, control or direct, directly or indirectly, at least three times his annual director retainer of US$70,000 in Shares, RSUs and/or DSUs within five year of his appointment. Please see “Director Compensation - Share Ownership Policy” below for further details.

15

Steven Busby
	Age: 61 British Columbia, Canada Director since July 27, 2016 / Independent			Areas of Expertise · Mining Operations / Metallurgy · Risk Management · Environment, Safety and Sustainability · Governance · International Business
Mr. Busby is the Chief Operating Officer of Pan American Silver Corp. (since 2008) with over 31 years of experience in the mining industry where he has participated in successful mine development, construction and operations in both North and South America, Africa and Asia.  As Chief Operating Officer, he is responsible for Pan American’s operations, projects, safety, and corporate social responsibility within a large multi mine organization. Mr. Busby has previously held positions in a privately-owned consulting firm, Coeur d’Alene Mines Corp., Amax Gold Inc., Meridian/FMC Gold Company, and Nerco Minerals Company. Mr. Busby is a former director of Anfield Gold Corp. Mr. Busby holds a Bachelor of Science degree in Mineral Processing Engineering and is a member of the Montana Tech Metallurgical Engineering Department Advisory Board.
Share Ownership as at March 16, 2021				Voting Results
Shares DSUs(2) Target Requirement(3) Meets Requirement	366,666(1) 14,820 US$210,000 Yes			2020	For:     99.35%	Withheld:    0.65%
				2019	For:     80.96%	Withheld:  19.04%
				2018	For:     99.75%	Withheld:    0.25%
Committee Membership		Attendance		Other Directorships with Reporting Issuers
Environmental, Health, Safety and Sustainability Committee (Chair) Nominating and Corporate Governance Committee		5 of 5 4 of 4	100% 100%	None

Notes:

⁽¹⁾ Mr. Busby also holds 66,666 Founder Warrants and 64,809 Options, entitling him to acquire in the aggregate an additional 131,475 Shares.

⁽²⁾ Pursuant to the terms of the DSU Plan, DSUs may only be settled in cash. Please see “Director Compensation - Deferred Share Unit Plan” below for further details.

⁽³⁾ Pursuant to the Share Ownership Policy adopted by the Board, Mr. Busby, as an independent director of the Company, is required to beneficially own, control or direct, directly or indirectly, at least three times his annual director retainer of US$70,000 in Shares, RSUs and/or DSUs within five year of his appointment. Please see “Director Compensation - Share Ownership Policy” below for further details.

16

Dr. Sally Eyre
	Age: 49 British Columbia, Canada Director since August 12, 2019 / Independent				Areas of Expertise · Mining Operations / Geology · Finance / Accounting · Capital Markets · Risk Management · Human Resources and Compensation · Governance · International Business
Dr. Eyre is a mining finance professional with extensive experience in global resource capital markets and mining operations. Dr. Eyre holds three non-executive directorships: Adventus Mining Corporation, Centamin plc. and Equinox Gold Corp. From August 2011 to January 2014, she served as President and Chief Executive Officer of Copper North Mining and, prior thereto, served as Senior Vice President, Operations at Endeavour Mining, responsible for a portfolio of resource exploration, development and production projects throughout West Africa. Dr. Eyre served as President and Chief Executive Officer of Etruscan Resources Inc. (now Endeavour Mining Corp.), a gold company with producing assets in West Africa.  She served as Director of Business Development for Endeavour Financial Ltd. and has held executive positions with a number of Canadian resource companies. Dr. Eyre holds a Ph.D. in Economic Geology from the Royal School of Mines, Imperial College, London and is a member of the Society of Economic Geologists (SEG), a member of the Institute of Corporate Directors and a former Director of the SEG Canada Foundation.
Share Ownership as at March 16, 2021					Voting Results
Shares DSUs(2) Target Requirement(3) Meets Requirement		Nil(1) 11,017 US$210,000 Yes			2020	For:          99.21%	Withheld:          0.79%
					2019	N/A	N/A
					2018	N/A	N/A
Committee Membership			Attendance		Other Directorships with Reporting Issuers
Compensation Committee Nominating and Corporate Governance Committee			6 of 6 4 of 4	100% 100%	Adventus Mining Corporation Centamin plc Equinox Gold Corp.

Notes:

⁽¹⁾ Dr. Eyre also holds 29,809 Options, entitling her to acquire an additional 29,809 Shares.

⁽²⁾ Pursuant to the terms of the DSU Plan, DSUs may only be settled in cash. Please see “Director Compensation - Deferred Share Unit Plan” below for further details.

⁽³⁾ Pursuant to the Share Ownership Policy adopted by the Board, Dr. Eyre, as an independent director of the Company, is required to beneficially own, control or direct, directly or indirectly, at least three times her annual director retainer of US$70,000 in Shares, RSUs and/or DSUs within five year of her appointment. Please see “Director Compensation - Share Ownership Policy” below for further details.

17

Robert Getz
	Age: 58 Connecticut, USA Director since June 14, 2018 / Independent			Areas of Expertise · Finance/Accounting · Capital Markets · Risk Management · Governance · Human Resources and Compensation · International Business
Mr. Getz brings over 35 years of experience in public and private investments and international mergers and acquisitions. Mr. Getz currently serves as Managing Partner of Pecksland Capital Partners (since December 2015), a private investment and advisory firm. Mr. Getz previously served as a Founder and Managing Director of Cornerstone Equity Investors (from September 1996 until December 2016), a private equity investment company. Mr. Getz has served as a director of numerous public and private companies, including many metals and mining companies. He currently serves as the Chairman of the board of directors of Haynes International, Inc., a developer and producer of specialty nickel alloys, and as a director of Techtronic Industries Company Limited. Mr. Getz previously served as Chairman of the board of directors of Crocodile Gold Corp., a gold mining company with operations in Australia, prior to the company’s merger with Newmarket Gold in July 2015. Mr. Getz subsequently served as a director of Newmarket Gold Inc. until May 2016. Newmarket Gold Inc. was subsequently acquired by Kirkland Lake Gold Ltd. in December 2016. Mr. Getz holds a Bachelor of Arts, cum laude, from Boston University, and a Master of Business Administration in Finance from the Stern School at New York University.
Share Ownership as at March 16, 2021				Voting Results
Shares DSUs(2) Target Requirement(3) Meets Requirement	172,666(1) 8,059 US$210,000 Yes			2020	For:     98.26%	Withheld:      1.74%
				2019	For:     99.88%	Withheld:      0.12%
				2018	For:   100.00%	Withheld:  100.00%
Committee Membership		Attendance		Other Directorships with Reporting Issuers
Compensation Committee (Chair) Nominating and Corporate Governance Committee		6 of 6 4 of 4	100% 100%	Haynes International, Inc. Techtronic Industries Company Limited

Notes:

⁽¹⁾ Mr. Getz also holds 58,809 Options, entitling him to acquire an additional 58,809 Shares.

⁽²⁾ Pursuant to the terms of the DSU Plan, DSUs may only be settled in cash. Please see “Director Compensation - Deferred Share Unit Plan” below for further details.

⁽³⁾ Pursuant to the Share Ownership Policy adopted by the Board, Mr. Getz, as an independent director of the Company, is required to beneficially own, control or direct, directly or indirectly, at least three times his annual director retainer of US$70,000 in Shares, RSUs and/or DSUs within five year of his appointment. Please see “Director Compensation - Share Ownership Policy” below for further details.

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Chantal Gosselin
	Age: 51 British Columbia, Canada Director since August 12, 2019 / Independent				Areas of Expertise · Mining Operations · Finance / Accounting · Capital Markets · Risk Management · Environment, Safety and Sustainability · Governance · International Business
Ms. Gosselin is an experienced corporate board member with 30 years of combined experience in mining operations and capital markets. Her involvement in the financial markets range from asset management to sell side analyst. She recently held positions as Vice President and Portfolio Manager at Goodman Investment Counsel and Senior Mining Analyst at Sun Valley Gold LLP, along with various analyst positions earlier in her career. Ms. Gosselin has also held various mine-site management positions in Canada, Peru and Nicaragua, giving her firsthand experience in underground and open pit mine development and production in diverse cultural and social environments. She currently serves on the board of two TSX-listed companies in the natural resource sector. Ms. Gosselin has a Masters of Business Administration from Concordia University and a Bachelor of Science (Mining Engineering) from Laval University and has completed the Institute of Corporate Director program.
Share Ownership as at March 16, 2021					Voting Results
Shares DSUs(2) Target Requirement(3) Meets Requirement		625(1) 13,974 US$210,000 Yes			2020	For:          99.97%	Withheld:          0.03%
					2019	N/A	N/A
					2018	N/A	N/A
Committee Membership			Attendance		Other Directorships with Reporting Issuers
Audit Committee Environmental, Health, Safety and Sustainability Committee			4 of 4 5 of 5	100% 100%	Lundin Gold Inc. Wheaton Precious Metals Corp.

Notes:

⁽¹⁾ Ms. Gosselin also holds 29,809 Options, entitling her to acquire an additional 29,809 Shares.

⁽²⁾ Pursuant to the terms of the DSU Plan, DSUs may only be settled in cash. Please see “Director Compensation - Deferred Share Unit Plan” below for further details.

⁽³⁾ Pursuant to the Share Ownership Policy adopted by the Board, Ms. Gosselin, as an independent director of the Company, is required to beneficially own, control or direct, directly or indirectly, at least three times her annual director retainer of US$70,000 in Shares, RSUs and/or DSUs within five year of her appointment. Please see “Director Compensation - Share Ownership Policy” below for further details.

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John Wright
	Age: 68 British Columbia, Canada Director since July 27, 2016 / Independent			Areas of Expertise · Mining Operations / Metallurgy · Exploration / Geology · Capital Markets · Risk Management · Governance · Environment, Safety and Sustainability · International Business
Mr. Wright is a Metallurgical Engineer and Honours graduate of Queen’s University in Ontario. He has been providing business development services to Capstone Mining Corp. since December 2006. He has over 36 years’ experience in many facets of the exploration and mining industry. Mr. Wright was a co-founder, and former director, President and Chief Operating Officer of Pan American Silver Corp.  Mr. Wright was also the co-founder of Equinox Resources. Previously, he spent 10 years with Teck Cominco where he worked at the Trail Smelter operations and later participated in the management of the feasibility studies, marketing and mine construction at the Afton, Highmont, Bull Moose and David Bell Mines. Mr. Wright currently serves as a director of Luminex Resources Corp. and SilverCrest Metals Inc. and is a former director of Lumina Copper Corp., Northern Peru Copper, Global Copper Corp. and Bitterroot Resources Ltd. He is a Member of the Canadian Institute of Mining and Metallurgy and has a P.Eng. designation from the Association of Professional Engineers and Geoscientists of British Columbia.
Share Ownership as at March 16, 2021				Voting Results
Shares DSUs(2) Target Requirement(3) Meets Requirement	820,332(1) 8,059 US$210,000 Yes			2020	For:   99.52%	Withheld:    0.48%
				2019	For:   99.97%	Withheld:    0.03%
				2018	For:   99.80%	Withheld:    0.20%
Committee Membership		Attendance		Other Directorships with Reporting Issuers
Audit Committee Environmental, Health, Safety and Sustainability Committee		4 of 4 5 of 5	100% 100%	Luminex Resources Corp. SilverCrest Metals Inc.

Notes:

⁽¹⁾ Mr. Wright also holds 64,809 Options, entitling him to acquire an additional 64,809 Shares.

⁽²⁾ Pursuant to the terms of the DSU Plan, DSUs may only be settled in cash. Please see “Director Compensation - Deferred Share Unit Plan” below for further details.

⁽³⁾ Pursuant to the Share Ownership Policy adopted by the Board, Mr. Wright, as an independent director of the Company, is required to beneficially own, control or direct, directly or indirectly, at least three times his annual director retainer of US$70,000 in Shares, RSUs and/or DSUs within five year of his appointment. Please see “Director Compensation - Share Ownership Policy” below for further details.

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Matthew Wubs
	Age: 50 British Columbia, Canada Director since July 27, 2016 / Independent			Areas of Expertise · Finance/Accounting · Insurance · Risk Management · Governance · Human Resources and Compensation
Mr. Wubs is a director of Westland Insurance Group Ltd. (since January 2020), one of the largest private insurance brokerage operations in Canada. Westland directly manages approximately $1.4 billion in premium volume through its brokerage, insurance company and wholesale operations. Prior to joining Westland’s board, Mr. Wubs was the Co-Chief Executive Officer of Westland from January 2016 to December 2019 and was responsible for oversight of insurance, reinsurance, risk management, finance and mergers and acquisitions. He joined Westland in the role of Controller in 1997 and thereafter held the position of Chief Financial Officer from January 2002 until December 2015. Previous to Westland, he held a consulting role in Management Information Systems at International Forest Products Ltd. and also obtained his Chartered Professional Accountant designation while working at Deloitte LLP.
Share Ownership as at March 16, 2021				Voting Results
Shares DSUs(2) Target Requirement(3) Meets Requirement	1,867,735(1) 15,242 US$210,000 Yes			2020	For:       98.93%	Withheld:       1.07%
				2019	For:       99.94%	Withheld:       0.06%
				2018	For:       99.79%	Withheld:       0.21%
Committee Membership		Attendance		Other Directorships with Reporting Issuers
Audit Committee (Chair) Compensation Committee		4 of 4 6 of 6	100% 100%	Westland Insurance Group Ltd. (private)

Notes:

⁽¹⁾ Mr. Wubs also holds 66,666 Founder Warrants and 64,809 Options, entitling him to acquire in the aggregate an additional 131,475 Shares.

⁽²⁾ Pursuant to the terms of the DSU Plan, DSUs may only be settled in cash. Please see “Director Compensation - Deferred Share Unit Plan” below for further details.

⁽³⁾ Pursuant to the Share Ownership Policy adopted by the Board, Mr. Wubs, as an independent director of the Company, is required to beneficially own, control or direct, directly or indirectly, at least three times his annual director retainer of US$70,000 in Shares, RSUs and/or DSUs within five year of his appointment. Please see “Director Compensation - Share Ownership Policy” below for further details.

The Nominees, as a group, beneficially owned, or controlled or directed, directly or indirectly, 12,018,907 Shares, representing approximately 13.64% of the total number of Shares outstanding before giving effect to the exercise of any Founder Warrants, Options and PSUs held by such Nominees.

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

No Nominee is, as at the date of this Circular, or was within 10 years before the date of this Circular, a director, CEO or Chief Financial Officer (“CFO”) of any company (including Ero), that: (i) was subject to a cease trade order (including a management cease trade order), an order similar to a cease trade order, or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days (an “Order”) and that was issued while the Nominee was acting in the capacity as director, CEO or CFO; or (ii) was subject to an Order that was issued after the Nominee ceased to be a director, CEO or CFO and which resulted from an event that occurred while that person was acting in the capacity as director, CEO or CFO.

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No Nominee (i) is, as at the date of this Circular, or was within the 10 years before the date of this Circular, a director or executive officer of any company (including Ero) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or (ii) has, within the 10 years before the date of this Circular, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the Nominee.

No Nominee has been subject to: (i) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or (ii) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for a Nominee.

3. Appointment of Auditor

KPMG has been the independent auditor of the Company since May 15, 2017.

At the Meeting, we will ask shareholders to reappoint KPMG as auditor of the Company until the close of the next annual meeting of the shareholders and authorize the Board to fix the remuneration to be paid to the auditor. The following table discloses the aggregate fees billed to the Company and its subsidiaries by KPMG in the financial years ended December 31, 2020 and 2019:

Financial Year End	Audit Fees(1)	Audit Related Fees(2)	Tax Fees	All Other Fees
December 31, 2020	US$351,361	US$3,877	Nil	Nil
December 31, 2019	US$363,403	US$2,562	US$5,049(3)	Nil

Note:

⁽¹⁾ The aggregate fees billed for the audit of the annual consolidated financial statements of the Company, quarterly interim review of the Company and of its Brazilian subsidiaries and statutory audits of the Company’s Brazilian subsidiaries.

⁽²⁾ The aggregate fees billed for professional services rendered by the external auditors in connection with general training provided with respect to new International Financial Reporting Standards for the Company’s subsidiaries in Brazil.

⁽³⁾ The aggregate fees billed for professional services rendered by the external auditors in connection with the review of IRPJ (income tax for legal entity) / CSLL (social contribution on net profit) deferred tax calculations of the Company’s subsidiaries in Brazil.

In the absence of instructions to the contrary, the person(s) designated by management of the Company in the enclosed form of proxy intend to vote FOR the reappointment of KPMG as auditor of the Company until the close of the next annual meeting of the shareholders, at a remuneration to be fixed by the Board.

4. Advisory Vote on Executive Compensation

The Board and the Compensation Committee believe that the Company’s compensation program must be competitive to attract and retain top quality directors and officers, provide a strong incentive to its management to achieve the Company’s goals and align the interests of management with the interests of the Company’s shareholders.

A detailed discussion of the Company’s compensation philosophy and executive compensation program can be found in the “Compensation Discussion and Analysis” section of this Circular. Shareholders are asked to consider such disclosure as they have a formal opportunity at the Meeting to provide their views on the Company’s approach to executive compensation through the following “Say on Pay” advisory vote:

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RESOLVED THAT, on an advisory basis and not to diminish the role and responsibilities of the Board and the Compensation Committee, the shareholders of the Company accept the approach to executive compensation disclosed in the Circular with respect to the Meeting.

As this is an advisory vote, it is not binding on the Board or the Compensation Committee. The Board and the Compensation Committee remain fully responsible for their compensation decisions and are not relieved of this responsibility. The Board and the Compensation Committee will consider the outcome of the vote, as appropriate, when considering future compensation policies, procedures and decisions, all of which are to be consistent with our pay for performance compensation model.

The Board views the inclusion of an advisory vote on executive compensation as the opening of an additional channel of communication between the Board and the shareholders.

We recommend a vote “FOR” the approval of the non-binding resolution on executive compensation.

In the absence of instructions to the contrary, the person(s) designated by management of the Company in the enclosed form of proxy intend to vote FOR the approval of the non-binding resolution on executive compensation.

The complete voting results will be filed under the Company’s profile on SEDAR (www.sedar.com).

We are not aware of any other matter to come before the Meeting other than as set forth in the Notice of Meeting. If any other matter properly comes before the Meeting, it is the intention of the persons named in the enclosed proxy to vote the Shares represented thereby in accordance with their best judgment on such matter.

Statement of Executive and Director Compensation

The following section describes the significant elements of the Company’s executive and director compensation programs, with particular emphasis on the compensation payable to the Executive Chairman, the CEO, the CFO and other officers that were determined to be “Named Executive Officers” or “NEOs” within the meaning of National Instrument 51-102 – Continuous Disclosure Obligations (“NI 51-102”). During the financial year ended December 31, 2020, the Company had the following six NEOs:

· Christopher Noel Dunn, Executive Chairman and a director of the Company;

· David Strang, CEO and a director of the Company (also served as President until January 4, 2021);

· Wayne Drier, CFO;

· Michel (Mike) Richard, Chief Geological Officer (“CGO”);

· Makko DeFilippo, President (formerly served as Vice President, Corporate Development until January 4, 2021); and

· Anthea Bath, Chief Operating Officer (“COO”) (formerly served as Vice President, Technical Services until January 4, 2021).

In some instances, the compensation programs and certain other matters outlined herein also apply to other members of senior management, however, the programs are discussed as they relate specifically to our NEOs.

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Compensation Discussion and Analysis

Compensation Governance

Responsibilities of the Compensation Committee

The Board has established the Compensation Committee and adopted a Compensation Committee mandate. The role of the Compensation Committee is to assist the Board in fulfilling its oversight responsibilities pertaining to compensation matters, including the Company’s compensation policies and practices. Among other things, the Compensation Committee is responsible for:

· reviewing and approving corporate goals and objectives relevant to the compensation of the Executive Chairman and the CEO;

· periodically reviewing the terms of the Company’s executive compensation programs to determine if they are properly coordinated and achieving their desired purpose;

· reviewing and approving corporate goals and objectives relevant to the compensation of the Executive Chairman and the CEO, evaluating their performance in light of such corporate goals and objectives, and making recommendations to the Board with respect to their compensation levels based on such evaluation;

· reviewing recommendations from the Executive Chairman and the CEO regarding the appointment, compensation and other terms of employment of the President, CFO, CGO, COO and other officers, and making recommendations to the Board regarding the same;

· administering and interpreting the Company’s equity-based compensation arrangements and its policies respecting the grant of Options issued pursuant to the Stock Option Plan and share units (the “Share Units”) issued pursuant to the Share Unit Plan or sale of Shares thereunder, the grant of DSUs issued pursuant to the DSU Plan, and reviewing and approving grants of Options, Share Units and DSUs and terms thereof;

· periodically retaining the services of a compensation consultant to facilitate the Compensation Committee’s performance of its mandate; and

· reviewing and assessing the adequacy of its mandate at least annually to ensure compliance with any rules or regulations promulgated by any regulatory body and recommending to the Board for its approval any modifications to its mandate as considered.

As of August 12, 2019, the Compensation Committee has been comprised of Robert Getz (Chairman), Dr. Sally Eyre and Matthew Wubs, all of whom are independent directors within the meaning of National Instrument 52-110, Audit Committee (“NI 52-110”). Each of the members of the Compensation Committee has business and other experience which is relevant to their work on the Compensation Committee. By virtue of their differing professional backgrounds, business experience, knowledge of the Company’s industry, knowledge of corporate governance practices and experience interacting with external consultants and advisors, the members of the Compensation Committee are able to make decisions on the suitability of the Company’s compensation policies and practices.

Compensation Consultant

Pursuant to its mandate, the Compensation Committee has the authority to retain external legal counsel, consultants or other advisors to assist it in fulfilling its responsibilities, including a compensation consultant, at the expense of the Company.

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The Compensation Committee has retained Lane Caputo Compensation Inc. (“Lane Caputo”) since August 8, 2017 to assist the Compensation Committee with the development of a compensation program for the Company’s executive officers and independent directors. Pursuant to this mandate, Lane Caputo has provided a review of current market practices regarding executive and director compensation, assisted the Compensation Committee in developing an appropriate compensation philosophy and a comparator group of companies that reflects the Company’s current size and stage of development, and has provided advice and recommendations with respect to best practices in the governance of compensation. In the course of conducting its activities, Lane Caputo has attended meetings of the Compensation Committee and presented its findings for discussion by the Compensation Committee. The Chairman of the Compensation Committee has also met separately with Lane Caputo on several occasions during 2020 to provide further direction.

The Compensation Committee has considered the advice, guidance and recommendations provided by Lane Caputo as part of its deliberations on its recommendations to the Board with respect to salary, annual performance incentives (the “APIs”) and approval of long-term equity-based incentives.

For the financial years ended December 31, 2020 and 2019, the following fees were billed by and paid to Lane Caputo:

Financial Year Ended	Executive Compensation-Related Fees		All Other Fees
December 31, 2020	$	51,979	Nil
December 31, 2019	$	50,282	Nil

The Compensation Committee must pre-approve any retainers by Lane Caputo or other compensation consultants and provide notice of said retainer to the Board. There were no other consultants hired or contracted to assist the Board or the Compensation Committee in formulating executive compensation from 2017 through and including 2020.

Compensation Philosophy

The Company has adopted a “pay for performance” approach to executive compensation. Accordingly, salary is targeted near market median levels of the compensation peer group, while variable compensation opportunities (short and long-term incentives) are structured to provide above-market total compensation for high levels of corporate performance. Compensation elements are designed to balance the following compensation objectives:

· total compensation realization will be aligned with the overall performance of the Company;

· compensation programs will encourage a long-term view to shareholder value creation, as a significant portion of each executive’s variable pay will be equity-based; and

· compensation programs will facilitate the attraction, retention and motivation of experienced and talented executives who will, in turn, drive shareholder value creation.

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Benchmarking and 2020 Compensation Peer Group

The Company’s primary objective is to maximize safe and profitable copper and gold production to increase value to shareholders. To succeed, it is a strategic imperative to engage, retain and attract executive officers by providing a reasonable and competitive total compensation package. The Compensation Committee believes that it is appropriate to establish total compensation levels for executives with reference to benchmark roles among similar companies, both in terms of compensation levels and practices.

To benchmark the competitiveness of the compensation program for the Company’s executive officers for the financial year ended December 31, 2020, the Compensation Committee, in consultation with Lane Caputo, considered the size (based on market capitalization, operating revenue and number of producing mines) and stage of development of the following 18 companies (the “2020 Compensation Peer Group”) in determining an appropriate peer group of comparators:

Alacer Gold Corp.	Fortuna Silver Mines Inc.	SEMAFO Inc.
Capstone Mining Corp	Hudbay Minerals Inc.	Sierra Metals Inc.
Copper Mountain Mining Corp.	Leagold Mining Corp.	SSR Mining Inc.
Dundee Precious Metals Inc.	McEwen Mining Inc.	Taseko Mines Ltd.
Eldorado Gold Corp.	OZ Minerals Ltd.	Torex Gold Resources Inc.
Endeavour Silver Corp.	Pretium Resources Inc.	Trevali Mining Corp.

These mining companies were selected as peer companies on the basis that they were the direct competitors for the individuals required to execute the Company’s strategic plan. Peer group constituents are reviewed at least annually to ensure their continued relevance. The 2020 Compensation Peer Group was also used to benchmark the Company’s director compensation practices for the financial year ended December 31, 2020.

Elements of Executive Compensation

The Company’s strategy is to provide a competitive compensation package for its executive officers that is in alignment with the Company’s business strategy and compensation philosophy.

Base Salary

Base salaries are reviewed annually to ensure they reflect the individual’s expertise and performance in fulfilling their role and responsibilities, internal equity and market competitiveness. An executive officer’s base salary may be below or above the median for the 2020 Compensation Peer Group depending on a number of factors, including the incumbent’s experience in the role, market competitiveness and/or retention considerations and individual performance.

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The following table sets out the base salary of each NEO for the financial year ended December 31, 2020:

Name	Position(s) and Office(s) with Ero as at December 31, 2020	Annual Base Salary (US$)
Christopher Noel Dunn	Executive Chairman Director		536,000
David Strang	President and CEO Director(1)		536,000
Michel (Mike) Richard	CGO		370,000
Wayne Drier	CFO		340,000
Makko DeFilippo	Vice President, Corporate Development(2)		340,000
Anthea Bath	Vice President, Technical Services(3)		260,000

Note:

⁽¹⁾ Currently CEO and director of the Company, effective January 4, 2021.

⁽²⁾ Currently President of the Company, effective January 4, 2021.

⁽³⁾ Currently COO of the Company, effective January 4, 2021.

Annual Performance Incentive

The API recognizes short-term (typically annual) efforts and milestone achievements that are aligned to the long-term success of the Company. The API is a variable component of compensation designed to provide motivation to executive officers to achieve near-term corporate objectives, and to reward them in cash when such objectives are met or exceeded. Target incentive levels target total cash compensation at the median of the 2020 Compensation Peer Group but have sufficient leverage that actual payment can position above or below the median to correlate with corporate and personal performance.

Target incentive levels for 2020 performance for the NEOs were as follows:

Name	2020 Annual Base Salary (US$)		Target (% of Annual Base Salary)			Target Eligibility (US$)
Christopher Noel Dunn		536,000		100	%		536,000
David Strang		536,000		100	%		536,000
Michel (Mike) Richard		370,000		75	%		277,500
Wayne Drier		340,000		65	%		221,000
Makko DeFilippo		340,000		50	%		170,000
Anthea Bath		260,000		50	%	$	130,000

Actual awards may be above or below target based on performance outcomes. The performance measures range from 0% (if the threshold performance level is not achieved) to 100% (if the performance target is met) and up to 150% for all executive officers of the Company, other than the Executive Chairman and the CEO who are capped at a maximum level of 200% (if the performance target is exceeded by a specified amount).

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The Company’s 2020 key performance indicators were selected to reflect the Company’s top priorities for success in 2020, focussed on safety, environment, operating performance, mineral reserve replacement and expansion, and new discovery measures. As set out below, the result for the 2020 annual performance incentive award was 113.3% of target:

	Performance Range						Actual Result		Weight			Weighted Result
Category	Threshold		Target		Stretch
Safety & Environment
MCSA Long Term Injury Frequency Rate		1.3		1.0		0.7		0.2		10	%		15	%
NX Gold Long Term Injury Frequency Rate		1.3		1.0		0.7		0.8		5	%		6.3	%
Reportable Environmental Incidents		2		1		0		0		5	%		7.5	%
MCSA Operating Performance
Copper Production (tonnes)		38,740		43,044		45,196		42,814		12.5	%		12.2	%
C1 Cash Cost(1)		0.96		0.87		0.83		0.67		12.5	%		18.8	%
NX Gold Operating Performance
Gold Production (oz)		35,100		39,000		40,950		36,830		5	%		3.6	%
C1 Cash Cost(2)		578		525		499		455		5	%		7.5	%
MCSA Reserve Replacement / Growth (tonnes contained copper)		42,500		85,000		130,000		144,300		15	%		22.5	%
NX Gold Reserves Replacement / Growth (oz)		40,000		80,000		120,000		139,300		5	%		7.5	%
MCSA Exploration Program		172,000 m drilled		1 new discovery		2 new discoveries		238,000 m drilled		25	%		12.5	%
Total													113.3	%

Note:

⁽¹⁾ C1 cash cost of copper produced (per lb) is the sum of production costs, net of capital expenditure development costs and by-product credits, divided by the copper pounds produced. C1 cash costs reported by the Company include treatment, refining charges, offsite costs, and certain tax credits relating to sales invoiced to the Company’s Brazilian customer on sales. By-product credits are calculated based on actual precious metal sales (net of treatment costs) during the period divided by the total pounds of copper produced during the period. C1 cash cost of copper produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

⁽²⁾ C1 cash cost of gold produced (per ounce) is the sum of production costs, net of capital expenditure development costs and silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. C1 cash cost of gold produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

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Given the Company’s: (i) achievement of one-year of operating without a lost-time injury at its MCSA Mining Complex prior to the end of 2020, being a record in the mine’s over 40 year operating history; (ii) operational and financial management and preparedness throughout 2020 in response to the COVID-19 pandemic (as discussed in more detail below), resulting in, among others, record operational and financial performance; and (iii) execution of several key growth objectives in 2020 including, among others, commissioning of the HIG Mill on budget at the MCSA Mining Complex, completion of the comprehensive ore-sorting pilot plant test program at the MCSA Mining Complex, and drilling and integration of the Deepening Extension Project located in the Pilar underground mine into the life-of-mine plan update for the MCSA Mining Complex announced on November 30, 2020, the Compensation Committee made a discretionary adjustment to the API awards to reflect the contribution of the NEOs to such achievements, resulting in the following API payments:

Name	Target API (US$)		API at 113.3% of Target (US$)		Actual API Payment, inclusive of discretionary adjustment (US$)
Christopher Noel Dunn		536,000		607,288		961,154
David Strang		536,000		607,288		961,154
Michel (Mike) Richard		277,500		314,408		383,713
Wayne Drier		221,000		250,393		305,588
Makko DeFilippo		170,000		192,610		235,068
Anthea Bath		130,000		147,290		179,758

As stated above, the Compensation Committee considered, among others, the Company’s operational and financial management and preparedness throughout 2020 in response to the COVID-19 pandemic, and the contribution of the NEOs to such management and preparedness. The Company continues to have no material disruption to operations, supply chains or sales channels as a result of the COVID-19 pandemic. Since the onset of the COVID-19 pandemic in early 2020, the Company has continued to take extraordinary measures to mitigate the possible impact of COVID-19 on its workforce and operations. Some of these measures include:

(i) eliminating all non-essential travel to and from the Company’s mining operations;

(ii) routine engagement with all suppliers and active stockpiling of key consumables to protect against any supply chain disruptions;

(iii) reducing physical interaction throughout the organization as much as possible by closing administrative offices and moving to a work-from-home format, increasing social distancing by limiting the number of employees travelling on provided buses between the Company’s mining communities and mines, limiting the number of employees in the cafeteria at any given time, cancelling all group meetings, implementing social-distancing for essential line-out meetings and encouraging work-from-home and video/telephone conferencing where feasible;

(iv) establishing COVID-19 committees with senior leadership and local health administrators for the regions in which the Company operates;

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(v) purchasing thousands of COVID-19 testing kits for the Company’s operations, with the donation of a portion of these test kits, as well as other personal protective equipment, to each of the Company’s local municipalities to facilitate rapid testing throughout each community; and,

(vi) implementing wellness education, health screenings, and self-isolation protocols along with enhanced sanitization throughout the Company’s operations.

The Company continues to closely monitor the COVID-19 pandemic and is engaged in active operational and financial contingency planning to prudently manage the potential impact of the pandemic on its operations.

As a result of COVID-19 mitigation measures employed and strong operating performance throughout 2020, the Company ended the period with a robust cash position of $62.5 million in cash and cash equivalents – a quarter-on-quarter improvement of $8.2 million and a $41.0 million improvement since December 31, 2019.

Option-based and Share-based Awards

The Company’s compensation policy targets annual grants of long-term equity incentives at the median of the 2020 Compensation Peer Group. The Company has two forms of long-term equity incentive plans for executive officers, the Stock Option Plan and the Share Unit Plan.

The Stock Option Plan and the Share Unit Plan each serve as a vehicle by which equity-based incentives may be awarded to the directors, officers, employees and consultants of the Company or any of its subsidiaries to recognize and reward their significant contributions to the long-term success of the Company, to attract to and retain in the employ of the Company or any of its subsidiaries, persons of experience and ability, by providing them with the opportunity to acquire an increased proprietary interest in the Company, and to align their interests more closely with the shareholders of the Company.

The Stock Option Plan and the Share Unit Plan each require shareholder approval every three years and were last approved at our annual general and special meeting of shareholders on May 7, 2020.

Stock Option Plan

As at the date of this Circular, there were 4,485,781 Options issued and outstanding under the Stock Option Plan. The annual burn rate under the Stock Option Plan is set out below under the heading “Securities Authorized for Issuance Under Equity Compensation Plans - Annual Burn Rates of Equity-Based Compensation Arrangements”. The Stock Option Plan is summarized in the table below.

Key Terms

Summary

Administration

The Compensation Committee, in its sole and absolute discretion, but subject to the general purposes, terms and conditions of the Stock Option Plan and to the direction of the Board, administers the Stock Option Plan and exercises all the powers and authorities either specifically granted to it under the Stock Option Plan or necessary or advisable in the administration of the Stock Option Plan, acting reasonably and in good faith and subject to and not inconsistent with the express provisions of the Stock Option Plan. The Compensation Committee is fully comprised of independent directors, as more particularly described under the heading “Corporation Governance Practices – Compensation Committee”.

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Key Terms	Summary
Securities	Each Option entitles the holder thereof (an “Optionee”) to purchase one Share at an exercise price set at the time of the grant.
Eligibility	Any director, officer, employee, consultant or other personnel of the Company (including any subsidiary of the Company), as the Compensation Committee may determine.
Exercise Price	The exercise price of an Option will be determined by the Compensation Committee at the time of the grant, but will be no lower than the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the relevant date (or on any such other stock exchange, inter-dealer quotation network or other organized trading facility on which the Shares trade or are quoted from time to time) (the “Fair Market Value”). If the Shares are suspended from trading or have not traded on the TSX or another stock exchange, inter-dealer quotation network or other organized trading facility for an extended period, the exercise price will be no lower than the Fair Market Value of the Shares at the time of the grant as determined by the Compensation Committee in its sole discretion acting in good faith.
Vesting and Exercise Period	The vesting and exercise period of an Option will be determined by the Compensation Committee at the time of grant; however, the expiry date of an Option shall be no later than five years from the date of grant, or in the case where the expiry date of an Option occurs during a period of time during which the Optionee cannot exercise or sell securities of Ero due to applicable policies of the Company in respect of insider trading (a “Blackout Period”) or within 10 business days after the expiry of the Blackout Period, then the expiry date for the Option will be the date that is the tenth business day after the expiry of the Blackout Period.
Cessation of Employment	Subject to certain limitations, in the event that an Optionee’s employment is terminated for any reason other than death, retirement, long-term disability or for cause, the Options held by such Optionee may be exercised within 60 days of termination, provided such Options have vested and not expired. Subject to certain limitations, in the event that an Optionee’s employment is terminated due to retirement or as a result of long-term disability, unless the Compensation Committee determines otherwise, the Options held by such Optionee may be exercised within one year of retirement or termination as a result of long-term disability, provided such Options have vested and not expired. In addition, such Optionee’s unvested Options shall continue to vest in accordance with their terms until the earlier of the date which is one year following the date of retirement or termination as a result of long-term disability and the expiry date. Subject to certain limitations, in the event that an Optionee’s employment is terminated by reason of death, unless the Compensation Committee determines otherwise, the Options held by such Optionee shall become fully vested and may be exercised by the legal personal representative(s) of such Optionee’s estate within one year following the death of the Optionee or prior to the expiry date, whichever is earlier. In the event an Optionee’s employment is terminated for cause, the Options held by such Optionee shall expire and terminate immediately upon such Optionee ceasing to actively provided services to the Company in his or her capacity as a director, officer, employee or consultant, as the case may be.

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Key Terms	Summary
Change of Control	Subject to the Compensation Committee’s ability to accelerate the vesting of Options at any time in its sole discretion, if the Company completes a transaction which results in a “Change of Control” (as defined in the Stock Option Plan), all unvested Options will vest, and if within 90 days (or such other period as the Compensation Committee determines) following the completion of such transaction an event(s) that would constitute “constructive dismissal” (as defined pursuant to common law) occurs, and if within 90 days (or such other period as the Compensation Committee determines) following the date of such “constructive dismissal” an Optionee’s employment is terminated (whether at the Optionee’s discretion or otherwise) then all Options held by such Optionee will remain exercisable until the earlier of 90 days (or such other period as the Compensation Committee determines) from the date of termination and the expiry date thereof. Notwithstanding the foregoing, with respect to any performance-based Options granted under the Stock Option Plan, vesting of an Option will be dependent on achievement of the applicable performance criteria as of the date of the completion of the above-mentioned transaction and/or be prorated to the date of the completion of such transaction, as applicable.
Limitations	The total number of Shares issuable pursuant to the Stock Option Plan (subject to adjustments under the Stock Option Plan) together with all other security based compensation arrangements of the Company (including the Share Unit Plan discussed below) shall not exceed 8% of the Company’s issued and outstanding Shares, on a non-diluted basis, at the relevant time (currently 7,048,153 Shares, based on 88,101,909 Shares issued and outstanding as at the date of this Circular). Provided that such maximum number of Shares is not exceeded, following the exercise, expiration, cancellation or other termination of any Options under the Stock Option Plan, a number of Shares equal to the number of Options or rights so exercised, expired, cancelled or terminated shall automatically become available for issuance in respect of Options that may subsequently be granted under the Stock Option Plan. Subject to certain limitations, the total number of Shares that may be issued to any individual Optionee under the Stock Option Plan together with all other security based compensation arrangements of the Company (including the Share Unit Plan) in any one-year period, shall not exceed 5% of the number of issued and outstanding Shares at the date of grant (the “Individual Limit”). Subject to certain exceptions, the total number of Shares issuable to insiders of the Company as a group at any time and the total number of Shares issued to insiders of the Company within any one-year period, under the Stock Option Plan together with all other security based compensation arrangements of the Company (including the Share Unit Plan) shall not exceed 8% of the issued and outstanding Shares, on a non-diluted basis, at the date of grant. The total number of Shares that may be issued to any one insider of the Company under the Stock Option Plan together with all other security based compensation arrangements of the Company (including the Share Unit Plan) shall not exceed the Individual Limit. The Fair Market Value of Options that may be granted to each non-employee director of the Company within any one-year period under the Stock Option Plan shall not exceed $100,000, and under the Stock Option Plan together with all other security based compensation arrangements of the Company (including the Share Unit Plan) shall not exceed $150,000.

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Key Terms

Summary

Net Settlement of Options

The Stock Option Plan provides for the cashless exercise of Options, subject to certain limitations.  The number of Shares issuable pursuant to any such cashless exercise is equal to the number determined by dividing (a) the product of the number of unexercised vested Options tendered for settlement by the difference between the Fair Market Value of one Share (calculated as at the date of settlement) and the exercise price of such Options, by (b) the Fair Market Value (calculated as at the date of settlement) of one Share, represented by the following formula:

A x (X-Y)
       X Where: A = the number of unexercised vested Options tendered for settlement X = the Fair Market Value of the Shares on the date of settlement Y = the exercise price of the Options tendered for settlement

Amendments

The Compensation Committee has the right to suspend, discontinue or amend the Stock Option Plan or any Option granted thereunder, provided that it obtain shareholder and necessary regulatory approval prior to certain amendments. Subject to certain exceptions approval from a majority of holders of Shares (and other voting securities of the Company) is required to effect the following amendments to the Stock Option Plan: (i) increasing the maximum number of Shares issuable, as a fixed percentage of the issued and outstanding Shares pursuant to the Stock Option Plan; (ii) amendments that would reduce the exercise price of an outstanding Option; (iii) make any amendments to the non-employee director participation limits (see last paragraph under the above heading “Limitations”); (iv) extending the expiry date of any Option beyond its expiry date determined at the date of grant, except with respect to an expiry date that occurs during a Blackout Period; (v) change the categories of individuals who are eligible to participate in the plan, including where such change may introduce, re-introduce, broaden or increase the participation of non-employee directors under the Plan; (vi) amendments to permit the transfer or assignment of Options, except to permit a transfer to a family member, to an entity controlled by the Optionee or a family member, to a charity or for estate planning or estate settlement purposes; and (vii) amendments to the amendment provisions of the Stock Option Plan.

Assignment

Rights respecting Options shall not be transferable or assignable other than by reason of death of the Optionee or by shareholder approval.

The full text of the Stock Option Plan is available under our profile on SEDAR at www.sedar.com.

Share Unit Plan

As at the date of this Circular, there were 727,761 PSUs issued and outstanding under the Share Unit Plan. The annual burn rate under the Share Unit Plan is set out below under the heading “Securities Authorized for Issuance Under Equity Compensation Plans - Annual Burn Rates of Equity-Based Compensation Arrangements”. The Share Unit Plan is summarized in the table below.

Key Terms	Summary
Administration	The Compensation Committee, in its sole and absolute discretion, but subject to the general purposes, terms and conditions of the Share Unit Plan, applicable securities and tax law requirements and to the direction of the Board: (i) interprets and administers the Share Unit Plan; (ii) may establish, amend and rescind any rules and regulations relating to the Share Unit Plan; and (iii) makes other determinations that the Compensation Committee deems necessary or desirable for the administration and operation of the Share Unit Plan. The Compensation Committee is fully comprised of independent directors, as more particularly described under the heading “Corporation Governance Practices – Compensation Committee”
Eligibility	Any director, officer, employee, or consultant of the Company or of any of its subsidiaries, as the Compensation Committee may determine.
Securities	Each vested Share Unit entitles the holder thereof (a “Share Unit Participant”) to receive on or about the applicable date of vesting of such Share Unit: (i) one Share; (ii) a cash amount equal to the Fair Market Value of one Share (the “Cash Consideration”) as at the applicable date of vesting; or (iii) a combination of (i) and (ii), as determined by the Compensation Committee in its sole discretion.
Performance Conditions	At the time of grant of a Share Unit, the Compensation Committee may, in its sole discretion, establish performance conditions for the vesting of such Share Unit, which may include terms or conditions relating to: (i) the market price of the Shares; (ii) the return to holders of Shares, with or without reference to other comparable companies; (iii) the financial performance or results of the Company or its subsidiaries; (iv) the achievement of performance conditions or other performance criteria relating to the Company or its subsidiaries; (v) any other terms and conditions the Compensation Committee may in its sole discretion determine with respect to vesting or the acceleration of vesting; and (vi) the vesting date of the Share Units. The performance conditions may be graduated such that different percentages (which may be greater or lesser than 100%) of the Share Units in a grant become vested depending on the extent of satisfaction of one or more performance conditions. The Compensation Committee may, in its discretion, subsequent to the grant of a Share Unit, waive any such performance condition or determine that it has been satisfied subject to applicable law. Each Share Unit for which vesting is subject to performance conditions is herein referred to as a “PSU”. Each Share Unit for which vesting is not subject to performance conditions is herein referred to as an “RSU”.

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Vesting	Each RSU shall vest at such time as determined by the Compensation Committee at the time of grant. Each PSU shall vest at such time as determined by the Compensation Committee at the time of grant, subject to satisfaction of applicable Performance Conditions. The vesting date of a Share Unit is subject to compliance with the requirements pertaining to the exception to the application of the salary deferral arrangement rules in paragraph (k) of the definition of “salary deferral arrangement” in subsection 248(1) of Income Tax Act (Canada), as amended from time to time (the “Tax Act”), as such subsection may be amended or enacted from time to time.
Redemption	Each Share Unit will be redeemed on the date (the “Redemption Date”) selected by the Compensation Committee following the date of vesting of such Share Unit, which will be within 30 days of the date of vesting, or at a later deferred date, subject to certain exceptions and restrictions. The Redemption Date for a Share Unit is subject to compliance with the requirements pertaining to the exception to the application of the salary deferral arrangement rules in paragraph (k) of the definition of “salary deferral arrangement” in subsection 248(1) of the Tax Act, as such subsection may be amended or enacted from time to time.
Deferral Date	Non-Canadian Share Unit Participants may elect to defer the receipt of all or any part of their entitlement to Shares and/or Cash Consideration, as applicable, until a date following the Redemption Date but no later than such individual’s date of retirement (the “Deferred Payment Date”). Non-Canadian Share Unit Participants who elect to set a Deferred Payment Date must provide prior notice to the Company and, subject to certain restrictions, may change a Deferred Payment Date by providing prior notice to the Company.
Dividends	When dividends are paid on Shares, each Share Unit Participant shall be credited with dividend equivalents in respect of the Share Units credited to his or her account as of the record date for payment of dividends. Such dividend equivalents shall be converted into additional Share Units (including fractional Share Units) based on the Fair Market Value of the Share on the date credited and redeemed on the Redemption Date or a later deferred date, as applicable, of the Share Unit with respect to which the dividend equivalent was granted.

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Cessation of Employment	Subject to certain restrictions, if a Share Unit Participant is terminated by the Company for cause or if a Share Unit Participant voluntarily terminates his or her employment for any reasons or resigns as a director, as applicable, all of his or her Share Units that have not reached their respective Redemption Dates as at the date of termination will be cancelled, and all of his or her Share Units that have reached their respective Redemption Dates as at the date of termination but redemption thereof has been deferred by the Share Unit Participant will be redeemed as soon as possible for Shares, Cash Consideration in lieu thereof or a combination of both, as determined by the Compensation Committee in its sole discretion. Subject to certain restrictions, in the event that a non-director Share Unit Participant’s employment is involuntarily terminated for reasons other than cause, his or her Share Units will be redeemed on the date of termination for Shares, Cash Consideration in lieu thereof or a combination of both, as determined by the Compensation Committee in its sole discretion, provided such Share Units have vested at such time. Subject to certain restrictions, in the event that a director Share Unit Participant is not re-elected at an annual or special meeting of shareholders of the Company, his or her Share Units will be redeemed on the date of the annual or special meeting of shareholders for Shares, Cash Consideration in lieu thereof or a combination of both, as determined by the Compensation Committee in its sole discretion, provided such Share Units have vested at such time. Subject to certain restrictions, in the event that a Share Unit Participant dies, his or her Share Units will be redeemed upon the date of death for Shares, Cash Consideration in lieu thereof or a combination of both, as determined by the Compensation Committee in its sole discretion.
Change of Control	In the event that a Share Unit Participant is terminated for reasons other than cause within 12 months following a “Change of Control” (as defined in the Share Unit Plan), all Share Units held by such Share Unit Participant will be redeemed as soon as reasonably practical following such termination for Shares, Cash Consideration in lieu thereof or a combination of both, as determined by the Compensation Committee in its sole discretion; provided that in the event that any Share Units are subject to satisfaction of any performance conditions, the Compensation Committee shall consider the extent of satisfaction of such performance conditions in determining the number of Share Units to be redeemed.
Limitations	The number of Shares reserved for issuance under the Share Unit Plan: (i) together with the Shares issuable under all other security based compensation arrangements of the Company (including the Stock Option Plan), shall not exceed 8% of the total number of issued and outstanding Shares, on a non-diluted basis, subject to certain limited exceptions (currently 7,048,153 Shares, based on 88,101,909 Shares issued and outstanding as at the date of this Circular); and (ii) to any one Share Unit Participant within a 12-month period shall not exceed 2% of the total number of issued and outstanding Shares. The number of Shares issuable to insiders of the Company as a group at any time and the number of Shares issued to insiders of the Company as a group within any one-year period, under the Share Unit Plan together with all other security based compensation arrangements of the Company shall not exceed 8% of the total number of issued and outstanding Shares, on a non-diluted basis. The number of Shares issuable to non-employee directors of the Company as a group, under the Share Unit Plan, shall not exceed 1% of the total number of issued and outstanding Shares, on a non-diluted basis. The Fair Market Value of the Shares issuable to each non-employee director of the Company within any one-year period under the Share Unit Plan shall not exceed $150,000. Notwithstanding the foregoing, the Fair Market Value of the Shares issuable to each non-employee director of the Company within any one-year period under the Share Unit Plan together with all security based compensation arrangements of the Company shall not exceed $150,000.

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Amendments

The Compensation Committee has the right to suspend, terminate or amend the Share Unit Plan or any portion thereof, subject to certain restrictions and provided that it obtain any necessary prior shareholder and/or regulatory approvals. The following amendments to the Share Unit Plan may be effected without obtaining prior shareholder approval: (i) amendments to the terms and conditions necessary to ensure that the Share Unit Plan complies with applicable regulatory requirements; (ii) amendments respecting administration of the Share Unit Plan; (iii) amendments respecting the terms and conditions on which Share Units may be granted; and (iv) amendments of a “housekeeping” nature. Prior shareholder approval is required to effect any amendment to the Share Unit Plan related to: (i) the number or percentage of Shares available for grant; (ii) removing or exceeding the number of Shares issuable or that may be issued to insiders as a group under the Share Unit Plan; (iii) removing or exceeding the non-employee director participation limits (see last paragraph under the above heading “Limitations”); (iv) permitting the transfer or assignment of Share Units other than for normal estate settlement purposes; (v) change the categories of individuals who are eligible to participate in the plan, including where such change may introduce, re-introduce, broaden or increase the participation of non-employee directors under the Plan; (vi) changing the method of calculation of redemption of Share Units; (vi) extending the term for redemption of Share Units; and (vii) any amendments to the amendment provisions of the Share Unit Plan.

Assignment

Rights respecting Share Units shall not be transferable or assignable other than by will or the laws of decent and distribution or by shareholder approval.

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The full text of the Share Unit Plan is available under our profile on SEDAR at www.sedar.com.

As with the PSUs awarded in 2018 and 2019, the PSUs awarded in 2020 vest to executives on the third anniversary of the date of grant based on the Company’s performance relative to two performance metrics:

1. The Company’s total shareholder return (“TSR”) against a peer group of base metals producers that the Company competes with for investment dollars (the “TSR Peer Group”), as follows:

Performance Level	Performance Achieved	PSU Vesting
Maximum	TSR at or above 90th percentile	200%
Above Target	TSR at 80th percentile	150%
Target	TSR at 65th percentile	100%
Below Threshold	TSR below 35th percentile	0%

Linear interpolation will be applied to determine percentage PSU vesting for TSR performance between the performance achievement levels shown in the table above.

The TSR Peer Group is comprised of the following 16 companies:

Antofagasta plc	Imperial Metals Corp	Southern Copper Corp.
Capstone Mining Corp.	Lundin Mining Corp.	Taseko Mines Ltd.
Copper Mountain Mining Corp.	MMG Ltd.	Teck Resources Limited
First Quantum Minerals Ltd.	Nexa Resources SA	Trevali Mining Corp.
Freeport-McMoRan Inc.	Oz Minerals Ltd.
Hudbay Minerals Ltd.	South32 Limited

2. The Company’s return on invested capital (“ROIC”), as follows:

Performance Level	Performance Achieved	PSU Vesting
Maximum	ROIC at or above 12%	200%
Above Target	ROIC at 10%	150%
Target	ROIC at 8%	100%
Below Threshold	ROIC below 5%	0%

Linear interpolation will be applied to determine percentage PSU vesting for ROIC performance between the performance achievement levels shown in the table above.

The Compensation Committee is responsible for administering and interpreting the Company’s equity-based compensation arrangements and the policies respecting the grant of Options or Share Units, whether PSUs or RSUs, or the sale or issuance, as applicable, of Shares thereunder, as well as reviewing and awarding grants of Options and Share Units, whether PSUs or RSUs, and the terms thereof. Awards of Options and Share Units, whether PSUs or RSUs, under the Stock Option Plan and Share Unit Plan are subject to certain limitations set out in each plan as well as the approval of the Compensation Committee. Such awards are generally based on the executive officer’s total target compensation relative to their peers and their level within the organization. Options and Share Units are not granted to reward past performance, but rather as forward-looking incentive. As such, previous grants of Options or Share Units, as applicable, are not taken into account when considering additional grants of Options or Share Units, as applicable.

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Managing Compensation Risk

As part of its annual review of the Company’s compensation policies and practices, including the setting of annual corporate performance objectives, as discussed below, the Compensation Committee considers any risks associated with such policies and practices. The Compensation Committee is satisfied that the current compensation policies and practices, combined with the enterprise risk management of the Company, offer a balanced combination that promotes adequate risk-taking with appropriate and reasonable compensation incentives.

The Compensation Committee believes that the executive compensation program of the Company should not raise its risk profile. Accordingly, the Company’s compensation programs include safeguards designed to mitigate compensation risks. The following measures seek to impose appropriate limits to avoid excessive or inappropriate risk-taking or payments:

· the Compensation Committee retains an independent advisor to provide an external perspective of marketplace changes and best practices related to executive compensation design, governance and compensation risk management;

· the Compensation Committee undertakes annual review of the Company’s compensation program to ensure competitiveness with a compensation peer group and continued alignment with trends in compensation practices and governance;

· the Compensation Committee undertakes an annual review of the Company’s APIs, long-term equity-based incentives, and corresponding performance objectives to ensure continued relevance and applicability to the Company’s then current stage of development and business strategy;

· compensation paid to the Company’s executive officers is spread between short-term incentives and long-term incentives to mitigate the risk of too much emphasis on short-term goals at the expense of long-term sustainable performance;

· API payments are capped at a maximum level of 150% of target in the case of all executive officers of the Company, other than the Executive Chairman and the CEO who are capped at a maximum level of 200% of target, to ensure preservation of capital and to provide upper payout boundaries;

· the Compensation Committee and the Board retain discretion to adjust individual performance objectives during the year to ensure they remain aligned with the evolving priorities of the Company in light of developments during the year. Discretion may also be exercised to increase or decrease payout levels based on a holistic assessment of the Company’s performance, ensuring appropriate pay-for-performance alignment and providing the flexibility to make reasonable exceptions when necessary;

· the Executive Chairman and the CEO of the Company are each required to own at least three times their annual base salary in Shares and/or RSUs within five years of their appointment and the President, CFO, CGO and COO of the Company and any other c-suite level executive of the Company appointed in the future are each required to own at least two times their annual base salary in Shares and/or RSUs within five years of their appointment to further align their interests more closely with the shareholders of the Company. See “Share Ownership Policy” below for the guidelines and current share ownership levels.

· a compensation Clawback Policy has been adopted, which applies to all performance-based compensation awards, issued to any executive at the Vice-President level or above (including each NEO). For the purposes of this policy, performance-based compensation includes incentive compensation awarded or paid in any form, including cash or equity-based (such as PSUs), whether vested or unvested. See “Clawback Policy” below.

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· no NEO or director, among others, is permitted to purchase financial instruments, including prepaid variable forward contracts, instruments for the short sale or purchase or sale of call or put options, equity swaps, collars, or units of exchangeable funds, that are designed to or that may reasonably be expected to have the effect of hedging or offsetting a decrease in the market value of any securities of the Company.

Compensation Committee Decisions Relating to 2021 Compensation

Peer group constituents are reviewed at least annually to ensure their continued relevance. To improve our positioning and alignment relative to our peer group, to ensure the size and stability of the group and to address 2020 M&A activity of certain members of the 2020 Compensation Peer Group (SSR Mining Inc. acquired Alacer Gold Corp. in July 2020; Equinox Gold Corp. acquired Leagold Mining Corp. in March 2020; and, Endeavour Mining Corporation acquired SEMAFO Inc. in July 2020), Lane Caputo was given the mandate to review the peer group against which Ero’s executive compensation program is benchmarked. To benchmark the competitiveness of the compensation program for the Company’s executive officers for the financial year ending December 31, 2021, the Compensation Committee, in consultation with Lane Caputo, have utilized the following peer group of 15 comparators (the “2021 Compensation Peer Group”):

Aura Minerals Inc.	Fortuna Silver Mines Inc.	Sandfire Resources Ltd.
Capstone Mining Corp.	Hudbay Minerals Inc.	SSR Mining Inc.
Dundee Precious Metals Inc.	McEwen Mining Inc.	Taseko Mines Ltd.
Eldorado Gold Corp.	OZ Minerals Ltd.	Torex Gold Resources Inc.
Equinox Gold Corp.	Pretium Resources Inc.	Turquoise Hill Resources Ltd.

The 2021 Compensation Peer Group has also been used to benchmark the Company’s director compensation practices for the financial year ending December 31, 2021.

The following table sets out the base salary of each NEO for the financial year ending December 31, 2021, which was targeted at or near the median for the 2021 Compensation Peer Group depending on a number of factors, including the incumbent’s experience in the role, market competitiveness and/or retention considerations and individual performance:

Name	Position(s) and Office(s) with Ero	Annual Base Salary (US$)
Christopher Noel Dunn	Executive Chairman Director	550,000
David Strang	CEO Director	550,000
Michel (Mike) Richard	CGO	375,000
Wayne Drier	CFO	345,000
Makko DeFilippo	President	345,000
Anthea Bath	COO	345,000

The Compensation Committee has established 2021 corporate performance measures for each executive officer, including safety, environment, operating performance, mineral reserve replacement and expansion, and strategic initiatives measures such as measures relating to new discoveries at the MCSA Mining Complex and the NX Gold Mine and optimization of the Company’s Boa Esperança project, located in the Carajás Mineral Province in Pará State, Brazil. The weighting assigned to each measure varies with each executive officer, depending on his or her position and level in the organization.

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Share Ownership Policy

The Board has adopted a Share Ownership Policy, which sets Share ownership targets for the Executive Chairman, CEO, President, CFO, COO, CGO and independent directors of the Company to further align their interests more closely with the shareholders of the Company.

The Executive Chairman and the CEO of the Company are each required to beneficially own, control or direct, directly or indirectly, at least three times their annual base salary in Shares and/or RSUs within five years of their appointment. The President, CFO, COO and CGO of the Company and any other c-suite level executive of the Company appointed in the future are each required to beneficially own, control or direct, directly or indirectly, at least two times their annual base salary in Shares and/or RSUs within five years of their appointment.

Each independent director of the Company is required to beneficially own, control or direct, directly or indirectly, at least three times their annual base retainer fee in Shares, DSUs and/or RSUs within five years of their appointment.

To measure compliance, Share and RSUs held by each c-suite level executive officer and Shares, DSUs and RSUs held by each independent director are valued at the greater of their acquisition cost or grant date value, as the case may be, and current market value.

As at the date of this Circular, the Executive Chairman and each c-suite level executive of the Company, other than Makko DeFilippo (promoted from Vice President, Corporate Development to President on January 4, 2021) and Anthea Bath (promoted from Vice President, Technical Services to COO on January 4, 2021), has achieved their respective Share ownership target. Mr. DeFilippo and Ms. Bath must achieve their Share ownership target of at least two times their annual base salary in Shares and/or RSUs by January 3, 2026.

As at the date of this Circular, each independent director has achieved their respective Share ownership target.

Clawback Policy

The Board has adopted a Clawback Policy, which applies to all performance-based compensation awards issued to any executive at the Vice-President level or above (including each NEO). The Clawback Policy providing for the full or partial forfeiture and recoupment of performance-based compensation awarded and outstanding or paid to any such executive officer subsequent to a material restatement of previously issued financial statements of the Company, required by applicable securities laws and directly resulting or arising from the gross negligence, fraud or willful misconduct of any such executive officer, the result of which is that any performance-based compensation provided to any such executive officer would have been a lower amount had it been calculated based on such restated results. For the purposes of this policy, performance-based compensation includes incentive compensation awarded or paid in any form, including cash or equity-based, whether vested or unvested.

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Performance Graph

Total cumulative shareholder return represents the overall financial benefit generated for shareholders (change in share price + dividends received) and is considered an effective measure of how the market evaluates the overall performance of a company over a specific period of time.

The graph below shows the total cumulative shareholder return of $100 invested in our Shares on October 19, 2017 (first day of trading on the TSX) compared to $100 invested in the S&P/TSX Composite Index, S&P Metals & Mining Select Industry Index and the TSR Peer Group, assuming reinvestment of dividends.

Since the Company’s initial public offering (“IPO”) on October 19, 2017, Ero Copper has significantly outperformed not only the Canadian market (S&P/TSX Composite Index) and the mining industry (S&P Metals & Mining Select Industry Index), but also the Company’s peers in the market in which it competes for investment capital (TSR Peer Group) as a result of its execution of key objectives following the IPO and continued focus on low-cost and high-margin production.

NEO compensation levels have increased since the IPO, but at a much lower rate as compared to the relative share price performance of the Company over that same time period. As reflected in the chart above, Total Compensation reported for the Company’s CEO declined on a year-over-year basis, reflecting the volatility in the Company’s share price over the past year and demonstrating the alignment between shareholder experience and executive pay in the Company’s compensation program. As such, we feel that our executive compensation practice is effective and supports the relationship between the compensation earned by our NEOs and the return to shareholders.

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Compensation Table

The following table contains information about the compensation awarded to, earned by, paid to, or payable to, individuals who were Named Executive Officers as at the end of the financial year ended December 31, 2020, 2019 and 2018.

Name and Principal Position	Year	Salary (US$)	Share- based Awards (US$)(1)	Option- based Awards (US$)(2)	Non-equity Incentive Plan Compensation (US$)		Pension Value (US$)	All Other Compensation (US$)(4)	Total Compensation (US$)
					Annual Incentive Plans (US$)(3)	Long- term Incentive Plans
Christopher Noel Dunn(5) Executive Chairman	2020	536,000	674,599	Nil	961,154	N/A	N/A	1,365	2,173,118
	2019	525,000	811,275	Nil	1,050,000	N/A	N/A	1,307	2,387,582
	2018	400,000	149,449	351,753(6)	650,000	N/A	N/A	956	1,552,158
David Strang(5) CEO	2020	536,000	674,599	Nil	961,154	N/A	N/A	690	2,172,443
	2019	525,000	811,275	Nil	1,050,000	N/A	N/A	471	2,386,746
	2018	400,000	149,449	351,753(6)	650,000	N/A	N/A	875(5)	1,552,077
Michel (Mike) Richard CGO	2020	370,000	260,644	213,197(7)	383,713	N/A	N/A	1,935	1,229,489
	2019	360,000	210,335	318,921(8)	404,984	N/A	N/A	645	1,294,885
	2018	300,000	119,555	281,399(6)	337,500	N/A	N/A	354	1,038,808
Wayne Drier CFO	2020	340,000	245,309	200,652(7)	305,588	N/A	N/A	1,267	1,092,816
	2019	335,000	190,267	288,549(8)	326,612	N/A	N/A	908	1,141,336
	2018	300,000	112,083	263,816(6)	270,000	N/A	N/A	1,502	947,401
Makko DeFilippo President	2020	340,000	245,309	200,652(7)	235,068	N/A	N/A	1,362	1,022,391
	2019	265,000	130,212	197,429(8)	198,742	N/A	N/A	1,307	792,690
	2018	220,000	74,725	193,465(6)	165,000	N/A	N/A	956	654,146
Anthea Bath COO	2020	260,000	245,309	200,652(7)	179,758	N/A	N/A	1,091	886,810
	2019	250,000	110,173	167,052(8)	187,493	N/A	N/A	1,081	715,799
	2018	110,909(9)	74,725	176,019(6)	75,000	N/A	N/A	Nil	1,010,653
				574,000(10)

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Notes:

⁽¹⁾ Represents the total grant date fair value of the PSUs granted and may not represent the amounts the recipient will actually realize from the award. On December 17, 2020, the Board approved the issuance of 289,298 PSUs under the Share Unit Plan based on a grant date fair value of C$18.90 per Share (US$14.86 per Share based on the daily exchange rate reported by the Bank of Canada on December 17, 2020 of US$1.2718 = $1.00), which is the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the grant date. On December 12, 2019, the Board approved the issuance of 225,659 PSUs under the Share Unit Plan based on a grant date fair value of C$20.52 per Share (US$15.57 per Share based on the daily exchange rate reported by the Bank of Canada on December 12, 2019 of US$1.3182 = $1.00), which is the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the grant date. On December 31, 2018, the Board approved the issuance of 215,288 PSUs under the Share Unit Plan based on a grant date fair value of C$9.76 per Share (US$7.15 per Share based on the daily exchange rate reported by the Bank of Canada on December 31, 2018 of US$1.3642 = $1.00), which is the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the grant date. The grant date fair value of the PSUs as presented will differ from the compensation expense included for these grants in the Company’s financial statements, as in accordance with IFRS accounting requirements the compensation expense reflects only the fair value amortized in the period based on each grant’s vesting terms.

⁽²⁾ Represents the total grant date fair value of the Options granted and may not represent the amounts the recipient will actually realize from the award. The fair value of the Options has been estimated at the date of grant in accordance with IFRS accounting requirements using a Black-Scholes option pricing model and was determined based on various assumptions including share price volatility on the grant date taking into account the expected life of the Options, an assumption that no dividends are to be paid and a risk-free interest rate determined by the Bank of Canada for the grant date. Please see the notes below for the assumptions used for each grant of Options.

⁽³⁾ Represents cash bonuses (API) awarded for individual performance and corporate achievements. Amount has been included in the year that the cash bonus was earned despite being paid in the following year.

⁽⁴⁾ Represents life insurance premiums paid by the Company.

⁽⁵⁾ Messrs. Dunn and Strang do not receive compensation for their services as directors of the Company.

⁽⁶⁾ On December 31, 2018, the NEO was granted Options at an exercise price of $9.76 per Share (US$7.15 per Share based on the daily exchange rate reported by the Bank of Canada on December 31, 2018 of US$1.3642 = $1.00), expiring on December 31, 2023. These Options have a grant date fair value of $4.13 each (US$3.03 per Share based on the daily exchange rate reported by the Bank of Canada on December 31, 2018 of US$1.3642 = $1.00) based on the following assumptions: risk-free interest rate of 1.88%; dividend yield of 0%; a forfeiture rate of 0%; volatility factor of 61.0%; and, expected life of 3 years.

⁽⁷⁾ On December 17, 2020, the NEO was granted Options at an exercise price of $18.90 per Share (US$14.86 per Share based on the daily exchange rate reported by the Bank of Canada on December 17, 2020 of US$1.2718 = $1.00), expiring on December 17, 2025. These Options have a grant date fair value of $7.53 each (US$5.92 per Share based on the daily exchange rate reported by the Bank of Canada on December 17, 2020 of US$1.2718 = $1.00) based on the following assumptions: risk-free interest rate of 0.39%; dividend yield of 0%; a forfeiture rate of 0%; volatility factor of 53.81%; and, expected life of 3 years.

⁽⁸⁾ On December 12, 2019, the NEO was granted Options at an exercise price of $20.52 per Share (US$15.57 per Share based on the daily exchange rate reported by the Bank of Canada on December 12, 2019 of US$1.3182 = $1.00), expiring on December 12, 2024. These Options have a grant date fair value of $7.53 each (US$5.71 per Share based on the daily exchange rate reported by the Bank of Canada on December 12, 2019 of US$1.3182 = $1.00) based on the following assumptions: risk-free interest rate of 1.67%; dividend yield of 0%; a forfeiture rate of 0%; volatility factor of 50.59%; and, expected life of 3 years.

⁽⁹⁾ Ms. Bath’s employment with the Company commenced on July 16, 2018.

⁽¹⁰⁾ On July 16, 2018, the NEO was granted Options at an exercise price of $9.01 per Share (US$6.86 per Share based on the daily exchange rate reported by the Bank of Canada on July 16, 2018 of US$1.3137 = $1.00), expiring on July 16, 2023. These Options have a grant date fair value of $3.77 each (US$2.87 per Share based on the daily exchange rate reported by the Bank of Canada on July 16, 2018 of US$1.3137 = $1.00) based on the following assumptions: risk-free interest rate of 2.03%; dividend yield of 0%; a forfeiture rate of 0%; volatility factor of 60.21%; and, expected life of 3 years.

Significant terms of each NEOs employment agreement are set out below under the heading, “Termination and Change of Control Benefits”.

43

Incentive Plan Awards

Outstanding Share-Based Awards and Option-Based Awards

The following table sets forth all Share-based awards and Option-based awards outstanding for each NEO as at December 31, 2020.

	Option-Based Awards				Share-Based Awards
Name	Number of Securities Underlying Unexercised Options (#)(1)	Option Exercise Price (US$)(2)	Option Expiration Date	Value of Unexercised In-the- Money Options (US$)(3)	Number of Shares or Units of Shares that Have Not Vested (#)(4)	Market or Payout Value of Share- Based Awards that Have Not Vested (US$)(5)	Market or Payout Value of Vested Share- Based Awards Not Paid Out or Distributed (US$)
Christopher Noel Dunn	159,000(6)	5.09(7)	November 24, 2022	1,741.050	20,902	335,268	Nil
	250,000(8)	5.29(9)	December 7, 2022	2,687,500
	116,185(10)	7.67(11)	December 31, 2023	972,468	52,105	835,764	Nil
					45,397	728,168	Nil
David Strang	159,000(6)	5.09(7)	November 24, 2022	1,741,050	20,902	335,268	Nil
	250,000(8)	5.29(9)	December 7, 2022	2,687,500
	116,185(10)	7.67(11)	December 31, 2023	972,468	52,105	835,764	Nil
					45,397	728,168	Nil
Michel (Mike) Richard	125,000(8)	5.29(9)	December 7, 2022	1,343,750	16,721	268,205	Nil
	92,948(10)	7.67(11)	December 31, 2023	777,975
	55,853(12)	16.12(13)	December 12, 2024	Nil	13,509	216,684	Nil
	36,013(14)	14.84(15)	December 17, 2025	43,216	17,540	281,342	Nil
Wayne Drier	150,000(16)(17)	1.50	May 15, 2022	2,181,000	15,676	251,443	Nil
	125,000(8)	5.29(9)	December 7, 2022	1,343,750
	87,139(10)	7.67(11)	December 31, 2023	729,353
	50,534(12)	16.12(13)	December 12, 2024	Nil	12,222	196,041	Nil
	33,894(14)	14.84(15)	December 17, 2025	40,673	16,508	264,788	Nil

44

	Option-Based Awards				Share-Based Awards
Name	Number of Securities Underlying Unexercised Options (#)(1)	Option Exercise Price (US$)(2)	Option Expiration Date	Value of Unexercised In-the- Money Options (US$)(3)	Number of Shares or Units of Shares that Have Not Vested (#)(4)	Market or Payout Value of Share- Based Awards that Have Not Vested (US$)(5)	Market or Payout Value of Vested Share- Based Awards Not Paid Out or Distributed (US$)
Makko DeFilippo	50,334(16)(18)	1.50	May 15, 2022	731,856	11,496	184,396	Nil
	75,000(8)	5.29(9)	December 7, 2022	806,250
	63,902(10)	7.67(11)	December 31, 2023	534,860
	34,576(12)	16.12(13)	December 12, 2024	Nil	8,363	134,143	Nil
	33,894(14)	14.84(15)	December 17, 2025	40,673	16,508	264,788	Nil
Anthea Bath	100,000(19)(20)	7.08(21)	July 16, 2023	896,000	10,451	167,634	Nil
	58,092(10)	7.67(11)	December 31, 2023	486,230
	29,256(12)	16.12(13)	December 12, 2024	Nil	7,076	113,499	Nil
	33,894(14)	14.84(15)	December 17, 2025	40,673	16,508	264,788	Nil

Note:

⁽¹⁾ Class of securities underlying all Options is Shares. All Options granted to the NEOs are governed by the Stock Option Plan.

⁽²⁾ Exercise price for the Options is equivalent to the “Fair Market Value”, as defined in the Stock Option Plan or the “Market Price” as defined in the TSX Company Manual, which currently means the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the grant date.

⁽³⁾ The figures shown in this column are calculated based on the difference between the Option exercise price and the closing price of the Shares on the TSX on December 31, 2020 ($20.42 or US$16.04 based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00). The figures shown in this column do not represent the actual value the individual NEO would receive. The actual gain, if any, on exercise will depend on the value of the Shares on the date of exercise.

⁽⁴⁾ Class of securities underlying all PSUs is Shares. All PSUs granted to the NEOs are governed by the Share Unit Plan.

⁽⁵⁾ Based on the closing price of the Shares on the TSX on December 31, 2020 ($20.42 or US$16.04 based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00) multiplied by the number of notional Shares underlying the PSUs assuming a payout multiple of 1.0. The PSUs will vest three years from the date of grant and the actual number of PSUs that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain performance conditions. See “Compensation Committee Decisions Relating to 2020 Compensation – Options and Share Based Awards” above. The figures shown in this column do not represent the actual value the individual NEO would receive. The actual value, if any, on settlement will depend on the value of the Shares on the date of settlement.

⁽⁶⁾ Fully vested Options. One-third of the Options vested on an annual basis, with the first tranche vesting on November 24, 2018.

⁽⁷⁾ These Options were granted in Canadian dollars (exercise price of $6.48) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00.

⁽⁸⁾ Fully vested Options. One-third of the Options vested on an annual basis, with the first tranche vesting on December 7, 2018.

⁽⁹⁾ These Options were granted in Canadian dollars (exercise price of $6.74) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00.

⁽¹⁰⁾ One-third of the Options vest on an annual basis, with the first tranche vesting on December 31, 2019.

⁽¹¹⁾ These Options were granted in Canadian dollars (exercise price of $9.76) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00.

⁽¹²⁾ One-third of the Options vest on an annual basis, with the first tranche vesting on December 12, 2020.

⁽¹³⁾ These Options were granted in Canadian dollars (exercise price of $20.52) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00.

⁽¹⁴⁾ One-third of the Options vest on an annual basis, with the first tranche vesting on December 17, 2021.

⁽¹⁵⁾ These Options were granted in Canadian dollars (exercise price of $18.90) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00.

45

⁽¹⁶⁾ Fully vested Options. One-third of the Options vested on an annual basis, with the first tranche vesting on May 15, 2018.

⁽¹⁷⁾ Mr. Drier exercised 100,000 Options on October 2, 2018, 100,000 Option on June 27, 2019, 90,000 options on November 27, 2019, and 50,000 Options on May 15, 2020, June 29, 2020 and September 17, 2020, respectively. This figure represents the number of Shares underlying the unexercised Options held by Mr. Drier.

⁽¹⁸⁾ Mr. DeFilippo exercised 33,000 Options on June 21, 2018, 66,666 Options on August 19, 2019 and 50,000 Options on May 15, 2020. This figure represents the number of Shares underlying the unexercised Options held by Mr. DeFilippo.

⁽¹⁹⁾ One-third of the Options vest on an annual basis, with the first tranche vesting on July 16, 2019.

⁽²⁰⁾ Ms. Bath exercised 100,000 Options on September 20, 2020. This figure represents the number of Shares underlying the unexercised Options held by Ms. Bath.

⁽²¹⁾ These Options were granted in Canadian dollars (exercise price of $9.01) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00.

Incentive Plan Awards – Value Vested or Earned During the Year

The following table sets forth the value of incentive plan awards vested or earned by each NEO during the financial year ended December 31, 2020.

Name	Option-based awards – Value vested during the year (US$)(1)	Share-based awards – Value vested during the year (US$)(2)	Non-equity incentive plan compensation – Value earned during the year (US$)(3)
Christopher Noel Dunn	1,812,803(4)	Nil	961,154
David Strang	1,812,803(4)	Nil	961,154
Michel (Mike) Richard	678,498(5)	Nil	383,713
Wayne Drier	2,483,421(6)	Nil	305,588
Makko DeFilippo	1,047,126(7)	Nil	235,068
Anthea Bath	740,738(8)	Nil	179,758

Note:

⁽¹⁾ Aggregate dollar value that would have been realized if the in-the-money Options had been exercised on their vesting date. The figures shown in this column do not represent the actual value the individual NEO would receive. The actual gain, if any, on exercise will depend on the value of the Shares on the date of exercise.

⁽²⁾ No Share Units (PSUs) vested during the financial year ended December 31, 2020.

⁽³⁾ Represents cash bonuses (API) awarded for individual performance and corporate achievements during 2020.

⁽⁴⁾ 53,000 Options vested on November 24, 2020 at an exercise price of $6.48, 83,334 Options vested on December 7, 2020 at an exercise price of $6.74 per Share, and 38,728 Options vested on December 31, 2020 at an exercise price of $9.76 per Share. This figure is calculated based on the difference between the Option exercise price and the closing price of the Shares on the TSX on November 24, 2020 ($22.47), December 7, 2020 ($19.63), and December 31, 2020 ($20.42), respectively. This figure is shown in US dollars and has been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on November 24, 2020 of US$1.3033 = $1.00, December 7, 2020 of US$1.2801 = $1.00, and December 31, 2020 of US$1.2732 = $1.00, respectively.

⁽⁵⁾ 41,667 Options vested on December 7, 2020 at an exercise price of $6.74 per Share, 18,617 Options vested on December 12, 2020 at an exercise price of $20.52 and 30,983 Options vested on December 31, 2020 at an exercise price of $9.76 per Share. This figure is calculated based on the difference between the Option exercise price and the closing price of the Shares on the TSX on December 7, 2020 ($19.63), December 14, 2020 ($18.36), the first trading day after December 12, 2020, which was not a business day, and December 31, 2020 ($20.42), respectively. This figure is shown in US dollars and has been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 7, 2020 of US$1.2801 = $1.00, December 14, 2020 of US$1.2757 = $1.00, and December 31, 2020 of US$1.2732 = $1.00, respectively.

⁽⁶⁾ 196,667 Options vested on May 15, 2020 at an exercise price of US$1.50, 41,667 Options vested on December 7, 2020 at an exercise price of $6.74 per Share, 16,844 Options vested on December 12, 2020 at an exercise price of $20.52 and 29,046 Options vested on December 31, 2020 at an exercise price of $9.76 per Share. This figure is calculated based on the difference between the Option exercise price and the closing price of the Shares on the TSX on May 15, 2020 ($15.17), December 7, 2020 ($19.63), December 14, 2020 ($18.36), the first trading day after December 12, 2020, which was not a business day, and December 31, 2020 ($20.42), respectively. This figure is shown in US dollars and has been converted from Canadian dollars, where applicable, based on the daily exchange rate reported by the Bank of Canada on May 15, 2020 of US$1.4094 = $1.00, December 7, 2020 of US$1.2801 = $1.00, December 14, 2020 of US$1.2757 = $1.00, and December 31, 2020 of US$1.2732 = $1.00, respectively.

46

⁽⁷⁾ 66,667 Options vested on May 15, 2020 at an exercise price of US$1.50, 25,000 Options vested on December 7, 2020 at an exercise price of $6.74 per Share, 11,525 Options vested on December 12, 2020 at an exercise price of $20.52 and 21,301 Options vested on December 31, 2020 at an exercise price of $9.76 per Share. This figure is calculated based on the difference between the Option exercise price and the closing price of the Shares on the TSX on May 15, 2020 ($15.17), December 7, 2020 ($19.63), December 14, 2020 ($18.36), the first trading day after December 12, 2020, which was not a business day, and December 31, 2020 ($20.42), respectively. This figure is shown in US dollars and has been converted from Canadian dollars, where applicable, based on the daily exchange rate reported by the Bank of Canada on May 15, 2020 of US$1.4094 = $1.00, December 7, 2020 of US$1.2801 = $1.00, December 14, 2020 of US$1.2757 = $1.00, and December 31, 2020 of US$1.2732 = $1.00, respectively.

⁽⁸⁾ 66,666 Options vested on July 16, 2020 at an exercise price of $9.01, 9,752 Options vested on December 12, 2020 at an exercise price of $20.52 and 19,364 Options vested on December 31, 2020 at an exercise price of $9.76 per Share. This figure is calculated based on the difference between the Option exercise price and the closing price of the Shares on the TSX on July 16, 2020 ($17.14), December 14, 2020 ($18.36), the first trading day after December 12, 2020, which was not a business day, and December 31, 2020 ($20.42), respectively. This figure is shown in US dollars and has been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on July 16, 2020 of US$1.3543 = $1.00, December 14, 2020 of US$1.2757 = $1.00, and December 31, 2020 of US$1.2732 = $1.00, respectively.

Pension Plan Benefits

The Company does not have a defined benefit or a defined contribution pension plan.

Deferred Compensation Plans

The Company does not have a deferred compensation plan.

Termination and Change of Control Benefits

Each NEO is currently engaged under an employment agreement that provides for, among other things, a base salary (may be adjusted annually by the Board on the recommendation of the Compensation Committee), API and Share and/or Option based awards (as determined by the Board on the recommendation of the Compensation Committee), vacation time and extended benefits. Under the terms of each NEO’s employment agreement, their employment may be terminated as a result of (i) a “Change of Control”; (ii) termination without cause; (iii) termination for cause; (iv) retirement; (v) disability; and (iv) death.

A Change of Control, in general, occurs when the Company sells, transfers or otherwise disposes of all or substantially all (90% or more) of its assets, or any person or group of persons acting jointly or in concert by virtue of an agreement, arrangement, commitment or understanding either acquire 50% or more of the outstanding Shares or sufficient Shares to replace the majority of the Board.

The Company’s obligation to compensate a NEO for a Change of Control will be triggered if both of the following events occur:

· there is a Change of Control of Ero; and

· the NEO is terminated without cause or resigns for “Good Reason” within 12 months of the Change of Control.

A NEO may resign for “Good Reason” within 12 months of a Change of Control, if the Company (i) reduces the NEO’s salary (except in certain limited circumstances); (ii) materially reduces the NEO’s duties, responsibilities, authority or status without the consent of the NEO; (iii) breaches or fails to observe any material provision of the NEO’s employment agreement; or (iv) takes any action that would be considered to amount to constructive dismissal by a court of competent jurisdiction.

Each NEO’s employment agreement also contains non-solicitation, non-competition, confidentiality and notice of resignation provisions which will apply on a termination of employment. Non-competition and non-solicitation restrictions apply for a period of one year from the date the executive’s employment ceases, and the confidentiality provisions apply, subject to certain exceptions, for an indefinite period of time following the termination of employment of an executive. A NEO may terminate their employment by giving not less than 120 days (in the case of the Executive Chairman and the CEO) or 60 days (in the case of all other NEOs) written notice of resignation.

47

The following table summarizes the compensation that would be payable to each NEO should their employment be terminated.

Termination Type	Severance	Bonus	Share Awards	Benefits
Termination Subsequent to Change of Control or Resignation for Good Reason within 12 Months of a Change in Control	Payment equal to 24 months’ salary Prior to Makko DeFilippo’s promotion to President and Anthea Bath’s promotion to COO, effective January 4, 2021, their employment agreements provided for a payment equal to 12 months’ salary)	Lump sum payment equal to the most recent 3-year’s average bonus paid	All unvested Options and Share Units vest immediately All vested Option are exercisable at any time up to, but not after, the earlier of the expiry date, and the date which is 90 days after the termination date Vested Share Units have 30 days to be redeemed. In the event that Share Units are subject to satisfaction of any performance conditions, the Compensation Committee shall consider the extent of satisfaction of such performance conditions in determining the number of Share Units to be redeemed	Extension of executive benefits for 12 months following termination (to the extent permitted by the applicable benefit plan)
Termination without Cause	Payment equal to 12 months’ salary + 1 month of salary per year of service to an aggregate maximum of 24 months’ salary (pro-rated for partial years) Prior to Makko DeFilippo’s promotion to President and Anthea Bath’s promotion to COO, effective January 4, 2021, their employment agreements provided for a payment equal to 6 months’ salary + 1 month of salary per year of service to an aggregate maximum of 12 months’ salary (pro rated for partial years)	None	All unvested Options or Share Units expire on the termination date All vested Option are exercisable at any time up to, but not after, the earlier of the expiry date, and the date which is 60 days after the termination date All vested Share Units will be redeemed on the termination date	Extension of executive benefits for 12 months following termination (to the extent permitted by the applicable benefit plan) Prior to Makko DeFilippo’s promotion to President and Anthea Bath’s promotion to COO, effective January 4, 2021, their employment agreements provided for the extension of executive benefits for 6 months following termination (to the extent permitted by the applicable benefit plan)
Termination for Cause	None	None	All Options and Share Units expire on the termination date	None
Voluntary Resignation	None	None	All unvested Options or Share Units expire on the termination date All vested Option are exercisable at any time up to, but not after, the earlier of the expiry date, and the date which is 60 days after the termination date All vested Share Units will be redeemed on the termination date	None

48

Termination Type	Severance	Bonus	Share Awards	Benefits
Retirement	None	None	Options will continue to vest in normal course and vested Option are exercisable at any time up to, but not after, the earlier of the expiry date, and the date which is one (1) year after the termination date Vested Share Units have 30 days to be redeemed	None
Disability	None	None	Options will continue to vest in normal course and vested Options are exercisable at any time up to, but not after, the earlier of the expiry date, and the date which is one (1) year after the termination date Vested Share Units have 30 days to be redeemed	None
Death	None	None	All outstanding Options will vest immediately and are exercisable at any time up to, but not after, the earlier of the expiry date, and the date which is one (1) year after the termination date All vested Share Units will be redeemed on the termination date	None

Estimated Incremental Payments on Termination

The following table sets forth the estimated incremental payments, payable and benefits that would be due to the NEOs under various termination scenarios, assuming a termination date of December 31, 2020.

	Christopher Noel Dunn		David Strang		Michel (Mike) Richard		Wayne Drier		Makko DeFilippo		Anthea Bath
Change of Control with Termination
Severance Base Payment (US$)(1)		1,072,000		1,072,000		740,000		680,000		340,000		260,000
Severance Bonus Payment (US$)		887,051		887,051		375,399		300,733		199,603		147,417
Stock Options (US$)(2)		324,162		324,162		302,543		283,796		350,389		622,089
Share Units (US$)(3)		1,171,032		1,171,032		484,889		447,484		318,538		281,133
Benefits (US$)		15,730		3,791		5,031		4,404		12,656		4,550
Total		3,469,975		3,458,036		1,907,862		1,716,417		1,221,186		1,315,189
Termination without Cause
Severance Base Payment (US$)(4)		714,667		714,667		493,333		448,610		280,971		183,294
Severance Bonus Payment (US$)		N/A		N/A		N/A		N/A		N/A		N/A
Stock Options (US$)		Nil		Nil		Nil		Nil		Nil		Nil
Share Units (US$)		Nil		Nil		Nil		Nil		Nil		Nil
Benefits (US$)		15,730		3,791		5,031		4,404		12,656		4,550
Total		730,397		718,458		498,364		453,014		293,627		188,718

49

Christopher Noel Dunn

David Strang

Michel (Mike) Richard

Wayne Drier

Makko DeFilippo

Anthea Bath

Other Termination

Termination for Cause (US$)

Nil

Nil

Nil

Nil

Nil

Nil

Resignation (US$)

Nil

Nil

Nil

Nil

Nil

Nil

Retirement (US$)

Nil

Nil

Nil

Nil

Nil

Nil

Disability (US$)

Nil

Nil

Nil

Nil

Nil

Nil

Death (US$)(5)

324,162

324,162

302,543

283,796

350,389

622,089

Note:

⁽¹⁾ Represents the severance base payment, which is equal to 24 months’ salary, except in the case of Mr. DeFilippo and Ms. Bath, whose employment agreements as at December 31, 2020 provided for a payment that is equal to 12 months’ salary. Effective January 4, 2020, Mr. DeFilippo was promoted from Vice President, Corporate Development to President of the Company and Ms. Bath was promoted from Vice President, Technical Services to COO of the Company, and their employment agreements with the Company have been amended to provide that their severance base payment shall be equal to 24 months’ salary.

⁽²⁾ Represents the value of unvested in-the-money Options as at December 31, 2020. All unvested Options will vest immediately upon a Change of Control with termination. The figures are calculated based on the difference between the Option exercise price and the closing price of the Shares on the TSX on December 31, 2020 ($20.42 or US$16.04 based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00).

⁽³⁾ PSUs were granted to each NEO on December 31, 2018, December 12, 2019 and December 17, 2020. The PSUs will vest three years from the date of grant and the actual number of PSUs that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain performance conditions (see “Compensation Committee Decisions Relating to 2020 Compensation – Options and Share Based Awards” above). The figures in this row assume that upon a Change of Control with termination, the Board would consider that 100% of the PSUs granted on December 31, 2018 and December 12, 2019 vest on December 31, 2020, based on the closing price of the Shares on the TSX on December 31, 2020 ($20.42 or US$16.04 based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00) multiplied by the number of notional Shares underlying the PSUs assuming a payout multiple of 1.0. None of the PSUs granted on December 17, 2020 would vest as none of the performance conditions could be satisfied by December 31, 2020.

⁽⁴⁾ Represents the severance base payment, which is equal to 12 months’ salary, plus one month of salary per year of service to an aggregate maximum of 24 months’ salary (pro-rated for partial years), except in the case of Mr. DeFilippo and Ms. Bath, whose employment agreements as at December 31, 2020 provided for a payment that is equal to 6 months’ salary, plus one month of salary per year of service to an aggregate maximum of 12 months’ salary (pro-rated for partial years). Effective January 4, 2020, Mr. DeFilippo was promoted from Vice President, Corporate Development to President of the Company and Ms. Bath was promoted from Vice President, Technical Services to COO of the Company, and their employment agreements with the Company have been amended to provide that their severance base payment shall now be equal to 12 months’ salary, plus one month of salary per year of service to an aggregate maximum of 24 months’ salary (pro-rated for partial years). As the employment of Messrs. Drier and DeFilippo and Ms. Bath commenced on March 1, 2017, February 1, 2017 and July 16, 2018, respectively, their severance base payments have been pro-rated accordingly.

⁽⁵⁾ Represents the value of unvested in-the-money Options as at December 31, 2020. All unvested Options will vest immediately upon death. The figures are calculated based on the difference between the Option exercise price and the closing price of the Shares on the TSX on December 31, 2020 ($20.42 or US$16.04 based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00). No PSUs would vest on December 31, 2020.

Director Compensation

Compensation of directors has been determined by taking into consideration the size and stage of development of the Company and to achieve the objectives of retaining and attracting skilled, experienced and dedicated directors.

The Compensation Committee reviews our independent director compensation on an annual basis and recommends revisions to the compensation paid to our independent directors when warranted under the circumstances. In late 2019, Lane Caputo provided a review of market practices regarding independent director compensation, including a benchmarking exercise against the same peer group used to benchmark executive compensation, to assist the Compensation Committee in recommending a compensation structure for independent directors.

As senior officers, Messrs. Dunn and Strang did not and will not receive compensation for their service as directors and their compensation information is presented in the section relating to executive compensation above.

50

On December 12, 2019, a DSU Plan was established by the Board to promote a greater alignment of long-term interests between independent directors and shareholders of the Company, and to provide a compensation system for independent directors that, together with our other compensation mechanisms, is reflective of the responsibility, commitment and risks that accompany Board membership and the performance of the duties required of our directors. DSUs may be awarded by the Compensation Committee from time to time to provide independent directors with appropriate equity-based compensation for the services they render to the Company and may be subject to terms and conditions with respect to vesting of such DSUs. In addition, independent directors may elect, once a year, to receive a portion or all of their respective annual cash remuneration in the form of DSUs, which will be fully vested upon such grant. Pursuant to the DSU Plan, DSUs may only be settled by way of cash payment upon the independent director’s death, retirement or removal from the Board. Further information regarding the DSU Plan is provided below under the “Deferred Share Unit Plan”.

For 2020, our independent directors were compensated for their services as directors through a combination of an annual retainer fee and grant of Options and DSUs. Independent directors are not compensated based on performance. The 2020 annual retainers were as follows:

Director (Base)	US$	70,000
Lead Director	US$	30,000
Audit Committee Chair	US$	15,000
Compensation Committee Chair	US$	12,500
Nominating and Corporate Governance Committee Chair	US$	10,000
Environmental, Health, Safety and Sustainability Chair	US$	10,000

Retainers are paid quarterly and withholding taxes apply. In the event that an independent director elects to receive a portion or all of their annual retainer in the form of DSUs, such DSUs are issued quarterly as more particularly set out below under the “Deferred Share Unit Plan”. Our directors were also reimbursed for reasonable travel and other out-of-pocket expenses incurred in connection with attending meetings and otherwise carrying out their duties as directors of the Company.

Historically, annual equity-based compensation of independent directors for a particular financial year (the “Compensation Year”) has been granted to such directors during early January of the following year (e.g., each independent director was granted 6,208 Options and 3,382 DSUs on January 2, 2020 as part of their 2019 compensation) as compared to the annual equity-based compensation of officers (including the NEOs), employees and consultants of the Company, which has been granted to such individuals during December of the Compensation Year. In late 2020, our Compensation Committee and Board decided that, going forward, annual equity-based compensation grants to independent directors would occur on the same date in December of the Compensation Year as the grant date of annual equity-based compensation of officers, employees and consultants. Accordingly, each independent director was granted 3,601 Options and 4,677 DSUs on December 17, 2020 as part of their 2020 compensation.

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For 2021, our independent directors will be compensated for their services as directors through a combination of an annual retainer fee and annual equity-based compensation in the form of DSUs and Options, with at least 90% of equity grant values to be in the form of DSUs and no more than 10% of equity grant values to be in the form of Options. The schedule of annual retainer fees remains unchanged.

Director Compensation Table

The following table sets forth all amounts of compensation provided to the independent directors of the Company during the financial year ended December 31, 2020.

Name	Fees earned (US$)(1)		Share- based awards (US$)			Option- based awards (US$)(2)			Non-equity incentive plan compensation (US$)		Pension value (US$)		All other compensation (US$)		Total (US$)
Lyle Braaten		80,000		60,966	(3)		40,104	(6)		N/A		N/A		Nil		271,892
				69,504	(4)		21,318	(7)
Steven Busby		Nil		60,966	(3)		40,104	(6)		N/A		N/A		Nil		272,447
				69,504	(4)		21,318	(7)
				80,556	(5)
Dr. Sally Eyre		35,000		60,966	(3)		40,104	(6)		N/A		N/A		Nil		262,134
				69,504	(4)		21,318	(7)
				35,243	(5)
Robert Getz		82,500		60,966	(3)		40,104	(6)		N/A		N/A		Nil		274,392
				69,504	(4)		21,318	(7)
Chantal Gosselin		Nil		60,966	(3)		40,104	(6)		N/A		N/A		Nil		262,369
				69,504	(4)		21,318	(7)
				70,477	(5)
John Wright		100,000		60,966	(3)		40,104	(6)		N/A		N/A		Nil		291,892
				69,504	(4)		21,318	(7)
Matthew Wubs		Nil		60,966	(3)		40,104	(6)		N/A		N/A		Nil		277,476
				69,504	(4)		21,318	(7)
				85,584	(5)

Note:

⁽¹⁾ Represents retainer fees earned and paid in cash. Messrs. Braaten, Getz and Wright elected to receive 100% of their retainer fees earned in cash. Dr. Eyre elected to receive 50% of her retainer fees earned in the form of DSUs and Ms. Gosselin and Messrs. Busby and Wubs elected to receive 100% of their respective retainer fees earned in the form of DSUs, which are included in the Share-based awards column and more particularly described in footnote (5) below.

⁽²⁾ Represents the total grant date fair value of the Options granted and may not represent the amounts the recipient will actually realize from the award. The fair value of the Options has been estimated at the date of grant in accordance with IFRS accounting requirements using a Black-Scholes option pricing model and was determined based on various assumptions including share price volatility on the grant date taking into account the expected life of the Options, an assumption that no dividends are to be paid and a risk-free interest rate determined by the Bank of Canada for the grant date. Please see footnotes (6) and (7) below for the assumptions used for the grant of Options.

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⁽³⁾ Represents the total grant date fair value of the DSUs granted and may not represent the amounts the recipient will actually realize from the award. On January 2, 2020, the Board approved the issuance of 3,382 DSUs to each independent director under the DSU Plan as part of their 2019 compensation, and based on a grant date fair value of C$23.42 per Share (US$18.03 per Share based on the daily exchange rate reported by the Bank of Canada on January 2, 2020 of US$1.2992 = $1.00), which is the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the grant date.

⁽⁴⁾ Represents the total grant date fair value of the DSUs granted and may not represent the amounts the recipient will actually realize from the award. On December 17, 2020, the Board approved the issuance of 4,677 DSUs to each independent director under the DSU Plan as part of their 2020 compensation, and based on a grant date fair value of C$18.90 per Share (US$14.86 per Share based on the daily exchange rate reported by the Bank of Canada on December 17, 2020 of US$1.2718 = $1.00), which is the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the grant date.

⁽⁵⁾ Represents the total grant date fair value of the DSUs granted to Dr. Eyre, Ms. Gosselin and Messrs. Busby and Wubs, as the case may be, in lieu of a portion or all of their respective retainers fees earned (each such director’s election set out in footnote (1) above) and may not represent the amounts the recipient will actually realize from the award. On March 31, 2020, Dr. Eyre, Ms. Gosselin and Messrs. Busby and Wubs received 1,122 DSUs, 2,243 DSUs, 2,564 DSUs and 2,724 DSUs, respectively, in lieu of a portion or all of their respective retainers fees earned (each such director’s election set out in footnote (1) above) earned during the first quarter of 2020, and based on a grant date fair value of C$11.30 per Share (US$7.97 per Share based on the daily exchange rate reported by the Bank of Canada on March 31, 2020 of US$1.4187 = $1.00), which is the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the grant date. On June 30, 2020, Dr. Eyre, Ms. Gosselin and Messrs. Busby and Wubs received 647 DSUs, 1,295 DSUs, 1,480 DSUs and 1,572 DSUs, respectively, in lieu of a portion or all of their respective retainers fees earned (each such director’s election set out in footnote (1) above) earned during the second quarter of 2020, and based on a grant date fair value of C$18.49 per Share (US$13.57 per Share based on the daily exchange rate reported by the Bank of Canada on June 30, 2020 of US$1.3628 = $1.00), which is the volume weighted average trading price of the Shares on the Toronto Stock Exchange (the “TSX”) for the five trading days immediately preceding the grant date. On September 30, 2020, Dr. Eyre, Ms. Gosselin and Messrs. Busby and Wubs received 636 DSUs, 1,271 DSUs, 1,453 DSUs and 1,544 DSUs, respectively, in lieu of a portion or all of their respective retainers fees earned (each such director’s election set out in footnote (1) above) earned during the third quarter of 2020, and based on a grant date fair value of C$18.36 per Share (US$13.76 per Share based on the daily exchange rate reported by the Bank of Canada on September 30, 2020 of US$1.3339 = $1.00), which is the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the grant date. On December 31, 2020, Dr. Eyre, Ms. Gosselin and Messrs. Busby and Wubs received 553 DSUs, 1,106 DSUs, 1,264 DSUs and 1,343 DSUs, respectively, in lieu of a portion or all of their respective retainers fees earned (each such director’s election set out in footnote (1) above) earned during the fourth quarter of 2020, and based on a grant date fair value of C$20.20 per Share (US$15.87 per Share based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00), which is the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the grant date.

⁽⁶⁾ On January 2, 2020, each independent director was granted 6,208 Options as part of their 2019 compensation, and at an exercise price of $23.42 per Share (US$18.03 per Share based on the daily exchange rate reported by the Bank of Canada on January 2, 2020 of US$1.2992 = $1.00), expiring on January 2, 2025. These Options have a grant date fair value of $8.39 each (US$6.46 per Share based on the daily exchange rate reported by the Bank of Canada on January 2, 2020 of US$1.2992 = $1.00) based on the following assumptions: risk-free interest rate of 1.63%; dividend yield of 0%; a forfeiture rate of 0%; volatility factor of 50.59%; and, expected life of 3 years.

⁽⁷⁾ On December 17, 2020, each independent director was granted 3,601 Options as part of their 2020 compensation, and at an exercise price of $18.90 per Share (US$14.86 per Share based on the daily exchange rate reported by the Bank of Canada on December 17, 2020 of US$1.2718 = $1.00), expiring on December 17, 2025. These Options have a grant date fair value of $7.53 each (US$5.92 per Share based on the daily exchange rate reported by the Bank of Canada on December 17, 2020 of US$1.2718 = $1.00) based on the following assumptions: risk-free interest rate of 0.39%; dividend yield of 0%; a forfeiture rate of 0%; volatility factor of 53.81%; and, expected life of 3 years.

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Outstanding Share-Based Awards and Option-Based Awards

The following table sets forth all Option-based awards and Share-based awards outstanding for each independent director as at December 31, 2020.

	Option-Based Awards								Share-Based Awards
Name	Number of Securities Underlying Unexercised Options (#)(1)		Option Exercise Price (US$)(2)			Option Expiration Date	Value of Unexercised In-the- Money Options (US$)(3)		Number of Shares or Units of Shares that Have Not Vested (#)(4)		Market or Payout Value of Share- Based Awards that Have Not Vested (US$)(5)		Market or Payout Value of Vested Share- Based Awards Not Paid Out or Distributed (US$)
		30,000		5.29	(6)	December 7, 2022		322,388
		25,000		7.70	(7)	January 2, 2024		208,571
Lyle Braaten		6,208		18.39	(8)	January 2, 2025		Nil		8,059		129,266	Nil
		3,601		14.84	(9)	December 17, 2025		4,305
		30,000		5.29	(6)	December 7, 2022		322,388
		25,000		7.70	(7)	January 2, 2024		208,571
Steven Busby		6,208		18.39	(8)	January 2, 2025		Nil		14,820		237,713	Nil
		3,601		14.84	(9)	December 17, 2025		4,305
		20,000		16.56	(10)	August 15, 2024		Nil
Dr. Sally Eyre		6,208		18.39	(8)	January 2, 2025		Nil		11,017		176,713	Nil
		3,601		14.84	(9)	December 17, 2025		4,305
		24,000		8.05	(11)	June 19, 2023		191,746
Robert Getz		25,000		7.70	(7)	January 2, 2024		208,571		8,059		129,266	Nil
		6,208		18.39	(8)	January 2, 2025		Nil
		3,601		14.84	(9)	December 17, 2025		4,305
		20,000		16.56	(10)	August 15, 2024		Nil
Chantal Gosselin		6,208		18.39	(8)	January 2, 2025		Nil		13,974		224,143	Nil
		3,601		14.84	(9)	December 17, 2025		4,305
		30,000		5.29	(6)	December 7, 2022		322,388
John Wright		25,000		7.70	(7)	January 2, 2024		208,571		8,059		129,266	Nil
		6,208		18.39	(8)	January 2, 2025		Nil
		3,601		14.84	(9)	December 17, 2025		4,305
		30,000		5.29	(6)	December 7, 2022		322,388
Matthew Wubs		25,000		7.70	(7)	January 2, 2024		208,571		15,242		244,482	Nil
		6,208		18.39	(8)	January 2, 2025		Nil
		3,601		14.84	(9)	December 17, 2025		4,305

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Note:

⁽¹⁾ Class of securities underlying all Options is Shares. All Options granted to the independent directors are governed by the Stock Option Plan. The Options held by each independent director, in the amounts set out in this column, are fully vested.

⁽²⁾ Exercise price for the Options is equivalent to the “Fair Market Value”, as defined in the Stock Option Plan or the “Market Price” as defined in the TSX Company Manual, which currently means the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the grant date.

⁽³⁾ The figures shown in this column are calculated based on the difference between the Option exercise price and the closing price of the Shares on the TSX on December 31, 2020 ($20.42 or US$16.04 based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00). The figures shown in this column do not represent the actual value the individual director would receive. The actual gain, if any, on exercise will depend on the value of the Shares on the date of exercise.

⁽⁴⁾ Represents DSUs held by each independent director. Pursuant to the DSU Plan, DSUs may only be settled by way of cash payment upon the director’s death, retirement or removal from the Board.

⁽⁵⁾ The figures shown in this column are calculated based on the closing price of the Shares on the TSX on December 31, 2020 ($20.42 or US$16.04 based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00) multiplied by the number of notional Shares underlying the DSUs. The figures shown in this column do not represent the actual cash value the individual director would receive. The actual cash value will depend on the value of the Shares on the date of settlement.

⁽⁶⁾ These Options were granted in Canadian dollars (exercise price of $6.74) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00.

⁽⁷⁾ These Options were granted in Canadian dollars (exercise price of $9.80) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00.

⁽⁸⁾ These Options were granted in Canadian dollars (exercise price of $23.42) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00.

⁽⁹⁾ These Options were granted in Canadian dollars (exercise price of $18.90) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00.

⁽¹⁰⁾ These Options were granted in Canadian dollars (exercise price of $21.09) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00.

⁽¹¹⁾ These Options were granted in Canadian dollars (exercise price of $10.25) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2020 of US$1.2732 = $1.00.

55

Incentive Plan Awards – Value Vested or Earned During the Year

The following table sets forth the value of incentive plan awards vested or earned by each independent director during the financial year ended December 31, 2020.

Name	Option-based awards – Value vested during the year (US$)			Share-based awards – Value vested during the year (US$)	Non-equity incentive plan compensation – Value earned during the year (US$)
Lyle Braaten		526	(1)	Nil	N/A
		2,746	(2)
Steven Busby		526	(1)	Nil	N/A
		2,746	(2)
Dr. Sally Eyre		526	(1)	Nil	N/A
		Nil	(3)
		2,746	(2)
Robert Getz		526	(1)	Nil	N/A
		2,746	(2)
Chantal Gosselin		526	(1)	Nil	N/A
		Nil(3)
		2,746	(2)
John Wright		526	(1)	Nil	N/A
		2,746	(2)
Matthew Wubs		526	(1)	Nil	N/A
		2,746	(2)

Note:

⁽¹⁾ Options granted to each independent director on January 2, 2020 as part of their 2019 compensation vested, in full, on the grant date. This figure represents the aggregate dollar value that would have been realized if the 6,208 Options granted on January 2, 2020 had been exercised on the vesting date, calculated based on the difference between the Option exercise price ($23.42 or US$18.03 based on the daily exchange rate reported by the Bank of Canada on January 2, 2020 of US$1.2992 = $1.00) and the closing price of the Shares on the TSX on the vesting date ($23.53 or US$18.11 based on the daily exchange rate reported by the Bank of Canada on January 2, 2020 of US$1.2992 = $1.00). The figure shown do not represent the actual value the individual director would receive. The actual gain, if any, on exercise will depend on the value of the Shares on the date of exercise.

⁽²⁾ Options granted to each independent director on December 17, 2020 as part of their 2020 compensation vested, in full, on the grant date. This figure represents the aggregate dollar value that would have been realized if the 3,601 Options granted on December 17, 2020 had been exercised on the vesting date, calculated based on the difference between the Option exercise price ($18.90 or US$14.86 based on the daily exchange rate reported by the Bank of Canada on December 17, 2020 of US$1.2718 = $1.00) and the closing price of the Shares on the TSX on the vesting date ($19.87 or US$15.62 based on the daily exchange rate reported by the Bank of Canada on December 17, 2020 of US$1.2718 = $1.00). The figure shown do not represent the actual value the individual director would receive. The actual gain, if any, on exercise will depend on the value of the Shares on the date of exercise.

⁽³⁾ Of the 20,000 Options granted to each of Dr. Eyre and Ms. Gosselin on August 15, 2019, 11,914 Options vested on the grant date and 8,086 Options vested upon receipt of approval by shareholders of the Company on May 7, 2020. The figure shown is Nil given the 8,086 Options being out of the money on the vesting date, and represents the aggregate dollar value that would have been realized if the 8,086 Options granted had been exercised on the vesting date, calculated based on the difference between the Option exercise price ($21.09 or US$15.05 based on the daily exchange rate reported by the Bank of Canada on May 7, 2020 of US$1.4015 = $1.00) and the closing price of the Shares on the TSX on the vesting date ($15.01 or US$10.71 based on the daily exchange rate reported by the Bank of Canada on May 7, 2020 of US$1.4015 = $1.00). The figure shown do not represent the actual value the individual director would receive. The actual gain, if any, on exercise will depend on the value of the Shares on the date of exercise.

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Deferred Share Unit Plan

On December 12, 2019, a DSU Plan was established by the Board as a component of our compensation for independent directors. Only independent directors are eligible to participate and to receive DSUs under the DSU Plan.

DSUs may be awarded by the Board from time to time to provide independent directors with appropriate equity-based compensation for the services they render to the Company and may be subject to terms and conditions with respect to vesting of such DSUs.

In addition, independent directors may elect, once a year, to receive a portion or all of their respective annual cash remuneration in the form of DSUs, which will be fully vested upon such grant. The number of DSUs to be awarded to a participant under the DSU Plan is determined by dividing the portion of that participant’s annual cash remuneration by the fair market value of a Share on the last day of the quarter in which such portion of the annual cash remuneration was earned. For the purposes of the DSU Plan, fair market value of a Share is the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the relevant date (or on any such other stock exchange, inter-dealer quotation network or other organized trading facility on which the Shares trade or are quoted from time to time). If the Shares are suspended from trading or have not traded on the TSX or another stock exchange, inter-dealer quotation network or other organized trading facility for an extended period, the fair market value of a Share will be determined by the Board in its sole discretion acting in good faith.

Pursuant to the DSU Plan, DSUs may only be settled by way of cash payment. A participant is not entitled to payment in respect of the DSUs until his or her death, retirement or removal from the Board. The settlement amount of each DSU is based on the fair market value of a Share on the DSU redemption date multiplied by the number of DSUs being redeemed.

In the event that a participant’s death, retirement or removal from the Board is concurrent with, or within twelve (12) months following, a “Change of Control” (as defined in the DSU Plan), the participant or his or her beneficiary, as the case may be, shall on such accelerated entitlement date receive a payment in cash of an aggregate amount equal to the greater of (a) the amount payable under the DSU Plan as prescribed in the above paragraph; and (b) the product of (i) the price attributed to the Shares in connection with the transaction resulting in the Change of Control (or the fair market value of a Share at the time of such transaction as determined by the Board in good faith if no Share price was in fact established for purposes of such transaction) multiplied by (ii) the number of DSUs being settled as of accelerated entitlement date. Any unvested DSUs will vest upon Change of Control.

In case of payment of dividends on the Shares, participants under the DSU Plan will receive the value of the dividend in the form of DSUs.

Share Ownership Requirement

Pursuant to the Share Ownership Policy adopted by the Board, each current and new independent director of the Company is required to beneficially own, control or direct, directly or indirectly, at least three times their annual base retainer fee in Shares, RSUs and/or DSUs within five years of their appointment. As at the date of this Circular, each independent director has achieved their respective Share ownership target. Please see “Share Ownership Policy” above for further details.

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Securities Authorized For Issuance Under Equity Compensation Plans

The following table sets forth details of the Company’s compensation plans under which equity securities of the Company are authorized for issuance at the end of the Company’s most recently completed financial year.

Plan Category	Number of securities to be issued upon exercise of outstanding Options, warrants and rights			Weighted-average exercise price of outstanding Options, warrants and rights (US$)		Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by securityholders
Stock Option Plan		4,641,763			7.91		1,660,817	(2)
Share Unit Plan		727,761	(1)		N/A
Equity compensation plans not approved by securityholders		Nil			Nil		Nil
Total		5,369,524			7.91		1,660,817

Note:

⁽¹⁾ The figure in the above table assumes that 100% of the PSUs granted (211,804 PSUs, 225,659 PSUs, 1,000 PSUs, and 289,298 granted on December 31, 2018, December 31, 2019, January 2, 2020 and December 17, 2020, respectively) will vest. The PSUs will vest three years from the date of grant and the actual number of PSUs that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain performance conditions. See “Compensation Committee Decisions Relating to 2020 Compensation – Options and Share Based Awards” above.

⁽²⁾ Based on the maximum number of Shares reserved for issuance under the Stock Option Plan and the Share Unit Plan of 7,030,341, representing 8% of the 87,879,261 Shares issued and outstanding as at December 31, 2020.

Annual Burn Rates of Security-Based Compensation Arrangements

In accordance with the requirements of the TSX, the following table sets forth the number of security-based compensation awards granted during the periods noted below and the annual burn rate of each security-based compensation arrangement:

	Stock Option Plan					Share Unit Plan						Total (Combined)
	Granted		Burn Rate(1)			Granted			Burn Rate(1)			Burn Rate
December 31, 2020		489,295		0.57	%		290,298	(2)		0.34	%		0.91	%
December 31, 2019		635,228		0.75	%		225,659	(2)		0.26	%		1.01	%
December 31, 2018		1,714,519		2.04	%		215,288	(2)		0.26	%		2.30	%

Notes:

⁽¹⁾ The annual burn rate is calculated as the number of securities granted under the arrangement during the applicable fiscal year divided by the weighted average number of securities outstanding for the applicable fiscal year.

⁽²⁾ The figure in the above table assumes 100% vesting of the PSUs. The PSUs will vest three years from the date of grant and the actual number of PSUs that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain performance conditions. See “Compensation Committee Decisions Relating to 2020 Compensation – Options and Share Based Awards” above.

58

Pursuant to the TSX requirements, the DSU Plan is not considered a security-based compensation arrangement as the DSUs granted thereunder may only be settled by way of cash payment. See “Deferred Share Unit Plan” above.

Corporate Governance Practices

The Company and the Board recognize the importance of corporate governance to the effective management of the Company and to the protection of its employees and shareholders. The Company’s approach to significant issues of corporate governance is designed with a view to ensuring that the business and affairs of the Company are effectively managed so as to enhance shareholder value. The Board fulfills its mandate directly and through its committees at regularly scheduled meetings or at meetings held as required. Frequency of meetings may be increased, and the nature of the agenda items may be changed depending upon the state of the Company’s affairs and in light of opportunities or risks which the Company faces. The directors are kept informed of the Company’s business and affairs at these meetings as well as through reports and discussions with management on matters within their particular areas of expertise.

The Board

The Board currently consists of nine directors, seven of whom are independent based upon the test for director independence set out in NI 52-110. As such, the majority of Ero’s directors are independent. Lyle Braaten, Steven Busby, Dr. Sally Eyre, Robert Getz, Chantal Gosselin, John Wright and Matthew Wubs are the independent directors of the Company. Christopher Noel Dunn is the Executive Chairman of the Company and engages in the management of day-to-day operations of the Company. As such, Mr. Dunn is not an independent director. David Strang is the CEO of the Company and is not independent as a result.

As the Executive Chairman of the Board, Mr. Dunn is primarily responsible for the following functions in connection with the affairs of the Board: (i) providing leadership to foster the effectiveness of the Board; (ii) ensuring an effective relationship exists between the Board and senior management of the Company, that the appropriate committee structure is in place with regards to making recommendations for appointment to such committees, and that the directors receive the information required for the proper performance of their duties; (iii) chairing Board meetings, including stimulating debate, providing adequate time for discussion of issues, encouraging full participation and discussion by individual directors and confirming that clarity regarding decision-making is reached and accurately recorded; (iv) chairing general meetings of shareholders; (v) together with the Nominating and Corporate Governance Committee, ensuring that an appropriate system is in place to evaluate the performance of the Board as a whole, the Board’s committees and individual directors; (vi) consulting with the Nominating and Corporate Governance Committee on candidates for nomination or appointment to the Board; (vii) working with the CEO of the Company to ensure that the Board is provided with the resources to permit it to carry out its responsibilities and raising any issues that are preventing the Board from being able to carry out its responsibilities; and (viii) assisting the CEO in fulfilling his responsibilities, as necessary.

As the Executive Chairman is not an independent director, the Board has appointed John Wright as the Lead Director. The Lead Director facilitates the functioning of the Board independently of the Company’s management and provides independent leadership to the Board by: (i) ensuring that the Board functions independently of management and other non-independent directors; (ii) fostering the effectiveness of the Board; (iii) working with the Executive Chairman to ensure that the appropriate committee structure is in place and assisting the Nominating and Corporate Governance Committee in making recommendations for appointment to such committees; (iv) suggesting items of importance for consideration on the agenda for each Board meeting; (v) in the absence of the Executive Chairman, chairing Board meetings, including stimulating debate, providing adequate time for discussion of issues, encouraging full participation and discussions and confirming that clarity regarding decision-making is reached and accurately recorded; (vi) chairing each Board meeting at which only independent directors are present; (vii) as may be required, consulting and meeting with any or all independent directors and representing such directors in discussions with management of the Company; (viii) providing recommendations and advice to the Nominating and Corporate Governance Committee on candidates for nomination or appointment to the Board; (ix) recommending, where necessary, the holding of special meetings of the Board; and (x) working with the Executive Chairman and the CEO to ensure that the Board is provided with the resources to permit it to carry out its responsibilities and raising any issues that are preventing the Board from being able to do so.

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Inter-locking Directorships

The following table lists the directors of the Company who serve on boards of directors of other reporting issuers (or the equivalent) and the identities of such reporting issuers (or the equivalent). Except as set out below, none of our directors currently serve together on the board of directors of other reporting issuers (or the equivalent) in Canada or foreign jurisdictions.

Name of Director	Reporting Issuers (or the Equivalent)
Lyle Braaten	Lumina Gold Corp. Luminex Resources Corp.
Dr. Sally Eyre	Adventus Mining Corporation Centamin plc Equinox Gold Corp.
Robert Getz	Haynes International, Inc. Techtronic Industries Company Limited
Chantal Gosselin	Lundin Gold Inc. Wheaton Precious Metals Corp.
John Wright	Luminex Resources Corp. SilverCrest Metals Inc.
Matthew Wubs	Westland Insurance Group Ltd. (private)

Board Meetings

The Executive Chairman is primarily responsible for the agenda and for supervising the conduct of each meeting of the Board. Any director may propose the inclusion of items on the agenda, request the presence of or a report by any member of senior management, or at any Board meeting raise subjects that are not on the agenda for the meeting. Materials for each meeting are distributed to the Board in advance of the meeting via a secure online Board portal.

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The following table sets out the attendance record of each director for all Board meetings and meetings of the committees of the Board of which they were members during the financial year ended December 31, 2020.

Director	Board	Audit Committee	Compensation Committee	Nominating and Corporate Governance Committee	Environmental, Health, Safety and Sustainability Committee
	6 meetings	4 meetings	6 meetings	4 meetings	5 meetings
Christopher Noel Dunn	6 of 6	-	-	-	-
David Strang	6 of 6	-	-	-	-
Lyle Braaten	6 of 6	4 of 4	-	4 of 4	-
Steven Busby	6 of 6	-	-	4 of 4	5 of 5
Dr. Sally Eyre	6 of 6	-	6 of 6	4 of 4	-
Robert Getz	6 of 6	-	6 of 6	4 of 4	-
Chantal Gosselin	6 of 6	4 of 4	-	-	5 of 5
John Wright	6 of 6	4 of 4	-	-	5 of 5
Matthew Wubs	6 of 6	4 of 4	6 of 6	-	-

Meetings of Independent Directors

Our Board encourages open and candid discussion amongst its independent director and as such, the independent directors meet in-camera (privately) during each Board meeting without non-independent directors and members of management in attendance. During the financial year ended December 31, 2020, the independent directors met in-camera during all six Board meetings. In addition, the Audit Committee regularly holds in-camera sessions with our auditors or amongst themselves. Independent directors sitting on other committees of the Board also hold in-camera sessions on an ad-hoc basis.

Majority Voting Policy

The Company has adopted a Majority Voting Policy. Pursuant to the provisions of the Majority Voting Policy, a nominee for election as a director of the Company who does not receive a greater number of votes “for” than votes “withheld” with respect to the election of directors by shareholders shall offer to tender his or her resignation to the Executive Chairman of the Board promptly following the meeting of shareholders at which the director was elected. The Nominating and Corporate Governance Committee will promptly consider such offer and make a recommendation to the Board whether to accept it or not. The Board will promptly accept the resignation unless it determines that there are exceptional circumstances. The Board shall act on the Nominating and Corporate Governance Committee’s recommendation in respect of a resignation tendered pursuant to the Majority Voting Policy within 90 days following the date of the applicable election and shall promptly disclose, via press release, its decision whether to accept the director’s resignation offer including the reasons for rejecting the resignation offer, if applicable. A director who tenders a resignation pursuant to the Majority Voting Policy will not participate in any meeting of the Board or the Nominating and Corporate Governance Committee at which the resignation is considered. The Majority Voting Policy will not apply to contested meetings at which the number of directors nominated for election is greater than the number of seats available on the Board. The full text of the Majority Voting Policy is available on our website at www.erocopper.com.

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Board Mandate

Our Board is responsible for the supervision of the management of the business and affairs of the Company. In discharging its mandate, the Board is primarily responsible, either directly or through committees of the Board and the Executive Chairman of the Board, for the oversight of, among other things, the following matters:

· the strategic planning process of the Company;

· the identification of the principal risks of the Company’s business and ensuring the implementation of appropriate systems to manage these risks;

· succession planning, including appointing, training and monitoring the Company’s executive officers;

· a culture of integrity of the Company and its executive officers;

· a disclosure policy for the Company to facilitate communications with investors and other interested parties;

· the Company’s approach to corporate governance and director independence standards and the appointment of a Lead Director;

· ethical behavior of the directors, officers and employees of the Company; and

· the composition and organization of the Board, including the number, qualifications and remuneration of directors.

The Board may at any time retain and terminate external legal counsel, consultants or other advisors at the expense of the Company to assist it in fulfilling its responsibilities and to set and pay the respective reasonable compensation of these advisors.

The Board discharges its responsibilities directly and through its committees, currently consisting of the Audit Committee, the Compensation Committee, the Environmental, Health, Safety and Sustainability Committee, and the Nominating and Corporate Governance Committee.

The full text of the Board of Directors Mandate setting out the Board’s mandate and responsibilities and the duties of its members is attached to this Circular as Appendix “A”.

Position Descriptions

The Board has developed written position descriptions for the Executive Chairman, the Chair of each committee of the Board, the Lead Director of the Board and the CEO. A copy of each position description is available on our website at www.erocopper.com.

Orientation and Continuing Education

We recognize the importance of continuing education for directors and as such, directors are encouraged to (i) communicate with management and auditors; (ii) introduce topics of discussion that they feel are of particular importance to the Board and request presentations or additional training by management or external advisors; (iii) keep themselves current with industry trends and developments and changes in legislation with management’s assistance; (iii) attend related industry seminars, conferences, and continuing education programs that are of interest and of relevance to their position as directors, such as environmental, social and governance matters, financial and accounting practices and corporate ethics, and the Nominating and Corporate Governance Committee is responsible for arranging funding for such attendance; and (iv) visit the Company’s operations. Directors have been and will continue to be given tours of our operations. Subject to prevailing COVID-19 conditions and travel restrictions, we intend to schedule at least one visit to the MCSA Mining Complex and the NX Gold Property during 2021.

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During 2020, we held continuing education sessions for our directors which focused on providing more in-depth information about the key aspects of our business, including risks and opportunities. The Board and its committees received a number of presentations in 2020 on topics including the Company’s COVID-19 mitigation measures; evolving environmental, social and governance requirements; amendments to Brazilian legislation and regulations, including the Mining Code and National Dams Safety Policy, regarding the construction and management of tailings dams; equity-based compensation programs; mine plan geology, mining, milling and mine site safety; community-based initiatives and programs; and new audit standards.

All directors are provided with monthly reports regarding our business and operations, and at each quarterly Board meeting, the directors meet with management on topics including short, medium and long-term corporate objectives, strategic risk and mitigation strategies and strategic planning, and receive an update on strategic issues or challenges, risks, our performance, budget, schedule and any trends which may influence or change our planned development and operations.

We use a secure online Board portal to provide and assist in the flow of information to our Board, including meeting materials. All of our codes, charters, mandates and policies are also contained in the Board portal, together with other resources and reports, to enable our directors to perform more effectively.

Board members and management have access to corporate director education programs which offer courses on topics such as strategic direction and risks, financial strategy, audit committee effectiveness, risks and disclosure, human resource and compensation committee performance and enterprise risk oversight.

New members of the Board are provided with an orientation that covers our strategy, business and operations and have access to the other Board members and multiple layers of our management team. New members are also given access to our secure online Board portal to access historic Board and committee meeting materials and monthly management reports as well as our codes, charters, mandates, policies, and other resources and reports.

Each new director participates in the Company’s initial orientation program and each director participates in the Company’s continuing director development programs, both of which are reviewed annually by the Nominating and Corporate Governance Committee.

Director Assessment

The Nominating and Corporate Governance Committee is responsible for ensuring that an appropriate system is in place to evaluate the effectiveness of the Board as a whole, the individual committees of the Board, and the individual members of the Board and such committees with a view of ensuring that they are fulfilling their respective responsibilities and duties. In connection with such evaluations, each director is required to provide his or her assessment of the effectiveness of the Board and each committee as well as the performance of the individual directors, annually. Such evaluations take into account the competencies and skills each director is expected to bring to his or her particular role on the Board or on a committee, as well as any other relevant facts. The Chairman of the Nominating and Corporate Governance Committee meets with each director to review and discuss their assessment and then reports on the meetings to the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee then makes a final report to the Board and recommends improvements to be adopted and implemented.

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Director Term Limits and Other Mechanisms for Board Renewal

The Company has not adopted term limits for the directors on its Board or other formal mechanisms for Board renewal. The Company believes that the Board has the appropriate level of continuity and renewal without imposing formal mechanisms, particularly term limits or director retirement requirements. In addition, the Company believes that the imposition of director term limits or director retirement requirements may discount the value of experience and continuity amongst Board members and runs the risk of excluding experienced and valuable candidates for Board membership.

The Nominating and Corporate Governance Committee is responsible for developing and updating the long-term plan for the composition of the Board that takes into consideration the current strengths, competencies, skills and experience of the Board members, retirement dates and the strategic direction of the Company. In addition, the Nominating and Corporate Governance Committee, as and when required from time to time, recruits and identifies individuals qualified to become new Board members and makes recommendations to the Board regarding new director nominees. In making such recommendations, the Nominating and Corporate Governance Committee will consider the competencies and skills that the Board considers to be necessary for the Board as a whole to possess, for each existing director to possess, and for a new nominee to bring to the boardroom. In this respect, through the Nominating and Corporate Governance Committee and the annual Board assessment process, the Board is able to consider the contribution of current Board members and the skills and experience necessary for an effective and efficient Board and recommends changes to best meet those needs.

Diversity

Our business spans Canada, the United States of America and Brazil, and this geographic breadth is further complemented by our regional and local diversity at our operations in Brazil. As such, we enjoy a multi-faceted and multi-cultural work force that brings a wide array of experience, skills, background, culture and heritage to our business.

We believe that diversity celebrates all of the varied characteristics that make individuals unique from one another, whether that be gender (including gender identity and expression), education, religion, ethnicity, race, nationality, culture, language, aboriginal or indigenous status and other ethnic distinctions, sexual orientation, political affiliation, family and marital status, age or disability. We recognize and embrace the benefits of having a diverse workforce. Diversity is important to ensure that our workforce has the necessary range of perspectives, experience and expertise required to achieve our corporate objectives and deliver for our stakeholders. We believe that diversity mitigates the risk of group think, ensures that Ero Copper has the opportunity to benefit from all available talent and enhances, among other things, its organizational strength, problem-solving ability and opportunity for innovation.

Like our business as a whole, we also consider it important to have diversity amongst our Board and senior management team, and we have adopted a Diversity Policy to reinforce this commitment. We are committed to a merit-based system for the composition of our Board and senior management team, within a diverse and inclusive culture that solicits multiple perspectives and views, free of conscious or unconscious bias and discrimination. The Diversity Policy provides a framework within which the Nominating and Corporate Governance Committee, the Executive Chairman and the CEO will consider the principle of diversity, including gender diversity, when reviewing and considering the appointment of candidates for Board and senior management positions. While appointments will be primarily merit-based in order to ensure that the composition of the Board and the senior management team will ultimately reflect the particular skills, knowledge and experience that are required to effectively run our business, due consideration will also be given to the present level of diversity, including gender diversity, within the leadership of the Company and the positive impact that further diversity might have on our business.

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When identifying and considering the selection of candidates for appointment or nomination for election to the Board, the Nomination and Corporate Governance Committee will consider diversity criteria when determining the composition of the Board; review potential candidates from a variety of backgrounds and perspectives, with the Company’s diversity objectives in mind; ensure that appropriate efforts are made to include women in the list of candidates being considered for a Board position; and, in addition to its own searches, as and when appropriate from time to time, engage qualified independent external advisors to conduct a search for candidates, to help achieve the Company’s diversity objectives.

When reviewing and considering the appointment of candidates for senior management positions, the Nomination and Corporate Governance Committee, the Executive Chairman and the CEO will consider diversity criteria when determining the composition of senior management; review potential candidates from a variety of backgrounds and perspectives, with the Company’s diversity objectives in mind; ensure that appropriate efforts are made to include women in the list of candidates being considered for a senior management position; and, in addition to its own searches, as and when appropriate from time to time, engage qualified independent external advisors to conduct a search for candidates, to help achieve the Company’s diversity objectives.

No specific diversity targets have been set at this time, including gender diversity, on the Board or in senior management positions, as potential candidates are evaluated based on their individual merits and experiences while taking into account the needs of the Company.

As at the date of this Circular, two of nine (22.2%) directors on the Board are women (two of seven (28.6%) independent directors on the Board are women). None of the directors on the Board self-identify as an Aboriginal person (as defined under the Employment Equity Act (Canada)), a person with a disability or a member of a visible minority. On the senior management team, two of eleven (18.2%) members are women, three of eleven (27.3%) members self-identify as a member of a visible minority, and no member self-identifies as an Aboriginal person or a person with a disability.

In Brazil, approximately 99.8% of our employees are sourced locally or within Brazil. Women make up approximately 10% of our employees, with approximately 11% of management level roles held by women. We are also required to reserve 5% of the positions at our operations in Brazil for persons with disabilities.

The Nominating and Corporate Governance Committee will conduct a review of the Diversity Policy at least annually and will report to the Board annually on the Company’s adherence to this policy. In connection with such review, the Nominating and Corporate Governance Committee will consider the effectiveness of the Company’s approach to diversity and will recommend to the Board any changes that it thinks appropriate.

A copy of the Diversity Policy is available on our website at www.erocopper.com.

Succession Planning

The Company has short-term contingency plans and longer-term succession plans for its executive management team. The Board is responsible for: (i) ensuring Ero has an orderly succession plan for the Lead Director, Executive Chairman and the CEO; (ii) reviewing the succession plan for the executive management team that the Executive Chairman and the CEO manage; and (iii) ensuring the succession plan includes a process for responding to an emergency situation that requires an immediate replacement of the Lead Director, Executive Chairman, the CEO, or any other member of the executive management, or a replacement of any combination of these roles.

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To assist the Board, the Executive Chairman and the CEO review succession planning for each executive management position on an ongoing basis and share their views with the Board from time to time. The Executive Chairman and the CEO consider Ero’s future business strategy, the core skills and experience required to carry out the strategy, gender balance and the abilities of each individual when identifying potential successors for advancement to more senior roles.

The Board discusses the management succession plans, which identify potential short- and longer-term successors to the Lead Director, Executive Chairman, the CEO and potentially other executive management positions.

Ethical Business Conduct

The Board has adopted a Code of Business Conduct and Ethics of the Company (the “Code”) for the directors, officers, employees and consultants of the Company and its subsidiaries. All new employees must read the Code when hired and acknowledge that they will abide by the Code.

The Nominating and Corporate Governance Committee, together with the Board, is responsible for monitoring compliance with the Code. In accordance with the Code, directors, officers, employees and consultants of the Company and its subsidiaries should raise questions regarding the application of any requirement under the Code, and report a possible violation of a law or the Code, promptly to their superior or manager. If reporting a concern or complaint to a superior or manager is not possible or advisable, or if reporting it to such person does not resolve the matter, the matter should be addressed with the CFO of the Company.

The Nominating and Corporate Governance Committee monitors compliance with the Code by, among other things, obtaining reports from the Executive Chairman and the CEO regarding breaches of the Code and reporting such breaches to the Board. The Nominating and Corporate Governance Committee also reviews investigations and any resolutions of complaints received under the Code, and reports annually to the Board thereon. In turn, the Board reviews such reports from the Nominating and Corporate Governance Committee as well as reports relating to compliance with, or material deficiencies from, the Code and approves changes it considers appropriate, at least annually. The Code is available on our website at www.erocopper.com or under our profile on SEDAR at www.sedar.com.

The Board takes steps to ensure that directors, officers and other employees exercise independent judgment in considering transactions and agreements in respect of which a director, officer or other employee of the Company has a material interest, which include ensuring that directors, officers and other employees are thoroughly familiar with the Code and, in particular, the rules concerning reporting conflicts of interest and obtaining direction from their superior or manager or the CFO regarding any potential conflicts of interest.

The Board encourages and promotes an overall culture of ethical business conduct by promoting compliance with applicable laws, rules and regulations; providing guidance to directors, officers and other employees to help them recognize and deal with ethical issues; promoting a culture of open communication, honesty and accountability; and ensuring awareness of disciplinary action for violations of ethical business conduct.

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In addition to the Code, the Board has adopted a Supplier Code of Conduct, which sets out the core values that each supplier of the Company is expected to respect and abide by at all times, including (i) adhering to all applicable laws and regulations of the countries and regions where they conduct business, including laws protective of human rights, worker health and safety, and the environment; (ii) conducting their business ethically and not engaging, directly or indirectly, in unethical or illegal practices; (iii) adhering to the Company’s Anti-Corruption Policy (discussed below), and with all applicable anti-corruption laws, including the Corruption of Foreign Public Officials Act (Canada); (iv) adhering to the Company’s Global Human Rights Policy and Corporate Social Responsibility Policy (discussed below) in all of their dealings with workers, community members and others affected by their activities while providing services to the Company; (v) adhering to the Company’s Environmental Policy (discussed below), Health and Safety Policy (discussed below) and all other site-specific environmental, health and safety practices and procedures that apply to their activities; (vi) keeping all of Ero’s information, to which they have access, in strict confidence and only use such information for the purposes of performing services for the Company; and (v) maintaining books, accounts and records (all of which must be made available to Ero, upon request) that properly, fairly and accurately record and report all transactions related, directly or indirectly, to their agreement with the Company. The Supplier Code of Conduct is available on our website at www.erocopper.com or under our profile on SEDAR at www.sedar.com.

The Board has also adopted a Whistleblowing Policy for individuals to report complaints and concerns regarding, among other things, violations of the Code. As well, the Board has adopted an Anti-Corruption Policy which requires that directors, officers, other employees and contractors of the Company conduct business in a manner that does not contravene anti-bribery and anti-corruption laws that apply to the Company, including the Criminal Code (Canada) and Corruption of Foreign Public Officials Act (Canada). The Lead Director and the Audit Committee or a designated member thereof are responsible for monitoring compliance with these policies, although employees may approach the Company’s external legal counsel if preferred for concerns under the Anti-Corruption Policy. A copy of the Whistleblower Policy and the Anti-Corruption Policy is available on our website at www.erocopper.com.

Nominating and Corporate Governance Committee

Pursuant to the Nominating and Corporate Governance Committee’s mandate, the committee shall be comprised of at least three directors, all of whom shall be independent directors within the meaning of NI 52-110. The committee is currently comprised of Lyle Braaten (Chair), Steven Busby, Dr. Sally Eyre and Robert Getz, all of whom are independent directors.

The Nominating and Corporate Governance Committee, in consultation with the Executive Chairman and the CEO, is responsible for recruiting and identifying individuals qualified to become new Board members and making recommendations to the Board regarding new director nominees, as and when required from time to time. Further, the Nominating and Corporate Governance Committee is responsible for recommending to the Board the individual director appointments to each Board committee, annually or as required. In making such recommendations, the Nominating and Corporate Governance Committee will consider the competencies and skills that the Board considers to be necessary for the Board as a whole to possess, for each existing director to possess, and for a new nominee to bring to the boardroom. The Nominating and Corporate Governance Committee may also recommend for approval by the Board the removal of a director from the Board or a committee thereof if he or she is no longer qualified to serve as a director under applicable requirement or any other appropriate reason.

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In addition, the Nominating and Corporate Governance Committee has been delegated the responsibility of, among other things: (i) making recommendations to the Board regarding director remuneration; (ii) establishing an appropriate system to evaluate the effectiveness of the Board, as a whole, as well as its committees (see “Director Assessment” above); (iii) monitoring conflicts of interest of both the Board and management; (iv) conducting periodic reviews of the Company’s corporate governance policies and making policy recommendations aimed at enhancing Board and committee effectiveness; (v) annually reviewing the Board and committee mandates and position descriptions of the Executive Chairman, the CEO, the Lead Director and each committee Chair, and recommending to the Board that necessary changes be made; (vi) reviewing and recommending to the Board the appropriate structure, size, composition, mandate and members for Board committees, and the procedures to ensure that the Board and its committees function independently of management; (vii) providing the Board with updates on developments in corporate governance; (viii) conducting periodic reviews of the relationship between management and the Board; (ix) reviewing, monitoring and making recommendations regarding new director orientation and ongoing development of existing directors; and, (x) reviewing reports from the Executive Chairman and the CEO regarding breaches of the Code and Supplier Code of Conduct, and investigations and resolutions of complaints received under the Code and Supplier Code of Conduct, and reporting to the Board thereon. The full text of the Nominating and Corporate Governance Committee’s mandate is available on our website at www.erocopper.com.

The Nominating and Corporate Governance Committee also assists the Board in its oversight of our Global Human Rights Policy, which apply to each director, officer, employee and any third party, such as consultant, supplier, vendor, security provider or other business partner, representing or providing services for or on behalf of Ero Copper or any of its subsidiaries. The policy, among other things, outlines the following commitments of the Company: (i) adhering to all applicable human rights laws and regulations of the countries and regions where the Company conducts its business; (ii) providing a safe and healthy workplace that is free from violence, harassment, intimidation, and discrimination on the basis of race, colour, creed, age, gender (including gender identity and expression), language, national or social origin, family or marital status, sexual orientation, disability, religious, political or other opinion, union affiliation or other basis prohibited by law; (iii) respecting workers’ rights, including freedom of peaceful assembly and association, and engagement in collective bargaining consistent with the relevant conventions on that subject; (iv) seeking to avoid or minimize causing or contributing to adverse human rights impacts through its activities, addressing such impacts if they occur, and engaging in processes to mitigate those impacts; (v) maintaining operational-level grievance mechanisms to report and address any actual or potential adverse impacts or risks on human rights; (vi) engaging in meaningful dialogue, promoting participation and fostering inclusion with potentially affected groups and other stakeholders, including women, children and minority groups; (vii) obtain land access rights and conduct land acquisitions in an appropriate and timely manner to ensure that physical and economic displacement impacts on affected people, if any, are avoided or minimized where possible, and appropriately mitigated when they occur in a manner that fosters trust and mutual respect; (viii) acting with transparency and avoiding knowingly being complicit in activities that cause, or are likely to cause, adverse impacts or risks to human rights; (ix) not engaging in the use of forced, compulsory or child labour; and, (x) respecting and not interfering with anyone who acts to promote or protect human rights through peaceful and lawful means. The full text of the Global Human Rights Policy is available on our website at www.erocopper.com.

The Nominating and Corporate Governance Committee has the authority to retain external legal counsel, consultants or other advisors to assist it in fulfilling its responsibilities, at the expense of the Company.

Compensation Committee

Pursuant to the Compensation Committee’s mandate, the committee shall be comprised of at least three directors, all of whom shall be independent directors within the meaning of NI 52-110. The committee is currently comprised of Robert Getz (Chair), Dr. Sally Eyre and Matthew Wubs, all of whom are independent directors.

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The Compensation Committee is responsible for determining and making recommendations with respect to all forms of compensation to be granted to the Executive Chairman and the CEO and reviewing the Executive Chairman’s and the CEO’s recommendations respecting compensation of the other senior executive offices of the Company. In particular, the Compensation Committee is responsible for, among other things: (i) reviewing and approving corporate goals and objectives relevant to compensation of the Executive Chairman and the CEO, evaluating their performance in light of such corporate goals and objectives, and making recommendations to the Board with respect to their compensation levels based on such evaluation; (ii) reviewing recommendations from the Executive Chairman and the CEO regarding the appointment, compensation and other terms of employment of the President, CFO, CGO, COO, and other officers, and making recommendations to the Board regarding the same; (iii) preparing and submitting to the Board at least annually a report on human resource matters of the Company; (iv) administering and interpreting the Company’s security based compensation arrangements and its policies respecting the grant of Options, Share Units or sale of Shares thereunder, and DSUs, and reviewing and approving grants of Options, Share Units, DSUs and terms thereof; (v) periodically reviewing the terms of the Company’s executive compensation programs to determine if they are properly coordinated and achieving their desired purpose; (vi) overseeing the Company’s compliance with any rules promulgated by a regulatory body prohibiting loans to officers and directors of the Company; and, (vii) reviewing and assessing the adequacy of its mandate at least annual. The full text of the Compensation Committee’s mandate is available on our website at www.erocopper.com.

Please see “Statement of Executive and Director Compensation” above, which summarizes, among other things, the process by which the Compensation Committee and Board determine compensation for the Company’s directors and executives.

The Compensation Committee has the authority to retain external legal counsel, consultants or other advisors to assist it in fulfilling its responsibilities, including a compensation consultant, at the expense of the Company. Any other work or services performed by such compensation consultant at the request of management must, however, be pre-approved by the Compensation Committee.

Audit Committee

Pursuant to the Audit Committee’s mandate, the committee shall be comprised of at least three directors, all of whom shall be independent directors and financially literate, in each case within the meaning of NI 52-110. The committee is currently comprised of Matthew Wubs (Chair), Lyle Braaten, Chantal Gosselin and John Wright, all of whom are independent directors and financially literate.

Each of the members of the Audit Committee has extensive education and experience relevant to the performance of their responsibilities as members of the Audit Committee.

· Matthew Wubs graduated with a B.A. from the University of British Columbia in 1992 and has been a Chartered Professional Accountant since 1996.  Mr. Wubs is a director of Westland Insurance Group Ltd., one of the largest private insurance brokerage operations in Canada. Westland directly manages approximately $1.4 billion in premium volume through its brokerage, insurance company and wholesale operations. Prior to joining Westland’s board on January 1, 2020, Mr. Wubs was the Co-Chief Executive Officer of Westland from January 2016 to December 2019 and was responsible for oversight of insurance, reinsurance, risk management, finance and M&A. He joined Westland in the role of Controller in 1997, and thereafter held the position of Chief Financial Officer from January 2002 until December 2015.  Previous to Westland, he held a consulting role in Management Information Systems at International Forest Products Ltd. and obtained his Chartered Professional Accountant designation while working at Deloitte LLP. Mr. Wubs has been a member of Westland’s audit committee for 13 years.

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· Lyle Braaten graduated with a B.Sc. from the University of Calgary in 1986 and an LL.B. from the University of British Columbia in 1989. He has been the President and Chief Executive Officer of Miedzi Copper Corp. since March 2012, the Vice President, Legal Counsel and a director of Lumina Gold Corp. since June 2014 and the Vice President, Legal Counsel and a director of Luminex Resources Corp. since August 2018. He was the General Counsel of Magma Energy Corp. from June 2008 to May 2011 when it acquired Plutonic Power Corp. and changed its name to Alterra Power Corp. Prior to joining Magma, he was involved in the management of a mid-sized law firm and served as its Managing Director from 2001 to 2008 with overall responsibility for the oversight of the firm’s financial results and reporting. He has been an audit committee member of Lumina Gold Corp. since July 2014 and has at least six years’ experience in audit committee positions. Mr. Braaten is a member of the Law Societies of British Columbia and the Yukon.

· Ms. Gosselin is an experienced corporate board member with 30 years of combined experience in mining operations and capital markets. Her involvement in the financial markets range from asset management to sell side analyst. She recently held positions as Vice President and Portfolio Manager at Goodman Investment Counsel and Senior Mining Analyst at Sun Valley Gold LLP, along with various analyst positions earlier in her career. Ms. Gosselin has also held various mine-site management positions in Canada, Peru and Nicaragua, giving her firsthand experience in underground and open pit mine development and production in diverse cultural and social environments. Ms. Gosselin has a Masters of Business Administration from Concordia University and a Bachelor of Science (Mining Engineering) from Laval University and has completed the Institute of Corporate Director program. She currently serves as a director and member of the audit committee of Wheaton Precious Metals Corp. (formerly Silver Wheaton Corp.) and Lundin Gold Inc. Ms. Gosselin formerly served as a director and a member of the audit committee of Peregrine Metals Ltd. from 2008 to October 2011 and Capstone Mining Corp. from 2010 to November 2016. Ms. Gosselin has at least 13 years of experience in audit committee positions.

· John Wright was a co-founder, and former Director, President and Chief Operating Officer of Pan American Silver Corp. Mr. Wright was also the co-founder of Equinox Resources. Previously, he spent 10 years with Teck Cominco where he worked at the Trail Smelter operations and later participated in the management of the feasibility studies, marketing and mine construction at the Afton, Highmont, Bull Moose and David Bell Mines. Mr. Wright is a director of SilverCrest Metals Inc. and Luminex Resources Corp. and a former director of Bitterroot Resources Ltd., Lumina Copper Corp., Northern Peru Copper Corp., Global Copper Corp. and Regalito Copper Corp. Mr. Wright has been involved in multiple asset purchases and sales and the accounting associated therewith. Mr. Wright was an audit committee member of Northern Peru Copper Corp. and Regalito Copper Corp. and has at least nine years’ experience in audit committee positions. Mr. Wright is a Member of the Canadian Institute of Mining and Metallurgy and has a P.Eng. designation from the Association of Professional Engineers and Geoscientists of British Columbia.

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The Audit Committee provides assistance to the Board in fulfilling its obligations relating to the integrity of the internal financial controls and financial reporting of the Company. The external auditor of the Company reports directly to the Audit Committee. The Audit Committee’s primary duties and responsibilities include: (i) reviewing and reporting to the Board on the annual audited financial statements (including the auditor’s report thereon) and unaudited interim financial statements and any related management’s discussion and analysis, and other financial disclosure related thereto that may be required to be reviewed by the Audit Committee pursuant to applicable legal and regulatory requirements; (ii) reviewing material changes in accounting policies and significant changes in accounting practices and their impact on the financial statements; (iii) overseeing the audit function, including engaging in required discussions with the Company’s external auditor and reviewing a summary of the annual audit plan at least annually, overseeing the independence of the Company’s external auditor, overseeing the Company’s internal auditor, and pre-approving any non-audit services to the Company; (iv) reviewing and discussing with management the appointment of key financial executives and recommending qualified candidates to the Board; (v) reviewing with management and the Company’s external auditor, at least annually, the integrity of the internal controls over financial reporting and disclosure, including the effectiveness of, or weaknesses or deficiencies in: the design or operation of the Company’s internal controls (including computerized information system controls and security); the overall control environment for managing business risks; and accounting, financial and disclosure controls (including, without limitation, controls over financial reporting), non-financial controls, and legal and regulatory controls and the impact of any identified weaknesses in internal controls on management’s conclusions; (vi) reviewing management reports related to legal or compliance matters that may have a material impact on the Company and the effectiveness of the Company’s compliance policies; and, (vii) establishing whistleblowing procedures and investigating any complaints or concerns it deems necessary.

The Audit Committee’s mandate requires that the Audit Committee pre-approve any retainer of the external auditor of the Company to provide any non-audit services to the Company that it deems advisable in accordance with applicable legal and regulatory requirements and policies and procedures of the Board. The Audit Committee is permitted to delegate pre-approval authority to one of its members; however, the decision of any member of the Audit Committee to whom such authority has been delegated must be presented to the full Audit Committee at its next scheduled meeting. The full text of the Audit Committee’s mandate is available on our website at www.erocopper.com.

The Audit Committee has the authority to retain external legal counsel, consultants or other advisors to assist it in fulfilling its responsibilities, at the expense of the Company.

Additional information regarding the Audit Committee is contained in our Annual Information Form for the year ended December 31, 2020 and dated March 16, 2020 (the “AIF”) under the heading “Audit Committee” and “Appendix A – Audit Committee Charter” The AIF is available on our website at www.erocopper.com or under our profile on SEDAR at www.sedar.com.

Environmental, Health, Safety and Sustainability Committee

Pursuant to the Environmental, Health, Safety and Sustainability Committee’s mandate, the committee shall be comprised of at least three directors, all of whom shall be independent directors within the meaning of NI 52-110. The committee is currently comprised of Steven Busby (Chair), Chantal Gosselin and John Wright, all of whom are independent directors.

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The Environmental, Health, Safety and Sustainability Committee assists the Board in fulfilling its oversight responsibilities in respect of development, implementation and monitoring of the Company’s health, safety, environment and sustainability policies. In particular, the Environmental, Health, Safety and Sustainability Committee is responsible for, among other things: (i) providing oversight with respect to management’s periodic review, evaluation and development, where necessary, of policies, practices and standards of performance that meet or exceed legal and regulatory requirements and industry standards in the areas of health, safety, sustainability and environmental stewardship; (ii) periodically reviewing, with management, the risks and opportunities associated with health and safety; environmental matters including water, waste, biodiversity and air quality management as well as emissions and climate change; corporate social responsibility matters including engagement with host communities; and related matters, and reviewing management’s recommendations regarding the adoption of appropriate programs and procedures to address such risk and opportunities or, if required, make such recommendations; (iii) periodically reviewing, with management, the Company’s loss prevention policies, tailings facility management, and emergency response plans and recovery programs; (iv) periodically reviewing, with management, the Company’s strategies with respect to health, safety, sustainability and the environment; (v) periodically reviewing and monitoring the Company’s policies and, if necessary, procedures and practices relating to the reporting of health, safety and environmental incidents with respect to the Company’s employees, suppliers, contractors, consultants, facilities and operations, in compliance with regulatory laws; (vi) reviewing with management and legal counsel, the Company’s current or pending legal actions by or against the Company, related to environmental, health and safety issues; (vii) receiving and reviewing reports regarding significant health, safety and environmental incidents, emerging issues, summaries of inspections or audits, and corrective actions taken in response to deficiencies; (viii) monitoring as well as reviewing reports prepared by the Company with respect to health, safety, sustainability and the environment, including emerging potential physical and market-related risks to the Company’s business associated with climate change, and review the Company’s public disclosure documents with respect to such matters; (ix) periodically reviewing steps taken by management to ensure that employees receive the training necessary to meet health, safety, sustainability and environmental standards set by law and policies set by the Company; (x) directing management to regularly monitor and report on the Company’s health, safety, environmental and sustainability performance; (xi) facilitating information sharing with other Board committees to address matters of mutual interest or concern regarding health, safety, environmental and sustainability issues; and (xii) reporting regularly to the Board on its activities. The full text of the Environmental, Health, Safety and Sustainability Committee’s mandate is available on our website at www.erocopper.com.

In addition, the Environmental, Health, Safety and Sustainability Committee assists the Board in its oversight of our Corporate Social Responsibility Policy, Health and Safety Policy and Environmental Policy, which apply to each director, officer, employee and any third party, such as a supplier, contractor or consultant, representing or providing services for or on behalf of Ero Copper or any of its subsidiaries. The full text of each policy is available on our website at www.erocopper.com.

The Corporate Social Responsibility Policy outlines the Company’s commitment to fostering sustainable development by operating all of its mines and developing new projects in a manner that is respectful of local communities. The policy, among other things, outlines the following commitments of Ero Copper: (i) identifying and engaging its communities of interest in timely, inclusive, ethical, transparent and culturally respectful dialogue prior to undertaking significant activities and throughout the life of an operation or project; (ii) continuing to maintain formal grievance mechanisms as part of its overall community engagement process; (iii) monitoring, continuously improving, and reporting on the performance and effectiveness of its activities related to corporate social responsibility; (iv) implementing meaningful and effective strategies for community engagement; (v) promoting a safe environment for local communities; (vi) respecting the social, economic and cultural rights of local people; (vii) assisting local and regional development in areas where its operations and projects are located through training and employment; and (viii) adhering to all applicable laws and regulations of the countries and regions where Ero Copper conducts its business.

The Health and Safety Policy outlines the Company’s commitment to protecting the health and safety of its employees and third parties, such as contractors, consultants, and suppliers, at its mining operations and development projects. The policy, among other things, outlines the following commitments of Ero Copper: (i) promoting health and safety on and off the job; (ii) providing employees with the training and tools to work safely and expecting third parties, such as contractors, consultants and suppliers, to do the same; (iii) educating its employees to the potential hazards of their job and expecting third parties, such as contractors, consultants and suppliers, to do the same; (iv) requiring that employees perform their duties in the safest manner possible and expecting third parties, such as contractors, consultants and suppliers, to do the same; (v) adhering to all applicable health and safety laws and regulations of the countries and regions where Ero Copper conducts its business; (vi) striving for continuous improvement in all aspects of health and safety; (vii) providing a safe work environment by minimizing or, where possible, eliminating hazards, adhering to proven health and safety practices, implementing accident prevention programs, and ensuring that first aid and emergency response plans are in place at each operation; (viii) ensuring accident reporting is completed in a diligent manner and where necessary taking immediate steps to mitigate the potential for reoccurrence; (ix) developing and operating health and safety management programs at its operations that meet or exceed those in use by its peer companies; (x) promoting employee participation in the development of health and safety standards and management programs such that its employees take ownership of their health and safety responsibilities; (xi) conducting regular reviews of health and safety management programs and report findings to management and the Board; and (xii) conducting annual audits of all health and safety management programs and, with its capabilities, remediating all identified health and safety findings promptly.

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The Environmental Policy outlines the Company’s commitment to wise environmental stewardship, including operating its mines and developing new projects in an environmentally sustainable and responsible manner. The policy, among other things, outlines the following commitments of Ero Copper: (i) adhering to all applicable environmental laws, regulations and other environmental obligations in the countries and regions in which it operates, and to follow additional environmental standards and practices that are voluntarily adopted by the Company; (ii) protecting the environment by applying proven management practices to minimize releases of greenhouse gas emissions and other pollutants to the air, land or water, facilitate the appropriate treatment and disposal of waste and mitigate environmental impacts; (iii) mitigating impacts to biodiversity through research, partnerships and land management processes; (iv) promoting the efficient use of energy, water and other natural resources through recovery, recycling and reuse; (v) striving to ensure the safe and responsible management and storage of tailings in accordance with applicable laws and regulations during the life of each operation and after the closure thereof; (vi) performing progressive reclamation activities during the life of each operation, and regularly updating closure plans to take into consideration the interests of host communities; (vii) communicating this commitment to excellence in environmental performance and climate protection with its subsidiaries, employees, suppliers, contractors, and other agents and the communities in which we operate; (vii) allocating the necessary resources to meet its reclamation and environmental obligations; (viii) educating employees regarding environmental matters, including climate change, water conservation and energy efficiency and awareness, and promoting employee participation in minimizing environmental impacts; (ix) striving to ensure all environmental incidents are reported, investigated and remediated; (x) seeking opportunities to improve its environmental performance through adherence to these principles; (xi) regularly reviewing its environmental management system to ensure that it remains appropriate and that Ero Copper’s environmental objectives and targets are being addressed; and (xii) communicating openly and transparently with internal and external interested parties to develop a mutual understanding of environmental issues, needs and expectations, including regularly report our water use, energy use and greenhouse gas emissions as well as climate-related risks and opportunities to our stakeholder.

The Environmental, Health, Safety and Sustainability Committee has the authority to retain external legal counsel, consultants or other advisors to assist it in fulfilling its responsibilities, at the expense of the Company.

Disclosure Committee

The Company has established a Disclosure Committee comprised of the Executive Chairman, the CEO and the CFO, to ensure the provision of accurate and timely communication of important information to our shareholders. The Board has adopted a Disclosure Policy to provide guidance to the Disclosure Committee. The full text of the Disclosure Policy is available on our website at www.erocopper.com.

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Additional Company Information

Voting Securities and Principal Holders of Voting Securities

The authorized voting share capital of Ero consists of an unlimited number of Shares without par value. As of the date of this Circular, there were 88,101,909 Shares issued and outstanding. The Shares are currently listed and traded on the TSX under the symbol “ERO”.

As at the date of this Circular, to the knowledge of the directors and executive officers of the Company, no one person or entity beneficially owns or exercises direction or control over, directly or indirectly, more than 10% of the Shares, except the following:

Name of Shareholder	Shares Owned, Controlled or Directed, Directly or Indirectly	Percentage of Outstanding Shares(1)
T. Rowe Price Associates, Inc.	10,888,858	12.36%

Note:

⁽¹⁾ The figures in this column have been calculated on a non-diluted basis.

Indebtedness of Directors and Executive Officers

No current or former directors, executive officers or employees of the Company or any of its subsidiaries, no Nominee, and no associate of any such director, executive officer or Nominee is, as at the date hereof, or has been, during the financial year ended December 31, 2020, indebted to the Company or any of its subsidiaries in connection with a purchase of securities or otherwise or indebted to another entity that is, or has been, the subject of a guarantee, support agreement, letter of credit or other similar arrangement or understanding provided by the Company or any of its subsidiaries.

Interest of Informed Persons in Material Transactions

No director or executive officer of the Company or any of its subsidiaries, Nominee, shareholder that beneficially owns, or controls or directs, directly or indirectly, more than 10% of the issued Shares, or any associate or affiliate of any of the foregoing persons, has had any material interest, direct or indirect, in any transaction since January 1, 2020, or in any proposed transaction which has materially affected or will materially affect the Company or any of its subsidiaries.

Management Contracts

Management functions of the Company and its subsidiaries are not, to any substantial degree, performed other than by the directors or executive officers of the Company and its subsidiaries.

Shareholder Engagement

The Board and management of Ero believe in the importance of communicating with our shareholders, as open and constructive dialogue can improve Board and management effectiveness and improve corporate performance. Ero communicates with shareholders and other stakeholders through a variety of channels, including through its annual and quarterly reports, press releases, annual information form, annual report, sustainability report and other public disclosure, website and industry conferences. Ero also holds quarterly earnings teleconference calls, where attendees, including our shareholders and stakeholders, have an equal opportunity to ask questions of management at the end of each call.

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Ero also communicates with our shareholders on an annual basis through its management information circular, including this Circular, which provides information about the Board, individual directors, its governance policies and practices and executive officer and independent director compensation policies and practices, and through annual shareholder meetings. This year, in light of the ongoing public health impact of the COVID-19 pandemic and Ero’s commitment to support the health, safety and wellness of our communities, shareholders, directors, employees and other stakeholders, Ero will hold the Meeting in a virtual-only format, which will be conducted via live audio teleconference. Ero intends to hold the virtual Meeting in a manner that affords our shareholders opportunities to participate, substantially similar to those shareholders would have at an in-person meeting. At the virtual Meeting, registered shareholders and duly appointed proxyholders, including non-registered shareholders who have duly appointed themselves or a third-party as proxyholder, regardless of geographic location and equity ownership, will have an equal opportunity to participate, vote during the Meeting and ask questions in respect of each of the matters to be voted upon as such matters are brought forward to the Meeting, all in real time, through the teleconference system, provided they have properly pre-registered before the Meeting in accordance with directions set out in this Circular under the heading “Solicitation of Proxies and Voting Instructions”. Any questions unrelated to a matter at hand will be deferred until the matter is brought forward for approval or until the end of the Meeting, as applicable.

Shareholders, employees and others can communicate directly with the Board by writing to the Executive Chairman or the Lead Director c/o the Vice President, General Counsel and Corporate Secretary, Ero Copper Corp., 625 Howe Street, Suite 1050, Vancouver, British Columbia, Canada, V6C 2T6 or by
e-mail at info@erocopper.com.

For More Information on Ero

Additional information regarding Ero, including financial information that is provided in our audited consolidated financial statements and MD&A for the financial year ended December 31, 2020, is available on our website at www.erocopper.com or under our profile on SEDAR at www.sedar.com. Securityholders may also contact the Corporate Secretary of the Company by phone at (604) 449-9236 or by e-mail at info@erocopper.com to request copies of these documents free of charge.

Directors’ Approval

The contents of the Circular and the sending thereof to the shareholders of the Company have been approved by the Board.

BY ORDER OF THE BOARD OF DIRECTORS

“Christopher Noel Dunn”

Christopher Noel Dunn

Executive Chairman

Vancouver, British Columbia

March 16, 2021

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APPENDIX “A”

ERO COPPER CORP.
BOARD OF DIRECTORS MANDATE

1.            Purpose

The members of the Board of Directors (the “Board”) have the duty to supervise the management of the business and affairs of Ero Copper Corp. (“Ero” or the “Company”). The Board, directly and through its committees and the Chair of the Board (the “Chair”), shall provide direction to senior management, generally through the Chief Executive Officer, to pursue the best interests of the Company.

2.            Duties and Responsibilities

The Board shall have the specific duties and responsibilities outlined below.

Strategic Planning

(a)            Strategic Plans

The Board will adopt a strategic plan for the Company. At least annually, the Board shall review and, if advisable, approve the Company’s strategic planning process and the Company’s annual strategic plan. In discharging this responsibility, the Board shall review the plan in light of management’s assessment of emerging trends, the competitive environment, the opportunities for the business of the Company, risk issues, and significant business practices and products.

(b)            Business and Capital Plans

At least annually, the Board shall review and, if advisable, approve the Company’s annual business and capital plans as well as policies and processes generated by management relating to the authorization of major investments and significant allocation of capital.

(c)            Monitoring

At least annually, the Board shall review management’s implementation of the Company’s strategic, business and capital plans. The Board shall review and, if advisable, approve any material amendments to, or variances from, these plans.

Risk Management

(a)            General

At least annually, the Board shall review reports provided by management of principal risks associated with the Company’s business and operations, review the implementation by management of appropriate systems to manage these risks, and review reports by management relating to the operation of, and any material deficiencies in, these systems.

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(b)            Verification of Controls

The Board shall verify that internal, financial, non-financial and business control and management information systems have been established by management.

Human Resource Management

(a)            General

At least annually, the Board shall review a report of the Compensation Committee concerning the Company’s approach to human resource management and executive compensation.

(b)            Succession Review

At least annually, the Board shall review the succession plans of the Company for the Chair, the Lead Director, the Chief Executive Officer and other executive officers, including the appointment, training and monitoring of such persons.

(c)            Integrity of Senior Management

The Board shall, to the extent feasible, satisfy itself as to the integrity of the Chief Executive Officer and other executive officers of the Company and that the Chief Executive Officer and other senior officers strive to create a culture of integrity throughout the Company.

Corporate Governance

(a)            General

At least annually, the Board shall review a report of the Nominating and Corporate Governance Committee concerning the Company’s approach to corporate governance.

(b)            Director Independence

At least annually, the Board shall review a report of the Nominating and Corporate Governance Committee that evaluates the director independence standards established by the Board and the Board’s ability to act independently from management in fulfilling its duties.

(c)            Ethics Reporting

The Board has adopted a written Code of Business Conduct and Ethics (the “Code”) applicable to directors, officers and employees of the Company. At least annually, the Board shall review the report of the Nominating and Corporate Governance Committee relating to compliance with, or material deficiencies from, the Code and approve changes it considers appropriate. The Board shall review reports from the Nominating and Corporate Governance Committee concerning investigations and any resolutions of complaints received under the Code.

(d)            Board of Directors Mandate Review

At least annually, the Board shall review and assess the adequacy of its Mandate to ensure compliance with any rules or regulations promulgated by any regulatory body and approve any modifications to this Mandate as considered advisable.

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Communications

(a)            General

The Board has adopted a Disclosure Policy for the Company. At least annually, the Board, in conjunction with the Chief Executive Officer, shall review the Company’s overall Disclosure Policy, including measures for receiving feedback from the Company’s stakeholders, and management’s compliance with such policy. The Board shall, if advisable, approve material changes to the Company’s Disclosure Policy.

(b)            Shareholders

The Company endeavors to keep its shareholders informed of its progress through an annual report, annual information form, quarterly interim reports and periodic press releases. Directors and management meet with the Company’s shareholders at the annual meeting and are available to respond to questions at that time.

3.            Composition

General

The composition and organization of the Board, including: the number, qualifications and remuneration of directors; the number of Board meetings; any Canadian residency requirements; quorum requirements; meeting procedures and notices of meetings are required by the Business Corporations Act (British Columbia), the Securities Act (British Columbia) and the notice of articles and articles of the Company, subject to any exemptions or relief that may be granted from such requirements.

Each director must have an understanding of the Company’s principal operational and financial objectives, plans and strategies, and financial position and performance. Directors must have sufficient time to carry out their duties and not assume responsibilities that would materially interfere with, or be incompatible with, Board membership. Directors who experience a significant change in their personal circumstances, including a change in their principal occupation, are expected to advise the chair of the Nominating and Corporate Governance Committee.

Independence

A majority of the Board must be independent, subject to any exemptions or relief that may be granted from such requirement. “Independent” shall have the meaning, as the context requires, given to it in National Policy 58-201 Corporate Governance Guidelines, as may be amended from time to time.

Chair of the Board

The Chair of the Board shall be an independent director, unless the Board determines that it is inappropriate to require the Chair to be independent. If the Board determines that it would be inappropriate to require the Chair of the Board to be independent, then the independent directors shall, from the time that the Company obtains a listing of its securities on a public market or stock exchange, select from among their number a director who will act as “Lead Director” and who will assume responsibility for providing leadership to enhance the effectiveness and independence of the Board. The Chair, if independent, or the Lead Director if the Chair is not independent, shall act as the effective leader of the Board and ensure that the Board’s agenda will enable it to successfully carry out its duties.

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4.            Committees of the Board

The Board has established the following committees: the Compensation Committee, the Audit Committee, the Nominating and Corporate Governance Committee and the Environmental, Health, Safety and Sustainability Committee. Subject to applicable law, the Board may establish other Board committees or merge or dispose of any Board committee.

Committee Mandates

The Board has approved mandates for each Board committee and shall approve mandates for each new Board committee. At least annually, each mandate shall be reviewed by the Nominating and Corporate Governance Committee and any suggested amendments brought to the Board for consideration and approval.

Delegation to Committees

The Board has delegated to the applicable committee those duties and responsibilities set out in each Board committee’s mandate.

Consideration of Committee Recommendations

As required by applicable law, by applicable committee mandate or as the Board may consider advisable, the Board shall consider for approval the specific matters delegated for review to Board committees.

Board/Committee Communication

To facilitate communication between the Board and each Board committee, each committee chair shall provide a report to the Board on material matters considered by the committee at the first Board meeting after the committee’s meeting.

5.            Meetings

The Board will meet at least once in each quarter, with additional meeting held as deemed advisable. The Chair is primarily responsible for the agenda and for supervising the conduct of the meeting. Any director may propose the inclusion of items on the agenda, request the presence of, or a report by any member of senior management, or at any Board meeting raise subjects that are not on the agenda for that meeting.

Meetings of the Board shall be conducted in accordance with the Company’s articles.

Secretary and Minutes

The Corporate Secretary, his or her designate or any other person the Board requests shall act as secretary of Board meetings. Minutes of Board meetings shall be recorded and maintained by the Corporate Secretary and subsequently presented to the Board for approval.

Meetings Without Management

The independent members of the Board shall hold regularly scheduled meetings, or portions of regularly scheduled meetings, at which non-independent directors and members of management are not present.

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Directors’ Responsibilities

Each director is expected to attend all meetings of the Board and any committee of which he or she is a member. Directors will be expected to have read and considered the materials sent to them in advance of each meeting and to actively participate in the meetings.

Access to Management and Outside Advisors

The Board shall have unrestricted access to management and employees of the Company. The Board shall have the authority to retain and terminate external legal counsel, consultants or other advisors to assist it in fulfilling its responsibilities and to set and pay the respective reasonable compensation of these advisors without consulting or obtaining the approval of any officer of the Company. The Company shall provide appropriate funding, as determined by the Board, for the services of these advisors.

Service on Other Boards

Directors may serve on the boards of other public companies so long as these commitments do not materially interfere and are compatible with their ability to fulfill their duties as a member of the Board. Directors must advise the Chair in advance of accepting an invitation to serve on the board of another public company.

6.            Management

Position Descriptions for Directors

The Board has approved position descriptions for the Chair, the Lead Director and the chair of each Board committee. At least annually, the Board (or the Nominating and Corporate Governance Committee if the Board so directs) shall review such position descriptions.

Position Description for CEO

The Board has approved a position description for the Chief Executive Officer, which includes delineating management’s responsibilities. The Board has also approved the corporate goals and objectives that the Chief Executive Officer has responsibility for meeting. At least annually, the Board shall review a report of the Compensation Committee and/or the Nominating and Corporate Governance Committee reviewing this position description and such corporate goals and objectives.

7.            Director development and evaluation

Each new director shall participate in the Company’s initial orientation program and each director shall participate in the Company’s continuing director development programs. At least annually, the Board shall review the Company’s initial orientation program and continuing director development programs.

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8.            No Rights Created

This Mandate is a statement of broad policies and is intended as a component of the flexible governance framework within which the Board, assisted by its committees, directs the affairs of the Company. While it should be interpreted in the context of all applicable laws, regulations and listing requirements, as well as in the context of the Company’s Notice of Articles and Articles, it is not intended to establish any legally binding obligations.

Adopted: May 15, 2017

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EX-99.21

Exhibit 99.21

NOTICE OF

2020 ANNUAL GENERAL AND SPECIAL MEETING

OF SHAREHOLDERS

MANAGEMENT INFORMATION circular

MARCH 12, 2020

These materials are important and require your immediate attention. They require the shareholders of Ero Copper Corp. to make important decisions. If you are in doubt as to how to make such decisions, please contact your financial, legal or other professional advisors.

NOTICE OF ANNUAL GENERAL AND SPECIAL
MEETING OF SHAREHOLDERS

NOTICE IS HEREBY GIVEN that the annual general and special meeting (the “Meeting”) of the shareholders of ERO COPPER CORP. (the “Company” or “Ero”) will be held:

When:
Thursday, May 7, 2020
3:30 p.m. (Vancouver time) Where:
Lancaster Room at the Rosewood Hotel Georgia
801 West Georgia Street, Vancouver, British Columbia

The following items of business will be covered at the Meeting:

1. receive the audited consolidated financial statements of the Company for the financial year ended December 31, 2019, and the auditor’s report thereon;

2. set the number of directors at nine (9) for the ensuing year;

3. re-elect nine directors to hold office for the ensuing year;

4. reappoint KPMG LLP, Chartered Professional Accountants, as the auditor of the Company for the ensuing year, and authorize the directors to fix the remuneration to be paid to the auditor;

5. ratify, authorize and approve the granting of 8,086 incentive stock options on August 15, 2019 to each of Dr. Sally Eyre and Chantal Gosselin, upon appointment to the Board of Directors of the Company;

6. authorize and approve the Company’s Stock Option Plan, including amendments thereto, and the unallocated options issuable thereunder;

7. authorize and approve the Company’s Share Unit Plan, including amendments thereto, and the unallocated units issuable thereunder;

8. authorize and approve the amendments to the Articles of the Company to increase the quorum requirement for meetings of directors and shareholders;

9. authorize and approve a non-binding advisory “say on pay” resolution accepting the Company’s approach to executive compensation; and

10. transact such other business as may be properly brought before the Meeting.

The accompanying management information circular (the “Circular”) provides additional information relating to the matters to be addressed at the Meeting and is deemed to form part of this Notice.

If you owned common shares of Ero as of the close of business on March 10, 2020 (the record date for the Meeting), you are entitled to vote at the Meeting.

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Registered shareholders of Ero are entitled to vote at the Meeting either in person or by proxy. Registered Shareholders who are unable to attend the Meeting in person are encouraged to read, complete, sign, date and return the enclosed proxy form in accordance with the instructions set out in the proxy form and in the Circular. In order to be valid for use at the Meeting, proxies must be received by Computershare Investor Services Inc., Proxy Dept., 100 University Avenue, 8th Floor, Toronto, Ontario, M5J 2Y1 in the envelope provided for that purpose, or vote using the telephone or internet based on instructions provided in the enclosed proxy form no later than 3:30 p.m. (Vancouver time) on May 5, 2020, or in the case of any adjournment or postponement of the Meeting, at least 48 hours (excluding Saturdays, Sundays and holidays), before the Meeting is reconvened. Please advise the Company of any change in your mailing address. The time limit for deposit of proxies may be waived or extended by the Chairman of the Meeting at his discretion, without notice.

If you are a non-registered shareholder of Ero, please refer to the section in the Circular entitled “Solicitation of Proxies and Voting Instructions” for information on how to vote your common shares.

DATED at Vancouver, British Columbia, this 12^th day of March, 2020.

BY ORDER OF THE BOARD OF DIRECTORS

“Christopher Noel Dunn”

Executive Chairman

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MANAGEMENT INFORMATION CIRCULAR

About This Management Information Circular

This management information circular (the “Circular”) is furnished in connection with the solicitation of proxies by the management of Ero for use at the annual general and special meeting of the Company to be held at 3:30 p.m. (Vancouver time) on Thursday, May 7, 2020 and at any adjournments or postponement thereof (the “Meeting”) for the purposes set forth in the accompanying Notice of Annual General and Special Meeting of Shareholders (the “Notice of Meeting”).

Management’s solicitation of proxies will be conducted by mail and may be supplemented by telephone or other personal contact to be made by our directors, officers and employees, without special compensation. All costs of the solicitation for the Meeting will be borne by the Company.   Unless otherwise specified, the information contained in this Circular is current as of March 12, 2020. In this Circular, unless otherwise indicated, all dollar amounts represented by “$” are references to Canadian dollars and all dollar amounts represented by “US$” are references to United States dollars. In this Circular, “we”, “us”, “our”, “Ero” and the “Company” means Ero Copper Corp.   “You”, “your” and “shareholder” means holders of Shares of Ero as of the
March 10, 2020 record date.   Your vote is important. You can vote by completing the form included with this package or by attending the Meeting in person.

Solicitation of Proxies and Voting Instructions

Who Can Vote

Each holder of common shares of the Company (the “Shares”) is entitled to one vote for each Share registered in his, her or its name held at the close of business on March 10, 2020, the date fixed by the board of directors of the Company (the “Board”) as the record date for determining who is entitled to receive notice of and to vote at the Meeting.

The voting process is different depending on whether you are a registered or non-registered shareholder.

Registered shareholders

You are a registered shareholder if your name appears on your share certificate or appears as the registered shareholder in the records of our transfer agent, Computershare Investor Services Inc. (“Computershare”).

Non-registered (beneficial) shareholder

You are a non-registered (beneficial) shareholder if your Shares are not registered in your name, but are instead registered in the name of either:

· an intermediary that you deal with in respect of your Shares, such as, among others, your brokerage firm, bank, trust company, securities dealer or broker, or trustee or administrator of a self-administered RRSP, RRIF, RESP, RDSPs, TFSAs or similar plans (your nominee); or

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· a clearing agency (such as CDS & Co.) that acts on behalf of your nominee.

Please be sure to follow the appropriate voting procedure set out below.

How to Vote

Registered Shareholders

You can vote by proxy or in person at the Meeting.

Voting by proxy

Voting by proxy is the easiest way to vote because you can appoint any person or company to be your proxyholder to attend the Meeting and vote your Shares according to your instructions. This proxyholder does not need to be a shareholder.

The executive officers of the Company named in the proxy form (the “Ero proxyholders”) can act as your proxyholder and vote your Shares according to your instructions. If you appoint the Ero proxyholders and do not indicate your voting instructions, they will vote your Shares:

· for setting the number of directors at nine (9) for the ensuing year;

· for the re-election of the nominated directors listed in the proxy form and in this Circular;

· for the reappointment of KPMG LLP, Chartered Professional Accountants, of Vancouver, British Columbia (“KPMG”) as the independent auditor of the Company, at a remuneration to be set by the Board;

· for the ratification, authorization and approval of the granting of the Incentive Option Grants (as defined below);

· for the authorization and approval of the Company’s Stock Option Plan, including amendments thereto, and the unallocated options issuable thereunder;

· for the authorization and approval of the Company’s Share Unit Plan, including amendments thereto, and the unallocated units issuable thereunder;

· for the authorization and approval of the amendments to the Articles of the Company to increase the quorum requirement for meetings of directors and shareholders; and

· for the authorization and approval of a non-binding advisory “say on pay” resolution accepting the Company’s approach to executive compensation.

This is consistent with the voting recommendations of the Board and management of Ero. If there are other items of business that properly come before the Meeting, or amendments or variations to the items of business set out in the Notice of Meeting, the Ero proxyholders will vote according to management’s recommendations.

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You have the right to appoint as proxyholder a person or company other than the Ero proxyholders to attend and act on your behalf at the Meeting. You can do so by inserting the name of the person or company in the blank space provided in the enclosed proxy form or by completing another form of proxy.

By completing and returning the proxy, you are authorizing your proxyholder to vote your Shares or withhold your vote in accordance with your instructions on any ballot that may be called for at the Meeting and if you specify a choice on a matter, your Shares will be voted accordingly. If there are other items of business that property come before the Meeting, or amendments or variations to the items of business, your proxyholder has the discretion to vote your Shares as he or she sees fit.

If you appoint someone other than the Ero proxyholders to be your proxyholder, he or she must attend and vote at the Meeting for your vote to be counted.

You can mail your completed proxy form to Computershare, Proxy Dept., 100 University Avenue, 8th Floor, Toronto, Ontario, M5J 2Y1 in the envelope provided for that purpose, or you can vote using the telephone or internet based on instructions provided in the enclosed proxy form.

To be effective, Computershare must receive your completed proxy form by no later than 3:30 p.m. (Vancouver time) on May 5, 2020. If the Meeting is adjourned or postponed, Computershare must receive your completed proxy form at least 48 hours (excluding Saturdays, Sundays and holidays) before the Meeting is reconvened. The time limit for deposit of proxies may be waived or extended by the Chairman of the Meeting at his discretion, without notice.

Questions? Call Computershare at 1-800-564-6253 (outside North America 514-982-7555).

Voting in person

If you want to attend the Meeting and vote in person, do not return the proxy form. Simply register with a representative of Computershare when you arrive at the Meeting.

Non-Registered (Beneficial) Shareholders

You can also vote by proxy or in person at the Meeting.

Voting by proxy

There are two types of non-registered (beneficial) shareholders:

· a non-objecting beneficial owner (“NOBO”) who does not object to us knowing their identity; and

· an objecting beneficial owner (“OBO”) who does not want us to know their identity.

In accordance with the requirements of National Instrument 54-101 – Communication with Beneficial Owners of Securities of a Reporting Issuer (“NI 54-101”), we have elected to deliver the proxy-related materials, including a voting instruction form (“VIF”) (collectively, the “Meeting Materials”) indirectly through intermediaries for onward distribution to the NOBOs and the OBOs (unless such shareholder has waived the right to receive such materials). We do not intend to pay for the distribution of the Meeting Materials by intermediaries and clearing agencies to OBOs, and OBOs will not receive the materials unless the OBOs’ intermediaries and clearing agencies assume the cost of delivery. Intermediaries often use a service company (such as Broadridge Investor Communication Solutions, Inc.) to deliver the Meeting Materials.

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Generally, non-registered shareholders who have not waived the right to receive the Meeting Materials will be given a VIF which must be completed and signed by the non-registered shareholder in accordance with the directions on the VIF. Non-registered shareholders should submit VIFs in sufficient time to ensure that their votes are received by the Company.

The purpose of these procedures is to permit non-registered shareholders to direct the voting of the Shares they beneficially own. Non-registered shareholders should carefully follow the instructions on the VIF. Non-registered shareholders should ensure that instructions respecting the voting of their Shares are communicated to the appropriate persons, as required.

Voting in person

If you want to attend the Meeting and vote in person, follow the instructions provided on the VIF and/or by your intermediary. You cannot use a VIF to vote directly at the Meeting. You must request a legal proxy form granting you the right to attend the Meeting and vote in person and return the proxy form to Computershare within the time period specified above. When you arrive at the Meeting, you must register with a representative of Computershare.

Changing your Vote

Registered Shareholders

You can revoke your proxy by sending a new completed proxy form with a later date, or a written notice signed by you or by your personal representative, if he or she has your written authorization. If you represent a registered shareholder that is a corporation, your written notice must have the seal of the corporation, if applicable, and must be executed by an officer or an attorney who has their written authorization. The written authorization must accompany the revocation notice. The new completed proxy form or written revocation notice must be received at our head office at Suite 1050, 625 Howe Street, Vancouver, British Columbia, V6C 2T6 at any time up to and including the last business day before the day of the Meeting, or in the case of any adjournment or postponement of the Meeting, the last business day before the Meeting is reconvened, or with the Chairman of the Meeting on the day of, and prior to the start of, the Meeting or any adjournment or postponement thereof. You can also revoke your proxy in any other manner permitted by law.

Non-Registered (Beneficial) Shareholders

Follow the instructions provided on the VIF and or/ by your intermediary to revoke your proxy.

Votes Necessary to Pass Resolutions

A simple majority of affirmative votes cast at the Meeting is required to pass each of the resolutions described in this Circular. If there are more nominees for election as directors or appointment of the Company’s auditor than there are vacancies to fill, the nominees receiving the greatest number of votes will be elected or appointed, as the case may be, until all such vacancies have been filled. If the number of nominees for election or appointment is equal to the number of vacancies to be filled, all such nominees will be declared elected or appointed by acclamation.

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Interest Of Certain Persons in Matters to be Acted Upon

Other than as disclosed elsewhere in this Circular, none of the directors or executive officers of the Company, no proposed nominee for election as a director of the Company, none of the persons who have been directors or executive officers of the Company since the commencement of the Company's most recently completed financial year and no associate or affiliate of any of the foregoing persons has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon at the Meeting other than the election of directors.

Particulars of Matters to be Acted Upon

We will cover the following items of business at the Meeting:

1. Financial Statements

The audited consolidated financial statements and management’s discussion and analysis (“MD&A”) of the Company for the financial year ended December 31, 2019 are available on our website at www.erocopper.com or under our profile on SEDAR at www.sedar.com.

The audited consolidated financial statements of the Company for financial year ended December 31, 2019, and the auditor’s report thereon, will be placed before the shareholders at the Meeting. No shareholder vote is required for this item.

2. Number of Directors

Management proposes that the number of directors on the Board be set at nine (9) for the ensuing year.

Shareholders will be asked at the Meeting to approve an ordinary resolution to set the number of directors elected for the ensuing year at nine (9), subject to such increases as may be permitted by the Articles of the Company and the provisions of the Business Corporations Act (British Columbia) (“BCBCA”).

We recommend a vote “FOR” the approval of the resolution setting the number of directors for the ensuing year at nine (9).

In the absence of instructions to the contrary, the person(s) designated by management of the Company in the enclosed form of proxy intend to vote FOR the approval of the resolution setting the number of directors for the ensuing year at nine (9).

3. Election of Directors

The Board currently consists of the following nine directors, being Christopher Noel Dunn (Executive Chairman), David Strang (President and Chief Executive Officer (“CEO”)), Lyle Braaten, Steven Busby, Dr. Sally Eyre, Robert Getz, Chantal Gosselin, John Wright and Matthew Wubs. Each director will be standing for re-election at the Meeting.

Majority Voting Policy

The Company has adopted a majority voting policy (the “Majority Voting Policy”). See “Corporate Governance Practices – The Board – Majority Voting Policy” below.

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Nominees for Election as Directors

The term of office of each of the current directors expires immediately prior to the Meeting. Persons named below will be presented for re-election at the Meeting as management’s nominees
(the “Nominees”):

· Christopher Noel Dunn;

· David Strang;

· Lyle Braaten;

· Steven Busby;

· Dr. Sally Eyre;

· Robert Getz;

· Chantal Gosselin;

· John Wright; and

· Matthew Wubs.

In the absence of instructions to the contrary, the person(s) designated by management of the Company in the enclosed form of proxy intend to vote FOR the re-election of the Nominees.

We do not contemplate that any of the Nominees will be unable to serve as a director. If that should occur for any reason prior to the Meeting, it is intended that discretionary authority shall be exercised by the persons named in the accompanying proxy to vote for the election of any other person or persons, unless you specify that your Shares are to be withheld from voting on the election of directors.

Each director elected at the Meeting will hold office until the next annual meeting of shareholders or until their successor is elected or appointed, unless their office is earlier vacated in accordance with the Articles of the Company or with the provision of the BCBCA.

Set out below is the name of each Nominee, their province or state and country of residence, their current position(s) and office(s) held with the Company, their principal occupation(s) during the preceding five years, the date they became a director of the Company, and the number of Shares they beneficially own, or control or direct, directly or indirectly, as at the date of this Circular.

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Christopher Noel Dunn, Executive Chairman
	Age: 60 Massachusetts, USA Director since May 16, 2016 / Non-Independent	Areas of Expertise ·    Finance / Accounting ·    Treasury / Derivatives ·    Capital Markets ·    Risk Management ·    Governance ·    Regulatory ·    Human Resources and Compensation ·    International Business
Messrs. Dunn and Strang formed Ero in May 2016. Mr. Dunn has served as the Executive Chairman and as a director of the Company since May 16, 2016. Mr. Dunn has over 25 years’ experience in the investment banking industry, primarily with Goldman Sachs managing a capital underwriting business in London. In later years he worked with Bear Stearns and JP Morgan as a leader of their respective investment banking practices in mining and metals.  Mr. Dunn is a former director of Pan American Silver Corp. and Pretivm Resources Inc.  Prior to forming Ero Resource Partners LLC in February 2014 with Mr. Strang, he was a Managing Director of Liberty Mining & Metals LLC, a subsidiary of Liberty Mutual Investments from 2011 to 2013. Mr. Dunn holds a Master of Arts degree from the University of Edinburgh and a Master of Science degree from the University of Durham.
Share Ownership as at March 12, 2020		Voting Results
Shares Target Requirement(2) Meets Requirement	3,027,281(1) US$1,608,000 Yes	2019	For:         98.80%	Withheld:        1.20%
		2018	For:         98.78%	Withheld:        1.22%
Committee Membership		Other Directorships with Reporting Issuers
None		None

Notes:

⁽¹⁾ Mr. Dunn also holds 1,000,000 Share purchase warrants (“Founder Warrants”), 525,185 stock options (“Options”) to purchase Shares issued pursuant to the stock option plan of the Company (the “Stock Option Plan”) and 73,007 performance share units (“PSUs”) issued pursuant to the share unit plan of the Company (the “Share Unit Plan”), entitling him to acquire in the aggregate an additional 1,598,192 Shares, assuming that 100% of the PSUs vest. The PSUs will vest three years from the date of grant and the actual number of PSUs that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain performance conditions, as more particularly described below under “Compensation Committee Decisions Relating to 2019 Compensation – Options and Share Based Awards”.

⁽²⁾ Pursuant to the Share Ownership Policy adopted by the Board, Mr. Dunn, as the Executive Chairman of the Company, is required to beneficially own, control or direct, directly or indirectly, at least three times his annual base salary of US$536,000 in Shares and/or restricted share units (“RSUs”) issued pursuant to the Share Unit Plan, within five years of his appointment. Please see “Share Ownership Policy” below for further details.

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David Strang, President and Chief Executive Officer
	Age: 51 British Columbia, Canada Director since May 16, 2016 / Non-Independent			Areas of Expertise ·    Mining Operations ·    Exploration / Geology ·    Capital Markets ·    Finance ·    Risk Management ·    Governance ·    Regulatory ·    Environment, Safety and Sustainability ·    International Business
Messrs. Strang and Dunn formed Ero in May 2016. Mr. Strang has served as the President and Chief Executive Officer and as a director of the Company since May 16, 2016. Mr. Strang served as a director, President and Chief Executive Officer of Lumina Copper Corp. from August 2008 until its sale to First Quantum Minerals Limited in August 2014.  He then formed Ero Resource Partners LLC in February 2014 with Mr. Dunn. Mr. Strang also served as a director, President and Chief Executive Officer of Lumina Royalty Corp. (sold to Franco Nevada Corporation in 2011), Global Copper Corp. (sold to Teck Resources in 2008), and Lumina Resources Corp. (sold to Western Copper Corp. in 2006).  Prior to this, Mr. Strang served as President of Regalito Copper Corp. (sold to Pan Pacific in 2006), and Vice President, Corporate Development of Northern Peru Copper Corp. (sold to China Minmetals and Jiangxi Copper in 2008) and (the original) Lumina Copper Corp. Mr. Strang has approximately 24 years of corporate finance experience, particularly in the areas of corporate and asset valuation, and has approximately eleven years of experience as an officer and director. Mr. Strang holds a Bachelor of Science degree in Applied Earth Sciences from Stanford University.
Share Ownership as at March 12, 2020				Voting Results
Shares Target Requirement(2) Meets Requirement	5,255,936(1) US$1,608,000 Yes			2019	For:       100.00%	Withheld:              Nil
				2018	For:       100.00%	Withheld:              Nil
Committee Membership		Attendance		Other Directorships with Reporting Issuers
Environmental, Health, Safety and Sustainability Committee (former member)(3)		3 of 3	100%	None

Notes:

⁽¹⁾ Mr. Strang also holds 1,000,000 Founder Warrants, 525,185 Options and 73,007 PSUs, entitling him to acquire in the aggregate an additional 1,598,192 Shares, assuming that 100% of the PSUs vest. The PSUs will vest three years from the date of grant and the actual number of PSUs that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain performance conditions, as more particularly described below under “Compensation Committee Decisions Relating to 2019 Compensation – Options and Share Based Awards”.

⁽²⁾ Pursuant to the Share Ownership Policy adopted by the Board, Mr. Strang, as the President and Chief Executive Officer of the Company, is required to beneficially own, control or direct, directly or indirectly, at least three times his annual base salary of US$536,000 in Shares and/or RSUs, within five years of his appointment. Please see “Share Ownership Policy” below for further details.

⁽³⁾ Mr. Strang ceased as a member of the Environmental, Health, Safety and Sustainability Committee on August 11, 2019.

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Lyle Braaten
	Age: 56 British Columbia, Canada Director since July 27, 2016 / Independent			Areas of Expertise ·    Legal ·    Finance / Accounting ·    Capital Markets ·    Risk Management ·    Governance ·    Regulatory ·    International Business
Mr. Braaten is the President and Chief Executive Officer of Miedzi Copper Corp. (since 2012), a private Canadian corporation involved in mineral exploration in Poland.  Mr. Braaten is currently Vice President, Legal Counsel and a director of Lumina Gold Corp. (since June 2014) and Vice President, Legal Counsel and a director of Luminex Resources Corp. (since August 2018). Mr. Braaten joined the Lumina Group in 2008 and assisted in the creation of Magma Energy Corp., a renewable energy company focused on international geothermal energy development. In 2011, Magma and Plutonic Power merged to create Alterra Power Corp. In 2018, Alterra was acquired by Innergex Renewable Energy for $1.1 billion.  Mr. Braaten is a former director of Anfield Gold Corp and Lumina Royalty Corp. Mr. Braaten received a law degree from the University of British Columbia in 1989 and a Bachelor of Science from the University of Calgary in 1986. Mr. Braaten is a member of the Law Societies of British Columbia and the Yukon.
Share Ownership as at March 12, 2020				Voting Results
Shares DSUs(2) Target Requirement(3) Meets Requirement	316,666(1) 3,382 US$210,000 Yes			2019	For:         75.97%	Withheld:        24.03%
				2018	For:         96.75%	Withheld:          3.25%
Committee Membership		Attendance		Other Directorships with Reporting Issuers
Nominating and Corporate Governance Committee (Chair) Audit Committee		3 of 3 4 of 4	100% 100%	Lumina Gold Corp. Luminex Resources Corp.

Notes:

⁽¹⁾ Mr. Braaten also holds 66,666 Founder Warrants and 61,208 Options, entitling him to acquire in the aggregate an additional 127,874 Shares.

⁽²⁾ Pursuant to the terms of the Company’s Deferred Share Unit Plan (the “DSU Plan”), Deferred Share Units (“DSUs”) may only be settled in cash. Please see “Director Compensation - Deferred Share Unit Plan” below for further details.

⁽³⁾ Pursuant to the Share Ownership Policy adopted by the Board, Mr. Braaten, as an independent director of the Company, is required to beneficially own, control or direct, directly or indirectly, at least three times his annual director retainer of US$70,000 in Shares, RSUs and/or DSUs within five year of his appointment. Please see “Director Compensation - Share Ownership Policy” below for further details.

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Steven Busby
	Age: 60 British Columbia, Canada Director since July 27, 2016 / Independent			Areas of Expertise ·    Mining Operations / Metallurgy ·    Risk Management ·    Environment, Safety and Sustainability ·    Governance ·    International Business
Mr. Busby is the Chief Operating Officer of Pan American Silver Corp. (since 2008) with over 30 years of experience in the mining industry where he has participated in successful mine development, construction and operations in both North and South America, Africa and Asia.  As Chief Operating Officer, he is responsible for Pan American’s operations, projects, safety, and corporate social responsibility within a large multi mine organization. Mr. Busby has previously held positions in a privately-owned consulting firm, Coeur d’Alene Mines Corp., Amax Gold Inc., Meridian/FMC Gold Company, and Nerco Minerals Company. Mr. Busby is a former director of Anfield Gold Corp. Mr. Busby holds a Bachelor of Science degree in Mineral Processing Engineering and is a member of the Montana Tech Metallurgical Engineering Department Advisory Board.
Share Ownership as at March 12, 2020				Voting Results
Shares DSUs(2) Target Requirement(3) Meets Requirement	366,666(1) 3,382 US$210,000 Yes			2019	For:     80.96%	Withheld:  19.04%
				2018	For:     99.75%	Withheld:    0.25%
Committee Membership		Attendance		Other Directorships with Reporting Issuers
Environmental, Health, Safety and Sustainability Committee (Chair) Nominating and Corporate Governance Committee		4 of 4 3 of 3	100% 100%	None

Notes:

⁽¹⁾ Mr. Busby also holds 66,666 Founder Warrants and 61,208 Options, entitling him to acquire in the aggregate an additional 127,874 Shares.

⁽²⁾ Pursuant to the terms of the DSU Plan, DSUs may only be settled in cash. Please see “Director Compensation - Deferred Share Unit Plan” below for further details.

⁽³⁾ Pursuant to the Share Ownership Policy adopted by the Board, Mr. Busby, as an independent director of the Company, is required to beneficially own, control or direct, directly or indirectly, at least three times his annual director retainer of US$70,000 in Shares, RSUs and/or DSUs within five year of his appointment. Please see “Director Compensation - Share Ownership Policy” below for further details.

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Dr. Sally Eyre
	Age: 48 British Columbia, Canada Director since August 12, 2019 / Independent				Areas of Expertise ·    Mining Operations / Geology ·    Finance / Accounting ·    Capital Markets ·    Risk Management ·    Human Resources and Compensation ·    Governance ·    International Business
Dr. Eyre is a mining finance professional with extensive experience in global resource capital markets and mining operations. Dr. Eyre holds three non-executive directorships: Adventus Mining Corporation, Japan Gold Corporation and Centamin plc.  From August 2011 to January 2014 she served as President and Chief Executive Officer of Copper North Mining and, prior thereto, served as Senior Vice President, Operations at Endeavour Mining, responsible for a portfolio of resource exploration, development and production projects throughout West Africa. Dr. Eyre served as President and Chief Executive Officer of Etruscan Resources Inc. (now Endeavour Mining Corp.), a gold company with producing assets in West Africa.  She served as Director of Business Development for Endeavour Financial Ltd. and has held executive positions with a number of Canadian resource companies. Dr. Eyre holds a Ph.D. in Economic Geology from the Royal School of Mines, Imperial College, London and is a member of the Society of Economic Geologists (SEG), a member of the Institute of Corporate Directors and a former Director of the SEG Canada Foundation.
Share Ownership as at March 12, 2020					Voting Results
Shares DSUs(2) Target Requirement(3) Meets Requirement		Nil(1) 3,382 US$210,000 No			N/A
Committee Membership			Attendance		Other Directorships with Reporting Issuers
Compensation Committee(4) Nominating and Corporate Governance Committee(4)			5 of 5 1 of 1	100% 100%	Adventus Mining Corporation Centamin plc Japan Gold Corporation

Notes:

⁽¹⁾ Dr. Eyre also holds 26,208 Options, entitling her to acquire an additional 26,208 Shares. 8,086 Options shall vest upon receipt of approval by shareholders of the Company (see below under the heading “Particulars of Matters to be Acted Upon – 5. Incentive Option Grants Under the Stock Option Plan to New Directors”).

⁽²⁾ Pursuant to the terms of the DSU Plan, DSUs may only be settled in cash. Please see “Director Compensation - Deferred Share Unit Plan” below for further details.

⁽³⁾ Pursuant to the Share Ownership Policy adopted by the Board, Dr. Eyre, as an independent director of the Company, is required to beneficially own, control or direct, directly or indirectly, at least three times her annual director retainer of US$70,000 in Shares, RSUs and/or DSUs within five year of her appointment. Please see “Director Compensation - Share Ownership Policy” below for further details.

⁽⁴⁾ Dr. Eyre was appointed to the Board as well as the Compensation Committee and Nominating and Corporate Governance Committee on August 12, 2019.

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Robert Getz
	Age: 57 Connecticut, USA Director since June 14, 2018 / Independent			Areas of Expertise ·    Finance/Accounting ·    Capital Markets ·    Risk Management ·    Governance ·    Human Resources and Compensation ·    International Business
Mr. Getz brings over 30 years of experience in public and private investments and international mergers and acquisitions. Mr. Getz currently serves as Managing Partner of Pecksland Capital Partners (since December 2015), a private investment and advisory firm. Mr. Getz previously served as a Founder and Managing Director of Cornerstone Equity Investors (from September 1996 until December 2016), a private equity investment company. Mr. Getz has served as a director of numerous public and private companies, including many metals and mining companies. He currently serves as the Chairman of the board of directors of Haynes International, Inc., a developer and producer of specialty nickel alloys, and a director of Techtronic Industries Company Limited. Mr. Getz previously served as Chairman of the board of directors of Crocodile Gold Corp., a gold mining company with operations in Australia, prior to the company’s merger with Newmarket Gold in July 2015. Mr. Getz subsequently served as a director of Newmarket Gold Inc. until May 2016. Newmarket Gold Inc. was subsequently acquired by Kirkland Lake Gold Ltd. in December 2016. Mr. Getz holds a Bachelor of Arts, cum laude, from Boston University, and a Master of Business Administration in Finance from the Stern School at New York University.
Share Ownership as at March 12, 2020				Voting Results
Shares DSUs(2) Target Requirement(3) Meets Requirement	202,666(1) 3,382 US$210,000 Yes			2019	For:     99.88%	Withheld:      0.12%
				2018	For:   100.00%	Withheld:  100.00%
Committee Membership		Attendance		Other Directorships with Reporting Issuers
Compensation Committee (Chair) Nominating and Corporate Governance Committee		7 of 7 3 of 3	100% 100%	Haynes International, Inc. Techtronic Industries Company Limited

Notes:

⁽¹⁾ Mr. Getz also holds 55,208 Options, entitling him to acquire an additional 55,208 Shares.

⁽²⁾ Pursuant to the terms of the DSU Plan, DSUs may only be settled in cash. Please see “Director Compensation - Deferred Share Unit Plan” below for further details.

⁽³⁾ Pursuant to the Share Ownership Policy adopted by the Board, Mr. Getz, as an independent director of the Company, is required to beneficially own, control or direct, directly or indirectly, at least three times his annual director retainer of US$70,000 in Shares, RSUs and/or DSUs within five year of his appointment. Please see “Director Compensation - Share Ownership Policy” below for further details.

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Chantal Gosselin
	Age: 50 Ontario, Canada Director since August 12, 2019 / Independent				Areas of Expertise ·    Mining Operations ·    Finance / Accounting ·    Capital Markets ·    Risk Management ·    Environment, Safety and Sustainability ·    Governance ·    International Business
Ms. Gosselin has over 25 years of combined experience in the mining industry and financial services. Ms. Gosselin most recently held the position of Vice President and Portfolio Manager at Goodman Investment Counsel from September 2011 to September 2013. Prior to that, she served as a senior mining analyst at Sun Valley Gold LLP, a precious metals focused hedge fund, from August 2009 to September 2011. Between 2002 and 2008, Ms. Gosselin was the senior mining analyst and a partner of Genuity Capital Markets (now Canaccord Genuity Group) and held mining analyst positions with Haywood Securities Inc. and Dundee Securities Corporation. Prior to her financial services experience, she held various mine site management positions in Canada, Peru and Nicaragua. Ms. Gosselin has served as a director of Wheaton Precious Metals Corp. (formerly Silver Wheaton Corp.) since November 2013 and Lundin Gold Inc. since March 2017 and Reunion Gold Corporation since November 2018. Ms. Gosselin holds a Masters of Business Administration from Concordia University and a Bachelor of Science (Mining Engineering) from Laval University and has completed the Chartered Investment Manager designation and the Institute of Corporate Director program.
Share Ownership as at March 12, 2020					Voting Results
Shares DSUs(2) Target Requirement(3) Meets Requirement		625(1) 3,382 US$210,000 No			N/A
Committee Membership			Attendance		Other Directorships with Reporting Issuers
Audit Committee(4) Environmental, Health, Safety and Sustainability Committee(4)			1 of 1 1 of 1	100% 100%	Lundin Gold Inc. Reunion Gold Corporation Wheaton Precious Metals Corp.

Notes:

⁽¹⁾ Ms. Gosselin also holds 26,208 Options, entitling her to acquire an additional 26,208 Shares. 8,086 Options shall vest upon receipt of approval by shareholders of the Company (see below under the heading “Particulars of Matters to be Acted Upon – 5. Incentive Option Grants Under the Stock Option Plan to New Directors”).

⁽²⁾ Pursuant to the terms of the DSU Plan, DSUs may only be settled in cash. Please see “Director Compensation - Deferred Share Unit Plan” below for further details.

⁽³⁾ Pursuant to the Share Ownership Policy adopted by the Board, Ms. Gosselin, as an independent director of the Company, is required to beneficially own, control or direct, directly or indirectly, at least three times her annual director retainer of US$70,000 in Shares, RSUs and/or DSUs within five year of her appointment. Please see “Director Compensation - Share Ownership Policy” below for further details.

⁽⁴⁾ Ms. Gosselin was appointed to the Board as well as the Audit Committee and Environmental, Health, Safety and Sustainability Committee on August 12, 2019.

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John Wright
	Age: 67 British Columbia, Canada Director since July 27, 2016 / Independent			Areas of Expertise ·    Mining Operations / Metallurgy ·    Exploration / Geology ·    Capital Markets ·    Risk Management ·    Governance ·    Environment, Safety and Sustainability ·    International Business
Mr. Wright is a Metallurgical Engineer and Honours graduate of Queen’s University in Ontario. He has been providing business development services to Capstone Mining Corp. since December 2006. He has over 35 years’ experience in many facets of the exploration and mining industry. Mr. Wright was a co-founder, and former director, President and Chief Operating Officer of Pan American Silver Corp.  Mr. Wright was also the co-founder of Equinox Resources. Previously, he spent 10 years with Teck Cominco where he worked at the Trail Smelter operations and later participated in the management of the feasibility studies, marketing and mine construction at the Afton, Highmont, Bull Moose and David Bell Mines. Mr. Wright currently serves as a director of Luminex Resources Corp. and SilverCrest Metals Inc. and is a former director of Lumina Copper Corp., Northern Peru Copper, Global Copper Corp. and Bitterroot Resources Ltd. He is a Member of the Canadian Institute of Mining and Metallurgy and has a P.Eng. designation from the Association of Professional Engineers and Geoscientists of British Columbia.
Share Ownership as at March 12, 2020				Voting Results
Shares DSUs(2) Target Requirement(3) Meets Requirement	866,666(1) 3,382 US$210,000 Yes			2019	For:   99.97%	Withheld:    0.03%
				2018	For:   99.80%	Withheld:    0.20%
Committee Membership		Attendance		Other Directorships with Reporting Issuers
Audit Committee Compensation Committee(4)		4 of 4 2 of 2	100% 100%	Luminex Resources Corp. SilverCrest Metals Inc.

Notes:

⁽¹⁾ Mr. Wright also holds 66,666 Founder Warrants and 61,208 Options, entitling him to acquire in the aggregate an additional 127,874 Shares.

⁽²⁾ Pursuant to the terms of the DSU Plan, DSUs may only be settled in cash. Please see “Director Compensation - Deferred Share Unit Plan” below for further details.

⁽³⁾ Pursuant to the Share Ownership Policy adopted by the Board, Mr. Wright, as an independent director of the Company, is required to beneficially own, control or direct, directly or indirectly, at least three times his annual director retainer of US$70,000 in Shares, RSUs and/or DSUs within five year of his appointment. Please see “Director Compensation - Share Ownership Policy” below for further details.

⁽⁴⁾ Mr. Wright ceased as a member of the Compensation Committee on August 11, 2019.

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Matthew Wubs
	Age: 49 British Columbia, Canada Director since July 27, 2016 / Independent			Areas of Expertise ·    Finance/Accounting ·    Insurance ·    Risk Management ·    Governance ·    Human Resources and Compensation
Mr. Wubs is a director of Westland Insurance Group Ltd. (since January 2020), one of the largest private insurance brokerage operations in Canada. Westland directly manages approximately $1.4 billion in premium volume through its brokerage, insurance company and wholesale operations. Prior to joining Westland’s board, Mr. Wubs was the Co-Chief Executive Officer of Westland from January 2016 to December 2019 and was responsible for oversight of insurance, reinsurance, risk management, finance and mergers and acquisitions. He joined Westland in the role of Controller in 1997 and thereafter held the position of Chief Financial Officer from January 2002 until December 2015. Previous to Westland, he held a consulting role in Management Information Systems at International Forest Products Ltd. and also obtained his Chartered Professional Accountant designation while working at Deloitte LLP.
Share Ownership as at March 12, 2020				Voting Results
Shares DSUs(2) Target Requirement(3) Meets Requirement	2,135,935(1) 3,382 US$210,000 Yes			2019	For:       99.94%	Withheld:       0.06%
				2018	For:       99.79%	Withheld:       0.21%
Committee Membership		Attendance		Other Directorships with Reporting Issuers
Audit Committee (Chair) Compensation Committee		4 of 4 7 of 7	100% 100%	Westland Insurance Group Ltd. (private)

Notes:

⁽¹⁾ Mr. Wubs also holds 66,666 Founder Warrants and 61,208 Options, entitling him to acquire in the aggregate an additional 127,874 Shares.

⁽²⁾ Pursuant to the terms of the DSU Plan, DSUs may only be settled in cash. Please see “Director Compensation - Deferred Share Unit Plan” below for further details.

⁽³⁾ Pursuant to the Share Ownership Policy adopted by the Board, Mr. Wubs, as an independent director of the Company, is required to beneficially own, control or direct, directly or indirectly, at least three times his annual director retainer of US$70,000 in Shares, RSUs and/or DSUs within five year of his appointment. Please see “Director Compensation - Share Ownership Policy” below for further details.

The Nominees, as a group, beneficially owned, or controlled or directed, directly or indirectly, 12,172,441 Shares, representing approximately 14.19% of the total number of Shares outstanding before giving effect to the exercise of any Founder Warrants, Options and PSUs held by such Nominees.

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

No Nominee is, as at the date of this Circular, or was within 10 years before the date of this Circular, a director, CEO or Chief Financial Officer (“CFO”) of any company (including Ero), that: (i) was subject to a cease trade order (including a management cease trade order), an order similar to a cease trade order, or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days (an “Order”) and that was issued while the Nominee was acting in the capacity as director, CEO or CFO; or (ii) was subject to an Order that was issued after the Nominee ceased to be a director, CEO or CFO and which resulted from an event that occurred while that person was acting in the capacity as director, CEO or CFO.

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Except as set out below, no Nominee (i) is, as at the date of this Circular, or was within the 10 years before the date of this Circular, a director or executive officer of any company (including Ero) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or (ii) has, within the 10 years before the date of this Circular, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the Nominee. In September 2010, while Mr. Getz was a director of EarthRenew Corporation (“EarthRenew”), a private company, EarthRenew appointed a receiver-manager pursuant to the Bankruptcy and Insolvency Act (Canada) in respect of its assets and undertakings. Mr. Getz is no longer a director of EarthRenew.

No Nominee has been subject to: (i) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or (ii) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for a Nominee.

4. Appointment of Auditor

KPMG has been the independent auditor of the Company since May 15, 2017.

At the Meeting, we will ask shareholders to reappoint KPMG as auditor of the Company until the close of the next annual meeting of the shareholders and authorize the Board to fix the remuneration to be paid to the auditor. The following table discloses the aggregate fees billed to the Company and its subsidiaries by KPMG in the financial years ended December 31, 2019 and 2018:

Financial Year End		Audit Fees(1)		Audit Related Fees(2)		Tax Fees		All Other Fees
December 31, 2019	US$	363,403	US$	2,562	US$	5,049	(3)	Nil
December 31, 2018	US$	370,035	US$	9,698	US$	19,971	(4)	Nil

Note:

(1)	The aggregate fees billed for the audit of the annual consolidated financial statements of the Company, quarterly interim review of the Company and of its Brazilian subsidiaries and statutory audits of the Company’s Brazilian subsidiaries.
(2)	The aggregate fees billed for professional services rendered by the external auditors in connection with general training provided with respect to the new International Financial Reporting Standards on leasing (IFRS 16) for the Company’s subsidiaries in Brazil.
(3)	The aggregate fees billed for professional services rendered by the external auditors in connection with the review of IRPJ (income tax for legal entity) / CSLL (social contribution on net profit) deferred tax calculations of the Company’s subsidiaries in Brazil.
(4)	The aggregate fees billed for professional services rendered by the external auditors in connection with the review of income tax of the Company’s Brazilian subsidiaries for the 2013 to 2017 fiscal years.

In the absence of instructions to the contrary, the person(s) designated by management of the Company in the enclosed form of proxy intend to vote FOR the reappointment of KPMG as auditor of the Company until the close of the next annual meeting of the shareholders, at a remuneration to be fixed by the Board.

5. Incentive Option Grants under the Stock Option Plan to New Directors

As part of the continued growth and development of the Company, the Board approved the appointment of Dr. Sally Eyre and Ms. Chantal Gosselin to the Board on August 12, 2019 pursuant to the Articles of the Company and the BCBCA.

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To ensure that each new director was appropriately incentivized given their extensive experience and expertise in the sector, Dr. Eyre and Ms. Gosselin were each granted a total of 20,000 Options on August 15, 2019 at an exercise price of $21.09 per Share (US$15.83 per Share based on the daily exchange rate reported by the Bank of Canada on August 15, 2019 of US$1.3325 = $1.00), expiring on August 15, 2024. These Options have a grant date fair value of $8.39 each (or $167,800 in the aggregate) using a Black-Scholes option pricing model based on the following assumptions: risk-free interest rate of 1.20%; dividend yield of 0%; a forfeiture rate of 0%; volatility factor of 58.4%; and, expected life of 3 years.

As the Stock Option Plan provides that the fair market value of Options that may be granted to each non-employee director of the Company within any one-year period under the plan shall not exceed $100,000, unless such grant is approved by the Company’s shareholders, the Board granted each of Dr. Eyre and Ms. Gosselin with 11,914 Options (within the limit noted above) and an additional 8,086 Options (the “Incentive Options Grants”), with such Incentive Option Grants being subject to shareholder approval.

Accordingly, at the Meeting, shareholders will be asked to consider, and if thought advisable, pass an ordinary resolution (the “Incentive Option Grant Resolution”), as further set out below, to ratify, confirm and approve the Incentive Options Grants.

In accordance with the terms of the Stock Option Plan, the ordinary resolution approving the Incentive Option Grant Resolution must be passed by a majority of votes cast by shareholders present in person or by proxy at the Meeting, excluding the votes attached to Shares beneficially owned by the Insiders (as defined in the Stock Option Plan) to whom the Incentive Option Grants are made. Accordingly, any Shares beneficially owned, or over which control or direction is exercised, directly or indirectly by Dr. Eyre and Ms. Gosselin must be excluded for the purposes of approving the Incentive Option Grant Resolution. As of the Record Date, Ms. Gosselin holds, or exercises control or direction, directly or indirectly over 625 Shares. Dr. Eyre does not hold any Shares as of the Record Date. As a result, a total of 625 Shares will be excluded from voting on Incentive Option Grant Resolution, representing less than 0.01% of the issued and outstanding Shares as of the Record Date.

If the Incentive Option Grant Resolution is approved at the Meeting, the Incentive Option Grants will continue to be effective. In the event that the Incentive Option Grant Resolution is not passed by the requisite number of shareholder votes cast at the Meeting, the Incentive Option Grants will be cancelled.

At the Meeting, shareholders will be asked to consider, and if thought advisable, pass the Incentive Option Grant Resolution, in substantially the following form:

RESOLVED THAT:

1. the granting of the Incentive Option Grants be and are hereby approved, confirmed and ratified; and

2. any one or more of the directors or senior officers of the Company be and is hereby authorized and directed to perform all such acts, deeds and things and execute, under the seal of the Company, or otherwise, all such documents and other writings, including treasury orders, as may be required to give effect to the true intent of these resolutions.

We recommend a vote “FOR” the Incentive Option Grant Resolution.

In the absence of instructions to the contrary, the person(s) designated by management of the Company in the enclosed form of proxy intend to vote FOR the Incentive Option Grant Resolution.

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6. Certain Matters Relating to the Stock Option Plan

We currently have a “rolling” Stock Option Plan, which was adopted by the Board on May 15, 2017, prior to the Company completing an initial public offering on October 19, 2017.

Pursuant to certain rules of the Toronto Stock Exchange (“TSX”), on which our Shares are traded, the Stock Option Plan needs to be renewed by shareholders and the unallocated Options available thereunder must be approved every three years, failing which no further Options may be awarded under the Stock Option Plan. Accordingly, at the Meeting, shareholders will be asked to consider, and if thought advisable, pass an ordinary resolution (the “Stock Option Plan Resolution”), as further set out below, to: (i) confirm and approve the Stock Option Plan, and in connection with this approval, will be asked to consider and approve certain amendments to the Stock Option Plan as further described herein (such amended Stock Option Plan being hereinafter referred to as the “Amended Stock Option Plan”); and (ii) approve the unallocated Options available thereunder.

The Amended Stock Option Plan has been conditionally approved by the Board and the TSX, subject to shareholder approval at the Meeting. The Amended Stock Option Plan is substantially similar to the Stock Option Plan other than with respect to the following:

· reduces the limit on Shares issuable from treasury under the Amended Stock Option Plan, when combined with any other equity compensation arrangements of the Company (including, the Amended Share Unit Plan, as defined below), from 10% to 8%;

· reduce the limit on Shares issuable to insiders as a group, at any time, under the Amended Stock Option Plan, when combined with any other equity compensation arrangement of the Company (including, the Amended Share Unit Plan), from 10% to 8%;

· adds the following to the list of amendments or revisions that require shareholder approval prior to being implemented:

(i) making any amendments to the non-employee director participation limits on the grant of Options under the plan or grants under any other equity compensation arrangements of the Company to non-employee directors within any one-year period; and

(ii) changing the category of individuals contained in the definition of “eligible person” under the plan who are eligible to participate in the plan, including where such change may introduce, re-introduce, broaden or increase the participation of non-employee directors under the plan;

· amends the administration provisions to provide that the Compensation Committee, rather than the Board, shall have the authority to administer the Amended Stock Option Plan. Pursuant to the Company’s Compensation Committee Mandate (a copy of which is available on our website at www.erocopper.com), each member of the committee must be independent, within the meaning of National Instrument 52-110 – Audit Committees (“NI 52-110”); and

· amendments of a housekeeping nature.

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Currently, the maximum aggregate number of Shares issuable under the Stock Option Plan, together with any other equity compensation arrangement of the Company that provides for the issuances of the Company’s Shares from treasury, may not exceed 10% of the issued and outstanding Shares from time to time (this limit includes the Shares issuable under the Share Unit Plan). As the number of issued and outstanding Shares increases, the Company may increase the number of Shares reserved for issuance, upon application to the TSX. As discussed above, the Amended Stock Option Plan reduces this limit to 8%. The Stock Option Plan, as well as the Amended Stock Option Plan, automatically make exercised Options available for subsequent grants thereunder and provide for the reservation and issuance of additional Shares pursuant to such Options.

As at the date of this Circular, Options to purchase 5,081,541 Shares and 438,463 PSUs are outstanding, representing approximately 5.9% and 0.5% (6.4% in the aggregate) of the 85,756,978 Shares issued and outstanding, respectively. As such, 3,055,693 Shares, representing approximately 3.6% of the issued and outstanding Shares, are available for future Option awards (or a combination of Options and awards under any other equity compensation arrangements of the Company (including, the Share Unit Plan)), as at the date hereof. This amount would be reduced to 1,340,554 Shares, representing approximately 1.6% of the issued and outstanding Shares as at the date hereof, under the Amended Stock Option Plan.

A summary of the Stock Option Plan (and the amendments thereto as per the Amended Stock Option Plan) is provided in this Circular under the heading “Statement of Executive and Director Compensation – Option-based and Share-based Awards – Stock Option Plan”. A copy of the Amended Stock Option Plan is attached to this Circular as Appendix “A”.

To be effective, the Stock Option Plan Resolution must be approved by a majority of the votes cast by the shareholders present in person or represented by proxy at the Meeting.

If the Stock Option Plan Resolution is approved at the Meeting, the Amended Stock Option Plan will become effective as at the close of business on the date of the Meeting. In the event that the Stock Option Plan Resolution is not passed by the requisite number of shareholder votes cast at the Meeting, all unallocated Options will be cancelled, and we will not be permitted to award further Options under the Stock Option Plan. All outstanding Options under the Stock Option Plan will continue unaffected.

At the Meeting, shareholders will be asked to consider, and if thought advisable, pass the Stock Option Plan Resolution, in substantially the following form:

RESOLVED THAT:

1. the Amended Stock Option Plan, as substantially described in the Circular with respect to the Meeting, be and is hereby approved, confirmed and ratified;

2. all unallocated options issuable pursuant to the Amended Stock Option Plan are hereby authorized, approved, confirmed and ratified;

3. the Compensation Committee of the Board be and is hereby authorized to reserve a sufficient number of Shares to satisfy the requirement of the Amended Stock Option Plan;

4. the Compensation Committee of the Board be and is hereby authorized to grant Options under the Amended Stock Option Plan until May 7, 2023, being the date that is three years from the Meeting date; and

5. any one or more of the directors or senior officers of the Company be and is hereby authorized and directed to perform all such acts, deeds and things and execute, under the seal of the Company, or otherwise, all such documents and other writings, including treasury orders, as may be required to give effect to the true intent of these resolutions.

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We recommend a vote “FOR” the Stock Option Plan Resolution.

In the absence of instructions to the contrary, the person(s) designated by management of the Company in the enclosed form of proxy intend to vote FOR the Stock Option Plan Resolution.

7. Certain Matters Relating to the Share Unit Plan

We currently have a Share Unit Plan, which was adopted by the Board on September 7, 2017, prior to the Company completing an initial public offering on October 19, 2017.

Pursuant to certain rules of the TSX, on which our Shares are traded, the Share Unit Plan needs to be renewed by shareholders and the unallocated units available thereunder must be approved every three years, failing which no further units may be awarded under the Share Unit Plan. Accordingly, at the Meeting, shareholders will be asked to consider, and if thought advisable, pass an ordinary resolution
(the “Share Unit Plan Resolution”), as further set out below, to: (i) confirm and approve the Share Unit Plan, and in connection with this approval, will be asked to consider and approve certain amendments to the Share Unit Plan as further described herein (such amended Share Unit Plan being hereinafter referred to as the “Amended Share Unit Plan”); and (ii) approve the unallocated units available thereunder.

The Amended Share Unit Plan has been conditionally approved by the Board and the TSX, subject to shareholder approval at the Meeting. The Amended Share Unit Plan is substantially similar to the Share Unit Plan other than with respect to the following:

· reduces the limit on Shares issuable from treasury under the Amended Share Unit Plan, when combined with any other equity compensation arrangements of the Company (including, the Amended Stock Option Plan), from 10% to 8%;

· reduce the limit on Shares issuable to insiders as a group, at any time, under the Amended Share Unit Plan, when combined with any other equity compensation arrangement of the Company (including, the Amended Stock Option Plan), from 10% to 8%;

· reduce the limit on Shares that may be issued to insiders as a group, within any one-year period, under the Amended Share Unit Plan, when combined with any other equity compensation arrangement of the Company (including, the Amended Stock Option Plan), from 10% to 8%;

· adds the following to the list of amendments or revisions that require shareholder approval prior to being implemented:

(i) removing or exceeding the non-employee director participation limits on the grant of units under the plan or grants under any other equity compensation arrangements of the Company to non-employee directors within any one-year period; and

(ii) changing the category of individuals contained in the definition of “eligible person” under the plan who are eligible to participate in the plan, including where such change may introduce, re-introduce, broaden or increase the participation of non-employee directors under the plan;

· amends the administration provisions to provide that the Compensation Committee, rather than the Board, shall have the authority to administer the Amended Share Unit Plan. Pursuant to the Company’s Compensation Committee Mandate (a copy of which is available on our website at www.erocopper.com), each member of the committee must be independent, within the meaning of NI 52-110; and

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· amendments of a housekeeping nature.

The Company may settle the units granted under the Share Unit Plan, as well as the Amended Share Unit Plan, by issuing Shares from treasury, by payment of cash, or a combination of both.

Currently, the maximum aggregate number of Shares issuable under the Share Unit Plan, together with any other equity compensation arrangement of the Company that provides for the issuances of the Company’s Shares from treasury, may not exceed 10% of the issued and outstanding Shares from time to time (this limit includes the Shares issuable under the Stock Option Plan). As the number of issued and outstanding Shares increases, the Company may increase the number of Shares reserved for issuance, upon application to the TSX. As discussed above, the Amended Share Unit Plan reduces this limit to 8%. The Share Unit Plan, as well as the Amended Share Unit Plan, automatically make settled units available for subsequent grants thereunder and provide for the reservation and issuance of additional Shares pursuant to such units.

As at the date of this Circular, Options to purchase 5,081,541 Shares and 438,463 PSUs are outstanding, representing approximately 5.9% and 0.5% (6.4% in the aggregate) of the 85,756,978 Shares issued and outstanding, respectively. As such, 3,055,693 Shares, representing approximately 3.6% of the issued and outstanding Shares, are available for future unit awards (or a combination of units and awards under any other equity compensation arrangements of the Company (including, the Stock Option Plan)), as at the date hereof. This amount would be reduced to 1,340,554 Shares, representing approximately 1.6% of the issued and outstanding Shares as at the date hereof, under the Amended Stock Option Plan.

A summary of the Share Unit Plan (and the amendments thereto as per the Amended Share Unit Plan) is provided in this Circular under the heading “Statement of Executive and Director Compensation – Option-based and Share-based Awards – Share Unit Plan”. A copy of the Amended Share Unit Plan is attached to this Circular as Appendix “B”.

To be effective, the Share Unit Plan Resolution must be approved by a majority of the votes cast by the shareholders present in person or represented by Proxy at the Meeting.

If the Share Unit Plan Resolution is approved at the Meeting, the Amended Share Unit Plan will become effective as at the close of business on the date of the Meeting. In the event that the Share Unit Plan Resolution is not passed by the requisite number of shareholder votes cast at the Meeting, all unallocated units will be cancelled, and we will not be permitted to award further units under the Share Unit Plan. All outstanding PSUs under the Share Unit Plan will continue unaffected.

At the Meeting, shareholders will be asked to consider, and if thought advisable, pass the Share Unit Plan Resolution, in substantially the following form:

RESOLVED THAT:

1. the Amended Share Unit Plan, as substantially described in the Circular with respect to the Meeting, be and is hereby approved, confirmed and ratified;

2. all unallocated units issuable pursuant to the Amended Share Unit Plan are hereby authorized, approved, confirmed and ratified;

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3. the Compensation Committee of the Board be and is hereby authorized to reserve a sufficient number of Shares to satisfy the requirement of the Amended Share Unit Plan;

4. the Compensation Committee of the Board be and is hereby authorized to grant units under the Amended Share Unit Plan until May 7, 2023, being the date that is three years from the Meeting date; and

5. any one or more of the directors or senior officers of the Company be and is hereby authorized and directed to perform all such acts, deeds and things and execute, under the seal of the Company, or otherwise, all such documents and other writings, including treasury orders, as may be required to give effect to the true intent of these resolutions.

We recommend a vote “FOR” the Share Unit Plan Resolution.

In the absence of instructions to the contrary, the person(s) designated by management of the Company in the enclosed form of proxy intend to vote FOR the Share Unit Plan Resolution.

8. Amendment to Our Articles of Incorporation

The Articles of the Company currently provide that:

(i) Subject to the special rights and restrictions attached to the shares of any class or series of shares, the quorum for the transaction of business at a meeting of shareholders is two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 5% of the issued shares entitled to be voted at the meeting; and

(ii) The quorum necessary for the transaction of the business of the directors may be set by the directors and, if not so set, is deemed to be set at two directors or, if the number of directors is set at one, is deemed to be set at one director, and that director may constitute a meeting.

At the Meeting, shareholders will be asked to consider, and if thought advisable, pass a special resolution, as further set out below (the “Articles Amendment Resolution”), to confirm, approve and ratify the following amendments to the Articles of the Company (such amended Articles being hereinafter collectively referred to as the “Amended Articles”) to: (i) to increase the quorum requirement for the Company’s shareholder meetings to two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 25% of the issued shares entitled to be voted at the meeting; and (ii) to increase the quorum requirement for the transaction of the business of the directors to be set at a majority of the directors.

The Board has determined, in order to better align with evolving corporate governance practices and to limit the ability of a significant shareholder or a small group of shareholders from passing resolutions that may be considered contentious or problematic by other shareholders, that it is in the best interest of the Company to amend its Articles to increase the quorum requirement for the Company’s shareholder meetings to two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 25% of the issued shares entitled to be voted at the meeting.

In addition, the Board has determined, in order to better align with evolving corporate governance practices and with the Board’s practice since the incorporation of the Company, that it is in the best interest of the Company to amend its Articles to increase the quorum requirement for the transaction of the business of the directors to a majority of the directors.

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The Amended Articles have been conditionally approved by the Board, subject to shareholder approval at the Meeting. A blackline showing the proposed revisions to the Articles of the Company is attached to this Circular as Appendix “C”.

Pursuant to the BCBCA and the Articles of the Company, the Articles Amendment Resolution must be approved by a special resolution of a minimum of two-thirds of the votes cast by the shareholders present in person or represented by proxy at the Meeting.

If the Articles Amendment Resolution is approved at the Meeting, the Company will proceed with formalizing the amendments contemplated hereby, including by filing a notice of alteration and other necessary documents with the registrar under the BCBCA. The Amended Articles will become effective on the date that the alteration to the Company’s Amended Articles is accepted by the registrar under the BCBCA. In the event that the Articles Amendment Resolution is not passed by the requisite number of shareholder votes cast at the Meeting, the amendments to the Articles of the Company described herein will not become effective.

At the Meeting, shareholders will be asked to consider, and if thought advisable, pass the Articles Amendment Resolution, in substantially the following form:

RESOLVED, BY SPECIAL RESOLUTION, THAT:

1. the amendments to the Articles of the Company to (i) increase the quorum requirement for the Company’s shareholder meetings to two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 25% of the issued shares entitled to be voted at the meeting; and (ii) increase the quorum requirement for the transaction of the business of the directors to be set at a majority of the directors, all as further described in the Circular with respect to the Meeting, which such amendments shall not take effect until the Articles of the Company are altered to reflect such amendments, be and are hereby approved, confirmed and ratified; and

2. any one or more of the directors or senior officers of the Company be and is hereby authorized and directed to perform all such acts, deeds and things and execute, under the seal of the Company, or otherwise, all such documents and other writings as may be required to give effect to the true intent of these resolutions.

We recommend a vote “FOR” the Articles Amendment Resolution.

In the absence of instructions to the contrary, the person(s) designated by management of the Company in the enclosed form of proxy intend to vote FOR the Articles Amendment Resolution.

9. Advisory Vote on Executive Compensation

The Board believes that the Company’s compensation program must be competitive to attract and retain top quality directors and officers, provide a strong incentive to its management to achieve the Company’s goals and align the interests of management with the interests of the Company’s shareholders.

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A detailed discussion of the Company’s compensation philosophy and executive compensation program can be found in the “Compensation Discussion and Analysis” section of this Circular. Shareholders are asked to consider such disclosure as they have a formal opportunity at the Meeting to provide their views on the Company’s approach to executive compensation through the following “Say on Pay” advisory vote:

RESOLVED THAT, on an advisory basis and not to diminish the role and responsibilities of the Board, the shareholders of the Company accept the approach to executive compensation disclosed in the Circular with respect to the Meeting.

As this is an advisory vote, it is not binding on the Board. The Board remains fully responsible for its compensation decisions and is not relieved of this responsibility. The Board and the Compensation Committee will consider the outcome of the vote, as appropriate, when considering future compensation policies, procedures and decisions, all of which are to be consistent with our pay for performance compensation model.

The Board views the inclusion of a periodic advisory vote (at least triennial as determined by the Board from time to time) on executive compensation as the opening of an additional channel of communication between the Board and the shareholders.

We recommend a vote “FOR” the approval of the non-binding resolution on executive compensation.

In the absence of instructions to the contrary, the person(s) designated by management of the Company in the enclosed form of proxy intend to vote FOR the approval of the non-binding resolution on executive compensation.

The complete voting results will be filed under the Company’s profile on SEDAR (www.sedar.com).

We are not aware of any other matter to come before the Meeting other than as set forth in the Notice of Meeting. If any other matter properly comes before the Meeting, it is the intention of the persons named in the enclosed proxy to vote the Shares represented thereby in accordance with their best judgment on such matter.

Statement of Executive and Director Compensation

The following section describes the significant elements of the Company’s executive and director compensation programs, with particular emphasis on the compensation payable to the Executive Chairman, the President and CEO, the CFO and other officers that were determined to be “Named Executive Officers” or “NEOs” within the meaning of National Instrument 51-102 – Continuous Disclosure Obligations (“NI 51-102”). During the financial year ended December 31, 2019, the Company had the following five NEOs:

· Christopher Noel Dunn, Executive Chairman and a director of the Company;

· David Strang, President and CEO and a director of the Company;

· Wayne Drier, CFO

· Michel (Mike) Richard, Chief Geological Officer (“CGO”); and

· Makko DeFilippo, Vice President, Corporate Development.

In some instances, the compensation programs and certain other matters outlined herein also apply to other members of senior management, however, the programs are discussed as they relate specifically to our NEOs.

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Compensation Discussion and Analysis

Compensation Governance

Responsibilities of the Compensation Committee

The Board has established the Compensation Committee and adopted a Compensation Committee mandate. The role of the Compensation Committee is to assist the Board in fulfilling its oversight responsibilities pertaining to compensation matters, including the Company’s compensation policies and practices. Among other things, the Compensation Committee is responsible for:

· reviewing and approving corporate goals and objectives relevant to the compensation of the Executive Chairman and President and CEO;

· periodically reviewing the terms of the Company’s executive compensation programs to determine if they are properly coordinated and achieving their desired purpose;

· reviewing and approving corporate goals and objectives relevant to the compensation of the Executive Chairman and the President and CEO, evaluating their performance in light of such corporate goals and objectives, and making recommendations to the Board with respect to their compensation levels based on such evaluation;

· reviewing recommendations from the Executive Chairman and the President and CEO regarding the appointment, compensation and other terms of employment of the CFO, and other officers, and making recommendations to the Board regarding the same;

· administering and interpreting the Company’s security based compensation arrangements and its policies respecting the grant of Options issued pursuant to the Stock Option Plan and share units (the “Share Units”) issued pursuant to the Share Unit Plan or sale of Shares thereunder, the grant of DSUs issued pursuant to the DSU Plan, and reviewing and recommending to the Board grants of Options, Share Units and DSUs and terms thereof;

· periodically retaining the services of a compensation consultant to facilitate the Compensation Committee’s performance of its mandate; and

· reviewing and assessing the adequacy of its mandate at least annually to ensure compliance with any rules or regulations promulgated by any regulatory body and recommending to the Board for its approval any modifications to its mandate as considered.

The Compensation Committee is currently comprised of Robert Getz (Chairman), Dr. Sally Eyre and Matthew Wubs, all of whom are independent directors within the meaning of NI 52-110. Each of the members of the Compensation Committee has business and other experience which is relevant to their work on the Compensation Committee. By virtue of their differing professional backgrounds, business experience, knowledge of the Company’s industry, knowledge of corporate governance practices and experience interacting with external consultants and advisors, the members of the Compensation Committee are able to make decisions on the suitability of the Company’s compensation policies and practices.

Compensation Consultant

Pursuant to its mandate, the Compensation Committee has the authority to retain external legal counsel, consultants or other advisors to assist it in fulfilling its responsibilities, including a compensation consultant, at the expense of the Company.

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The Compensation Committee has retained Lane Caputo Compensation Inc. (“Lane Caputo”) since August 8, 2017 to assist the Compensation Committee with the development of a compensation program for the Company’s executive officers and independent directors. Pursuant to this mandate, Lane Caputo has provided a review of current market practices regarding executive and director compensation, assisted the Compensation Committee in developing an appropriate comparator group of companies and a compensation philosophy that reflects the Company’s current size and stage of development, and has provided advice and recommendations with respect to best practices in the governance of compensation. In the course of conducting its activities, Lane Caputo has attended meetings of the Compensation Committee and presented its findings for discussion by the Compensation Committee. The Chairman of the Compensation Committee has also met separately with Lane Caputo on several occasions during 2019 to provide further direction.

The Compensation Committee has considered the advice, guidance and recommendations provided by Lane Caputo as part of its deliberations on its recommendations to the Board with respect to salary, annual performance incentives (the “APIs”) and long-term equity incentives.

For the financial years ended December 31, 2019 and 2018, the following fees were billed by and paid to Lane Caputo:

Financial Year Ended	Executive Compensation-Related Fees		All Other Fees
December 31, 2019	$	50,282	Nil
December 31, 2018	$	41,478	Nil

The Compensation Committee must pre-approve any retainers by Lane Caputo or other compensation consultants and provide notice of said retainer to the Board. There were no other consultants hired or contracted to assist the Board or the Compensation Committee in formulating executive compensation in 2017, 2018 or 2019.

Compensation Philosophy

The Company has adopted a “pay for performance” approach to executive compensation. Accordingly, salary is targeted near market median levels of the compensation peer group, while variable compensation opportunities (short and long-term incentives) are structured to provide above-market total compensation for high levels of corporate performance. Compensation elements are designed to balance the following compensation objectives:

· total compensation realization will be aligned with the overall performance of the Company;

· compensation programs will encourage a long-term view to shareholder value creation, as a significant portion of each executive’s variable pay will be equity-based; and

· compensation programs will facilitate the attraction, retention and motivation of experienced and talented executives who will, in turn, drive shareholder value creation.

Benchmarking and 2019 Compensation Peer Group

The Company’s primary objective is to maximize profitable and safe copper and gold production to increase value to shareholders. To succeed, it is a strategic imperative to engage, retain and attract executive officers by providing a reasonable and competitive total compensation package. The Compensation Committee believes that it is appropriate to establish total compensation levels for executives with reference to benchmark roles among similar companies, both in terms of compensation levels and practices.

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To benchmark the competitiveness of the compensation program for the Company’s executive officers for the financial year ended December 31, 2019, the Compensation Committee, in consultation with Lane Caputo, considered the size (based on market capitalization, operating revenue and number of producing mines) and stage of development of the following 18 companies (the “2019 Compensation Peer Group”) in determining an appropriate peer group of comparators:

Alacer Gold Corp.	Fortuna Silver Mines Inc.	OZ Minerals Ltd.
Capstone Mining Corp	Guyana Goldfields Inc.	Sierra Metals Inc.
Copper Mountain Mining Corp.	Hudbay Minerals Inc.	SSR Mining Inc.
Dundee Precious Metals Inc.	Leagold Mining Corp.	Taseko Mines Ltd.
Eldorado Gold Corp.	McEwen Mining Inc.	Torex Gold Resources Inc.
Endeavour Silver Corp.	Nevsun Resources Ltd.	Trevali Mining Corp.

These mining companies were selected as peer companies on the basis that they were the direct competitors for the individuals required to execute the Company’s strategic plan. Peer group constituents are reviewed on a regular basis (at least annually) to ensure their continued relevance. The 2019 Compensation Peer Group was also used to benchmark the Company’s director compensation practices for the financial year ended December 31, 2019.

Elements of Executive Compensation

The Company’s strategy is to provide a competitive compensation package for its executive officers that is in alignment with the Company’s business strategy and compensation philosophy.

Base Salary

Base salaries are reviewed annually to ensure they reflect the individual’s expertise and performance in fulfilling their role and responsibilities, internal equity and market competitiveness. An executive officer’s base salary may be below or above the median for the 2019 Compensation Peer Group depending on a number of factors, including the incumbent’s experience in the role, market competitiveness and/or retention considerations and individual performance.

The following table sets out the base salary of each NEO for the financial year ended December 31, 2019:

Name	Position(s) and Office(s) with Ero	Annual Base Salary (US$)
Christopher Noel Dunn	Executive Chairman Director		525,000
David Strang	President and CEO Director		525,000
Wayne Drier	CFO		335,000
Michel (Mike) Richard	CGO		360,000
Makko DeFilippo	Vice President, Corporate Development		265,000

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Annual Performance Incentive

The API recognizes short-term (typically annual) efforts and milestone achievements that are aligned to the long-term success of the Company. The API is a variable component of compensation designed to provide motivation to executive officers to achieve near-term corporate objectives, and to reward them in cash when such objectives are met or exceeded. Target incentive levels target total cash compensation at the median of the 2019 Compensation Peer Group but have sufficient leverage that actual payment can position above the median for superior corporate and personal performance.

Target incentive levels for 2019 performance for the NEOs were as follows:

Name	2019 Annual Base Salary (US$)		Target (% of Annual Base Salary)			Target Eligibility (US$)
Christopher Noel Dunn		525,000		100	%	525,000
David Strang		525,000		100	%	525,000
Wayne Drier		335,000		65	%	217,750
Michel (Mike) Richard		360,000		75	%	270,000
Makko DeFilippo		265,000		50	%	132,500

Actual awards may be above or below target based on performance outcomes. As more particularly outlined in the above, table, the performance measures range from 0% (if the threshold performance level is not achieved) to 100% (if the performance target is met) and up to 200% in the case of the Executive Chairman and the President and CEO or 150% in the case of all other executive officers of the Company (if the performance target is exceeded by a specified amount).

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The Company’s 2019 key performance indicators were selected to reflect the Company’s top priorities for success in 2019, focussed on safety, environment, operating performance, mineral reserve expansion and new discovery measures. As set out below, the result for the 2019 annual performance incentive award was 128% of target:

	Performance Range
Category	Threshold		Target		Stretch		Actual Result		Weight			Weighted Result
Safety & Environment
MCSA Long Term Injury Frequency Rate		1.6		1.3		1.1		1.0		10	%		15	%
NX Gold Long Term Injury Frequency Rate		1.6		1.3		1.1		0.9		5	%		7.5	%
Significant Environmental Incidents		2		1		0		0		5	%		7.5	%
MCSA Operating Performance
Copper Production (tonnes)		34,417		38,241		40,153		42,318		15	%		22.5	%
C1 Cash Cost(1)		1.13		1.03		0.98		0.93		15	%		22.5	%
NX Gold Operating Performance
Gold Production (oz)		35,310		39,233		41,195		30,434		5	%		0	%
C1 Cash Cost(2)		635		577		548		691		5	%		0	%
MCSA Proven and Probable Reserve Growth (tonnes contained copper)		40,000		80,000		120,000		93,000		15	%		17.4	%
NX Gold Reserves Growth (oz)		40,000		80,000		120,000		89,500		5	%		5.6	%
MCSA New Discoveries		130,000 m drilled		1 new discovery		2 new discoveries		2 new discovery		20	%		30	%
Total													128	%

Note:

(1)

C1 cash cost of copper produced (per lb) is the sum of production costs, net of capital expenditure development costs and by-product credits, divided by the copper pounds produced. C1 cash costs reported by the Company include treatment, refining charges, offsite costs, and certain tax credits relating to sales invoiced to the Company’s Brazilian customer on sales. By-product credits are calculated based on actual precious metal sales (net of treatment costs) during the period divided by the total pounds of copper produced during the period. C1 cash cost of copper produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit, and is widely reported in the mining industry as benchmarks for performance, but does not have a standardized meaning and is disclosed in addition to IFRS measures.

(2)

C1 cash cost of gold produced (per oz) is the sum of production costs, net of capital expenditure development costs and silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. C1 cash cost of gold produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

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Given the Company’s overall performance in 2019, the Compensation Committee made a discretionary adjustment to the API awards to reflect the contribution of the NEOs to that performance, resulting in the following API payments:

Name	Target API (US$)		API at 128% of Target (US$)		Actual API Payment, inclusive of discretionary adjustment (US$)
Christopher Noel Dunn		525,000		672,000		1,050,000
David Strang		525,000		672,000		1,050,000
Wayne Drier		217,750		278,720		326,612
Michel (Mike) Richard		270,000		345,600		404,984
Makko DeFilippo		132,500		169,600		198,742

Option-based and Share-based Awards

The Company’s compensation policy targets annual grants of long-term equity incentives at the median of the 2019 Compensation Peer Group. The Company has two forms of long-term equity incentive plans for executive officers, the Stock Option Plan and the Share Unit Plan.

Stock Option Plan

The Stock Option Plan was adopted by the Board on May 15, 2017 to provide an incentive to the directors, officers, employees, consultants and other personnel of the Company or any of its subsidiaries to achieve the longer-term objectives of the Company; to give suitable recognition to the ability and industry of such persons who contribute materially to the success of the Company; and, to attract to and retain in the employ of the Company or any of its subsidiaries, persons of experience and ability, by providing them with the opportunity to acquire an increased proprietary interest in the Company. As at the date of this Circular, there were 5,081,541 Options issued and outstanding under the Stock Option Plan. The annual burn rate under the Stock Option Plan is set out below under the heading “Securities Authorized for Issuance Under Equity Compensation Plans - Annual Burn Rates of Equity-Based Compensation Arrangements”. The Stock Option Plan is summarized in the table below.

Key Terms

Summary

Administration

The Board has the authority in its sole and absolute discretion to administer the Stock Option Plan and to exercise (or delegate to the Compensation Committee or such other persons as designated by the Board) all the powers and authorities either specifically granted to it under the Stock Option Plan or necessary or advisable in the administration of the Stock Option Plan, acting reasonably and in accordance with the Stock Option Plan.  To date, the Board has delegated the foregoing authority to the Compensation Committee, which is fully comprised of independent directors as more particularly described under the heading “Corporation Governance Practices – Compensation Committee”. The Amended Stock Option Plan would provide that the Committee has the foregoing authority, subject to the general purposes, terms and conditions of the Plan and to the direction of the Board. All references in this summary to the Board determining a particular matter, such as the eligible participants and vesting and exercise period of an Option, would be determined by the Compensation Committee under the Amended Stock Option Plan.

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Securities	Each Option entitles the holder thereof (an “Optionee”) to purchase one Share at an exercise price set at the time of the grant.
Eligibility	Any director, officer, employee, consultant or other personnel of the Company (including any subsidiary of the Company), as the Board may determine.
Exercise Price	The exercise price of an Option will be determined by the Board at the time of the grant, but will be no lower than the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the relevant date (or on any such other stock exchange, inter-dealer quotation network or other organized trading facility on which the Shares trade or are quoted from time to time) (the “Fair Market Value”). If the Shares are suspended from trading or have not traded on the TSX or another stock exchange, inter-dealer quotation network or other organized trading facility for an extended period, the exercise price will be no lower than the Fair Market Value of the Shares at the time of the grant as determined by the Board in its sole discretion acting in good faith.
Vesting and Exercise Period	The vesting and exercise period of an Option will be determined by the Board at the time of grant; however, the expiry date of an Option shall be no later than five years from the date of grant, or in the case where the expiry date of an Option occurs during a period of time during which the Optionee cannot exercise or sell securities of Ero due to applicable policies of the Company in respect of insider trading (a “Blackout Period”) or within 10 business days after the expiry of the Blackout Period, then the expiry date for the Option will be the date that is the tenth business day after the expiry of the Blackout Period.
Cessation of Employment	Subject to certain limitations, in the event that an Optionee’s employment is terminated for any reason other than death, retirement, long-term disability or for cause, the Options held by such Optionee may be exercised within 60 days of termination, provided such Options have vested and not expired. Subject to certain limitations, in the event that an Optionee’s employment is terminated due to retirement or as a result of long-term disability, unless the Board determines otherwise, the Options held by such Optionee may be exercised within one year of retirement or termination as a result of long-term disability, provided such Options have vested and not expired. In addition, such Optionee’s unvested Options shall continue to vest in accordance with their terms until the earlier of the date which is one year following the date of retirement or termination as a result of long-term disability and the expiry date.

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	Subject to certain limitations, in the event that an Optionee’s employment is terminated by reason of death, unless the Board determines otherwise, the Options held by such Optionee shall become fully vested and may be exercised by the legal personal representative(s) of such Optionee’s estate within one year following the death of the Optionee or prior to the expiry date, whichever is earlier. In the event an Optionee’s employment is terminated for cause, the Options held by such Optionee shall expire and terminate immediately upon such Optionee ceasing to actively provided services to the Company in his or her capacity as a director, officer, employee or consultant, as the case may be.
Change of Control	Subject to the Board’s ability to accelerate the vesting of Options at any time in its sole discretion, if the Company completes a transaction which results in a “Change of Control” (as defined in the Stock Option Plan), all unvested Options will vest, and if within 90 days (or such other period as the Board determines) following the completion of such transaction an event(s) that would constitute “constructive dismissal” (as defined pursuant to common law) occurs, and if within 90 days (or such other period as the Board determines) following the date of such “constructive dismissal” an Optionee’s employment is terminated (whether at the Optionee’s discretion or otherwise) then all Options held by such Optionee will remain exercisable until the earlier of 90 days (or such other period as the Board determines) from the date of termination and the expiry date thereof. Notwithstanding the foregoing, with respect to any performance-based Options granted under the Stock Option Plan, vesting of an Option will be dependent on achievement of the applicable performance criteria as of the date of the completion of the above-mentioned transaction and/or be prorated to the date of the completion of such transaction, as applicable.
Limitations	The total number of Shares issuable pursuant to the Stock Option Plan (subject to adjustments under the Stock Option Plan) together with all other security based compensation arrangements of the Company (including the Share Unit Plan discussed below) shall not exceed 10% of the Company’s issued and outstanding Shares, on a non-diluted basis, at the relevant time (currently 8,575,698 Shares, based on 85,756,978 Shares issued and outstanding as at the date of this Circular). Under the Amended Stock Option Plan, this limit would be decreased to 8% (6,860,558 Shares, based on 85,756,978 Shares issued and outstanding as at the date of this Circular). Provided that such maximum number of Shares is not exceeded, following the exercise, expiration, cancellation or other termination of any Options under the Stock Option Plan, a number of Shares equal to the number of Options or rights so exercised, expired, cancelled or terminated shall automatically become available for issuance in respect of Options that may subsequently be granted under the Stock Option Plan.

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Subject to certain limitations, the total number of Shares that may be issued to any individual Optionee under the Stock Option Plan together with all other security based compensation arrangements of the Company (including the Share Unit Plan) in any one-year period, shall not exceed 5% of the number of issued and outstanding Shares at the date of grant (the “Individual Limit”). Subject to certain exceptions, the total number of Shares issuable to insiders of the Company as a group at any time and the total number of Shares issued to insiders of the Company within any one-year period, under the Stock Option Plan together with all other security based compensation arrangements of the Company (including the Share Unit Plan) shall not exceed 10% of the issued and outstanding Shares, on a non-diluted basis, at the date of grant. Under the Amended Stock Option Plan, this limit would be decreased to 8% of the issued and outstanding Shares, on a non-diluted basis, at the date of grant. The total number of Shares that may be issued to any one insider of the Company under the Stock Option Plan together with all other security based compensation arrangements of the Company (including the Share Unit Plan) shall not exceed the Individual Limit. The Fair Market Value of Options that may be granted to each non-employee director of the Company within any one-year period under the Stock Option Plan shall not exceed $100,000, and under the Stock Option Plan together with all other security based compensation arrangements of the Company (including the Share Unit Plan) shall not exceed $150,000.

Net Settlement of Options

The Stock Option Plan provides for the cashless exercise of Options, subject to certain limitations.  The number of Shares issuable pursuant to any such cashless exercise is equal to the number determined by dividing (a) the product of the number of unexercised vested Options tendered for settlement by the difference between the Fair Market Value of one Share (calculated as at the date of settlement) and the exercise price of such Options, by (b) the Fair Market Value (calculated as at the date of settlement) of one Share, represented by the following formula:

A x (X-Y)X	Where:	A = the number of unexercised vested Options tendered for settlement
		X = the Fair Market Value of the Shares on the date of settlement
		Y = the exercise price of the Options tendered for settlement

Amendments The Board has the right to suspend, discontinue or amend the Stock Option Plan or any Option granted thereunder, provided that it obtain shareholder and necessary regulatory approval prior to certain amendments. 

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Subject to certain exceptions approval from a majority of holders of Shares (and other voting securities of the Company) is required to effect the following amendments to the Stock Option Plan: (i) increasing the maximum number of Shares issuable, as a fixed percentage of the issued and outstanding Shares pursuant to the Stock Option Plan; (ii) amendments that would reduce the exercise price of an outstanding Option; (iii) extending the expiry date of any Option beyond its expiry date determined at the date of grant, except with respect to an expiry date that occurs during a Blackout Period; (iv) expanding the categories of individuals who are eligible to participate in the Stock Option Plan; (v) amendments to permit the transfer or assignment of Options, except to permit a transfer to a family member, to an entity controlled by the Optionee or a family member, to a charity or for estate planning or estate settlement purposes; and (vi) amendments to the amendment provisions of the Stock Option Plan. Under the Amended Stock Option Plan, the foregoing list would be amended to expressly provide that the such shareholder approval would also be required to: (i)     change the categories of individuals who are eligible to participate in the plan, including where such change may introduce, re-introduce, broaden or increase the participation of non-employee directors under the Plan; and (ii)    make any amendment to the non-employee director participation limits (see last paragraph under the above heading “Limitations”).

Assignment

Rights respecting Options shall not be transferable or assignable other than by reason of death of the Optionee or by shareholder approval.

The full text of the Stock Option Plan is available under our profile on SEDAR at www.sedar.com. A copy of the Amended Stock Option Plan is attached hereto as Appendix “A”.

Share Unit Plan

The Share Unit Plan was established by the Board on September 7, 2017 as a vehicle by which equity-based incentives may be awarded to the directors, officers, employees and consultants of the Company or any of its subsidiaries, to recognize and reward their significant contributions to the long-term success of the Company and to align the interests of the directors, officers, employees and consultants more closely with the shareholders of the Company. As at the date of this Circular, there were 438,463 PSUs issued and outstanding under the Share Unit Plan. The annual burn rate under the Share Unit Plan is set out below under the heading “Securities Authorized for Issuance Under Equity Compensation Plans - Annual Burn Rates of Equity-Based Compensation Arrangements”. The Share Unit Plan is summarized in the table below.

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Key Terms	Summary
Administration	The Board, in its sole and absolute discretion, but subject to applicable securities and tax law requirements: (i) interprets and administers the Share Unit Plan; (ii) may establish, amend and rescind any rules and regulations relating to the Share Unit Plan; and (iii) makes other determinations that the Board deems necessary or desirable for the administration and operation of the Share Unit Plan. In carrying out its duties and powers under the Share Unit Plan, the Board may rely on recommendations of the Compensation Committee with respect to such matters, and may delegate to the Compensation Committee the power to exercise all the powers and authorities either specifically granted to it under the Share Unit Plan or necessary or advisable in the administration of the Share Unit Plan. To date, the Board has delegated the foregoing authority to the Compensation Committee, which is fully comprised of independent directors as more particularly described under the heading “Corporation Governance Practices – Compensation Committee”. The Amended Share Unit Plan would provide that the Committee has the foregoing authority, subject to the general purposes, terms and conditions of the Plan and to the direction of the Board. All references in this summary to the Board determining a particular matter, such as the eligible participants and performance conditions, would be determined by the Compensation Committee under the Amended Share Unit Plan.
Eligibility	Any director, officer, employee, or consultant of the Company or of any of its subsidiaries, as the Board may determine.
Securities	Each vested Share Unit entitles the holder thereof (a “Share Unit Participant”) to receive on or about the applicable date of vesting of such Share Unit: (i) one Share; (ii) a cash amount equal to the Fair Market Value of one Share (the “Cash Consideration”) as at the applicable date of vesting; or (iii) a combination of (i) and (ii), as determined by the Board in its sole discretion.
Performance Conditions	At the time of grant of a Share Unit, the Board may, in its sole discretion, establish performance conditions for the vesting of such Share Unit, which may include terms or conditions relating to: (i) the market price of the Shares; (ii) the return to holders of Shares, with or without reference to other comparable companies; (iii) the financial performance or results of the Company or its subsidiaries; (iv) the achievement of performance conditions or other performance criteria relating to the Company or its subsidiaries; (v) any other terms and conditions the Board may in its sole discretion determine with respect to vesting or the acceleration of vesting; and (vi) the vesting date of the Share Units.

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	The performance conditions may be graduated such that different percentages (which may be greater or lesser than 100%) of the Share Units in a grant become vested depending on the extent of satisfaction of one or more performance conditions. The Board may, in its discretion, subsequent to the grant of a Share Unit, waive any such performance condition or determine that it has been satisfied subject to applicable law. Each Share Unit for which vesting is subject to performance conditions is herein referred to as a “PSU”. Each Share Unit for which vesting is not subject to performance conditions is herein referred to as an “RSU”.
Vesting	Each RSU shall vest at such time as determined by the Board at the time of grant. Each PSU shall vest at such time as determined by the Board at the time of grant, subject to satisfaction of applicable Performance Conditions. The vesting date of a Share Unit is subject to compliance with the requirements pertaining to the exception to the application of the salary deferral arrangement rules in paragraph (k) of the definition of “salary deferral arrangement” in subsection 248(1) of Income Tax Act (Canada), as amended from time to time (the “Tax Act”), as such subsection may be amended or enacted from time to time.
Redemption	Each Share Unit will be redeemed on the date (the “Redemption Date”) selected by the Board following the date of vesting of such Share Unit, which will be within 30 days of the date of vesting, or at a later deferred date, subject to certain exceptions and restrictions. The Redemption Date for a Share Unit is subject to compliance with the requirements pertaining to the exception to the application of the salary deferral arrangement rules in paragraph (k) of the definition of “salary deferral arrangement” in subsection 248(1) of the Tax Act, as such subsection may be amended or enacted from time to time.
Deferral Date	Non-Canadian Share Unit Participants may elect to defer the receipt of all or any part of their entitlement to Shares and/or Cash Consideration, as applicable, until a date following the Redemption Date but no later than such individual’s date of retirement (the “Deferred Payment Date”). Non-Canadian Share Unit Participants who elect to set a Deferred Payment Date must provide prior notice to the Company and, subject to certain restrictions, may change a Deferred Payment Date by providing prior notice to the Company.
Dividends	When dividends are paid on Shares, each Share Unit Participant shall be credited with dividend equivalents in respect of the Share Units credited to his or her account as of the record date for payment of dividends. Such dividend equivalents shall be converted into additional Share Units (including fractional Share Units) based on the Fair Market Value of the Share on the date credited and redeemed on the Redemption Date or a later deferred date, as applicable, of the Share Unit with respect to which the dividend equivalent was granted.

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Cessation of Employment

Subject to certain restrictions, if a Share Unit Participant is terminated by the Company for cause or if a Share Unit Participant voluntarily terminates his or her employment for any reasons or resigns as a director, as applicable, all of his or her Share Units that have not reached their respective Redemption Dates as at the date of termination will be cancelled, and all of his or her Share Units that have reached their respective Redemption Dates as at the date of termination but redemption thereof has been deferred by the Share Unit Participant will be redeemed as soon as possible for Shares, Cash Consideration in lieu thereof or a combination of both, as determined by the Board in its sole discretion. Subject to certain restrictions, in the event that a non-director Share Unit Participant’s employment is involuntarily terminated for reasons other than cause, his or her Share Units will be redeemed on the date of termination for Shares, Cash Consideration in lieu thereof or a combination of both, as determined by the Board in its sole discretion, provided such Share Units have vested at such time. Subject to certain restrictions, in the event that a director Share Unit Participant is not re-elected at an annual or special meeting of shareholders of the Company, his or her Share Units will be redeemed on the date of the annual or special meeting of shareholders for Shares, Cash Consideration in lieu thereof or a combination of both, as determined by the Board in its sole discretion, provided such Share Units have vested at such time. Subject to certain restrictions, in the event that a Share Unit Participant dies, his or her Share Units will be redeemed upon the date of death for Shares, Cash Consideration in lieu thereof or a combination of both, as determined by the Board in its sole discretion.

Change of Control

In the event that a Share Unit Participant is terminated for reasons other than cause within 12 months following a “Change of Control” (as defined in the Share Unit Plan), all Share Units held by such Share Unit Participant will be redeemed as soon as reasonably practical following such termination for Shares, Cash Consideration in lieu thereof or a combination of both, as determined by the Board in its sole discretion; provided that in the event that any Share Units are subject to satisfaction of any performance conditions, the Board shall consider the extent of satisfaction of such performance conditions in determining the number of Share Units to be redeemed.

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Limitations

The number of Shares reserved for issuance under the Share Unit Plan: (i) together with the Shares issuable under all other security based compensation arrangements of the Company (including the Stock Option Plan), shall not exceed 10% of the total number of issued and outstanding Shares, on a non-diluted basis, subject to certain limited exceptions (currently 8,575,698 Shares, based on 85,756,978 Shares issued and outstanding as at the date of this Circular; however, under the Amended Share Unit Plan, this limit would be decreased to 8% (6,860,558 Shares, based on 85,756,978 Shares issued and outstanding as at the date of this Circular); and (ii) to any one Share Unit Participant within a 12-month period shall not exceed 2% of the total number of issued and outstanding Shares. The number of Shares issuable to insiders of the Company as a group at any time and the number of Shares issued to insiders of the Company as a group within any one-year period, under the Share Unit Plan together with all other security based compensation arrangements of the Company shall not exceed 10% of the total number of issued and outstanding Shares, on a non-diluted basis. Under the Amended Share Unit Plan, this limit would be decreased to 8% of the issued and outstanding Shares, on a non-diluted basis. The number of Shares issuable to non-employee directors of the Company as a group, under the Share Unit Plan, shall not exceed 1% of the total number of issued and outstanding Shares, on a non-diluted basis. The Fair Market Value of the Shares issuable to each non-employee director of the Company within any one-year period under the Share Unit Plan shall not exceed $150,000. Notwithstanding the foregoing, the Fair Market Value of the Shares issuable to each non-employee director of the Company within any one-year period under the Share Unit Plan together with all security based compensation arrangements of the Company shall not exceed $150,000.

Amendments

The Board has the right to suspend, terminate or amend the Share Unit Plan or any portion thereof, subject to certain restrictions and provided that it obtain any necessary prior shareholder and/or regulatory approvals. The following amendments to the Share Unit Plan may be effected without obtaining prior shareholder approval: (i) amendments to the terms and conditions necessary to ensure that the Share Unit Plan complies with applicable regulatory requirements; (ii) amendments respecting administration of the Share Unit Plan; (iii) amendments respecting the terms and conditions on which Share Units may be granted; and (iv) amendments of a “housekeeping” nature. Prior shareholder approval is required to effect any amendment to the Share Unit Plan related to: (i) the number or percentage of Shares available for grant; (ii) removing or exceeding the number of Shares issuable or that may be issued to insiders as a group under the Share Unit Plan; (iii) permitting the transfer or assignment of Share Units other than for normal estate settlement purposes; (iv) expanding the categories of individuals eligible to participate in the Share Unit Plan; (v) changing the method of calculation of redemption of Share Units; (vi) extending the term for redemption of Share Units; and (vii) any amendments to the amendment provisions of the Share Unit Plan. Under the Amended Share Unit Plan, the foregoing list would be amended to expressly provide that the such shareholder approval would also be required to: (i)       change the categories of individuals who are eligible to participate in the plan, including where such change may introduce, re-introduce, broaden or increase the participation of non-employee directors under the Plan; and (ii)       removing or exceeding the non-employee director participation limits (see last paragraph under the above heading “Limitations”).

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Assignment Rights respecting Share Units shall not be transferable or assignable other than by will or the laws of decent and distribution or by shareholder approval.

The full text of the Share Unit Plan is available under our profile on SEDAR at www.sedar.com. A copy of the Amended Share Unit Plan is attached hereto as Appendix “B”.

As with the PSUs awarded in 2018, the PSUs awarded in 2019 vest to executives on the third anniversary of the date of grant based on the Company’s performance relative to two performance metrics:

1. The Company’s total shareholder return (“TSR”) against a peer group of base metals producers that the Company competes with for investment dollars (the “Base Metals Index”), as follows:

Performance Level	Performance Achieved	PSU Vesting
Maximum	TSR at or above 90th percentile		200	%
Above Target	TSR at 80th percentile		150	%
Target	TSR at 65th percentile		100	%
Below Threshold	TSR below 35th percentile		0	%

Linear interpolation will be applied to determine percentage PSU vesting for TSR performance between the performance achievement levels shown in the table above.

The Base Metals Index is comprised of the following 16 companies:

Antofagasta plc	Lundin Mining Corp.	Teck Resources Limited
Capstone Mining Corp.	MMG Ltd.	Trevali Mining Corp.
Copper Mountain Mining Corp.	Nexa Resources SA
First Quantum Minerals Ltd.	Oz Minerals Ltd.
Freeport-McMoRan Inc.	South32 Limited
Hudbay Minerals Ltd.	Southern Copper Corp.
Imperial Metals Corp	Taseko Mines Ltd.

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2. The Company’s return on invested capital (“ROIC”), as follows:

Performance Level	Performance Achieved	PSU Vesting
Maximum	ROIC at or above 12%		200	%
Above Target	ROIC at 10%		150	%
Target	ROIC at 8%		100	%
Below Threshold	ROIC below 5%		0	%

Linear interpolation will be applied to determine percentage PSU vesting for ROIC performance between the performance achievement levels shown in the table above.

The Board has delegated to the Compensation Committee the responsibility for administering and interpreting the Company’s equity-based compensation arrangements and the policies respecting the grant of Options or Share Units, whether PSUs or RSUs, or the sale or issuance, as applicable, of Shares thereunder, and reviewing and recommending to the Board grants of Options and Share Units, whether PSUs or RSUs, and the terms thereof. Awards of Options and Share Units, whether PSUs or RSUs, under the Stock Option Plan and Share Unit Plan are subject to certain limitations set out in each plan as well as the approval of the Board and the Compensation Committee, as applicable. Such awards are generally based on the executive officer’s total target compensation relative to their peers and their level within the organization. Options and Share Units are not granted to reward past performance, but rather as forward-looking incentive. As such, previous grants of Options or Share Units, as applicable, are not taken into account when considering additional grants of Options or Share Units, as applicable.

Managing Compensation Risk

As part of its annual review of the Company’s compensation policies and practices, including the setting of annual corporate performance objectives, as discussed below, the Compensation Committee considers any risks associated with such policies and practices. The Compensation Committee is satisfied that the current compensation policies and practices, combined with the enterprise risk management of the Company, offer a balanced combination that promotes adequate risk-taking with appropriate and reasonable compensation incentives.

The Compensation Committee believes that the executive compensation program of the Company should not raise its risk profile. Accordingly, the Company’s compensation programs include safeguards designed to mitigate compensation risks. The following measures seek to impose appropriate limits to avoid excessive or inappropriate risk-taking or payments:

· the Compensation Committee retains an independent advisor to provide an external perspective of marketplace changes and best practices related to executive compensation design, governance and compensation risk management;

· the Compensation Committee undertakes annual review of the Company’s compensation program to ensure competitiveness with a compensation peer group and trends in compensation practices and governance;

· the Compensation Committee undertakes an annual review of the Company’s APIs, long-term equity incentives, and corresponding performance objectives to ensure continued relevance and applicability to the Company’s current stage of development and business strategy;

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· compensation paid to the Company’s executive officers is spread between short-term incentives and long-term incentives to mitigate the risk of too much emphasis on short-term goals at the expense of long-term sustainable performance;

· API payments are capped at a maximum level of 200% of target, in the case of the Executive Chairman and the President and CEO, or 150% of target, in the case of all other executive officers of the Company, to ensure preservation of capital and to provide upper payout boundaries;

· the Compensation Committee and the Board retain discretion to adjust individual performance objectives during the year to ensure they remain aligned with the evolving priorities of the Company in light of developments during the year. Discretion may also be exercised to increase or decrease payout levels based on a holistic assessment of the Company’s performance, ensuring appropriate pay-for-performance alignment and providing the flexibility to make reasonable exceptions when necessary;

· the Executive Chairman and the President and CEO of the Company are each required to own at least three times their annual base salary in Shares and the CFO, CGO of the Company and any other c-suite level executive of the Company appointed in the future are each required to own at least two time their annual base salary in Shares and/or RSUs to further align their interests more closely with the shareholders of the Company. See “Share Ownership Policy” below for the guidelines and current share ownership levels.

· a compensation Clawback Policy has been adopted, which applies to all performance-based compensation awards issued to any executive at the Vice-President level or above (including each NEO). See “Clawback Policy” below.

· no NEO or director, among others, are permitted to purchase financial instruments, including prepaid variable forward contracts, instruments for the short sale or purchase or sale of call or put options, equity swaps, collars, or units of exchangeable funds, that are designed to or that may reasonably be expected to have the effect of hedging or offsetting a decrease in the market value of any securities of the Company.

Compensation Committee Decisions Relating to 2020 Compensation

Given the Company’s extensive growth in 2019, Lane Caputo was given the mandate to revise the peer group against which the Company has historically benchmarked its compensation practices to reflect the Company’s current size and stage of development. To benchmark the competitiveness of the compensation program for the Company’s executive officers for the financial year ending December 31, 2020, the Compensation Committee, in consultation with Lane Caputo, utilized the following peer group of 18 comparators (the “2020 Compensation Peer Group”):

Alacer Gold Corp.	Fortuna Silver Mines Inc.	SEMAFO Inc.
Capstone Mining Corp	Hudbay Minerals Inc.	Sierra Metals Inc.
Copper Mountain Mining Corp.	Leagold Mining Corp.	SSR Mining Inc.
Dundee Precious Metals Inc.	McEwen Mining Inc.	Taseko Mines Ltd.
Eldorado Gold Corp.	OZ Minerals Ltd.	Torex Gold Resources Inc.
Endeavour Silver Corp.	Pretium Resources Inc.	Trevali Mining Corp.

The 2020 Compensation Peer Group has also been used to benchmark the Company’s director compensation practices for the financial year ending December 31, 2020.

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The following table sets out the base salary of each NEO for the financial year ending December 31, 2020, which was targeted at or near the median for the 2020 Compensation Peer Group depending on a number of factors, including the incumbent’s experience in the role, market competitiveness and/or retention considerations and individual performance:

Name	Position(s) and Office(s) with Ero	Annual Base Salary (US$)
Christopher Noel Dunn	Executive Chairman Director		536,000
David Strang	President and CEO Director		536,000
Wayne Drier	CFO		340,000
Michel (Mike) Richard	CGO		370,000
Makko DeFilippo	Vice President, Corporate Development		340,000

The Compensation Committee has established 2020 corporate performance measures for each executive officer, including safety, environment, operating performance, mineral reserve expansion and new discovery measures. The weighting assigned to each measure varies with each executive officer, depending on his or her position and level in the organization.

Share Ownership Policy

The Board has adopted a Share Ownership Policy, which sets Share ownership targets for the Executive Chairman, President and CEO, CFO, CGO and independent directors of the Company to further align their interests more closely with the shareholders of the Company.

The Executive Chairman and President and CEO of the Company are each required to beneficially own, control or direct, directly or indirectly, at least three times their annual base salary in Shares and/or RSUs. The CFO and CGO of the Company and any other c-suite level executive of the Company appointed in the future are each required to beneficially own, control or direct, directly or indirectly, at least two time their annual base salary in Shares and/or RSUs.

Each independent director of the Company is required to beneficially own, control or direct, directly or indirectly, at least three times their annual cash retainer in Shares, RSUs and/or DSUs.

To measure compliance, Share and RSUs held by each c-suite level executive officer and Shares, RSUs and DSUs held by each independent director are valued at the greater of their acquisition cost or grant date value, as the case may be, and current market value.

All new c-suite level executive officers and independent directors of the Company are required to satisfy their Share ownership target within five years of their appointment. As at the date of this Circular, each c-suite level executive of the Company, being the Executive Chairman, President and CEO, CFO and CGO has achieved their respective Share ownership target and each independent director, other than Dr. Sally Eyre and Chantal Gosselin, who were appointed to the Board on August 15, 2019, has achieved their respective Share ownership target.

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Clawback Policy

The Board has adopted a Clawback Policy, which applies to all performance-based compensation awards issued to any executive at the Vice-President level or above (including each NEO). The Clawback Policy providing for the full or partial forfeiture and recoupment of performance-based compensation awarded and outstanding or paid to any such executive officer subsequent to a material restatement of previously issued financial statements of the Company, required by applicable securities laws and directly resulting or arising from the gross negligence, fraud or willful misconduct of any such executive officer, the result of which is that any performance-based compensation provided to any such executive officer would have been a lower amount had it been calculated based on such restated results. For the purposes of this policy, performance-based compensation includes incentive compensation awarded or paid in any form, including cash or equity-based, whether vested or unvested.

Performance Graph

Total cumulative shareholder return represents the overall financial benefit generated for shareholders (change in share price + dividends received) and is considered an effective measure of how the market evaluates the overall performance of a company over a specific period of time.

The graph below shows the total cumulative shareholder return of $100 invested in our Shares on October 19, 2017 (first day of trading on the TSX) compared to $100 invested in the S&P Metals and Mining Select Industry Index, the S&P/TSX Global Base Metals Index and the 2019 Compensation Peer Group, assuming reinvestment of dividends.

 

NEO compensation levels have increased since the Company’s initial public offering, but at a much lower rate as compared to the relative share price performance of the Company over that same time period. We feel that our executive compensation practice is effective and supports the relationship between the compensation earned by our NEOs and the return to shareholders.

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Compensation Table

The following table contains information about the compensation awarded to, earned by, paid to, or payable to, individuals who were Named Executive Officers as at the end of the financial year ended December 31, 2019, 2018 and 2017.

											Non-equity Incentive Plan Compensation (US$)
Name and Principal Position	Year		Salary (US$)			Share-based Awards (US$)(1)		Option-based Awards (US$)(2)			Annual Incentive Plans (US$)(3)		Long-term Incentive Plans	Pension Value (US$)		All Other Compensation (US$)			Total Compensation (US$)
Christopher Noel Dunn(4)		2019		525,000			811,275		Nil			1,050,000	N/A		N/A		1,307	(6)		2,387,582
Executive Chairman		2018		400,000			149,449		351,753	(7)		650,000	N/A		N/A		956	(6)		1,552,158
		2017		400,000			Nil		350,164	(8)		320,000	N/A		N/A		Nil			1,591,939
									521,775	(9)
David Strang(4)		2019		525,000			811,275		Nil			1,050,000	N/A		N/A		471	(6)		2,386,746
President and CEO		2018		400,000			149,449		351,753	(7)		650,000	N/A		N/A		875	(6)		1,552,077
		2017		400,000			Nil		350,164	(8)		320,000	N/A		N/A		705	(6)		1,592,644
									521,775	(9)
Wayne Drier		2019		335,000			190,267		288,549	(5)		326,612	N/A		N/A		908	(6)		1,141,336
CFO		2018		300,000			112,083		263,816	(7)		270,000	N/A		N/A		1,502	(6)		947,401
		2017		250,000	(10)		Nil		432,138	(11)		180,000	N/A		N/A		871	(6)		1,123,897
									260,888	(9)
Michel (Mike) Richard		2019		360,000			210,335		318,921	(5)		404,984	N/A		N/A		645	(6)		1,294,885
CGO		2018		300,000			119,555		281,399	(7)		337,500	N/A		N/A		354	(6)		1,038,808
		2017		300,000			Nil		260,888	(9)		180,000	N/A		N/A		Nil			740,888
Makko DeFilippo		2019		265,000			130,212		197,429	(5)		198,742	N/A		N/A		1,307	(6)		792,690
Vice President, Corporate Development		2018		220,000			74,725		193,465	(7)		165,000	N/A		N/A		956	(6)		654,146
		2017		201,667	(12)		Nil		146,487	(11)		110,000	N/A		N/A		Nil			614,687
									156,533	(9)

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Notes:

(1)	Represents the total grant date fair value of the PSUs granted and may not represent the amounts the recipient will actually realize from the award. On December 12, 2019, the Board approved the issuance of 225,659 PSUs under the Share Unit Plan based on a grant date fair value of C$20.52 per Share (US$15.57 per Share based on the daily exchange rate reported by the Bank of Canada on December 12, 2019 of US$1.3182 = $1.00), which is the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the grant date. On December 31, 2018, the Board approved the issuance of 215,288 PSUs under the Share Unit Plan based on a grant date fair value of C$9.76 per Share (US$7.15 per Share based on the daily exchange rate reported by the Bank of Canada on December 31, 2018 of US$1.3642 = $1.00), which is the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the grant date. The grant date fair value of the PSUs as presented will differ from the compensation expense included for these grants in the Company’s financial statements, as in accordance with IFRS accounting requirements the compensation expense reflects only the fair value amortized in the period based on each grant’s vesting terms.
(2)	Represents the total grant date fair value of the Options granted and may not represent the amounts the recipient will actually realize from the award. The fair value of the Options has been estimated at the date of grant in accordance with IFRS accounting requirements using a Black-Scholes option pricing model and was determined based on various assumptions including share price volatility on the grant date taking into account the expected life of the Options, an assumption that no dividends are to be paid and a risk-free interest rate determined by the Bank of Canada for the grant date. Please see the footnotes below for the assumptions used for each grant of Options.
(3)	Represents cash bonuses (API) awarded for individual performance and corporate achievements. Amount has been included in the year that the cash bonus was earned despite being paid in the following year.
(4)	Messrs. Dunn and Strang do not receive compensation for their services as directors of the Company.
(5)	On December 12, 2019, each NEO was granted Options at an exercise price of $20.52 per Share (US$15.57 per Share based on the daily exchange rate reported by the Bank of Canada on December 12, 2019 of US$1.3182 = $1.00), expiring on December 12, 2024. These Options have a grant date fair value of $7.53 each (US$5.71 per Share based on the daily exchange rate reported by the Bank of Canada on December 12, 2019 of US$1.3182 = $1.00) based on the following assumptions: risk-free interest rate of 1.67%; dividend yield of 0%; a forfeiture rate of 0%; volatility factor of 50.59%; and, expected life of 3 years.
(6)	Represents life insurance premiums paid by the Company.
(7)	On December 31, 2018, each NEO was granted Options at an exercise price of $9.76 per Share (US$7.15 per Share based on the daily exchange rate reported by the Bank of Canada on December 31, 2018 of US$1.3642 = $1.00), expiring on December 31, 2023. These Options have a grant date fair value of $4.13 each (US$3.03 per Share based on the daily exchange rate reported by the Bank of Canada on December 31, 2018 of US$1.3642 = $1.00) based on the following assumptions: risk-free interest rate of 1.88%; dividend yield of 0%; a forfeiture rate of 0%; volatility factor of 61.0%; and, expected life of 3 years.
(8)	On November 24, 2017, these NEOs were granted Options at an exercise price of C$6.48 per Share (US$5.10 per Share based on the daily exchange rate reported by the Bank of Canada on November 24, 2017 of US$1.2708 = $1.00), expiring on November 24, 2022. These Options have a grant date fair value of $2.80 each (US$2.20 per Share based on the daily exchange rate reported by the Bank of Canada on November 24, 2017 of US$1.2708 = $1.00) based on the following assumptions: risk-free interest rate of 1.57%; dividend yield of 0%; a forfeiture rate of 0%; volatility factor of 60.2%; and, expected life of 3 years.
(9)	On December 7, 2017, each NEO was granted Options at an exercise price of C$6.74 per Share (US$5.25 per Share based on the daily exchange rate reported by the Bank of Canada on December 7, 2017 of US$1.2843 = $1.00), expiring on December 7, 2022. These Options have a grant date fair value of $2.68 each (US$2.09 per Share based on the daily exchange rate reported by the Bank of Canada on December 7, 2017 of US$1.2843 = $1.00) based on the following assumptions: risk-free interest rate of 1.60%; dividend yield of 0%; a forfeiture rate of 0%; volatility factor of 60.2%; and, expected life of 3 years.
(10)	Mr. Drier’s employment with the Company commenced on March 1, 2017 at a base salary of $300,000 per annum.
(11)	On May 15, 2017, these NEOs were granted Options at an exercise price of US$1.50 per Share, expiring on May 15, 2022. These Options have a grant date fair value of $1.00 each (US$0.73 per Share based on the daily exchange rate reported by the Bank of Canada on May 15, 2017 of US$1.3641 = $1.00) based on the following assumptions: risk-free interest rate of 0.91%; dividend yield of 0%; a forfeiture rate of 0%; volatility factor of 74.5%; and, expected life of 3 years.
(12)	Mr. DeFilippo’s employment with the Company commenced on February 1, 2017 at a base salary of $220,000 per annum.

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Significant terms of each NEOs employment agreement are set out below under the heading, “Termination and Change of Control Benefits”.

Incentive Plan Awards

Outstanding Share-Based Awards and Option-Based Awards

The following table sets forth all Share-based awards and Option-based awards outstanding for each NEO as at December 31, 2019.

	Option-Based Awards									Share-Based Awards
Name	Number of Securities Underlying Unexercised Options (#)(1)			Option Exercise Price (US$)(2)			Option Expiration Date	Value of Unexercised In-the-Money Options (US$)(3)		Number of Shares or Units of Shares that Have Not Vested (#)(4)		Market or Payout Value of Share-Based Awards that Have Not Vested (US$)(5)		Market or Payout Value of Vested Share-Based Awards Not Paid Out or Distributed (US$)
		159,000	(6)		4.99	(7)	November 24, 2022		2,097,210		20,902		379,998	Nil
Christopher Noel Dunn		250,000	(8)		5.19	(9)	December 7, 2022		3,247,500
		116,185	(10)		7.51	(11)	December 31, 2023		1,239,694		52,105		947,269	Nil
		159,000	(6)		4.99	(7)	November 24, 2022		2,097,210		20,902		379,998	Nil
David Strang		250,000	(8)		5.19	(9)	December 7, 2022		3,247,500
		116,185	(10)		7.51	(11)	December 31, 2023		1,239,694		52,105		947,269	Nil
		300,000	(12)(13)		1.50		May 15, 2022		5,004,000		15,676		284,990	Nil
		125,000	(8)		5.19	(9)	December 7, 2022		1,623,750
Wayne Drier		87,139	(10)		7.51	(11)	December 31, 2023		929,773
		50,534	(14)		15.80	(15)	December 12, 2024		120,271		12,222		222,196	Nil
		125,000	(8)		5.19	(9)	December 7, 2022		1,623,750		16,721		303,988	Nil
Michel (Mike) Richard		92,948	(10)		7.51	(11)	December 31, 2023		991,755
		55,853	(14)		15.80	(15)	December 12, 2024		132,930		13,509		245,594	Nil
		100,334	(12)(16)		1.50		May 15, 2022		1,673,571		11,496		208,997	Nil
		75,000	(8)		5.19	(9)	December 7, 2022		974,250
Makko DeFilippo		63,902	(10)		7.51	(11)	December 31, 2023		681,834
		34,576	(14)		15.80	(15)	December 12, 2024		82,291		8,363		152,039	Nil

Note:

(1)	Class of securities underlying all Options is Shares. All Options granted to the NEOs are governed by the Stock Option Plan.
(2)	Exercise price for the Options is equivalent to the “Fair Market Value”, as defined in the Stock Option Plan or the “Market Price” as defined in the TSX Company Manual, which currently means the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the grant date.

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(3)	The figures shown in this column are calculated based on the difference between the Option exercise price and the closing price of the Shares on the TSX on December 31, 2019 ($23.61 or US$18.18 based on the daily exchange rate reported by the Bank of Canada on December 31, 2019 of US$1.2988 = $1.00). The figures shown in this column do not represent the actual value the individual NEO would receive. The actual gain, if any, on exercise will depend on the value of the Shares on the date of exercise.
(4)	Class of securities underlying all PSUs is Shares. All PSUs granted to the NEOs are governed by the Share Unit Plan.
(5)	Based on the closing price of the Shares on the TSX on December 31, 2019 ($23.61 or US$18.18 based on the daily exchange rate reported by the Bank of Canada on December 31, 2019 of US$1.2988 = $1.00) multiplied by the number of notional Shares underlying the PSUs assuming a payout multiple of 1.0. The PSUs will vest three years from the date of grant and the actual number of PSUs that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain performance conditions. See “Compensation Committee Decisions Relating to 2019 Compensation – Options and Share Based Awards” above. The figures shown in this column do not represent the actual value the individual NEO would receive. The actual gain, if any, on settlement will depend on the value of the Shares on the date of settlement.
(6)	One-third of the Options vest on an annual basis, with the first tranche vesting on November 24, 2018.
(7)	These Options were granted in Canadian dollars (exercise price of $6.48) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2019 of US$1.2988 = $1.00.
(8)	One-third of the Options vest on an annual basis, with the first tranche vesting on December 7, 2018.
(9)	These Options were granted in Canadian dollars (exercise price of $6.74) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2019 of US$1.2988 = $1.00.
(10)	One-third of the Options vest on an annual basis, with the first tranche vesting on December 31, 2019.
(11)	These Options were granted in Canadian dollars (exercise price of $9.76) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2019 of US$1.2988 = $1.00.
(12)	One-third of the Options vest on an annual basis, with the first tranche vesting on May 15, 2018.
(13)	Mr. Drier exercised 100,000 Options on October 2, 2018, 100,000 Option on June 27, 2019 and 90,000 options on November 27, 2019. This figure represents the number of Shares underlying the unexercised Options held by Mr. Drier.
(14)	One-third of the Options vest on an annual basis, with the first tranche vesting on December 12, 2020.
(15)	These Options were granted in Canadian dollars (exercise price of $20.52) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2019 of US$1.2988 = $1.00.
(16)	Mr. DeFilippo exercised 33,000 Options on June 21, 2018 and 66,666 Options on August 19, 2019. This figure represents the number of Shares underlying the unexercised Options held by Mr. DeFilippo.

Incentive Plan Awards – Value Vested or Earned During the Year

The following table sets forth the value of incentive plan awards vested or earned by each NEO during the financial year ended December 31, 2019.

Name	Option-based awards – Value vested during the year (US$)(1)			Share-based awards – Value vested during the year (US$)(2)	Non-equity incentive plan compensation – Value earned during the year (US$)(3)
Christopher Noel Dunn		1,839,658	(4)	Nil		1,050,000
David Strang		1,839,658	(4)	Nil		1,050,000
Wayne Drier		3,024,345	(5)	Nil		326,612
Michel (Mike) Richard		773,498	(6)	Nil		404,984
Makko DeFilippo		1,263,025	(7)	Nil		198,742

Note:

(1)	Aggregate dollar value that would have been realized if the Options had been exercised on their vesting date. The figures shown in this column do not represent the actual value the individual NEO would receive. The actual gain, if any, on exercise will depend on the value of the Shares on the date of exercise.
(2)	No Share Units (PSUs) vested during the financial year ended December 31, 2019.
(3)	Represents cash bonuses (API) awarded for individual performance and corporate achievements during 2019.
(4)	53,000 Options vested on November 24, 2019 at an exercise price of $6.48, 83,333 Options vested on December 7, 2019 at an exercise price of $6.74 per Share, and 38,728 Options vested on December 31, 2019 at an exercise price of $9.76 per Share. This figure is calculated based on the difference between the Option exercise price and the closing price of the Shares on the TSX on November 25, 2019 ($20.06), the first trading day after November 24, 2019, which was not a business day, December 9, 2019 ($20.80), the first trading day after December 7, 2019, which was not a business day, and December 31, 2019 ($23.61), respectively. This figure is shown in US dollars and has been converted from Canadian dollars, where applicable, based on the daily exchange rate reported by the Bank of Canada on November 25, 2019 of US$1.3307 = $1.00, December 9, 2019 of US$1.3235 = $1.00, and December 31, 2019 of US$1.2988 = $1.00, respectively.

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(5)	196,667 Options vested on May 15, 2019 at an exercise price of US$1.50, 41,667 Options vested on December 7, 2019 at an exercise price of $6.74 per Share, and 29,046 Options vested on December 31, 2019 at an exercise price of $9.76 per Share. This figure is calculated based on the difference between the Option exercise price and the closing price of the Shares on the TSX on May 15, 2019 ($17.55), December 9, 2019 ($20.80), the first trading day after December 7, 2019, which was not a business day, and December 31, 2019 ($23.61), respectively. This figure is shown in US dollars and has been converted from Canadian dollars, where applicable, based on the daily exchange rate reported by the Bank of Canada on May 15, 2019 of US$1.3451 = $1.00, December 9, 2019 of US$1.3235= $1.00, and December 31, 2019 of US$1.2988 = $1.00, respectively.
(6)	41,667 Options vested on December 7, 2019 at an exercise price of $6.74 per Share and 30,982 Options vested on December 31, 2019 at an exercise price of $9.76 per Share. This figure is calculated based on the difference between the Option exercise price and the closing price of the Shares on the TSX on December 9, 2019 ($20.80), the first trading day after December 7, 2019, which was not a business day, and December 31, 2019 ($23.61), respectively. This figure is shown in US dollars and has been converted from Canadian dollars, where applicable, based on the daily exchange rate reported by the Bank of Canada on December 9, 2019 of US$1.3235 = $1.00, and December 31, 2019 of US$1.2988 = $1.00, respectively.
(7)	66,667 Options vested on May 15, 2019 at an exercise price of US$1.50, 25,000 Options vested on December 7, 2019 at an exercise price of $6.74 per Share, and 21,300 Options vested on December 31, 2019 at an exercise price of $9.76 per Share. This figure is calculated based on the difference between the Option exercise price and the closing price of the Shares on the TSX on May 15, 2019 ($17.55), December 9, 2019 ($20.80), the first trading day after December 7, 2019, which was not a business day, and December 31, 2019 ($23.61), respectively. This figure is shown in US dollars and has been converted from Canadian dollars, where applicable, based on the daily exchange rate reported by the Bank of Canada on May 15, 2019 of US$1.3451 = $1.00, December 9, 2019 of US$1.3235 = $1.00, and December 31, 2019 of US$1.2988 = $1.00, respectively.

Pension Plan Benefits

The Company does not have a defined benefit or a defined contribution pension plan.

Deferred Compensation Plans

The Company does not have a deferred compensation plan.

Termination and Change of Control Benefits

Each NEO is currently engaged under an employment agreement that provides for, among other things, a base salary (may be adjusted annually by the Board on the recommendation of the Compensation Committee), API and Share and/or Option based awards (as determined by the Board on the recommendation of the Compensation Committee), vacation time and extended benefits. Under the terms of each NEO’s employment agreement, his employment may be terminated as a result of (i) a “Change of Control”; (ii) termination without cause; (iii) termination for cause; (iv) retirement; (v) disability; and (iv) death.

A Change of Control, in general, occurs when the Company sells, transfers or otherwise disposes of all or substantially all (90% or more) of its assets, or any person or group of persons acting jointly or in concert by virtue of an agreement, arrangement, commitment or understanding either acquire 50% or more of the outstanding Shares or sufficient Shares to replace the majority of the Board.

The Company’s obligation to compensate a NEO for a Change of Control will be triggered if both of the following events occur:

· there is a Change of Control of Ero; and

· the NEO is terminated without cause or resigns for “Good Reason” within 12 months of the Change of Control.

A NEO may resign for “Good Reason” within 12 months of a Change of Control, if the Company (i) reduces the NEO’s salary (except in certain limited circumstances); (ii) materially reduces the NEO’s duties, responsibilities, authority or status without the consent of the NEO; (iii) breaches or fails to observe any material provision of the NEO’s employment agreement; or (iv) takes any action that would be considered to amount to constructive dismissal by a court of competent jurisdiction.

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Each NEO’s employment agreement also contains non-solicitation, non-competition, confidentiality and notice of resignation provisions which will apply on a termination of employment. Non-competition and non-solicitation restrictions apply for a period of one year from the date the executive’s employment ceases, and the confidentiality provisions apply, subject to certain exceptions, for an indefinite period of time following the termination of employment of an executive. A NEO may terminate his employment by giving not less than 120 days (in the case of the Executive Chairman and the President and CEO) or 60 days (in the case of all other NEOs) written notice of resignation.

The following table summarizes the compensation that would be payable to each NEO should their employment be terminated.

Termination Type	Severance	Bonus	Share Awards	Benefits
Termination Subsequent to Change of Control or Resignation for Good Reason within 12 Months of a Change in Control	Payment equal to 24 months’ salary, except for Makko DeFilippo’s employment agreement, which contemplates 12 months’ salary	Lump sum payment equal to the most recent 3-year’s average bonus paid	All unvested Options and Share Units vest immediately All vested Option are exercisable at any time up to, but not after, the earlier of the expiry date, and the date which is 90 days after the termination date Vested Share Units have 30 days to be redeemed. In the event that Share Units are subject to satisfaction of any performance conditions, the Board shall consider the extent of satisfaction of such performance conditions in determining the number of Share Units to be redeemed.	Extension of executive benefits for 12 months following termination (to the extent permitted by the applicable benefit plan)
Termination without Cause	Payment equal to 12 months’ salary + 1 month of salary per year of service to an aggregate maximum of 24 months’ salary (pro-rated for partial years), except for Makko DeFilippo’s employment agreement, which contemplates 6 months’ salary + 1 month of salary per year of service to an aggregate maximum of 12 months’ salary (pro-rated for partial years)	None	All unvested Options or Share Units expire on the termination date All vested Option are exercisable at any time up to, but not after, the earlier of the expiry date, and the date which is 60 days after the termination date All vested Share Units will be redeemed on the termination date.	Extension of executive benefits for 12 months (6 months in the case of Makko DeFilippo) following termination (to the extent permitted by the applicable benefit plan)
Termination for Cause	None	None	All Options and Share Units expire on the termination date	None
Voluntary Resignation	None	None	All unvested Options or Share Units expire on the termination date All vested Option are exercisable at any time up to, but not after, the earlier of the expiry date, and the date which is 60 days after the termination date All vested Share Units will be redeemed on the termination date	None

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Termination Type	Severance	Bonus	Share Awards	Benefits
Retirement	None	None	Options will continue to vest in normal course and vested Option are exercisable at any time up to, but not after, the earlier of the expiry date, and the date which is one (1) year after the termination date Vested Share Units have 30 days to be redeemed	None
Disability	None	None	Options will continue to vest in normal course and vested Options are exercisable at any time up to, but not after, the earlier of the expiry date, and the date which is one (1) year after the termination date Vested Share Units have 30 days to be redeemed	None
Death	None	None	All outstanding Options will vest immediately and are exercisable at any time up to, but not after, the earlier of the expiry date, and the date which is one (1) year after the termination date All vested Share Units will be redeemed on the termination date	None

Estimated Incremental Payments on Termination

The following table sets forth the estimated incremental payments, payable and benefits that would be due to the NEOs under various termination scenarios, assuming a termination date of December 31, 2019.

	Christopher Noel Dunn		David Strang		Wayne Drier		Michel (Mike) Richard		Makko DeFilippo
Change of Control with Termination
Severance Base Payment (US$)		1,050,000		1,050,000		670,000		720,000		265,000
Severance Bonus Payment (US$)		673,333		673,333		258,871		307,495		157,914
Stock Options (US$)(1)		3,021,273		3,021,273		4,871,703		1,665,940		2,200,881
Share Units (US$)(2)		379,998		379,998		284,990		303,988		208,997
Benefits (US$)		14,701		4,250		4,721		5,916		12,221
Total		5,139,305		5,128,854		6,090,285		3,003,339		2,845,013
Termination without Cause
Severance Base Payment (US$)(3)		656,250		656,250		414,097		450,000		329,410
Severance Bonus Payment (US$)		N/A		N/A		N/A		N/A		N/A
Stock Options (US$)		Nil		Nil		Nil		Nil		Nil
Share Units (US$)		Nil		Nil		Nil		Nil		Nil
Benefits (US$)		14,701		4,250		4,721		5,916		12,221
Total		670,951		660,500		418,818		455,916		341,631
Other Termination
Termination for Cause (US$)		Nil		Nil		Nil		Nil		Nil
Resignation (US$)		Nil		Nil		Nil		Nil		Nil
Retirement (US$)		Nil		Nil		Nil		Nil		Nil
Disability (US$)		Nil		Nil		Nil		Nil		Nil
Death (US$)(4)		3,021,273		3,021,273		4,871,703		1,665,940		2,200,881

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Note:

(1)	Represents the value of unvested in-the-money Options as at December 31, 2019. All unvested Options will vest immediately upon a Change of Control with termination. The figures are calculated based on the difference between the Option exercise price and the closing price of the Shares on the TSX on December 31, 2019 ($23.61 or US$18.18 based on the daily exchange rate reported by the Bank of Canada on December 31, 2019 of US$1.2988 = $1.00).
(2)	PSUs were granted to each NEO on December 31, 2018 and December 12, 2019, will vest three years from the date of grant and the actual number of PSUs that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain performance conditions (see “Compensation Committee Decisions Relating to 2019 Compensation – Options and Share Based Awards” above). The figures in this row assume that upon a Change of Control with termination, the Board would consider that 100% of the PSUs granted on December 31, 2018 vest on December 31, 2019, based on the closing price of the Shares on the TSX on December 31, 2019 ($23.61 or US$18.18 based on the daily exchange rate reported by the Bank of Canada on December 31, 2019 of US$1.2988 = $1.00) multiplied by the number of notional Shares underlying the PSUs assuming a payout multiple of 1.0. None of the PSUs granted on December 12, 2019 would vest as none of the performance conditions could be satisfied by December 31, 2019.
(3)	The severance base payment is equal to 12 months’ salary, plus one month of salary per year of service to an aggregate maximum of 24 months’ salary (pro-rated for partial years), except for Mr. DeFilippo’s employment agreement, which contemplates 6 months’ salary, plus 1 month of salary per year of service to an aggregate maximum of 12 months’ salary (pro-rated for partial years). As the employment of Messrs. Drier and DeFilippo commenced on March 1, 2017 and February 1, 2017, respectively, their severance base payments have been pro-rated accordingly.
(4)	Represents the value of unvested in-the-money Options as at December 31, 2019. All unvested Options will vest immediately upon a Change of Control with termination. The figures are calculated based on the difference between the Option exercise price and the closing price of the Shares on the TSX on December 31, 2019 ($23.61 or US$18.18 based on the daily exchange rate reported by the Bank of Canada on December 31, 2019 of US$1.2988 = $1.00). No PSUs would vest on December 31, 2019.

Director Compensation

Compensation of directors has been determined by taking into consideration the size and stage of development of the Company and to achieve the objectives of retaining and attracting skilled, experienced and dedicated directors.

The Compensation Committee reviews our independent director compensation on an annual basis and recommends revisions to the compensation paid to our independent directors when warranted under the circumstances. In 2019, Lane Caputo provided a review of market practices regarding independent director compensation, including a benchmarking exercise against the same peer group used to benchmark executive compensation, to assist the Compensation Committee in recommending a compensation structure for independent directors.

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As senior officers, Messrs. Dunn and Strang did not and will not receive compensation for their service as directors and their compensation information is presented in the section relating to executive compensation above.

On December 12, 2019, a Deferred Share Unit Plan (the “DSU Plan”) was established by the Board to promote a greater alignment of long-term interests between independent directors and shareholders of the Company, and to provide a compensation system for independent directors that, together with our other compensation mechanisms, is reflective of the responsibility, commitment and risks that accompany Board membership and the performance of the duties required of our directors. No DSUs were granted under the DSU Plan in 2019. On January 2, 2020, each independent director was granted 3,382 DSUs, for a total of 23,674 DSUs. Further information regarding the DSU Plan is provided below under the “Deferred Share Unit Plan”.

For 2019, our independent directors were compensated for their services as directors through a combination of an annual retainer fee and grant of Options. Independent directors are not compensated based on performance. Our directors were also reimbursed for reasonable travel and other out-of-pocket expenses incurred in connection with attending meetings and otherwise carrying out their duties as directors of the Company. The 2019 annual retainers were as follows:

Director (Base)	US$	60,000
Lead Director	US$	20,000
Audit Committee Chair	US$	15,000
Compensation Committee Chair	US$	12,500
Nominating and Corporate Governance Committee Chair	US$	10,000
Environmental, Health, Safety and Sustainability Chair	US$	10,000

For 2020, our independent directors will be compensated for their services as directors through a combination of an annual retainer fee and grant of Options and DSUs, with 40% of equity grant values to be in the form of Options and 60% of equity grant values to be in the form of DSUs. The 2020 annual retainers are as follows:

Director (Base)	US$	70,000
Lead Director	US$	30,000
Audit Committee Chair	US$	15,000
Compensation Committee Chair	US$	12,500
Nominating and Corporate Governance Committee Chair	US$	10,000
Environmental, Health, Safety and Sustainability Chair	US$	10,000

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Director Compensation Table

The following table sets forth all amounts of compensation provided to the independent directors of the Company during the financial year ended December 31, 2019.

Name

Fees earned (US$)

Share- based awards (US$)

Option- based awards (US$)(1)

Non-equity incentive plan compensation (US$)

Pension value (US$)

All other compensation (US$)

Total (US$)

Lyle Braaten

70,000

N/A

100,500

(3)

N/A

N/A

Nil

170,500

Steven Busby

70,000

N/A

100,500

(3)

N/A

N/A

Nil

170,500

Dr. Sally Eyre(2)

27,045

N/A

127,400

(4)

N/A

N/A

Nil

154,445

Robert Getz

72,500

N/A

100,500

(3)

N/A

N/A

Nil

173,000

Chantal Gosselin(2)

27,045

N/A

127,400

(4)

N/A

N/A

Nil

154,445

John Wright

80,000

N/A

100,500

(3)

N/A

N/A

Nil

180,500

Matthew Wubs

75,000

N/A

100,500

(3)

N/A

N/A

Nil

175,500

Note:

⁽¹⁾ Represents the total grant date fair value of the Options granted and may not represent the amounts the recipient will actually realize from the award. The fair value of the Options has been estimated at the date of grant in accordance with IFRS accounting requirements using a Black-Scholes option pricing model and was determined based on various assumptions including share price volatility on the grant date taking into account the expected life of the Options, an assumption that no dividends are to be paid and a risk-free interest rate determined by the Bank of Canada for the grant date. Please see footnotes (3) and (4) below for the assumptions used for the grant of Options.

⁽²⁾ Dr. Eyre and Ms. Gosselin were each appointed a director of the Company on August 15, 2019.

⁽³⁾ On January 2, 2019, Messrs. Braaten, Busby, Getz, Wright and Wubs were each granted 25,000 Options at an exercise price of $9.80 per Share (US$7.21 per Share based on the daily exchange rate reported by the Bank of Canada on January 2, 2019 of US$1.3600 = $1.00), expiring on January 2, 2024. These Options have a grant date fair value of $5.47 each (US$4.02 per Share based on the daily exchange rate reported by the Bank of Canada on January 2, 2019 of US$1.3600 = $1.00) based on the following assumptions: risk-free interest rate of 1.86%; dividend yield of 0%; a forfeiture rate of 0%; volatility factor of 61.0%; and, expected life of 3 years

⁽⁴⁾ On August 15, 2019, Dr. Eyre and Ms. Gosselin were each granted 20,000 Options at an exercise price of $21.09 per Share (US$15.83 per Share based on the daily exchange rate reported by the Bank of Canada on August 15, 2019 of US$1.3325 = $1.00), expiring on August 15, 2024. These Options have a grant date fair value of $8.39 each (US$6.30 per Share based on the daily exchange rate reported by the Bank of Canada on August 15, 2019 of US$1.3325 = $1.00) based on the following assumptions: risk-free interest rate of 1.20%; dividend yield of 0%; a forfeiture rate of 0%; volatility factor of 58.4%; and, expected life of 3 years.

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Outstanding Share-Based Awards and Option-Based Awards

The following table sets forth all Share-based awards and Option-based awards outstanding for each independent director as at December 31, 2019.

	Option-Based Awards									Share-Based Awards
Name	Number of Securities Underlying Unexercised Options (#)(1)			Option Exercise Price (US$)(2)			Option Expiration Date	Value of Unexercised In-the- Money Options (US$)(3)		Number of Shares or Units of Shares that Have Not Vested (#)	Market or Payout Value of Share- Based Awards that Have Not Vested (US$)	Market or Payout Value of Vested Share- Based Awards Not Paid Out or Distributed (US$)
Lyle Braaten		30,000	(4)		5.19	(5)	December 7, 2022		389,700	N/A	N/A	N/A
		25,000	(4)		7.55	(6)	January 2, 2024		265,750	N/A	N/A	N/A
Steven Busby		30,000	(4)		5.19	(5)	December 7, 2022		389,700	N/A	N/A	N/A
		25,000	(4)		7.55	(6)	January 2, 2024		265,750	N/A	N/A	N/A
Dr. Sally Eyre		20,000	(7)		16.24	(8)	August 15, 2024		38,800	N/A	N/A	N/A
Robert Getz		24,000	(4)		7.89	(9)	June 19, 2023		246,960	N/A	N/A	N/A
		25,000	(4)		7.55	(6)	January 2, 2024		265,750	N/A	N/A	N/A
Chantal Gosselin		20,000	(7)		16.24	(8)	August 15, 2024		38,800	N/A	N/A	N/A
John Wright		30,000	(4)		5.19	(5)	December 7, 2022		389,700	N/A	N/A	N/A
		25,000	(4)		7.55	(6)	January 2, 2024		265,750	N/A	N/A	N/A
Matthew Wubs		30,000	(4)		5.19	(5)	December 7, 2022		389,700	N/A	N/A	N/A
		25,000	(4)		7.55	(6)	January 2, 2024		265,750	N/A	N/A	N/A

Note:

⁽¹⁾ Class of securities underlying all Options is Shares. All Options granted to the independent directors are governed by the Stock Option Plan.

⁽²⁾ Exercise price for the Options is equivalent to the “Fair Market Value”, as defined in the Stock Option Plan or the “Market Price” as defined in the TSX Company Manual, which currently means the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the grant date.

⁽³⁾ The actual gain, if any, on exercise will depend on the value of the Shares on the date of exercise. The figures shown in this column are calculated based on the difference between the Option exercise price and the closing price of the Shares on the TSX on December 31, 2019 ($23.61 or US$18.18 based on the daily exchange rate reported by the Bank of Canada on December 31, 2019 of US$1.2988 = $1.00). The figures shown in this column do not represent the actual value the individual director would receive. The actual gain, if any, on exercise will depend on the value of the Shares on the date of exercise.

⁽⁴⁾ These Options vested on the grant date.

⁽⁵⁾ These Options were granted in Canadian dollars (exercise price of $6.74) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2019 of US$1.2988 = $1.00.

⁽⁶⁾ These Options were granted in Canadian dollars (exercise price of $9.80) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2019 of US$1.2988 = $1.00.

⁽⁷⁾ Of the 20,000 Options granted to each of Dr. Eyre and Ms. Gosselin, 11,914 Options vested on the grant date and 8,086 Options shall vest upon receipt of approval by shareholders of the Company (see above under the heading “Particulars of Matters to be Acted Upon – 5. Incentive Option Grants Under the Stock Option Plan to New Directors”).

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⁽⁸⁾ These Options were granted in Canadian dollars (exercise price of $21.09) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2019 of US$1.2988 = $1.00.

⁽⁹⁾ These Options were granted in Canadian dollars (exercise price of $10.25) but are shown in US dollars and have been converted from Canadian dollars based on the daily exchange rate reported by the Bank of Canada on December 31, 2019 of US$1.2988 = $1.00.

Incentive Plan Awards – Value Vested or Earned During the Year

The following table sets forth the value of incentive plan awards vested or earned by each independent director during the financial year ended December 31, 2019.

Name	Option-based awards – Value vested during the year (US$)			Share-based awards – Value vested during the year (US$)	Non-equity incentive plan compensation – Value earned during the year (US$)
Lyle Braaten		7,000	(1)	N/A	N/A
Steven Busby		7,000	(1)	N/A	N/A
Dr. Sally Eyre		Nil	(2)	N/A	N/A
Robert Getz		7,000	(3)	N/A	N/A
Chantal Gosselin		Nil	(2)	N/A	N/A
John Wright		7,000	(1)	N/A	N/A
Matthew Wubs		7,000	(1)	N/A	N/A

Note:

⁽¹⁾ Options granted to Messrs. Braaten, Busby, Wright and Wubs on December 7, 2017 and January 2, 2019 vested, in full, on the grant date. The aggregate dollar value that would have been realized if the 25,000 Options granted on January 2, 2019 had been exercised on the vesting date, calculated based on the difference between the Option exercise price ($9.80 or US$7.21 based on the daily exchange rate reported by the Bank of Canada on January 2, 2019 of US$1.3600 = $1.00) and the closing price of the Shares on the TSX on the vesting date ($10.18 or US$7.49 based on the daily exchange rate reported by the Bank of Canada on January 2, 2019 of US$1.3600 = $1.00). The figure shown do not represent the actual value the individual director would receive. The actual gain, if any, on exercise will depend on the value of the Shares on the date of exercise.

⁽²⁾ Of the 20,000 Options granted to each of Dr. Eyre and Ms. Gosselin on August 15, 2019, 11,914 Options vested on the grant date and 8,086 Options shall vest upon receipt of approval by shareholders of the Company (see above under the heading “Particulars of Matters to be Acted Upon – 5. Incentive Option Grants Under the Stock Option Plan to New Directors”). The aggregate dollar value that would have been realized if the 11,914 Options granted had been exercised on the vesting date, calculated based on the difference between the Option exercise price ($21.09 or US$15.83 based on the daily exchange rate reported by the Bank of Canada on August 15, 2019 of US$1.3325 = $1.00) and the closing price of the Shares on the TSX on the vesting date ($20.77 or US$15.59 based on the daily exchange rate reported by the Bank of Canada on August 15, 2019 of US$1.3325 = $1.00). The amounts reflected as Nil are based on Options being out of the money on the vesting date. The figure shown do not represent the actual value the individual director would receive. The actual gain, if any, on exercise will depend on the value of the Shares on the date of exercise.

⁽³⁾ Options granted to Mr. Getz on June 19, 2018 and January 2, 2019 vested, in full, on the grant date. The aggregate dollar value that would have been realized if the 25,000 Options granted on January 2, 2019 had been exercised on the vesting date, calculated based on the difference between the Option exercise price ($9.80 or US$7.21 based on the daily exchange rate reported by the Bank of Canada on January 2, 2019 of US$1.3600 = $1.00) and the closing price of the Shares on the TSX on the vesting date ($10.18 or US$7.49 based on the daily exchange rate reported by the Bank of Canada on January 2, 2019 of US$1.3600 = $1.00). The figure shown do not represent the actual value the individual director would receive. The actual gain, if any, on exercise will depend on the value of the Shares on the date of exercise.

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Deferred Share Unit Plan

On December 12, 2019, a Deferred Share Unit Plan (the “DSU Plan”) was established by the Board as a component of our compensation for independent directors. Only independent directors are eligible to participate and to receive DSUs under the DSU Plan.

DSUs may be awarded by the Board from time to time to provide independent directors with appropriate equity-based compensation for the services they render to the Company and may be subject to terms and conditions with respect to vesting of such DSUs.

In addition, independent directors may elect to receive a portion or all of their respective annual cash remuneration in the form of DSUs, which will be fully vested upon such grant. The number of DSUs to be awarded to a participant under the DSU Plan is determined by dividing the portion of that participant’s annual cash remuneration by the fair market value of a Share on the last day of the quarter in which such portion of the annual cash remuneration was earned. For the purposes of the DSU Plan, fair market value of a Share is the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the relevant date (or on any such other stock exchange, inter-dealer quotation network or other organized trading facility on which the Shares trade or are quoted from time to time). If the Shares are suspended from trading or have not traded on the TSX or another stock exchange, inter-dealer quotation network or other organized trading facility for an extended period, the fair market value of a Share will be determined by the Board in its sole discretion acting in good faith.

Pursuant to the DSU Plan, DSUs may only be settled by way of cash payment. A participant is not entitled to payment in respect of the DSUs until his or her death, retirement or removal from the Board. The settlement amount of each DSU is based on the fair market value of a Share on the DSU redemption date multiplied by the number of DSUs being redeemed.

In the event that a participant’s death, retirement or removal from the Board is concurrent with, or within twelve (12) months following, a “Change of Control” (as defined in the DSU Plan), the participant or his or her beneficiary, as the case may be, shall on such accelerated entitlement date receive a payment in cash of an aggregate amount equal to the greater of (a) the amount payable under the DSU Plan as prescribed in the above paragraph; and (b) the product of (i) the price attributed to the Shares in connection with the transaction resulting in the Change of Control (or the fair market value of a Share at the time of such transaction as determined by the Board in good faith if no Share price was in fact established for purposes of such transaction) multiplied by (ii) the number of DSUs being settled as of accelerated entitlement date. Any unvested DSUs will vest upon Change of Control.

In case of payment of dividends on the Shares, participants under the DSU Plan will receive the value of the dividend in the form of DSUs.

Share Ownership Requirement

Pursuant to the Share Ownership Policy adopted by the Board, each independent director of the Company is required to beneficially own, control or direct, directly or indirectly, at least three times their annual cash retainer in Shares, RSUs and/or DSUs. All new independent directors of the Company are required to satisfy their Share ownership target within five years of their appointment. As at the date of this Circular, each independent director, other than Dr. Sally Eyre and Chantal Gosselin, who were appointed to the Board on August 15, 2019, has achieved their respective Share ownership target. Please see “Share Ownership Policy” above for further details.

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Securities Authorized For Issuance Under Equity Compensation Plans

The following table sets forth details of the Company’s compensation plans under which equity securities of the Company are authorized for issuance at the end of the Company’s most recently completed financial year.

Plan Category	Number of securities to be issued upon exercise of outstanding Options, warrants and rights			Weighted-average exercise price of outstanding Options, warrants and rights (US$)		Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by securityholders
Stock Option Plan		5,061,417			6.23		3,508,948	(2)
Share Unit Plan		437,463	(1)		N/A
Equity compensation plans not approved by securityholders		Nil			Nil		Nil
Total		5,498,880			6.23		3,508,948

Note:

⁽¹⁾ The figure in the above table assumes that 100% of the PSUs granted (215,288 PSUs and 225,659 PSUs granted on December 31, 2018 and December 31, 2019, respectively) will vest. The PSUs will vest three years from the date of grant and the actual number of PSUs that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain performance conditions. See “Compensation Committee Decisions Relating to 2019 Compensation – Options and Share Based Awards” above.

⁽²⁾ Based on the maximum number of Shares reserved for issuance under the Stock Option Plan and the Share Unit Plan of 8,570,365, representing 10% of the 85,703,646 Shares issued and outstanding as at December 31, 2019. Under the Amended Stock Option Plan and the Amended Share Unit Plan, this limit would be decreased to 8% (6,860,558 Shares, based on 85,756,978 Shares issued and outstanding as at the date of this Circular.

Annual Burn Rates of Equity-Based Compensation Arrangements

The following table sets forth the number of Options granted under the Stock Option Plan (adopted on May 15, 2017) and the PSUs granted under the Share Unit Plan (adopted on September 7, 2017) during the periods noted below and the annual burn rate of each equity-based compensation arrangement:

	Stock Option Plan					Share Unit Plan						Total (Combined) Burn Rate
	Granted		Burn Rate(1)			Granted			Burn Rate(1)
December 31, 2019		635,228		0.75	%		225,659	(2)		0.26	%		1.01	%
December 31, 2018		1,714,519		2.04	%		215,288	(2)		0.26	%		2.30	%
December 31, 2017		3,493,000		6.21	%		Nil			Nil			6.21	%

Notes:

⁽¹⁾ The annual burn rate is calculated as the number of securities granted under the arrangement during the applicable fiscal year divided by the weighted average number of securities outstanding for the applicable fiscal year.

⁽²⁾ The figure in the above table assumes that 100% of the PSUs granted (215,288 PSUs and 225,659 PSUs granted on December 31, 2018 and December 31, 2019, respectively) will vest. The PSUs will vest three years from the date of grant and the actual number of PSUs that will vest may range from 0% to 200% of the number granted, subject to the satisfaction of certain performance conditions. See “Compensation Committee Decisions Relating to 2019 Compensation – Options and Share Based Awards” above.

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Corporate Governance Practices

The Company and the Board recognize the importance of corporate governance to the effective management of the Company and to the protection of its employees and shareholders. The Company’s approach to significant issues of corporate governance is designed with a view to ensuring that the business and affairs of the Company are effectively managed so as to enhance shareholder value. The Board fulfills its mandate directly and through its committees at regularly scheduled meetings or at meetings held as required. Frequency of meetings may be increased, and the nature of the agenda items may be changed depending upon the state of the Company’s affairs and in light of opportunities or risks which the Company faces. The directors are kept informed of the Company’s business and affairs at these meetings as well as through reports and discussions with management on matters within their particular areas of expertise.

The Board

The Board currently consists of nine directors, seven of whom are independent based upon the test for director independence set out in NI 52-110. As such, the majority of Ero’s directors are independent. Lyle Braaten, Steven Busby, Dr. Sally Eyre, Robert Getz, Chantal Gosselin, John Wright and Matthew Wubs are the independent directors of the Company. Christopher Noel Dunn is the Executive Chairman of the Company and engages in the management of day-to-day operations of the Company. As such, Mr. Dunn is not an independent director. David Strang is the President and CEO of the Company and is not independent as a result.

As the Executive Chairman of the Board, Mr. Dunn is primarily responsible for the following functions in connection with the affairs of the Board: (i) providing leadership to foster the effectiveness of the Board; (ii) ensuring an effective relationship exists between the Board and senior management of the Company, that the appropriate committee structure is in place with regards to making recommendations for appointment to such committees, and that the directors receive the information required for the proper performance of their duties; (iii) chairing Board meetings, including stimulating debate, providing adequate time for discussion of issues, encouraging full participation and discussion by individual directors and confirming that clarity regarding decision-making is reached and accurately recorded; (iv) chairing general meetings of shareholders; (v) together with the Nominating and Corporate Governance Committee, ensuring that an appropriate system is in place to evaluate the performance of the Board as a whole, the Board’s committees and individual directors; (vi) consulting with the Nominating and Corporate Governance Committee on candidates for nomination or appointment to the Board; (vii) working with the President and CEO of the Company to ensure that the Board is provided with the resources to permit it to carry out its responsibilities and raising any issues that are preventing the Board from being able to carry out its responsibilities; and (viii) assisting the President and CEO in fulfilling his responsibilities, as necessary.

As the Executive Chairman is not an independent director, the Board has appointed John Wright as the Lead Director. The Lead Director facilitates the functioning of the Board independently of the Company’s management and provides independent leadership to the Board by: (i) ensuring that the Board functions independently of management and other non-independent directors; (ii) fostering the effectiveness of the Board; (iii) working with the Executive Chairman to ensure that the appropriate committee structure is in place and assisting the Nominating and Corporate Governance Committee in making recommendations for appointment to such committees; (iv) suggesting items of importance for consideration on the agenda for each Board meeting; (v) in the absence of the Executive Chairman, chairing Board meetings, including stimulating debate, providing adequate time for discussion of issues, encouraging full participation and discussions and confirming that clarity regarding decision-making is reached and accurately recorded; (vi) chairing each Board meeting at which only independent directors are present; (vii) as may be required, consulting and meeting with any or all independent directors and representing such directors in discussions with management of the Company; (viii) providing recommendations and advice to the Nominating and Corporate Governance Committee on candidates for nomination or appointment to the Board; (ix) recommending, where necessary, the holding of special meetings of the Board; and (x) working with the Executive Chairman and the President and CEO to ensure that the Board is provided with the resources to permit it to carry out its responsibilities and raising any issues that are preventing the Board from being able to do so.

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Inter-locking Directorships

The following table lists the directors of the Company who serve on boards of directors of other reporting issuers (or the equivalent) and the identities of such reporting issuers (or the equivalent). Except as set out below, none of our directors currently serve together on the board of directors of other reporting issuers (or the equivalent) in Canada or foreign jurisdictions.

Name of Director	Reporting Issuers (or the Equivalent)
Lyle Braaten	Lumina Gold Corp. Luminex Resources Corp.
Dr. Sally Eyre	Adventus Mining Corporation Centamin plc Japan Gold Corp.
Robert Getz	Haynes International, Inc. Techtronic Industries Company Limited
Chantal Gosselin	Lundin Gold Inc. Reunion Gold Corporation Wheaton Precious Metals Corp.
John Wright	Luminex Resources Corp. SilverCrest Metals Inc.
Matthew Wubs	Westland Insurance Group Ltd. (private)

Board Meetings

The Executive Chairman is primarily responsible for the agenda and for supervising the conduct of each meeting of the Board. Any director may propose the inclusion of items on the agenda, request the presence of or a report by any member of senior management, or at any Board meeting raise subjects that are not on the agenda for the meeting. Materials for each meeting are distributed to the Board in advance of the meeting.

The following table sets out the attendance record of each director for all Board meetings and meetings of the committees of the Board of which they were members during the financial year ended December 31, 2019.

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Director	Board(1)	Audit Committee(2)	Compensation Committee(3)	Nominating and Corporate Governance Committee(4)	Environmental, Health, Safety and Sustainability Committee(5)
	5 meetings	4 meetings	7 meetings	3 meetings	4 meetings
Christopher Noel Dunn	5 of 5	-	-	-	-
David Strang	5 of 5	-	-	-	3 of 3
Lyle Braaten	5 of 5	4 of 4	-	3 of 3	-
Steven Busby	5 of 5	-	-	3 of 3	4 of 4
Dr. Sally Eyre	2 of 2	-	5 of 5	1 of 1	-
Robert Getz	5 of 5	-	7 of 7	3 of 3	-
Chantal Gosselin	2 of 2	1 of 1	-	-	1 of 1
John Wright	5 of 5	4 of 4	2 of 2	-	4 of 4
Matthew Wubs	5 of 5	4 of 4	7 of 7	-	-

Note:

⁽¹⁾ Dr. Sally Eyre and Chantal Gosselin were each appointed a director of the Company on August 12, 2019.

⁽²⁾ From January 1, 2019 to August 11, 2019, the Audit Committee has been comprised of Matthew Wubs (Chair), Lyle Braaten and John Wright. As of August 12, 2019, the committee is comprised of Matthew Wubs (Chair), Lyle Braaten, Chantal Gosselin and John Wright.

⁽³⁾ From January 1, 2019 to August 11, 2019, the Compensation Committee was comprised of Robert Getz (Chair), John Wright and Matthew Wubs. As of August 12, 2019, the committee is comprised of Robert Getz (Chair), Dr. Sally Eyre and Matthew Wubs.

⁽⁴⁾ From January 1, 2019 to August 11, 2019, the Nominating and Corporate Governance Committee was comprised of Lyle Braaten (Chair), Steven Busby and Robert Getz. As of August 12, 2019, the committee is comprised of Lyle Braaten (Chair), Steven Busby, Dr. Sally Eyre and Robert Getz

⁽⁵⁾ From January 1, 2019 to August 11, 2019, the Environmental, Health, Safety and Sustainability Committee was comprised of Steven Busby (Chair), David Strang and John Wright. As of August 12, 2019, the committee is comprised of Steven Busby (Chair), Chantal Gosselin and John Wright.

Meetings of Independent Directors

Our Board encourages open and candid discussion amongst its independent director and as such, the independent directors meet in-camera (privately) during each Board meeting without non-independent directors and members of management in attendance. During the financial year ended December 31, 2019, the independent directors met in-camera during all five Board meetings. In addition, the Audit Committee regularly holds in-camera sessions with our auditors or amongst themselves. Independent directors sitting on other committees of the Board also hold in-camera sessions on an ad-hoc basis.

Majority Voting Policy

The Company has adopted a Majority Voting Policy. Pursuant to the provisions of the Majority Voting Policy, a nominee for election as a director of the Company who does not receive a greater number of votes “for” than votes “withheld” with respect to the election of directors by shareholders shall offer to tender his or her resignation to the Executive Chairman of the Board promptly following the meeting of shareholders at which the director was elected. The Nominating and Corporate Governance Committee will promptly consider such offer and make a recommendation to the Board whether to accept it or not. The Board will promptly accept the resignation unless it determines that there are exceptional circumstances. The Board shall act on the Nominating and Corporate Governance Committee’s recommendation in respect of a resignation tendered pursuant to the Majority Voting Policy within 90 days following the date of the applicable election and shall promptly disclose, via press release, its decision whether to accept the director’s resignation offer including the reasons for rejecting the resignation offer, if applicable. A director who tenders a resignation pursuant to the Majority Voting Policy will not participate in any meeting of the Board or the Nominating and Corporate Governance Committee at which the resignation is considered. The Majority Voting Policy will not apply to contested meetings at which the number of directors nominated for election is greater than the number of seats available on the Board. The full text of the Majority Voting Policy is available on our website at www.erocopper.com.

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Board Mandate

Our Board is responsible for the supervision of the management of the business and affairs of the Company. In discharging its mandate, the Board is primarily responsible, either directly or through committees of the Board and the Executive Chairman of the Board, for the oversight of, among other things, the following matters:

· the strategic planning process of the Company;

· the identification of the principal risks of the Company’s business and ensuring the implementation of appropriate systems to manage these risks;

· succession planning, including appointing, training and monitoring the Company’s executive officers;

· a culture of integrity of the Company and its executive officers;

· a disclosure policy for the Company to facilitate communications with investors and other interested parties;

· the Company’s approach to corporate governance and director independence standards and the appointment of a Lead Director;

· ethical behavior of the directors, officers and employees of the Company; and

· the composition and organization of the Board, including the number, qualifications and remuneration of directors.

The Board may at any time retain and terminate external legal counsel, consultants or other advisors at the expense of the Company to assist it in fulfilling its responsibilities and to set and pay the respective reasonable compensation of these advisors.

The Board discharges its responsibilities directly and through its committees, currently consisting of the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee, and the Environmental, Health, Safety and Sustainability Committee.

The full text of the Board of Directors Mandate setting out the Board’s mandate and responsibilities and the duties of its members is attached to this Circular as Appendix “D”.

Position Descriptions

The Board has developed written position descriptions for the Executive Chairman, the Chair of each committee of the Board, the Lead Director of the Board and the President and CEO.

Orientation and Continuing Education

New members of the Board are provided with: (i) information respecting the functioning of the Board and its committees and a copy of the Company’s corporate governance documents; (ii) access to all documents of the Company, including those that are confidential; and (iii) access to management to discuss and better understand our business.

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Each new director participates in the Company’s initial orientation program and each director participates in the Company’s continuing director development programs, both of which are reviewed annually by the Nominating and Corporate Governance Committee.

Board members are encouraged to: (i) communicate with management and auditors; (ii) introduce topics of discussion that they feel are of particular importance to the Board and request presentations or additional training by management or external advisors; (iii) keep themselves current with industry trends and developments and changes in legislation with management’s assistance; (iii) attend related industry seminars and conferences that are of interest and of relevance to their position as directors, and the Nominating and Corporate Governance Committee is responsible for arranging funding for such attendance; and (iv) visit the Company’s operations.

In addition, all directors are provided with monthly management reports regarding our business and operations, and at each Board meeting, the directors are provided with an update on strategic issues or challenges, risks, our performance, budget, schedule and any trends which may influence or change our planned development and operations.

Directors have been and will continue to be given tours of our operations. Each of our directors, other than Dr. Sally Eyre and Chantal Gosselin who were appointed to the Board on August 12, 2019, have visited the Vale do Curaçá Property at least one time in each calendar year since 2017. Such directors also visited the NX Gold Property at least one time in 2019. Since their appointment to the Board, Dr. Eyre has visited the Vale do Curaçá Property and the NX Gold Property one time and Ms. Gosselin has visited the Vale do Curaçá Property one time. Each of the Company’s directors are scheduled to visit the Vale do Curaçá Property and the NX Gold Property during the first half of 2020.

As of 2020, we are using a secure online Board portal to provide and assist in the flow of information to our Board. All of our charters, mandates and policies are contained in the Board portal, together with other resources and reports, to enable our directors to perform more effectively.

Director Assessment

The Nominating and Corporate Governance Committee is responsible for ensuring that an appropriate system is in place to evaluate the effectiveness of the Board as a whole, the individual committees of the Board, and the individual members of the Board and such committees with a view of ensuring that they are fulfilling their respective responsibilities and duties. In connection with such evaluations, each director is required to provide his or her assessment of the effectiveness of the Board and each committee as well as the performance of the individual directors, annually. Such evaluations take into account the competencies and skills each director is expected to bring to his or her particular role on the Board or on a committee, as well as any other relevant facts.

Director Term Limits and Other Mechanisms for Board Renewal

The Company has not adopted term limits for the directors on its Board or other formal mechanisms for Board renewal. The Company believes that the Board has the appropriate level of continuity and renewal without imposing formal mechanisms, particularly term limits or director retirement requirements. In addition, the Company believes that the imposition of director term limits or director retirement requirements may discount the value of experience and continuity amongst Board members and runs the risk of excluding experienced and valuable candidates for Board membership.

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The Nominating and Corporate Governance Committee is responsible for developing and updating the long-term plan for the composition of the Board that takes into consideration the current strengths, competencies, skills and experience of the Board members, retirement dates and the strategic direction of the Company. In addition, the Nominating and Corporate Governance Committee, annually or as required, recruits and identifies individuals qualified to become new Board members and makes recommendations to the Board regarding new director nominees. In making such recommendations, the Nominating and Corporate Governance Committee will consider the competencies and skills that the Board considers to be necessary for the Board as a whole to possess, for each existing director to possess, and for a new nominee to bring to the boardroom. In this respect, through the Nominating and Corporate Governance Committee and the annual Board assessment process, the Board is able to consider the contribution of current Board members and the skills and experience necessary for an effective and efficient Board and recommends changes to best meet those needs.

Diversity

Our business spans Canada, the United States of America and Brazil, and this geographic breadth is further complemented by our regional and local diversity at our operations in Brazil. As such, we enjoy a multi-faceted and multi-cultural work force that brings a wide array of experience, skills, background, culture and heritage to our business.

We believe that diversity celebrates all of the varied characteristics that make individuals unique from one another, whether that be gender, education, religion, ethnicity, race, nationality, culture, language, aboriginal or indigenous status and other ethnic distinctions, sexual orientation, political affiliation, family and marital status, age or disability. We recognize and embrace the benefits of having a diverse workforce. Diversity is important to ensure that our workforce has the necessary range of perspectives, experience and expertise required to achieve our corporate objectives and deliver for our stakeholders. We believe that diversity mitigates the risk of group think, ensures that Ero Copper has the opportunity to benefit from all available talent and enhances, among other things, its organizational strength, problem-solving ability and opportunity for innovation.

Like our business as a whole, we also consider it important to have diversity amongst our Board and senior management team, and we have adopted a Diversity Policy to reinforce this commitment. We are committed to a merit-based system for the composition of our Board and senior management team, within a diverse and inclusive culture that solicits multiple perspectives and views, free of conscious or unconscious bias and discrimination. The Diversity Policy provides a framework within which the Nominating and Corporate Governance Committee, the Executive Chairman and the President and Chief Executive Officer will consider the principle of diversity, including gender diversity, when reviewing and considering the appointment of candidates for Board and senior management positions. While appointments will be primarily merit-based in order to ensure that the composition of the Board and the senior management team will ultimately reflect the particular skills, knowledge and experience that are required to effectively run our business, due consideration will also be given to the present level of diversity, including gender diversity, within the leadership of the Company and the positive impact that further diversity might have on our business.

When identifying and considering the selection of candidates for appointment or nomination for election to the Board, the Nomination and Corporate Governance Committee will consider diversity criteria when determining the composition of the Board; review potential candidates from a variety of backgrounds and perspectives, with the Company’s diversity objectives in mind; ensure that appropriate efforts are made to include women in the list of candidates being considered for a Board position; and, in addition to its own searches, as and when appropriate from time to time, engage qualified independent external advisors to conduct a search for candidates, to help achieve the Company’s diversity objectives.

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When reviewing and considering the appointment of candidates for senior management positions, the Nomination and Corporate Governance Committee, the Executive Chairman and the President and Chief Executive Officer will consider diversity criteria when determining the composition of senior management; review potential candidates from a variety of backgrounds and perspectives, with the Company’s diversity objectives in mind; ensure that appropriate efforts are made to include women in the list of candidates being considered for a senior management position; and, in addition to its own searches, as and when appropriate from time to time, engage qualified independent external advisors to conduct a search for candidates, to help achieve the Company’s diversity objectives.

No specific targets have been set at this time regarding women on the Board or in senior management positions, as potential candidates are evaluated based on their individual merits and experiences while taking into account the needs of the Company.

As at the date of this Circular, two of nine (22.2%) directors on the Board are female (two of seven (28.6%) independent directors on the Board are female) and one of ten (10.0%) members on the senior management team is female.

The Nominating and Corporate Governance Committee will conduct a review of the Diversity Policy at least annually and will report to the Board annually on the Company’s adherence to this policy. In connection with such review, the Nominating and Corporate Governance Committee will consider the effectiveness of the Company’s approach to diversity and will recommend to the Board any changes that it thinks appropriate.

A copy of the Diversity Policy is available on our website at www.erocopper.com.

Ethical Business Conduct

The Board adopted the Code of Business Conduct and Ethics of the Company (the “Code”) on May 15, 2017 for the directors, officers, employees and consultants of the Company and its subsidiaries. All new employees must read the Code when hired and acknowledge that they will abide by the Code.

The Nominating and Corporate Governance Committee, together with the Board, is responsible for monitoring compliance with the Code. In accordance with the Code, directors, officers, employees and consultants of the Company and its subsidiaries should raise questions regarding the application of any requirement under the Code, and report a possible violation of a law or the Code, promptly to their superior or manager. If reporting a concern or complaint to a superior or manager is not possible or advisable, or if reporting it to such person does not resolve the matter, the matter should be addressed with the CFO of the Company.

The Nominating and Corporate Governance Committee monitors compliance with the Code by, among other things, obtaining reports from the Executive Chairman and the President and CEO regarding breaches of the Code and reporting such breaches to the Board. The Nominating and Corporate Governance Committee also reviews investigations and any resolutions of complaints received under the Code, and reports annually to the Board thereon. In turn, the Board reviews such reports from the Nominating and Corporate Governance Committee as well as reports relating to compliance with, or material deficiencies from, the Code and approves changes it considers appropriate, at least annually. The Code is available on our website at www.erocopper.com or under our profile on SEDAR at www.sedar.com.

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The Board takes steps to ensure that directors, officers and other employees exercise independent judgment in considering transactions and agreements in respect of which a director, officer or other employee of the Company has a material interest, which include ensuring that directors, officers and other employees are thoroughly familiar with the Code and, in particular, the rules concerning reporting conflicts of interest and obtaining direction from their superior or manager or the CFO regarding any potential conflicts of interest.

The Board encourages and promotes an overall culture of ethical business conduct by promoting compliance with applicable laws, rules and regulations; providing guidance to directors, officers and other employees to help them recognize and deal with ethical issues; promoting a culture of open communication, honesty and accountability; and ensuring awareness of disciplinary action for violations of ethical business conduct.

The Board also adopted a Whistleblowing Policy on May 15, 2017 for individuals to report complaints and concerns regarding, among other things, violations of the Code. As well, the Board adopted an Anti-Corruption Policy on May 15, 2017 which requires that directors, officers, other employees and contractors of the Company conduct business in a manner that does not contravene anti-bribery and anti-corruption laws that apply to the Company, including the Criminal Code (Canada) and Corruption of Foreign Public Officials Act (Canada). The Lead Director and the Audit Committee or a designated member thereof are responsible for monitoring compliance with these policies, although employees may approach the Company’s external legal counsel if preferred for concerns under the Anti-Corruption Policy. A copy of the Whistleblower Policy and the Anti-Corruption Policy is available on our website at www.erocopper.com.

Nominating and Corporate Governance Committee

Pursuant to the Nominating and Corporate Governance Committee’s mandate, the committee shall be comprised of at least three directors, all of whom shall be independent directors within the meaning of NI 52-110. The committee is currently comprised of Lyle Braaten (Chair), Steven Busby, Dr. Sally Eyre and Robert Getz, all of whom are independent directors.

The Nominating and Corporate Governance Committee, in consultation with the Executive Chairman and the President and CEO, is responsible for recruiting and identifying individuals qualified to become new Board members and making recommendations to the Board regarding new director nominees, annually or as required. Further, the Nominating and Corporate Governance Committee is responsible for recommending to the Board the individual director appointments to each Board committee, annually or as required. In making such recommendations, the Nominating and Corporate Governance Committee will consider the competencies and skills that the Board considers to be necessary for the Board as a whole to possess, for each existing director to possess, and for a new nominee to bring to the boardroom. The Nominating and Corporate Governance Committee may also recommend for approval by the Board the removal of a director from the Board or a committee thereof if he or she is no longer qualified to serve as a director under applicable requirement or any other appropriate reason.

In addition, the Nominating and Corporate Governance Committee has been delegated the responsibility of, among other things: (i) making recommendations to the Board regarding director remuneration; (ii) establishing an appropriate system to evaluate the effectiveness of the Board as a whole as well as its committees; (iii) monitoring conflicts of interest of both the Board and management; (iv) conducting periodic reviews of the Company’s corporate governance policies and making policy recommendations aimed at enhancing Board and committee effectiveness; (v) annually reviewing the Board and committee mandates and position descriptions of the Executive Chairman, the President and CEO, the Lead Director and each committee Chair, and recommending to the Board that necessary changes be made; (vi) reviewing and recommending to the Board the appropriate structure, size, composition, mandate and members for Board committees, and the procedures to ensure that the Board and its committees function independently of management; (vii) providing the Board with updates on developments in corporate governance; (viii) conducting periodic reviews of the relationship between management and the Board; (ix) reviewing monitoring and making recommendations regarding new director orientation and ongoing development of existing directors; and (x) reviewing reports from the Executive Chairman and the President and CEO regarding breaches of the Code, and investigations and resolutions of complaints received under the Code, and reporting to the Board thereon. See “– Director Assessment” above. The full text of the Nominating and Corporate Governance Committee’s mandate is available on our website at www.erocopper.com.

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The Nominating and Corporate Governance Committee also assists the Board in its oversight of our Global Human Rights Policy, which apply to each director, officer, employee and consultant of Ero Copper and its subsidiaries. The policy, among other things, outlines the following commitments of Ero Copper: (i) adhering to all applicable human rights laws and regulations of the countries and regions where the Company conducts its business; (ii) providing a safe and healthy workplace that is free from violence, harassment, intimidation, and discrimination on the basis of race, colour, creed, age, gender, language, national or social origin, family or marital status, sexual orientation, disability, religious, political or other opinion, union affiliation or other basis prohibited by law; (iii) respecting workers’ rights, including freedom of peaceful assembly and association, and engagement in collective bargaining consistent with the relevant conventions on that subject; (iv) seeking to avoid or minimize causing or contributing to adverse human rights impacts through its activities, addressing such impacts if they occur, and engaging in processes to mitigate those impacts; (v) maintaining operational-level grievance mechanisms to report and address any actual or potential adverse impacts or risks on human rights; (vi) engaging in meaningful dialogue, promoting participation and fostering inclusion with potentially affected groups and other stakeholders; (vii) acting with transparency and avoiding knowingly being complicit in activities that cause, or are likely to cause, adverse impacts or risks to human rights; (viii) not engaging in the use of forced, compulsory or child labour; and (ix) respecting and not interfering with anyone who acts to promote or protect human rights through peaceful and lawful means. The full text of the Global Human Rights Policy is available on our website at www.erocopper.com.

The Nominating and Corporate Governance Committee has the authority to retain external legal counsel, consultants or other advisors to assist it in fulfilling its responsibilities, at the expense of the Company.

Compensation Committee

Pursuant to the Compensation Committee’s mandate, the committee shall be comprised of at least three directors, all of whom shall be independent directors within the meaning of NI 52-110. The committee is currently comprised of Robert Getz (Chair), Dr. Sally Eyre and Matthew Wubs, all of whom are independent directors.

The Compensation Committee is responsible for determining and making recommendations with respect to all forms of compensation to be granted to the Executive Chairman and the President and CEO and reviewing the Executive Chairman’s and the President and CEO’s recommendations respecting compensation of the other senior executive offices of the Company. In particular, the Compensation Committee is responsible for, among other things: (i) reviewing and approving corporate goals and objectives relevant to compensation of the Executive Chairman and the President and CEO, evaluating their performance in light of such corporate goals and objectives, and making recommendations to the Board with respect to their compensation levels based on such evaluation; (ii) reviewing recommendations from the Executive Chairman and the President and CEO regarding the appointment, compensation and other terms of employment of the CFO, and other officers, and making recommendations to the Board regarding the same; (iii) preparing and submitting to the Board at least annually a report on human resource matters of the Company; (iv) administering and interpreting the Company’s security based compensation arrangements and its policies respecting the grant of Options, Share Units or sale of Shares thereunder, and reviewing and recommending to the Board grants of Options and Share Units and terms thereof; (v) periodically reviewing the terms of the Company’s executive compensation programs to determine if they are properly coordinated and achieving their desired purpose; (vi) overseeing the Company’s compliance with any rules promulgated by a regulatory body prohibiting loans to officers and directors of the Company; and (vii) reviewing and assessing the adequacy of its mandate at least annual. The full text of the Compensation Committee’s mandate is available on our website at www.erocopper.com.

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Please see “Statement of Executive and Director Compensation” above, which summarizes, among other things, the process by which the Compensation Committee and Board determine compensation for the Company’s directors and executives.

The Compensation Committee has the authority to retain external legal counsel, consultants or other advisors to assist it in fulfilling its responsibilities, including a compensation consultant, at the expense of the Company. Any other work or services performed by such compensation consultant at the request of management must, however, be pre-approved by the Compensation Committee.

Audit Committee

Pursuant to the Audit Committee’s mandate, the committee shall be comprised of at least three directors, all of whom shall be independent directors and financially literate, in each case within the meaning of NI 52-110. The committee is currently comprised of Matthew Wubs (Chair), Lyle Braaten, Chantal Gosselin and John Wright, all of whom are independent directors and financially literate.

Each of the members of the Audit Committee has extensive education and experience relevant to the performance of their responsibilities as members of the Audit Committee.

· Matthew Wubs graduated with a B.A. from the University of British Columbia in 1992 and has been a Chartered Professional Accountant since 1996.  Mr. Wubs is a director of Westland Insurance Group Ltd., one of the largest private insurance brokerage operations in Canada. Westland directly manages approximately $1.4 billion in premium volume through its brokerage, insurance company and wholesale operations. Prior to joining Westland’s board on January 1, 2020, Mr. Wubs was the Co-Chief Executive Officer of Westland from January 2016 to December 2019 and was responsible for oversight of insurance, reinsurance, risk management, finance and M&A. He joined Westland in the role of Controller in 1997, and thereafter held the position of Chief Financial Officer from January 2002 until December 2015.  Previous to Westland, he held a consulting role in Management Information Systems at International Forest Products Ltd. and obtained his Chartered Professional Accountant designation while working at Deloitte LLP. Mr. Wubs has been a member of Westland’s audit committee for 12 years.

· Lyle Braaten graduated with a B.Sc. from the University of Calgary in 1986 and an LL.B. from the University of British Columbia in 1989. He has been the President and Chief Executive Officer of Miedzi Copper corp. since March 2012, the Vice President, Legal Counsel and a director of Lumina Gold Corp. since June 2014 and the Vice President, Legal Counsel and a director of Luminex Resources Corp. since August 2018. He was the General Counsel of Magma Energy Corp. from June 2008 to May 2011 when it acquired Plutonic Power Corp. and changed its name to Alterra Power Corp. Prior to joining Magma, he was involved in the management of a mid-sized law firm and served as its Managing Director from 2001 to 2008 with overall responsibility for the oversight of the firm’s financial results and reporting. He has been an audit committee member of Lumina Gold Corp. since July 2014 and has at least five years’ experience in audit committee positions.

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· Chantal Gosselin has over 25 years of combined experience in the mining industry and financial services. Ms. Gosselin most recently held the position of Vice President and Portfolio Manager at Goodman Investment Counsel. Prior to that, she served as a senior mining analyst at Sun Valley Gold LLP, a precious metals focused hedge fund. Between 2002 and 2008, Ms. Gosselin was the senior mining analyst and a partner of Genuity Capital Markets (now Canaccord Genuity Group) and held mining analyst positions with Haywood Securities Inc. and Dundee Securities Corporation. Prior to her financial services experience, she held various mine site management positions in Canada, Peru and Nicaragua. Ms. Gosselin received her Bachelor of Science Mine Engineering degree from Laval University and completed a Master in Business and Administration at Concordia University. She also completed the Chartered Investment Manager designation.  Ms. Gosselin serves as a director and member of the audit committee of Wheaton Precious Metals Corp. (formerly Silver Wheaton Corp.) and Lundin Gold Inc.  Ms. Gosselin formerly served as a director and a member of the audit, corporate governance and nominating (Chair) and technical committees of Capstone Mining Corp. from 2010 to November 2016.  Ms. Gosselin has at least 10 years of experience in audit committee positions.

· John Wright was a co-founder, and former Director, President and Chief Operating Officer of Pan American Silver Corp. Mr. Wright was also the co-founder of Equinox Resources. Previously, he spent 10 years with Teck Cominco where he worked at the Trail Smelter operations and later participated in the management of the feasibility studies, marketing and mine construction at the Afton, Highmont, Bull Moose and David Bell Mines. Mr. Wright is a director of SilverCrest Metals Inc. and Luminex Resources Corp. and a former director of Bitterroot Resources Ltd., Lumina Copper Corp., Northern Peru Copper Corp., Global Copper Corp. and Regalito Copper Corp. Mr. Wright has been involved in multiple asset purchases and sales and the accounting associated therewith. Mr. Wright was an audit committee member of Northern Peru Copper Corp. and Regalito Copper Corp. and has at least eight years’ experience in audit committee positions.

The Audit Committee provides assistance to the Board in fulfilling its obligations relating to the integrity of the internal financial controls and financial reporting of the Company. The external auditor of the Company reports directly to the Audit Committee. The Audit Committee’s primary duties and responsibilities include: (i) reviewing and reporting to the Board on the annual audited financial statements (including the auditor’s report thereon) and unaudited interim financial statements and any related management’s discussion and analysis, and other financial disclosure related thereto that may be required to be reviewed by the Audit Committee pursuant to applicable legal and regulatory requirements; (ii) reviewing material changes in accounting policies and significant changes in accounting practices and their impact on the financial statements; (iii) overseeing the audit function, including engaging in required discussions with the Company’s external auditor and reviewing a summary of the annual audit plan at least annually, overseeing the independence of the Company’s external auditor, overseeing the Company’s internal auditor, and pre-approving any non-audit services to the Company; (iv) reviewing and discussing with management the appointment of key financial executives and recommending qualified candidates to the Board; (v) reviewing with management and the Company’s external auditor, at least annually, the integrity of the internal controls over financial reporting and disclosure; (vi) reviewing management reports related to legal or compliance matters that may have a material impact on the Company and the effectiveness of the Company’s compliance policies; and (vii) establishing whistleblowing procedures and investigating any complaints or concerns it deems necessary.

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The Audit Committee’s mandate requires that the Audit Committee pre-approve any retainer of the external auditor of the Company to provide any non-audit services to the Company that it deems advisable in accordance with applicable legal and regulatory requirements and policies and procedures of the Board. The Audit Committee is permitted to delegate pre-approval authority to one of its members; however, the decision of any member of the Audit Committee to whom such authority has been delegated must be presented to the full Audit Committee at its next scheduled meeting. The full text of the Audit Committee’s mandate is available on our website at www.erocopper.com.

The Audit Committee has the authority to retain external legal counsel, consultants or other advisors to assist it in fulfilling its responsibilities, at the expense of the Company.

Additional information regarding the Audit Committee is contained in our Annual Information Form for the year ended December 31, 2019 and dated March 12, 2020 (the “AIF”) under the heading “Audit Committee” and “Appendix A – Audit Committee Charter” The AIF is available on our website at www.erocopper.com or under our profile on SEDAR at www.sedar.com.

Environmental, Health, Safety and Sustainability Committee

The Environmental, Health, Safety and Sustainability Committee is currently comprised of Steven Busby (Chair), Chantal Gosselin and John Wright, all of whom are independent directors within the meaning of NI 52-110.

The Environmental, Health, Safety and Sustainability Committee assists the Board in fulfilling its oversight responsibilities in respect of development, implementation and monitoring of the Company’s health, safety, environment and sustainability policies. In particular, the Environmental, Health, Safety and Sustainability Committee is responsible for, among other things: (i) developing policies and maintaining standards of performance that meet or exceed legal and regulatory requirements and industry standards in the areas of health, safety, and environmental stewardship; (ii) identifying risks related to the environment, health and safety and recommending the adoption of appropriate programs and procedures to reduce such risks; (iii) periodically reviewing the Company’s loss prevention policies, emergency response plans and recovery programs; (iv) periodically reviewing and monitoring the Company’s policies, procedures and practices related to the reporting of health, safety and environmental incidents; (v) reviewing with management and legal counsel, any legal actions by or against the Company related to environmental, health and safety issues; (vi) reviewing reports regarding significant health, safety and environmental incidents, emerging issues, inspection and audit summaries and corrective actions taken in response to deficiencies; (vii) requiring management to take steps to ensure that employees receive necessary training to meet health, safety and environmental standards; (viii) facilitating information sharing with other Board committees to address matters of mutual interest or concern regarding health, safety, environmental and sustainability issues; and (ix) reporting regularly to the Board on its activities. The full text of the Environmental, Health, Safety and Sustainability Committee’s mandate is available on our website at www.erocopper.com.

In addition, the Environmental, Health, Safety and Sustainability Committee assists the Board in its oversight of our Corporate Social Responsibility Policy, Health and Safety Policy and Environmental Policy, which apply to each director, officer, employee and consultant of Ero Copper and its subsidiaries. The full text of each policy is available on our website at www.erocopper.com.

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The Corporate Social Responsibility Policy outlines the Company’s commitment to fostering sustainable development by operating all of its mines and developing new projects in a manner that is respectful of local communities. The policy, among other things, outlines the following commitments of Ero Copper: (i) identifying and engaging its communities of interest in timely, inclusive, ethical, transparent and culturally respectful dialogue prior to undertaking significant activities and throughout the life of an operation or project; (ii) continuing to maintain formal grievance mechanisms as part of its overall community engagement process; (iii) monitoring, continuously improving, and reporting on the performance and effectiveness of its activities related to corporate social responsibility; (iv) implementing meaningful and effective strategies for community engagement; (v) promoting a safe environment for local communities; (vi) respecting the social, economic and cultural rights of local people; (vii) assisting local and regional development in areas where its operations and projects are located through training and employment; and (viii) adhering to all applicable laws and regulations of the countries and regions where Ero Copper conducts its business.

The Health and Safety Policy outlines the Company’s commitment to protecting the health and safety of its employees, contractors and consultants at its mining operations and development projects. The policy, among other things, outlines the following commitments of Ero Copper: (i) promoting health and safety on and off the job; (ii) providing employees with the training and tools to work safely and requiring each contractor and consultant to do the same; (iii) educating its employees to the potential hazards of their job and requiring each contractor and consultant to do the same; (iv) requiring that employees, contractors and consultants perform their duties in the safest manner possible; (v) adhering to all applicable health and safety laws and regulations of the countries and regions where Ero Copper conducts its business; (vi) striving for continuous improvement in all aspects of health and safety; (vii) providing a safe work environment by minimizing or, where possible, eliminating hazards, adhering to proven health and safety practices, implementing accident prevention programs, and ensuring that first aid and emergency response plans are in place at each operation; (viii) ensuring accident reporting is completed in a diligent manner and where necessary taking immediate steps to mitigate the potential for reoccurrence; (ix) developing and operating health and safety management programs at its operations that meet or exceed those in use by its peer companies; (x) promoting employee participation in the development of health and safety standards and management programs such that its employees take ownership of their health and safety responsibilities; (xi) conducting regular reviews of health and safety management programs and report findings to management and the Board; and (xii) conducting annual audits of all health and safety management programs and, with its capabilities, remediating all identified health and safety findings promptly.

The Environmental Policy outlines the Company’s commitment to wise environmental stewardship, including operating its mines and developing new projects in an environmentally sustainable and responsible manner. The policy, among other things, outlines the following commitments of Ero Copper: (i) adhering to all applicable environmental laws, regulations and other environmental obligations in the countries and regions in which it operates, and to follow additional environmental standards and practices that are voluntarily adopted by the Company; (ii) protecting the environment by applying proven management practices to prevent pollution and mitigate environmental impacts; (iii) communicating this commitment to excellence in environmental performance with its subsidiaries, employees, contractors, and other agents and the communities in which we operate; (iv) striving to minimize releases of pollutants to the air, land or water and ensuring appropriate treatment and disposal of waste; (v) allocating the necessary resources to meet its reclamation and environmental obligations; (vi) educating employees regarding environmental matters and promoting employee participation in minimizing environmental impacts; (vii) seeking opportunities to improve its environmental performance through adherence to these principles; (viii) regularly reviewing its environmental management system to ensure that it remains appropriate and that Ero Copper’s environmental objectives and targets are being addressed; and (ix) communicating openly and transparently with internal and external interested parties to develop a mutual understanding of environmental issues, needs and expectations.

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The Environmental, Health, Safety and Sustainability Committee has the authority to retain external legal counsel, consultants or other advisors to assist it in fulfilling its responsibilities, at the expense of the Company.

Disclosure Committee

The Company has established a Disclosure Committee comprised of the Executive Chairman, the President and CEO and the CFO, to ensure the provision of accurate and timely communication of important information to our shareholders. The Board has adopted a Disclosure Policy to provide guidance to the Disclosure Committee. The full text of the Disclosure Policy is available on our website at www.erocopper.com.

Additional Company Information

Voting Securities and Principal Holders of Voting Securities

The authorized voting share capital of Ero consists of an unlimited number of Shares without par value. As of the date of this Circular, there were 85,756,978 Shares issued and outstanding. The Shares are currently listed and traded on the TSX under the symbol “ERO”.

As at the date of this Circular, to the knowledge of the directors and executive officers of the Company, no one person or entity beneficially owns or exercises direction or control over, directly or indirectly, more than 10% of the Shares, except the following:

Name of Shareholder	Shares Owned, Controlled or Directed, Directly or Indirectly		Percentage of Outstanding Shares(1)
BlackRock, Inc.		10,629,792		12.40	%
Fidelity(2)		9,133,247		10.65	%
T. Rowe Price Associates, Inc.		8,633,600		10.07	%

Notes:

(1)

The figures in this column have been calculated on a non-diluted basis.

(2)

May include Fidelity Management & Research Company, FMR Co., Inc., Fidelity Management Trust Company, FIAM LLC, Fidelity Institutional Asset Management Trust Company, Strategic Advisers LLC, FIL Limited, Crosby Advisors LLC, Fidelity SelectCo, LLC and Fidelity (Canada) Asset Management ULC based on Early Warning Report under the Alternative Monthly Reporting System of National Instrument 62-103F3 dated November 8, 2019.

Indebtedness of Directors and Executive Officers

No current or former directors, executive officers or employees of the Company or any of its subsidiaries, no Nominee, and no associate of any such director, executive officer or Nominee is, as at the date hereof, or has been, during the financial year ended December 31, 2019, indebted to the Company or any of its subsidiaries in connection with a purchase of securities or otherwise or indebted to another entity that is, or has been, the subject of a guarantee, support agreement, letter of credit or other similar arrangement or understanding provided by the Company or any of its subsidiaries.

Interest of Informed Persons in Material Transactions

Except as disclosed below, no director or executive officer of the Company or any of its subsidiaries, Nominee, shareholder that beneficially owns, or controls or directs, directly or indirectly, more than 10% of the issued Shares, or any associate or affiliate of any of the foregoing persons, has had any material interest, direct or indirect, in any transaction since January 1, 2019, or in any proposed transaction which has materially affected or will materially affect the Company or any of its subsidiaries.

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On January 18, 2017, the Company completed a private placement offering of an aggregate principal amount of US$2,750,000 unsecured convertible debentures bearing simple interest at an annual rate of 10%, payable on the maturity date of January 18, 2019 (the “General Debentures”). Pursuant to the subscription agreements between the Company and each subscriber of the General Debentures, the outstanding principal and accrued and unpaid interest on the General Debentures could be converted, subject to certain limitations and conditions, at the option of the holders thereof and until the maturity date of the General Debentures into units of the Company (the “General Debenture Units”) at a price of US$0.75 per General Debenture Unit (subject to adjustment pursuant to the terms of the certificates representing the General Debentures). Each General Debenture Unit was comprised of one Share and one-quarter of a share purchase warrant (a “General Warrant”), with each one General Warrant entitling the holder thereof to acquire one Share at a price of US$1.20 until December 12, 2021.

David Strang, the President and Chief Executive Officer and a director of the Company and Matthew Wubs, a director of the Company, each participated in the offering by subscribing to US$500,000 of General Debentures. In January 2018, Messrs. Strang and Wubs both exercised their option to convert the outstanding principal and accrued and unpaid interest (US$53,562) on their General Debentures into General Debenture Units and concurrently exercised the underlying General Warrants. As a result, they were each issued an aggregate of 922,602 Shares by the Company, of which, 184,520 Shares were issued upon exercise of the underlying General Warrants.

Management Contracts

Management functions of the Company and its subsidiaries are not, to any substantial degree, performed other than by the directors or executive officers of the Company and its subsidiaries.

For More Information on Ero

Additional information regarding Ero, including financial information that is provided in our audited consolidated financial statements and MD&A for the financial year ended December 31, 2019, is available on our website at www.erocopper.com or under our profile on SEDAR at www.sedar.com. Securityholders may also contact the Corporate Secretary of the Company by phone at (604) 449-9236 or by e-mail at info@erocopper.com to request copies of these documents free of charge.

Directors’ Approval

The contents of the Circular and the sending thereof to the shareholders of the Company have been approved by the Board.

	BY ORDER OF THE BOARD OF DIRECTORS
	“Christopher Noel Dunn”
	Christopher Noel Dunn
	Executive Chairman
Vancouver, British Columbia
March 12, 2020

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APPENDIX “A”

AMENDED STOCK OPTION PLAN
OF
ERO COPPER CORP.

Effective May 7, 2020

(See attached)

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ERO COPPER CORP.
STOCK OPTION PLAN
EFFECTIVE MAY 7, 2020

Article 1
Introduction and Interpretation

1.1 Purpose

The purpose of the Plan is to provide an incentive to the officers, employees, Consultants and other personnel of the Corporation or any of its subsidiaries to achieve the longer-term objectives of the Corporation; to give suitable recognition to the ability and industry of such persons who contribute materially to the success of the Corporation; and to attract to and retain in the employ of the Corporation or any of its subsidiaries, persons of experience and ability, by providing them with the opportunity to acquire an increased proprietary interest in the Corporation.

1.2 Definitions

In this Plan, the following terms have the following meanings:

(a) “Administrative Agreement” has the meaning set forth in Section 2.2(a);

(b) “affiliate” and “associate” have the meanings set forth in the Securities Act (British Columbia);

(c) “Aggregate Insider Limit” has the meaning set forth in Section 4.5(a);

(d) “Applicable Law” means any applicable provision of law, domestic or foreign, including, without limitation, applicable securities legislation, together with all regulations, rules, policy statements, rulings, notices, orders or other instruments promulgated thereunder, and Stock Exchange Rules;

(e) “Approval Date” has the meaning set forth in Section 4.1(b);

(f) “Blackout Period” means a period of time during which the Optionee cannot exercise an Option, or sell Shares, due to applicable policies of the Corporation in respect of insider trading;

(g) “Board” means the board of directors of the Corporation as constituted from time to time;

(h) “Business Day” any day that is not a Saturday, Sunday or holiday (as defined in the Interpretation Act (Canada)) in Vancouver, British Columbia;

(i) “Change of Control” includes:

(i) the acquisition whether directly or indirectly, by a person or company, or any persons or companies acting jointly or in concert (as determined in accordance with the Securities Act (British Columbia) and the rules and regulations thereunder) of voting securities of the Corporation which, together with any other voting securities of the Corporation held by such person or company or persons or companies, constitute, in the aggregate, more than 50% of all outstanding voting securities of the Corporation;

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(ii) an amalgamation, arrangement or other form of business combination of the Corporation with another company which results in the holders of voting securities of that other company holding, in the aggregate, 50% or more of all outstanding voting securities of the Corporation (including a merged or successor company) resulting from the business combination;

(iii) the sale, lease or exchange of all or substantially all of the property of the Corporation to another person, other than in the ordinary course of business of the Corporation or to a related entity; or

(iv) any other transaction that is deemed to be a “Change of Control” for the purposes of this Plan by the Board in its sole discretion.

(j) “Committee” means the Compensation Committee for the Board, or such other persons as are designated by the Board, provided, however, that if no Compensation Committee is in existence at any particular time and the Board has not appointed another committee of the Board to administer the Plan, all references to the Plan to “Committee” shall at such time be in reference to the Board;

(k) “Consultant” means a person, other than an employee, executive officer, or director of the Corporation or of a related entity of the Corporation, that (a) is engaged to provide services to the Corporation or a related entity of the Corporation, other than services provided in relation to a distribution, for an initial, renewable or extended period of twelve months or more, (b) provides the services under a written contract with the Corporation or a related entity of the Corporation, and (c) spends or will spend a significant amount of time and attention on the affairs and business of the Corporation or a related entity of the Corporation;

(l) “Corporation” means Ero Copper Corp. and its successors and assigns, and any reference in the Plan to action by the Corporation means action by or under the authority of the Board or the Committee;

(m) “Effective Date” means May 7, 2020;

(n) “Eligible Person” means any director, officer, employee, Consultant or other personnel of the Corporation (including any subsidiary of the Corporation);

(o) “Exchange” means, collectively, the Toronto Stock Exchange, any successor thereto and any other stock exchange, inter-dealer quotation network or other organized trading facility through which the Shares trade or are quoted from time to time;

(p) “Exercise Price” means the price per Share at which the Optionee is entitled to purchase the underlying Share or Shares in the Corporation, subject to any adjustments pursuant to Section 7.2;

(q) “Expiry Date” means the date designated by the Board at the time of grant on which the Option expires and is of no further force and effect, except in accordance with the provisions related to a Blackout Period described in Section 4.1(c);

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(r) “Fair Market Value” means, with respect to any particular date, the volume weighted average trading price of the Shares on the Toronto Stock Exchange for the five trading days immediately preceding the relevant date (or on any such other stock exchange, inter-dealer quotation network or other organized trading facility on which the Shares trade or are quoted from time to time). If the Shares are suspended from trading or have not traded on the Toronto Stock Exchange or another stock exchange, inter-dealer quotation network or other organized trading facility for an extended period, the Fair Market Value will be the fair market value of the Shares as determined by the Board in its sole discretion acting in good faith;

(s) “Individual Limit” has the meaning set forth in Section 4.4;

(t) “Insider” means an insider of the Corporation, as defined in the Securities Act (British Columbia), and any associate or affiliate of any such insider;

(u) “Long-Term Disability” means a circumstance whereby the Corporation is able and elects, either under the terms of an employment contract or at common law, to terminate or consider frustrated the employment of an Optionee due to the Optionee’s long-term disability;

(v) “Notice of Grant of Options” means a written notice from the Corporation to the Optionee evidencing a grant of Options made pursuant to the Plan;

(w) “Option” means an option to purchase a Share granted under the Plan;

(x) “Optionee” means an Eligible Person to whom an Option has been granted;

(y) “Plan” means the Ero Copper Corp. Stock Option Plan, including all Schedules hereto, as amended and restated from time to time in accordance with its terms;

(z) “Plan Administrator” means the person or corporation appointed by the Corporation under Section 2.2 to provide administrative services in respect of the Plan;

(aa) “Retirement” means a resignation from employment with the Corporation by an Optionee in circumstances the Committee, acting reasonably, deems to constitute retirement from employment, and not resignation to obtain alternate employment;

(bb) “Security Based Compensation Arrangements” has the meaning ascribed thereto in Part VI of the Company Manual of the Toronto Stock Exchange, as amended from time to time;

(cc) “Shares” means a common share in the capital of the Corporation and any other share that may be added thereto or substituted therefore as a result of amendments to the articles of the Corporation, reorganization or otherwise, including any rights that form a part of the common share or substituted share;

(dd) “Stock Exchange Rules” means the applicable rules of the Exchange;

(ee) “subsidiary” has the meaning set forth in the Securities Act (British Columbia);

(ff) “Successor Corporation” has the meaning set forth in Section 7.4;

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(gg) “Transaction” has the meaning set forth in Section 7.1; and

(hh) “U.S. Securities Act” means the United States Securities Act of 1933, as amended.

1.3 Construction and Interpretation

(a) In this Plan, all references to the masculine include the feminine; references to the singular shall include the plural and vice versa, as the context shall require.

(b) The headings of all articles, sections and paragraphs in the Plan are inserted for convenience of reference only and shall not affect the construction or interpretation of the Plan. References to “Article” “Section” or “Paragraph” mean an article, section or paragraph contained in the Plan unless expressly stated otherwise.

(c) In this Plan, “including” and “includes” mean including or includes, as the case may be, without limitation. The words “hereto”, “herein”, “hereby”, “hereunder”, “hereof” and similar expressions mean or refer to the Plan as a whole and not to any particular article, section, paragraph or other part hereof.

(d) Whenever the Board or, where applicable, the Committee or any sub-delegate of the Committee is to exercise discretion in the administration of the terms and conditions of this Plan, the term “discretion” means the sole and absolute discretion of the Board, the Committee or sub-delegate of the Committee, as the case may be.

1.4 Effective Date

The Plan shall be effective as of the Effective Date and Options may be granted immediately thereafter, subject to receipt of all regulatory approvals. The Committee shall review and confirm the terms of the Plan from time to time.

Article 2
Plan Administration

2.1 Administration

The Plan shall be administered by the Committee. Subject to the general purposes, terms and condition of the Plan, and to the direction of the Board, the Committee shall have the authority in its sole and absolute discretion to administer the Plan and to exercise all the powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan, all acting reasonably and in good faith and subject to and not inconsistent with the express provisions of this Plan. Where the Board has delegated a power or authority to the Committee, any reference to the Board in this Plan shall be deemed to be a reference to the Committee.

The powers and duties of the Committee include, without limitation, the following:

(a) the authority to grant Options;

(b) to determine the number of Shares subject by each Option;

(c) to determine the Exercise Price of each Option, subject to the provisions of this Plan;

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(d) to determine the Eligible Persons to whom, and the time or times at which, Options shall be granted;

(e) to determine the time or times when Options will be granted, vested and exercisable (including any determination to accelerate the vesting of any Options granted hereunder) and determine the Expiry Date of an Option;

(f) to determine if the Shares that are issuable on the exercise of an Option will be subject to any restrictions upon the exercise of such Option;

(g) to establish policies and to adopt rules and regulations for carrying out the purposes, provisions and administration of the Plan;

(h) to interpret and construe the Plan and to determine all questions arising out of the Plan and any Option granted pursuant to the Plan (and any such interpretation, construction or determination made by the Committee shall be final, binding and conclusive for all purposes on the Corporation and the Optionee);

(i) to determine and prescribe the terms and provisions of Notices of Grant of Options (which need not be identical) provided in connection with grants of Options and the form of documents or processes in respect of the exercise of Options;

(j) to make all other determinations deemed necessary or advisable for the administration of the Plan; and

(k) to appoint, in accordance with Section 2.2, one or more persons or corporations to perform the duties of the Plan Administrator under the Plan.

Without limiting the discretion conferred on the Committee pursuant to this Section 2.1, the Committee’s decision to approve the grant of an Option to an Eligible Person in any period shall not require the Committee to approve the grant of an Option to any Eligible Person in any other period; nor shall the Committee’s decision with respect to the size or terms and conditions of an Option grant in any period require it to approve the grant of Options of the same or similar size or with the same or similar terms and conditions to any Eligible Person in any other period. The Committee shall not be precluded from approving the grant of an Option to any Eligible Person solely because such Eligible Person may previously have been granted an Option under this Plan or any other similar compensation arrangement of the Corporation.

2.2 Agreements

(a) The Corporation may enter into an agreement or agreements with a person or corporation to perform the duties of the Plan Administrator as set out in this Plan (each, an “Administrative Agreement”).

(b) The Corporation shall have the right at any time and from time to time, to remove from office the Plan Administrator under the Plan and to appoint another Plan Administrator in its stead in accordance with the terms of the relevant Administrative Agreement.

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2.3 Shares Subject to Plan

Options may be granted in respect of authorized and unissued Shares, provided that the aggregate number of Shares reserved for issuance under this Plan, subject to adjustment or increase of such number pursuant to the provisions of Section 7.2, and in combination with the aggregate number of Shares which may be issuable under any other Security Based Compensation Arrangement adopted by the Corporation, shall not exceed 8% of the number of issued and outstanding Shares (on a non-diluted basis) at the relevant time. Provided that such maximum number of Shares is not exceeded, following the exercise, expiration, cancellation or other termination of any Options under the Plan, a number of Shares equal to the number of Options or rights so exercised, expired, cancelled or terminated shall automatically become available for issuance in respect of Options that may subsequently be granted under the Plan. No fractional Shares may be purchased or issued under the Plan. In the event the number of Shares to be issued upon the exercise of an Option is a fraction, the Optionee will receive the next lowest whole number of Shares and will not receive any other form of compensation (cash or otherwise) for the fractional interest.

2.4 Conditions to Grant or Exercise

The Committee may, in its discretion, require as conditions to the grant or exercise of any Option, that the Optionee shall have:

(a) represented, warranted and agreed in form and substance satisfactory to the Corporation that he, she or it is acquiring and will acquire such Option and the Shares to be issued upon the exercise thereof or, as the case may be, is acquiring such Shares, for his, her or its own account, for investment and not with a view to or in connection with any distribution, that he, she or it has had access to such information as is necessary to enable him or her to evaluate the merits and risks of such investment and that he or she is able to bear the economic risk of holding such Shares for an indefinite period;

(b) provided certain representations, warranties and certifications to the Corporation to satisfy the requirements of applicable securities laws, including, without limitation, exemptions from the registration requirements of the U.S. Securities Act and applicable state securities laws;

(c) agreed to restrictions on transfer in form and substance satisfactory to the Corporation and to an endorsement on any option agreement or certificate representing the Shares making appropriate reference to such restrictions; and

(d) agreed to indemnify the Corporation in connection with the foregoing.

2.5 Additional Requirements

Any Option granted under the Plan shall be subject to the requirement that, if at any time counsel to the Corporation shall determine that the listing, registration or qualification of the Shares subject to such Option upon any securities exchange or under any law or regulation of any jurisdiction, or the consent or approval of any securities exchange or any governmental or regulatory body, is necessary as a condition of, or in connection with, the grant or exercise of such Option or the issuance or purchase of Shares thereunder, such Option may not be accepted or exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Board. Nothing herein shall be deemed to require the Corporation to apply for or to obtain such listing, registration, qualification, consent or approval. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of applicable securities law, including, without limitation, the U.S. Securities Act, the United States Securities Exchange Act of 1934, as amended, applicable U.S. state securities laws, the rules and regulations promulgated thereunder, and the requirements of any stock exchange or consolidated stock price reporting system on which prices for the Shares are quoted at any given time.

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Article 3
Plan Participation

3.1 Eligibility

Options may be granted only to Eligible Persons as the Committee may determine, provided that no Eligible Person has any claim or right to be granted an Option. In determining the Eligible Persons to whom Options may be granted and the number of Options granted to any Eligible Person, the Committee may take into account such factors as it shall determine in its sole and absolute discretion.

3.2 Participation

Participation in the Plan by Eligible Persons is voluntary.

Article 4Grant of Options

4.1 Grant of Options

Subject to, and except as herein and as otherwise specifically provided for in this Plan, the number of Shares subject to each Option, the Exercise Price, the Expiry Date of each Option, the extent to which each Option vests and is exercisable from time to time during the term of the Option and other terms and conditions relating to each such Option shall be determined by the Committee; provided, however, that:

(a) the Expiry Date of an Option shall be no later than the date which is five years from the date of grant of such Option;

(b) the date of grant of an Option shall be either the date on which such Option was approved by the Committee (the “Approval Date”), or, if the Approval Date was not a Business Day, then the Business Day immediately following the Approval Date, or if the Approval Date occurred during a Blackout Period applicable to the relevant Optionee, then the Business Day immediately following the expiry of the Blackout Period applicable to the relevant Optionee; and

(c) notwithstanding Section 4.1(a), if the Expiry Date of an Option occurs during a Blackout Period applicable to the relevant Optionee, or within ten Business Days after the expiry of a Blackout Period applicable to the relevant Optionee, then the Expiry Date for the Option shall be the date that is the tenth Business Day after the expiry of the Blackout Period (the “Blackout Expiry Date”).

4.2 Notice of Grant of Options

Each Option granted under the Plan shall be subject to the terms and conditions of the Plan and evidenced by a Notice of Grant of Options and such other terms and conditions as the Committee, in its discretion, shall establish. The form of Notice of Grant of Options is attached hereto as Schedule “A”.

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4.3 Exercise Price

The Exercise Price for Shares that are subject to any Option shall in no circumstances be lower than the Fair Market Value, calculated in accordance with the terms of the Plan at the date of grant of the Option.

4.4 Restrictions on Number of Options to Individual Optionee

Subject to Section 4.5, the number of Shares that may be issued to any individual Optionee under the Plan, in combination with the aggregate number of Shares which may be issuable under any other Security Based Compensation Arrangement adopted by the Corporation, within a one year period, shall not exceed 5% of the number of issued and outstanding Shares (on a non-diluted basis) at the date of grant of the Option (the “Individual Limit”).

4.5 Restrictions on Number of Options to Insiders and Non-Employee Directors

Subject to regulatory approval and unless approved by the shareholders of the Corporation given by the affirmative vote of a majority of the votes cast at a meeting of shareholders of the Corporation, excluding the votes attached to Shares beneficially owned by Insiders to whom Options may be granted under the Plan, other than persons who are Insiders solely by virtue of being a director or senior officer of a subsidiary of the Corporation, and associates thereof:

(a) the number of Shares issuable to Insiders as a group, at any time, under the Plan, or when combined with all of the other Security Based Compensation Arrangements adopted by the Corporation, shall not exceed 8% of the number of issued and outstanding Shares (on a non-diluted basis) at the date of grant of the Option (the “Aggregate Insider Limit”);

(b) the number of Shares that may be issued to Insiders as a group, within any one-year period, under the Plan, or when combined with all of the other Security Based Compensation Arrangements adopted by the Corporation, shall not exceed the Aggregate Insider Limit;

(c) the number of Shares that may be issued to any one Insider under the Plan, or when combined with all of the other Security Based Compensation Arrangements adopted by the Corporation, shall not exceed the Individual Limit; and

(d) the Fair Market Value of Options that may be granted to each non-employee director of the Corporation within any one-year period under the Plan shall not exceed $100,000. Notwithstanding the foregoing, the Fair Market Value of Options that may be granted to each non-employee director of the Corporation within any one-year period under the Plan, or when combined with all of the other Security Based Compensation Arrangements adopted by the Corporation, shall not exceed $150,000.

Article 5Exercise of Options

5.1 Exercise

Subject to the provisions of the Plan, an Option may be exercised from time to time by delivery to the Plan Administrator or, if no Plan Administrator is appointed pursuant to the Plan, to the Corporation, a written notice of exercise specifying the number of Shares with respect to which the Options are being exercised and accompanied by payment in full, by way of cash, cheque or other form of payment acceptable to the Corporation, of (a) the Exercise Price of the Shares to be purchased and (b) an amount for any tax withholding or remittance obligations of the Optionee or the Corporation arising under Applicable Law (or by entering into some other arrangement acceptable to the Corporation). Certificates or other evidence of ownership for such Shares shall be issued and delivered to the Optionee within a reasonable time following the receipt of such notice and payment.

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If, as and when any Shares have been duly purchased and paid for under the terms of an Option, and all conditions relating to the exercise of an Option have been fulfilled to the satisfaction of the Committee, such Shares shall be conclusively deemed allotted and issued as fully paid and non-assessable Shares at the price paid therefor.

Notwithstanding the above, the Corporation may implement (or cause to have implemented) such systems and procedures (including systems and procedures operated by the Plan Administrator) from time to time to facilitate the exercise of Options pursuant to this Plan and shall provide Optionees with all necessary details regarding such systems and procedures to facilitate the exercise of Options from time to time in accordance with their terms.

Notwithstanding any of the provisions of the Plan, any Notice of Grant of Options or any Option, the Corporation’s obligation to issue Shares to an Optionee pursuant to the exercise of any Option shall be subject to:

(a) completion of such registration or other qualification of such Shares or obtaining approval of such governmental or regulatory authority as the Corporation shall determine to be necessary or advisable in connection with the authorization, issuance or sale thereof;

(b) the admission of such Shares to listing on any stock exchange on which the Shares may then be listed;

(c) the receipt from the Optionee of such representations, warranties, agreements and undertakings, as the Corporation determines is necessary or advisable in order to safeguard against the violation of the securities laws of any jurisdiction; and

(d) the satisfaction of any conditions on exercise prescribed pursuant to the provisions hereof.

5.2 Net Settlement of Options

Subject to the provisions of the Plan and, upon prior approval of the Committee, once an Option has vested and become exercisable an Optionee may elect, in lieu of exercising such Option, to exercise such Option by surrendering such Option in exchange for the issuance of Shares equal to the number determined by dividing (a) the difference between the Fair Market Value (calculated as at the date of settlement) and the Exercise Price of such Option by (b) the Fair Market Value (calculated as at the date of settlement). An Option may be surrendered and disposed of pursuant to this Section 5.2 from time to time by delivery to the Plan Administrator or, if no Plan Administrator is appointed pursuant to the Plan, to the Corporation, at its head office or such other place as may be specified by the Plan Administrator or the Corporation, as the case may be, of (a) a written notice specifying that the Optionee has elected to effect such a net settlement of such Option and the number of Options to be exercised and (b) the payment of an amount for any tax withholding or remittance obligations of the Optionee or the Corporation arising under Applicable Law (or by entering into some other arrangement acceptable to the Corporation). The Corporation will not be required, upon the net settlement of any Options pursuant to this Section 5.2, to issue fractions of Shares or to distribute certificates which evidence fractional Shares. In the event the number of Shares to be issued upon the net settlement of an Option is a fraction, the Optionee will receive the next lowest whole number of Shares and will not receive any other form of compensation (cash or otherwise) for the fractional interest. Upon exercise of the foregoing, the number of Shares underlying the Options disposed of shall be deducted from the number of Shares reserved for issuance under the Plan.

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5.3 Blackout Period

No Option shall be exercised pursuant to this Article 5 during a Blackout Period.

Article 6Termination of Employment

6.1 No Right to Exercise After Termination

Subject to Sections 6.2, 6.3 and 6.4 hereof, or to any express resolution or other determination by the Board with respect to an Option or the terms of any Notice of Grant of Options, an Option, and all rights to purchase Shares pursuant thereto, shall expire and terminate immediately upon the Optionee ceasing to actively provide services to the Corporation in his or her capacity as a director, an officer, employee or Consultant of the Corporation, as the case may be.

6.2 Termination Other than for Retirement, Long-Term Disability, Death or Just Cause

Subject to any express resolution or other determination by the Committee with respect to an Option or the terms of any Notice of Grant of Options, if, before the Expiry Date of an Option, the employment of the Optionee by the Corporation is terminated by either party for any reason whatsoever, other than death, Retirement, Long-Term Disability or termination for cause, such Option may, subject to the terms thereof (including the vesting provisions thereof) and any other terms of the Plan, be exercised by the Optionee, at any time within 60 days of the termination of such Optionee’s active employment or other service with the Corporation, but in any case prior to the Expiry Date of the Option in accordance with the terms thereof and only to the extent the Optionee was entitled to exercise the Option on the date of termination. For greater certainty, the termination of active employment shall be the last day an Eligible Person provides actual service to the Corporation pursuant to a written notice of termination and does not include any subsequent common law or contractual notice period.

6.3 Termination Due to Retirement or Long-Term Disability

If, before the Expiry Date of an Option in accordance with the terms thereof, the employment of the Optionee by the Corporation is terminated by reason of Retirement or as a result of Long-Term Disability, unless the Committee determines otherwise, all Options held by such Optionee which have vested in accordance with their terms may be exercised at any time within one year following the date of Retirement or termination of the Optionee as a result of a Long-Term Disability or prior to the Expiry Date, whichever is earlier. Options held by an Optionee whose employment has been terminated by reason of Retirement or as a result of Long-Term Disability shall continue to vest in accordance with their terms until the earlier of the date which is one year following the date of Retirement or termination of the Optionee as a result of Long-Term Disability and the Expiry Date.

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6.4 Death of the Optionee

If, before the Expiry Date of an Option in accordance with the terms thereof, the employment of the Optionee by the Corporation is terminated by reason of death, unless the Committee determines otherwise, all outstanding Options held by such Optionee shall become fully vested and may be exercised by the legal personal representative(s) of the estate of the Optionee (including such part, if any, thereof which, but for this Section 6.4, would not otherwise be able to be exercised) at any time within one year following the date of death of the Optionee or prior to the Expiry Date, whichever is earlier, and only to the extent the Option was entitled to exercise the Option on the date of death.

6.5 No Right of Transfer

Subject to Section 6.4 in the case of the death of an Optionee, an Option granted to an Optionee, and the right to receive Shares pursuant thereto, is personal to such Optionee. Except as otherwise provided in this Plan, no assignment, sale, transfer, pledge or charge of an Option, whether voluntary, involuntary, by operation of law or otherwise, vests any interest or right in such Option whatsoever in any assignee or transferee and, immediately upon any assignment, sale, transfer, pledge or charge or attempt to assign, sell, transfer, pledge or charge, such Option shall terminate and be of no further force or effect.

6.6 Transfer Not Termination for Plan Purposes

A transfer of employment or services between the Corporation and a subsidiary or affiliate of the Corporation or between subsidiaries or affiliates of the Corporation shall not be considered an interruption or termination of the employment of an Optionee by the Corporation for any purpose of the Plan, and Options shall not be affected by any such transfer of employment or services.

6.7 Change in Employment

Options shall not be affected by any change of employment of the Optionee or by the Optionee ceasing to be a director, an officer or Consultant of the Corporation where the Optionee at the same time continues to be an Eligible Person.

Article 7Business Combinations and Certain Adjustments

7.1 Business Combinations

Subject to Section 7.3, if, during the term of an outstanding Option, the Corporation completes any transaction which results in a Change of Control (referred to as a “Transaction”) all unvested Options shall vest, and if within 90 days or such other period of time that the Committee determines following the date of the completion of the Transaction an event or events that would constitute a “constructive dismissal” (as such term is defined pursuant to the common law) occur with respect to an Optionee, and within 90 days or such other period of time that the Committee determines following the date of such “constructive dismissal” such Optionee’s employment with the Corporation is terminated (whether at the discretion of the Optionee or otherwise):

(a) each exercisable Option then held by the Optionee shall remain exercisable for a period of 90 days or such other period of time that the Committee determines from the date of such termination of employment, but not later than the end of the Expiry Date, and thereafter any such Option shall expire; and

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(b) each non-exercisable Option then held by the Optionee shall become exercisable upon such termination of employment and shall remain exercisable for a period of 90 days or such other period of time that the Committee determines from the date of such termination of employment, but not later than the end of the Expiry Date, and thereafter any such Option shall expire.

Notwithstanding the foregoing, with respect to any performance-based Options granted under the Plan, vesting of an Option shall be dependent on achievement of the applicable performance criteria as of the date of the completion of the Transaction and/or be prorated to the date of the completion of the Transaction, as applicable.

7.2 Adjustments

Appropriate adjustments as regards Options granted or to be granted, in the number of Shares optioned and in the Exercise Price, shall be made by the Committee to give effect to adjustments in the number of Shares resulting from subdivisions, consolidations or reclassifications of the Shares, or other relevant changes in the Corporation. The appropriate adjustment in any particular circumstance shall be conclusively determined by the Committee in its sole discretion, subject to the direction of the Board, approval by the shareholders of the Corporation and to acceptance by the Exchange, respectively, if applicable.

7.3 No Limitation on Ability to Accelerate

Nothing in this Article 7 shall in any way affect or derogate from the ability of the Committee to accelerate the vesting of Options at any time in its sole discretion as provided for in Section 2.1(e).

7.4 Other Adjustments

If at any time after the grant of an Option to any Optionee and prior to the Expiry Date of such Option, the Shares shall be reclassified, reorganized or otherwise changed, otherwise than as specified in Section 7.2 or, subject to the provisions of Section 7.1 hereof, the Corporation shall consolidate, merge or amalgamate with or into another corporation (the corporation resulting or continuing from such consolidation, merger or amalgamation being herein called the “Successor Corporation”) the Optionee shall be entitled to receive upon the subsequent exercise of his, her or its Option in accordance with the terms hereof and shall accept in lieu of the number of Shares to which he, she or it was theretofore entitled upon such exercise but for the same aggregate consideration payable therefor, the aggregate number of shares of the appropriate class and/or other securities of the Corporation or the Successor Corporation (as the case may be) and/or other consideration from the Corporation or the Successor Corporation (as the case may be) that the Optionee would have been entitled to receive as a result of such reclassification, reorganization or other change or, subject to the provisions of Section 7.1 hereof, as a result of such consolidation, merger or amalgamation, if on the record date of such reclassification, reorganization or other change or the effective date of such consolidation, merger or amalgamation, as the case may be, he or she had been the registered holder of the number of Shares to which he or she was theretofore entitled upon such exercise.

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Article 8Amendment or Termination of the Plan

8.1 Amendment and Termination of the Plan

Subject to Sections 8.2, 8.3 and 8.4, the Board may, at any time and from time to time, without the approval of the holders of Shares or any other voting securities of the Corporation, suspend, discontinue or amend the Plan or an Option.

8.2 Amendments Requiring Shareholder Approval

To the extent required by the Stock Exchange Rules, notwithstanding Section 8.1, the Board may not, without the approval of the holders of a majority of Shares and other voting securities of the Corporation present and voting in person or by proxy at a meeting of shareholders of the Corporation, amend the Plan or an Option to:

(a) increase the maximum number of Shares issuable, as a fixed percentage of the issued and outstanding Shares pursuant to the Plan;

(b) make any amendment that would reduce the Exercise Price of an outstanding Option (including a cancellation and reissue of an Option that constitutes a reduction of the Exercise Price);

(c) make any amendments to the non-employee director participation limits set forth in Section 4.5(d) hereof;

(d) extend the Expiry Date of any Option granted under the Plan beyond the Expiry Date of the Option determined at the date of grant in accordance with the Plan, except as provided for in Section 4.1 with respect to an Expiry Date that occurs during a Blackout Period;

(e) changing the categories of individuals contained in the definition of “Eligible Person” who are eligible to participate in the Plan, including where such change may introduce, re-introduce, broaden or increase the participation of non-employee directors under the Plan; or

(f) amend the Plan to permit the transfer or assignment of Options, except to permit a transfer to a family member, an entity controlled by the holder of the Options or a family member, a charity or for estate planning or estate settlement purposes, unless the change to the Plan or an Option results from the application of Article 7.

8.3 No Adverse Effect

Unless an Optionee otherwise agrees, the Board may not suspend, discontinue or amend the Plan or amend any outstanding Option in a manner that would materially and adversely alter or impair any Option previously granted to an Optionee under the Plan, and any such suspension, discontinuance or amendment of the Plan or amendment to an Option shall apply only in respect of Options granted on or after the date of such suspension, discontinuance or amendment. No suspension, discontinuance or amendment of the Plan or amendment of an Option may contravene the requirements of the Exchange or any securities commission or regulatory body to which the Plan, the Option or the Corporation is now or may hereafter be subject.

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8.4 No Amendment to Article 8

The Board may not amend any provision of this Article 8 without the approval of the holders of a majority of Shares and other voting securities of the Corporation present and voting in person or by proxy at a meeting of shareholders of the Corporation.

Article 9Accounts, Notices and Miscellaneous Provisions

9.1 Accounts and Statements

The Plan Administrator (or if none is appointed, the Corporation) shall maintain records of the details of each Option granted to each Optionee under the Plan. Upon request therefor from an Optionee and at such other times as the Corporation shall determine, the Plan Administrator (or if none is appointed, the Corporation) shall furnish the Optionee with a statement setting forth details of his, her or its Options. Such statement shall be deemed to have been accepted by the Optionee as correct unless written notice to the contrary is given to the Plan Administrator (or if none is appointed, the Corporation) within 10 days after such statement is given to the Optionee.

9.2 Notices

Any payment, notice, statement, certificate or other instrument required or permitted to be given to an Optionee or any person claiming or deriving any rights through him shall be given by:

(a) delivering it personally to the Optionee or the person claiming or deriving rights to the Optionee, as the case may be;

(b) mailing it, postage paid (provided that the postal service is then in operation) or delivering it to the address which is maintained for the Optionee in the Corporation’s personnel records; or

(c) facsimile, e-mail or other similar means of electronic communication.

9.3 Address

Any payment, notice, statement, certificate or instrument required or permitted to be given to the Plan Administrator or the Corporation, as the case may be, shall be given by mailing it, postage prepaid (provided that the postal service is then in operation) or delivering it to the Plan Administrator or the Corporation, as the case may be, at the following address:

Ero Copper Corp. 

Suite 1050, 625 Howe Street 

Vancouver, British Columbia V6C 2T6 

Attention: Chief Financial Officer 

Facsimile: (604) 398-3767

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9.4 Date of Delivery

Any payment, notice, statement, certificate or instrument referred to in Sections 9.2 or 9.3, if delivered, shall be deemed to have been given or delivered, on the date on which it was delivered; if faxed, e-mailed or sent by other means of recorded electronic communication, shall be deemed to have been given or delivered, on the date of faxing, e-mailing or sending by other means of electronic communication, provided that such date is a Business Day and the communication is so faxed, e-mailed or sent before 4:30 p.m. on such date at the place of receipt, otherwise, such communication shall be deemed to have been given and delivered on the next following Business Day; or, if mailed (provided that the postal service is then in operation), shall be deemed to have been given or delivered on the second Business Day following the date on which it was mailed.

9.5 Shareholder and Regulatory Approval

The Plan (and any amendments thereto as required under Article 8) shall be subject to such future approvals of the shareholders of the Corporation and any stock exchange upon which the Shares trade from time to time as may be required under the terms of the Plan or such stock exchange from time to time. Any Options granted on terms requiring such approval shall be conditional upon such approval being given and no such Options may be exercised until such approval is given.

9.6 Withholding Taxes

Notwithstanding anything else in this Plan, the Corporation may take such steps as are considered necessary or appropriate for the withholding of any taxes which the Corporation is required by any law or regulation of any governmental authority whatsoever to withhold in connection with any Share including, without limiting the generality of the foregoing, the withholding of all or any portion of any payment or the withholding of the issue of Shares to be issued under the Plan, until such time as the Eligible Person has paid the Corporation for any amount which the Corporation is required to withhold with respect to such taxes or other amounts. Without limitation to the foregoing, the Committee may adopt administrative rules under the Plan which provide for the sale of Shares (or a portion thereof) in the market upon the issuance of such Shares under the provisions of the Plan to satisfy withholding obligations under the Plan.

9.7 U.S. Tax Considerations

The terms of the Plan and Options granted hereunder to Eligible Persons subject to taxation under the United States Internal Revenue Code of 1986, as amended, shall be determined by taking into consideration Schedule B to the Plan setting forth special provisions applicable to such persons.

9.8 No Right of Ownership

Any holder of an Option shall not possess any rights of ownership as a shareholder of the Corporation with respect to any of the Shares covered by such Option including, for greater certainty and without limitation, the right to receive dividends on such Shares and the right to exercise voting rights in respect of such Shares, until such holder shall have exercised such Option in accordance with the terms of the Plan and the issuance of the Shares by the Corporation.

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9.9 No Right of Continued Employment

Nothing in the Plan, any Notice of Grant of Options or any Option shall confer upon any Optionee any right to continue in the employ of the Corporation or any of its subsidiaries or affect in any way the right of the Corporation or any of its subsidiaries to terminate his or her employment at any time; nor shall anything in the Plan or any Option be deemed or construed to constitute an agreement, or any expression of intent, on the part of the Corporation or any of its subsidiaries to extend the employment of any Optionee beyond the time that he or she would normally be retired pursuant to the provisions of any present or future retirement plan of the Corporation or any of its subsidiaries, or any present or future retirement policy of the Corporation or any of its subsidiaries, or beyond the time at which he or she would otherwise be retired pursuant to the provisions of any contract of employment of the Corporation or any of its subsidiaries.

9.10 Expenses

All expenses in connection with the Plan shall be borne by the Corporation.

9.11 Governing Law

This Plan shall be governed by, construed and interpreted in accordance with the laws of the Province of British Columbia and the laws of Canada applicable therein.

9.12 Severability

If any provision of the Plan or part hereof is determined to be void or unenforceable in whole or in part, such determination shall not affect the validity or enforcement of any other provision or part thereof.

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SCHEDULE “A”

NOTICE OF GRANT OF STOCK OPTIONS

TO: [●] (the “Optionee”)

FROM: ERO COPPER CORP. (the “Corporation”)

DATE: [●]

The Corporation hereby notifies the Optionee as follows:

1. The Corporation hereby grants to the Optionee, subject to the terms and conditions set forth in this Notice and the stock option plan of the Corporation (the “Plan”), the right to purchase the following number of common shares in the capital of the Corporation (the “Shares”) at the following exercise price on or after the following vesting date(s) and prior to the close of business on the following expiry date:

#of Shares	Exercise Price	Vesting Date(s)	Expiry Date
[●]	$[●]	[●]	[●]

2. On the close of business on the expiry date set forth in Paragraph 1 above, the stock option granted hereby shall expire and automatically terminate and be of no further force and effect.

3. The Optionee acknowledges receipt of a copy of the Plan and hereby agrees that the terms and conditions of the Plan shall govern the stock option granted hereby, including all amendments or adjustments pursuant to the Plan or otherwise consented to by the Optionee.

4. All stock options granted pursuant to the Plan and reflected in this Notice shall be personal to the Optionee and shall not be assignable or otherwise transferable except by will or the laws of descent and distribution.

ERO COPPER CORP.

By:
Title:

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SCHEDULE “B”

Special Provisions Applicable to Optionees Subject to taxation under
the United States Internal Revenue Code

This special appendix sets forth special provisions of the Plan that apply to Optionees subject to taxation under the United States Internal Revenue Code of 1986, as amended.

1. Definitions

For purposes of this Schedule “B”:

1.1 “Code” means the United States Internal Revenue Code of 1986, as amended.

1.2 “Section 409A” means Section 409A of the Code and any applicable regulatory guidance issued thereunder.

1.3 “US Optionee” means an Optionee whose compensation from the Corporation or its subsidiaries is subject to taxation under the Code.

2. Compliance with Section 409A

2.1 In General. Notwithstanding any provision of the Plan to the contrary, it is intended that with respect to any US Optionee, such US Optionee’s participation in the Plan shall be exempt from Section 409A and in a manner which does not subject the US Optionee’s interests in the Plan to accelerated or additional tax under Section 409A (and all provisions of the Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A). If any grant to a US Optionee or exercise, dividend or distribution hereunder could cause the application of accelerated or additional tax under Section 409A, such grant, exercise, dividend or distribution shall be deferred if and to the extent deferral will make such grant, exercise, dividend or distribution compliant with Section 409A; otherwise such grant, exercise, dividend or distribution shall be restructured, to the extent possible, in a manner determined by the Committee that does not cause such an accelerated or additional tax. Each US Optionee is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or for the account of such US Optionee in connection with the Plan (including any taxes and penalties under Section 409A), and neither the Corporation nor any of its affiliates shall have any obligation to indemnify or otherwise hold such US Optionee (or any beneficiary) harmless from any or all of such taxes or penalties.

2.2 Modification of Options. Notwithstanding any provision of the Plan to the contrary and with respect to any US Optionee, no Option may be extended beyond the Blackout Expiry Date and in no event following the 10^th anniversary of the date of grant.

2.3 Exercise Price: Notwithstanding any other provision of the Plan, so long as at the time of the grant of an Option the Shares are “readily tradable” as determined under United States Treasury Regulation Section 1.409A-1(b)(5)(vi)(G), the Exercise Price shall be the closing sale price of the Shares reported on the primary securities exchange on which the Shares are listed on the last business day on which such exchange is open for trading prior to the date of grant of such Option, and if at the time of grant the Shares are not “readily tradable” as determined under United States Treasury Regulation Section 1.409A-1(b)(5)(vi)(G), the Exercise Price shall be determined by the reasonable application of a reasonable valuation method in accordance with Treasury Regulation Section 1.409A-1(b)(5)(iv)(B).

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3. Adjustments to Options.

3.1 Notwithstanding the Plan or any provision of the Notice of Grant of Options to the contrary, in connection with any adjustment to the Options, the number of Shares deliverable on the exercise of an Option held by a US Optionee and the Exercise Price of an Option held by a US Optionee shall be adjusted in a manner intended to keep the Options exempt from Section 409A.

4. Amendment of Appendix

4.1 The Committee shall retain the power and authority to amend or modify this Schedule “B” to the extent the Committee in its sole discretion deems necessary or advisable to comply with any guidance issued under Section 409A. Such amendments may be made without approval of the shareholders of the Corporation or the approval of any individual Optionee.

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APPENDIX “B”

AMENDED SHARE UNIT PLAN
OF
ERO COPPER CORP.

Effective May 7, 2020

(See attached)

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ERO COPPER CORP. 

SHARE UNIT PLAN 

EFFECTIVE MAY 7, 2020 

Article 1 

General Provisions

1.1 Purpose

This Share Unit Plan is established as a vehicle by which equity-based incentives may be awarded to the employees, consultants, directors and officers of the Corporation, to recognize and reward their significant contributions to the long-term success of the Corporation including to align the employees’, consultants’ directors’ and officers’ interests more closely with the shareholders of the Corporation.

1.2 Definitions

As used in the Plan, the following terms have the following meanings:

(a) “Blackout Period” means a period of time imposed by the Corporation, pursuant to the Corporation's policies, upon certain designated persons during which those persons may not trade in any securities of the Corporation;

(b) “Board” means the Board of Directors of the Corporation;

(c) “Business Day” means any day that is not a Saturday, Sunday or holiday (as defined in the Interpretation Act (Canada)) in Vancouver, British Columbia.

(d) “Cash Consideration” has the meaning ascribed thereto in Section 3.3(b);

(e) “Change of Control” means:

(i) the acquisition whether directly or indirectly, by a person or company, or any persons or companies acting jointly or in concert (as determined in accordance with the Securities Act (British Columbia) and the rules and regulations thereunder) of voting securities of the Corporation which, together with any other voting securities of the Corporation held by such person or company or persons or companies, constitute, in the aggregate, more than 50% of all outstanding voting securities of the Corporation;

(ii) an amalgamation, arrangement or other form of business combination of the Corporation with another company which results in the holders of voting securities of that other company holding, in the aggregate, 50% or more of all outstanding voting securities of the Corporation (including a merged or successor company) resulting from the business combination;

(iii) the sale, lease or exchange of all or substantially all of the property of the Corporation to another person, other than in the ordinary course of business of the Corporation or to a related entity; or

(iv) any other transaction that is deemed to be a “Change of Control” for the purposes of this Plan by the Board in its sole discretion.

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(f) “Code” means the United States Internal Revenue Code of 1986, as amended.

(g) “Committee” means the Compensation Committee of the Board or such other persons designated by the Board to determine the grants of Share Units and administer this Plan;

(h) “Common Share” means a common share in the capital of the Corporation;

(i) “Consultant” means a person, other than an employee, executive officer, or director of the Corporation and/or of a Subsidiary of the Corporation, that (a) is engaged to provide services to the Corporation and/or a Subsidiary of the Corporation, other than services provided in relation to a distribution, for an initial, renewable or extended period of 12 months or more, (b) provides the services under a written contract with the Corporation and/or a Subsidiary of the Corporation, and (c) spends or will spend a significant amount of time and attention on the affairs and business of the Corporation and/or a Subsidiary of the Corporation;

(j) “Corporation” means Ero Copper Corp. and its successors and assigns;

(k) “Deferred Payment Date” means the date for a Non-Canadian Eligible Person under the Plan after the Redemption Date and not later than the Non-Canadian Eligible Person’s Retirement Date which the Non-Canadian Eligible Person has elected to defer receipt of Common Shares and/or Cash Consideration, as applicable;

(l) “Director” means a non-Employee director of the Board of the Corporation and/or the board of directors of a Subsidiary of the Corporation;

(m) “Dividend” means a dividend declared and payable on a Common Share in accordance with the Corporation’s dividend policy as the same may be amended from time to time (an “Ordinary Dividend”), and may, in the discretion of the Board, include a special or stock dividend (a “Special Dividend”), and may, in the discretion of the Board, include a Special Dividend declared and payable on a Common Share;

(n) “Eligible Person” means any Employee, Consultant, Director or Officer who is designated as an Eligible Person pursuant to Section 2.1;

(o) “Employee” means an employee of the Corporation and/or a Subsidiary of the Corporation;

(p) “Exchange” means, collectively, the Toronto Stock Exchange, any successor thereto and any other stock exchange or trading facilities through which the Common Shares trade or are quoted from time to time;

(q) “Fair Market Value” means, with respect to any particular date, the volume weighted average trading price of the Common Shares on the Toronto Stock Exchange for the five trading days immediately preceding the relevant date (or on any such other stock exchange, inter-dealer quotation network or other organized trading facility on which the Common Shares trade or are quoted from time to time). If the Common Shares are suspended from trading or have not traded on the Toronto Stock Exchange or another stock exchange, inter-dealer quotation network or other organized trading facility for an extended period, the Fair Market Value will be the fair market value of the shares as determined by the Board in its sole discretion acting in good faith;

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(r) “Grant Agreement” has the meaning ascribed thereto in Section 2.5;

(s) “Grant Date” means any date determined from time to time by the Board as a date on which a grant of Share Units will be made to one or more Eligible Persons under this Plan;

(t) “Insider” means an insider of the Corporation, as defined in the Securities Act (British Columbia), and any associate or affiliate of any such insider;

(u) “Non-Canadian Eligible Person” means an Eligible Person who is not, or has not, been resident, or deemed to be resident, in Canada at any time, and has not received his or her grant of Share Units as a result of employment carried on in whole or in part in Canada;

(v) “Officer” means an officer of the Corporation that has been duly appointed by the Board and/or an officer of a Subsidiary of the Corporation that has been duly appointed by the board of directors of such Subsidiary;

(w) “Plan” means this Share Unit Plan, as amended from time to time;

(x) “Redemption Date” in respect of any Share Unit means a date to be selected by the Board following the date a Share Unit has become a Vested Share Unit, which shall be within thirty (30) days of the Vesting Date, unless (i) except with respect to a Vested Share Unit held by a U.S. Taxpayer, an earlier date(s) has been approved by the Board as the Redemption Date in respect of such Vested Share Unit, or (ii) Section 4.1, 4.2, 6.2 is applicable, in which case the Redemption Date(s) in respect of such Vested Share Unit shall be the date(s) established as such in accordance with the applicable Section. Such date shall, in all cases, be in compliance with the requirements pertaining to the exception to the application of the salary deferral arrangement rules in paragraph (k) of the definition of “salary deferral arrangement” in subsection 248(1) of the Income Tax Act (Canada), as such subsection may be amended or enacted from time to time;

(y) “Reorganization” means any declaration of any stock dividend (other than a Special Dividend in respect of which the Board, in its discretion, determines that Eligible Persons are to be paid pursuant to Section 3.8), stock split, combination or exchange of shares, merger, consolidation, recapitalization, amalgamation, plan of arrangement, reorganization, spin-off or other distribution (other than Ordinary Dividends) of the Corporation assets to shareholders or any other similar corporate transaction or event which the Board determines affects the Common Shares such that an adjustment is appropriate to prevent dilution or enlargement of the rights of Eligible Persons under this Plan;

(z) “Retirement” in respect of an Eligible Person means the Eligible Person ceasing to be an Employee, Director, Consultant or Officer after attaining a stipulated age in accordance with the Corporation’s normal retirement policy or earlier with the Corporation’s consent;

(aa) “Retirement Date” means the date an Eligible Person ceases to be an Employee, Consultant, Director, or Officer due to Retirement of the Eligible Person;

(bb) “Share Unit” means one notional Common Share (without any of the attendant rights of a shareholder of such Common Share, including, without limitation, the right to vote such Common Share and the right to receive dividends thereon, except to the extent otherwise specifically provided herein) credited by bookkeeping entry to a notional account maintained by the Corporation in respect of an Eligible Person in accordance with this Plan;

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(cc) “Subsidiary” has the meaning set out in the Securities Act (British Columbia);

(dd) “TSX Rules” means the applicable rules of the Toronto Stock Exchange, as set out in the Toronto Stock Exchange Company Manual;

(ee) “U.S. Taxpayer” means an Eligible Person who is at the relevant time subject to Section 409A of the Code;

(ff) “Vested Share Unit” means any Share Unit which has vested in accordance with the terms of this Plan and/or the terms of any applicable Grant Agreement; and

(gg) “Vesting Date” means, in respect of any Share Unit, the date that the Share Unit becomes a Vested Share Unit and shall, in all cases, be in compliance with the requirements pertaining to the exception to the application of the salary deferral arrangement rules in paragraph (k) of the definition of “salary deferral arrangement” in subsection 248(1) of the Income Tax Act (Canada), as such subsection may be amended or enacted from time to time.

1.3 Effective Date

The Plan shall be effective May 7, 2020; provided that no Common Shares and/or Cash Consideration, as applicable, may be issued and/or paid under the Plan until and unless all required Exchange, regulatory and shareholder approvals have been obtained with respect to the issuance of Common Shares and/or payment of Cash Consideration, as applicable, hereunder.

1.4 Governing Law; Subject to Applicable Regulatory Rules

The Plan shall be governed by and construed in accordance with the laws of the Province of British Columbia and the federal laws of Canada applicable therein. The provisions of the Plan shall be subject to the applicable by-laws, rules and policies of the Exchange and applicable securities legislation.

Article 2

Eligibility and Participation

2.1 Eligibility

This Plan applies to those Employees, Consultants, Directors and Officers whom the Committee designates as eligible for a grant of Share Units pursuant to Section 3.1 (an “Eligible Person”). The Committee shall make such a designation prior to each Grant Date.

2.2 Rights Under the Plan

Subject to Sections 4 and 5, an Eligible Person who has been granted Share Units shall continue to have rights in respect of such Share Units until such Share Units have been redeemed for Common Shares and/or Cash Consideration, as applicable, in accordance with this Plan.

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2.3 Copy of the Plan

The Corporation shall provide each Eligible Person with a copy of this Plan following the initial grant of Share Units to such Eligible Person and shall provide each Eligible Person with a copy of all amendments to this Plan.

2.4 Limitation on Rights

Nothing in this Plan shall confer on any Employee, Consultant, Director or Officer any right to be designated as an Eligible Person or to be granted any Share Units. There is no obligation for uniformity of treatment of Eligible Persons or any group of Employees, Consultants, Directors, Officers or Eligible Persons, whether based on salary or compensation, grade or level or organizational position or level or otherwise. A grant of Share Units to an Eligible Person on one or more Grant Dates shall not be construed to create a right to a grant of Share Units on a subsequent Grant Date.

2.5 Grant Agreements

Each grant of Share Units shall be evidenced by a written agreement (a “Grant Agreement”) executed by the Eligible Person in substantially the form appended as Schedule A hereto. An Eligible Person will not be entitled to any grant of Share Units or any benefit of this Plan unless the Eligible Person agrees with the Corporation to be bound by the provisions of this Plan. By entering into an agreement described in this Section 2.5, each Eligible Person shall be deemed conclusively to have accepted and consented to all terms of this Plan and all bona fide actions or decisions made by the Committee. Such terms and consent shall also apply to and be binding on the legal representative, beneficiaries, heirs and successors of each Eligible Person.

2.6 Limits on Common Shares Issuable

(a) The number of Common Shares which may be reserved for issuance under the Plan:

(i) in combination with the aggregate number of Common Shares which may be issuable under any and all of the Corporation’s security based compensation arrangements in existence from time to time, including the Corporation’s Stock Option Plan, shall not exceed eight percent (8%) of the total number of issued and outstanding Common Shares on a non-diluted basis, or such greater number of Common Shares as shall have been duly approved by the Committee and, if required by the TSX Rules or any other stock exchange on which the Common Shares of the Corporation may then be listed, and by the shareholders of the Corporation; and

(ii) to any one Eligible Person within a 12-month period shall not exceed 2% of the total number of issued and outstanding Common Shares on a non-diluted basis.

(b) The number of Common Shares issuable to Insiders as a group, at any time, under the Plan, or when combined with all of the Corporation’s other previously established or proposed security based compensation arrangements, shall not exceed 8% of the total number of issued and outstanding Common Shares on a non-diluted basis.

(c) The number of Common Shares that may be issued to Insiders as a group, within any one-year period, under the Plan, or when combined with all of the Corporation’s other previously established or proposed security based compensation arrangements, shall not exceed 8% of the total number of issued and outstanding Common Shares on a non-diluted basis.

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(d) The number of Common Shares issuable to non-employee Directors as a group, under the Plan, shall not exceed 1% of the total number of issued and outstanding Common Shares on a non-diluted basis.

(e) The Fair Market Value of the Common Shares issuable to each non-employee Director within any one-year period under the Plan shall not exceed $150,000. Notwithstanding the foregoing, the Fair Market Value of the Common Shares issuable to each non-employee Director within any one-year period under the Plan, or when combined with all of the Corporation’s other previously established or proposed security based compensation arrangements, shall not exceed $150,000.

2.7 No Fractional Shares

No fractional Common Shares may be issued under the Plan. In the event the number of Common Shares to be issued upon the redemption of Share Units is a fraction, the respective Eligible Person will receive the next lowest whole number of Common Shares and will not receive any other form of compensation (cash or otherwise) for the fractional interest.

Article 3

Share Units

3.1 Grant of Share Units

On each Grant Date, the Committee shall designate Eligible Persons and determine the number of Share Units to be granted to each Eligible Person in the Committee’s sole discretion.

3.2 Performance Conditions

At the time a grant of a Share Unit is made, the Committee may, in its sole discretion, establish such performance conditions for the vesting of Share Units as may be specified by the Committee in the applicable Grant Agreement (the “Performance Conditions”). Without limiting the generality of the foregoing, such Performance Conditions may include terms or conditions relating to:

(a) the market price of the Common Shares;

(b) the return to holders of Common Shares, with or without reference to other comparable companies;

(c) the financial performance or results of the Corporation or a Subsidiary of the Corporation;

(d) the achievement of Performance Conditions or other performance criteria relating to the Corporation or a Subsidiary of the Corporation;

(e) any other terms and conditions the Committee may in its sole discretion determine with respect to vesting or the acceleration of vesting; and

(f) the Vesting Date.

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The Performance Conditions may relate to all or a portion of the Share Units in a grant and may be graduated such that different percentages (which may be greater or lesser than 100%) of the Share Units in a grant will become vested depending on the extent of satisfaction of one or more Performance Conditions. The Committee may, in its discretion, subsequent to the Grant Date of a Share Unit, waive any such term or condition or determine that it has been satisfied subject to applicable law. Performance Conditions may differ for Share Units granted to any one Eligible Person or to different Eligible Persons.

3.3 Redemption of Share Units

Unless redeemed earlier in accordance with this Plan, the Share Units of each Eligible Person will be redeemed on or about (but no later than 30 days following) each applicable Vesting Date or, if applicable, at a later Deferred Payment Date(s), the Eligible Person will be entitled to receive and the Corporation will issue and/or pay to the Eligible Person, as applicable:

(a) a number of Common Shares equal to the number of Vested Share Units (net of any applicable statutory withholdings) on the Redemption Date(s) or Deferred Payment Date(s), as the case may be; or

(b) a cash amount, payable by way of certified cheque, bank draft, wire transfer or such other means as the Committee may determine in its sole discretion, equal to the number of Common Shares set out in subsection (a) above multiplied by the Fair Market Value on the applicable Vesting Date (the “Cash Consideration”) (net of any applicable statutory withholdings) on the Redemption Date(s) or Deferred Payment Date(s), as the case may be; or

(c) a combination of (a) and (b), as determined by the Committee in its sole discretion.

3.4 Deferred Payment Date

Non-Canadian Eligible Persons may elect to defer the receipt of all or any part of their entitlement to Common Shares and/or Cash Consideration, as applicable, until a Deferred Payment Date. Elections made by U.S. Taxpayers to defer the receipt of all or any part of their entitlement to Common Shares and/or Cash Consideration, as applicable, until a Deferred Payment Date shall comply with timing of election requirements and the timing and form of payment requirements of United States Treasury Regulation Section 1.409A-2 and any successor provision.

3.5 Prior Notice of Deferred Payment Date

Non-Canadian Eligible Persons who elect to set a Deferred Payment Date must give the Corporation written notice of one or more Deferred Payment Dates not later than thirty (30) days prior to the applicable Redemption Date(s); provided however, that in the case of a U.S. Taxpayer, such election must be made prior to the Grant Date of the Share Units to which the election relates. Non-Canadian Eligible Persons may change a Deferred Payment Date by providing written notice to the Corporation not later than thirty (30) days prior to the Deferred Payment Date.

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3.6 Blackout Period

In the event the Redemption Date or, if applicable, the Deferred Payment Date, determined in accordance with the Plan occurs during a Blackout Period applicable to the relevant Eligible Person, then the Redemption Date or the Deferred Payment Date, as applicable, shall be the date that is the tenth Business Day after the expiry of the Blackout Period; provided, however, that in the case of a U.S. Taxpayer, the change in the Redemption Date or the Deferred Payment Date does not violate Section 409A of the Code.

3.7 Withholding Taxes

The Corporation may take such steps as are considered necessary or appropriate for the withholding of any taxes which the Corporation is required by any law or regulation of any governmental authority whatsoever to withhold in connection with any Common Share and/or Cash Consideration including, without limiting the generality of the foregoing, the withholding of the issue of Common Shares and/or the withholding of all or any portion of any payment of the Cash Consideration, as applicable, to be issued and/or paid under the Plan, until such time as the Eligible Person has paid the Corporation for any amount which the Corporation is required to withhold with respect to such taxes or other amounts. Without limitation to the foregoing, the Committee may, if applicable, adopt administrative rules under the Plan which provide for the sale of Common Shares (or a portion thereof) in the market upon the issuance of such Common Shares under the provisions of the Plan to satisfy withholding obligations under the Plan.

3.8 Payment of Dividend Equivalents

When Dividends are paid on Common Shares, an Eligible Person shall be credited with Dividend equivalents in respect of the Share Units credited to the Eligible Person’s account as of the record date for payment of Dividends. Such Dividend equivalents shall be converted into additional Share Units (including fractional Share Units) based on the Fair Market Value per Common Share on the date credited and redeemed on the Redemption Date or Deferred Payment Date, as applicable, of the Share Unit with respect to which the Dividend equivalent was granted.

3.9 Adjustments

If any change occurs in the outstanding Common Shares by reason of a Reorganization, the Committee, in its sole discretion, and without liability to any person, shall make such equitable changes or adjustments, if any, as it considers appropriate, in such manner as the Committee may consider equitable, to reflect such change or event including, without limitation, adjusting the number of Share Units credited to Eligible Persons and outstanding under the Plan, provided that any such adjustment will not otherwise extend the Redemption Date otherwise applicable. The Corporation shall give notice to each Eligible Person of any adjustment made pursuant to this section and, upon such notice, such adjustment shall be conclusive and binding for all purposes. The existence of outstanding Share Units shall not affect in any way the right or power and authority of the Corporation or its shareholders to make or authorize any alteration, recapitalization, reorganization or any other change in the Corporation’s capital structure or its business or any merger or consolidation of the Corporation, any issue of bonds, debentures or preferred or preference shares (ranking ahead of the Common Shares or otherwise) or any right thereto, or the dissolution or liquidation of the Corporation, any sale or transfer of all or any part of its assets or business or any corporate act or proceeding whether of a similar character or otherwise.

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Article 4

Events Affecting Entitlement

4.1 Termination of Employment or Election as a Director

(a) Voluntary Termination or Termination for Cause. If an Eligible Person is terminated by the Corporation for cause (as determined by the Corporation), or if an Eligible Person, voluntarily terminates employment for any reason or resigns as a Director, as applicable, prior to a Redemption Date, all of the Eligible Person’s Share Units shall be cancelled and no amount shall be paid by the Corporation to the Eligible Person in respect of the Share Units so cancelled. Any Share Units outstanding after a Redemption Date for which an Eligible Person who is terminated as set out in this Section 4.1(a) has elected a Deferred Payment Date will be redeemed for an equal number of Common Shares, Cash Consideration in lieu thereof or a combination of both, as determined by the Committee in its sole discretion, as soon as possible but no later than 30 days following the date of termination.

(b) Involuntary Termination. The Share Units of an Eligible Person which are Vested Share Units on the applicable date, other than a Director, who is involuntarily terminated by the Corporation, for reasons other than cause, shall be redeemed for an equal number of Common Shares, Cash Consideration in lieu thereof or a combination of both, as determined by the Committee in its sole discretion. For the purposes of this Section 4.1(b), the Redemption Date shall be the date on which the employment of the Eligible Person, other than a Director, is terminated as stated in a written notice of termination, irrespective of any entitlement of the Eligible Person to notice, pay in lieu of notice or benefits beyond the termination date.

(c) Termination related to Directors. The Share Units of a Director, who is not re-elected at an annual or special meeting of shareholders shall be redeemed for such number of Common Shares equal to the number of Vested Share Units on the Redemption Date or Cash Consideration in lieu thereof or a combination of both, as determined by the Committee in its sole discretion. For purposes of this Section 4.1(c), the Redemption Date shall be the date on which the annual or special meeting is held.

(d) Termination on Change of Control. Notwithstanding anything else herein to the contrary, if an Eligible Person’s employment is terminated, for reasons other than cause, at any time within 12 months following a Change of Control, then the Corporation shall redeem 100% of the Share Units granted to such Eligible Person and outstanding under the Plan as soon as reasonably practical following such termination, but no later than thirty (30) days following the Redemption Date for an equal number of Common Shares, Cash Consideration in lieu thereof or a combination of both, as determined by the Committee in its sole discretion; provided that in the event that any Share Units are subject to satisfaction of any Performance Conditions, the Committee shall consider the extent of satisfaction of such Performance Conditions in determining the number of Share Units to be redeemed. For the purposes of this Section 4.1(d) the Redemption Date shall be the last day such Eligible Person provides actual service to the Corporation pursuant to a written notice of termination and does not include any subsequent common law or contractual notice period.

For purposes of Section 4.1, a U.S. Taxpayer shall be treated as terminated when such person incurs a “separation from service” within the meaning of Section 409A of the Code and United States Treasury Regulation Section 1.409A-1(h) ("Separation from Service"). Solely to the extent required by Section 409A of the Code, any payment in respect of Share Units which has become payable on or following a Separation from Service to any U.S. Taxpayer who is determined to be a "specified employee," under Section 409A(a)(2)(B)(i) of the Code and United States Treasury Regulation Section 1.409A-1(i), shall not be paid before the date that is six months after such U.S. Taxpayer's Separation from Service (or, if earlier, the date of the death of such U.S. Taxpayer). Following any applicable six month delay of payment, all such delayed payments shall be made to the U.S. Taxpayer in a single lump sum on the earliest possible date.

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4.2 Death

All of the Share Units of an Eligible Person who dies shall be redeemed in accordance with Section 3.2. For the purposes of the foregoing, the Redemption Date shall be the date of the Eligible Person’s death.

4.3 No Grants Following Last Day of Active Employment

In the event of termination of any Eligible Person’s employment with the Corporation, such Eligible Person shall not be granted any Share Units pursuant to Section 3.1 after the last day of active employment of such Eligible Person. Without limiting the generality of the foregoing and of Section 2.4, notwithstanding any other provision hereof, and notwithstanding any provision of any employment agreement between any Eligible Person and the Corporation, no Eligible Person will have any right to be awarded additional Share Units, and shall not be awarded any Share Units, pursuant to Section 3.1 after the last day of active employment of such Eligible Person on which such Eligible Person actually performs the duties of the Eligible Person’s position, whether or not such Eligible Person receives a lump sum payment of salary or other compensation in lieu of notice of termination, or continues to receive payment of salary, benefits or other remuneration for any period following such last day of active employment. Notwithstanding any other provision hereof, or any provision of any employment agreement between the Corporation and an Eligible Person, in no event will any Eligible Person have any right to damages in respect of any loss of any right to be awarded Share Units pursuant to Section 3.1 after the last day of active employment of such Eligible Person and no severance allowance, or termination settlement of any kind in respect of any Eligible Person will include or reflect any claim for such loss of right and no Eligible Person will have any right to assert, claim, seek or obtain, and shall not assert, claim, seek or obtain, any judgment or award in respect of or which includes or reflects any such right or claim for such loss of right.

Article 5

Administration

5.1 Transferability

Rights respecting Share Units shall not be transferable or assignable other than by will or the laws of decent and distribution.

5.2 Administration

Subject to the general purposes, terms and condition of this Plan, applicable corporate, securities and tax law requirements and to the direction of the Board, the Committee shall, in its sole and absolute discretion: (i) interpret and administer the Plan; (ii) establish, amend and rescind any rules and regulations relating to the Plan; and (iii) make any other determinations that the Committee deems necessary or desirable for the administration and operation of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent the Committee deems, in its sole and absolute discretion, necessary or desirable. Any decision of the Committee with respect to the administration and interpretation of the Plan shall be conclusive and binding on the Eligible Person and his or her legal representative. The Committee may establish policies respecting minimum ownership of Common Shares of the Corporation by Eligible Persons and the ability to elect Share Units to satisfy any such policy.

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It is intended that this Plan and Grant Agreements will comply with Section 409A of the Code (and any regulations and guidelines issued thereunder), to the extent this Plan and such agreements are subject thereto, and this Plan and such agreements shall be interpreted on a basis consistent with such intent. If an amendment of this Plan and such agreements is necessary in order for it to comply with Section 409A of the Code, the Committee will adopt any such amendment in a manner that preserves the original intent of the parties to the extent reasonably possible. No action or failure to act by the Committee shall subject the Corporation to any claim, liability, or expense, and the Corporation shall not have any obligation to indemnify or otherwise protect any person from the obligation to pay any taxes, interest or penalties pursuant to Section 409A of the Code.

5.3 Records

The Corporation will maintain records indicating the number of Share Units credited to an Eligible Person under the Plan from time to time and the Grant Dates of such Share Units. Such records shall be conclusive as to all matters involved in the administration of this Plan.

5.4 Statements

The Corporation shall furnish annual statements to each Eligible Person indicating the number of Share Units credited to the Eligible Person and the Grant Dates of the Share Units and such other information that the Corporation considers relevant to the Eligible Person.

5.5 Legal Compliance

Without limiting the generality of the foregoing, the Committee may take such steps and require such documentation from Eligible Persons as the Committee may determine are desirable to ensure compliance with all applicable laws and legal requirements, including all applicable corporate and securities laws and regulations of any country, and any political subdivisions thereof, and the by-laws, rules and regulations of any stock exchanges or other organized market on which Common Shares may from time to time be listed or posted and any applicable provisions of the Income Tax Act (Canada), as amended or income tax legislation or any other jurisdiction.

Article 6

Amendment and Termination

6.1 Amendment

(a) The Board reserves the right, in its sole discretion, to amend, suspend or terminate the Plan or any portion thereof at any time, provided that no such amendment, suspension or termination may be (i) made without obtaining any required regulatory or shareholder approvals, or (ii) adversely affect the rights of any Eligible Person with respect to the Share Units to which the Eligible Person is then entitled under the Plan without the consent of the Eligible Person.

(b) Without limiting the generality of the foregoing, the Board may make the following amendments to the Plan, without obtaining shareholder approval:

(i) amendments to the terms and conditions of the Plan necessary to ensure that the Plan complies with the applicable regulatory requirements, including the rules of the Exchange, in place from time to time;

12

(ii) amendments to the provisions of the Plan respecting administration of the Plan;

(iii) amendments to the provisions of the Plan respecting the terms and conditions on which Share Units may be granted pursuant to the Plan, including the provisions relating to the payment of the Share Units; and

(c) amendments to the Plan that are of a “housekeeping” nature.

(d) Notwithstanding the foregoing, the Corporation will be required to obtain the shareholder approval for any amendment related to:

(i) the number or percentage of issued and outstanding Common Shares available for grant under the Plan;

(ii) removing or exceeding the Insider participation limits set forth in Sections 2.6(b) and 2.6(c) hereof;

(iii) removing or exceeding the non-employee Director participation limits set forth in Sections 2.6(d) and 2.6(e) hereof;

(iv) permitting the transfer or assignment of Share Units other than for normal estate settlement purposes;

(v) changing the categories of individuals contained in the definition of “Eligible Person” who are eligible to participate in the Plan, including where such change may introduce, re-introduce, broaden or increase the participation of non-employee directors under the Plan;

(vi) a change in the method of calculation of redemption of Share Units held by Eligible Persons;

(vii) an extension to the term for redemption of Share Units held by Eligible Persons; and

(viii) any amendments to this Section 6.1 of the Plan,

(e) Unless an Eligible Person otherwise agrees, any amendment to the Plan or Share Unit shall apply only in respect of Share Units granted on or after the date of such amendment.

6.2 Termination of the Plan

The Board may from time to time amend or suspend this Plan in whole or in part and may at any time terminate this Plan. No such amendment, suspension or termination shall adversely affect the rights of any Eligible Person at the time of such amendment, suspension or termination with respect to outstanding and unredeemed Share Units credited to such Eligible Person without the consent of the affected Eligible Person. If the Board terminates the Plan, no new Share Units will be awarded to any Eligible Person, but outstanding and unredeemed previously credited Share Units shall remain outstanding, be entitled to payments as provided under Section 3.8, and be paid in accordance with the terms and conditions of this Plan existing at the time of termination. This Plan will finally cease to operate for all purposes when the last remaining Eligible Person receives a payment in satisfaction of all outstanding and unredeemed Share Units credited to such Eligible Person, or all outstanding and unredeemed Share Units credited to such Eligible Person are cancelled pursuant to the provisions thereof.

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Article 7

General

7.1 Rights to Common Shares and/or Cash Consideration

This Plan shall not be interpreted to create any entitlement of any Eligible Person to any Common Shares, or to the dividends payable pursuant thereto, or to any Cash Consideration, as applicable, except as expressly provided herein. A holder of Share Units shall not have rights as a shareholder of the Corporation with respect to any Common Shares which may be issuable pursuant to the Share Units so held, whether voting, right on liquidation or otherwise.

7.2 No Right to Employment

This Plan shall not be interpreted as either an employment or trust agreement. Nothing in this Plan nor any Board guidelines or any agreement referred to in Section 2.5 nor any action taken hereunder shall be construed as giving any Eligible Person the right to be retained in the continued employ or service of the Corporation or any of its subsidiaries, or giving any Eligible Person or any other person the right to receive any benefits not specifically expressly provided in this Plan nor shall it interfere in any way with any other right of the Corporation to terminate the employment or service of any Eligible Person at any time.

7.3 Right to Funds

Neither the establishment of this Plan nor the granting of Share Units under this Plan shall be deemed to create a trust. Amounts payable to any Eligible Person under the Plan shall be a general, unsecured obligation of the Corporation. The right of the Employees, Consultants, Directors or Officers to receive payment pursuant to this Plan shall be no greater than the right of other unsecured creditors of the Corporation.

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SCHEDULE A

SHARE UNIT GRANT AGREEMENT

SHARE UNIT PLAN OF ERO COPPER CORP.

This Share Unit Grant Agreement is made the_____day of___________, 20____between ________________________________________________, the undersigned “Eligible Person” (the “Eligible Person”), being an employee, consultant, director or officer of Ero Copper Corp. (the “Corporation”) or a subsidiary thereof, name or designated pursuant to the terms of the Share Unit Plan of the Corporation (which Plan, as the same may from time to time be modified, supplemented or amended and in effect, is herein referred to as the “Plan”), and the Corporation.

In consideration of the grant of Share Units made to the Eligible Person pursuant to the Plan (the receipt and sufficiency of which are hereby acknowledged), the Eligible Person hereby agrees and confirms that:

1. The Eligible Person has received a copy of the Plan and has read, understands and agrees to be bound by the provisions of the Plan.

2. The Eligible Person accepts and consents to and shall be deemed conclusively to have accepted and consented to, and agreed to be bound by, the provisions and all terms of the Plan and all bona fide actions or decisions made by the Board or, to the extent the Board delegated to the Committee administrative duties and powers in relation to the Plan, the Committee, which terms and consent shall also apply to and be binding on the legal representatives, beneficiaries and successors of the undersigned.

3. On____________, 20__, the Eligible Person was granted____________________Share Units, which grant is evidenced by this Agreement.

4. The Share Units shall vest and be redeemed as follows:

Performance Period	The period beginning on the date hereof and ending on [●], subject to any adjustments set forth in this Agreement, if applicable.
Vesting Date	[●]; subject to satisfaction of the Performance Conditions set out in this Agreement, if applicable. For greater certainty, if no Performance Conditions are set out in this Agreement, the Share Units subject to this Agreement shall vest on the date indicated above.
Redemption Date	[●], such date being not later than three years following the end of the year that includes the Grant Date.

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Performance Conditions	Performance Condition	Graduated Vesting Terms (if applicable)
	[●] [●] [●]	[●] [●] [●]
	The Performance Conditions will be measured over the term of the Performance Period set forth in this Agreement, subject to any adjustments set forth in this Agreement, if applicable. The extent to which each Performance Condition is met will be determined by the Board, based on such data as the Board determines to be relevant.

5. This Share Unit Grant Agreement shall be considered as part of and an amendment to any employment agreement between the Eligible Person and the Corporation and the Eligible Person herby agrees that the Eligible Person will not make any claim under that employment agreement for any rights or entitlement under the Plan or damages in lieu thereof except as expressly provided in the Plan.

This Agreement shall be determined in accordance with the laws of the province of British Columbia and the laws of Canada applicable therein. Words used herein which are defined in the Plan shall have the respective meanings ascribed to them in the Plan.

ERO COPPER CORP.     Per: ___________________________ Authorized Signatory ELIGIBLE PERSON     ____________________________ Print Name: (Eligible Person)

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APPENDIX “C”

blackline of proposed revisions to articles
OF
ERO COPPER CORP.

(See attached)

1

TABLE OF CONTENTS

BUSINESS CORPORATIONS ACT

ARTICLES

of

Ero Copper Corp.

Page

Article 1
INTERPRETATION
1.1	Definitions	7
1.2	Business Corporations Act and Interpretation Act Definitions Applicable	7
Article 2
SHARES AND SHARE CERTIFICATES
2.1	Authorized Share Structure	7
2.2	Form of Share Certificate	8
2.3	Shareholder Entitled to Certificate or Acknowledgement	8
2.4	Delivery by Mail	8
2.5	Replacement of Worn Out or Defaced Certificate or Acknowledgement	8
2.6	Replacement of Lost, Stolen or Destroyed Certificate or Acknowledgement	8
2.7	Splitting Share Certificates	8
2.8	Certificate Fee	8
2.9	Recognition of Trusts	8
Article 3
ISSUE OF SHARES
3.1	Directors Authorized	9
3.2	Commissions and Discounts	9
3.3	Brokerage	9
3.4	Conditions of Issue	9
3.5	Share Purchase Warrants and Rights	9
Article 4
SHARE REGISTERS
4.1	Central Securities Register	9
4.2	Closing Register	10
Article 5
SHARE TRANSFERS
5.1	Registering Transfers	10
5.2	Form of Instrument of Transfer	10
5.3	Transferor Remains Shareholder	10
5.4	Signing of Instrument of Transfer	10
5.5	Enquiry as to Title Not Required	10
5.6	Transfer Fee	11

2

Article 6
TRANSMISSION OF SHARES
6.1	Legal Personal Representative Recognized on Death	11
6.2	Rights of Legal Personal Representative	11
Article 7
PURCHASE OF SHARES
7.1	Company Authorized to Purchase Shares	11
7.2	Purchase When Insolvent	11
7.3	Sale and Voting of Purchased Shares	11
Article 8
BORROWING POWERS
8.1	Borrowing Powers	11
Article 9
ALTERATIONS
9.1	Alteration of Authorized Share Structure	12
9.2	Special Rights and Restrictions	12
9.3	Change of Name	13
9.4	Other Alterations	13
Article 10
MEETINGS OF SHAREHOLDERS
10.1	Annual General Meetings	13
10.2	Resolution Instead of Annual General Meeting	13
10.3	Calling of Meetings of Shareholders	13
10.4	Notice for Meetings of Shareholders	13
10.5	Record Date for Notice	13
10.6	Record Date for Voting	14
10.7	Failure to Give Notice and Waiver of Notice	14
10.8	Notice of Special Business at Meetings of Shareholders	14
Article 11
PROCEEDINGS AT MEETINGS OF SHAREHOLDERS
11.1	Special Business	14
11.2	Special Majority	15
11.3	Quorum	15
11.4	One Shareholder May Constitute Quorum	15
11.5	Other Persons May Attend	15
11.6	Requirement of Quorum	15
11.7	Lack of Quorum	15
11.8	Lack of Quorum at Succeeding Meeting	15
11.9	Chair	16
11.10	Selection of Alternate Chair	16
11.11	Adjournments	16
11.12	Notice of Adjourned Meeting	16
11.13	Decision by Show of Hands or Poll	16
11.14	Declaration of Result	16

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11.15	Motion Need Not be Seconded	16
11.16	Casting Vote	16
11.17	Manner of Taking Poll	17
11.18	Demand for Poll on Adjournment	17
11.19	Chair Must Resolve Dispute	17
11.20	Casting of Votes	17
11.21	Demand for Poll	17
11.22	Demand for Poll Not to Prevent Continuance of Meeting	17
11.23	Retention of Ballots and Proxies	17
11.24	Meeting by Telephone or Other Communications Medium	17
Article 12
VOTES OF SHAREHOLDERS
12.1	Number of Votes by Shareholder or by Shares	18
12.2	Votes of Persons in Representative Capacity	18
12.3	Votes by Joint Holders	18
12.4	Legal Personal Representatives as Joint Shareholders	18
12.5	Representative of a Corporate Shareholder	18
12.6	Proxy Provisions Do Not Apply to All Companies	19
12.7	Appointment of Proxy Holders	19
12.8	Alternate Proxy Holders	19
12.9	When Proxy Holder Need Not Be Shareholder	19
12.10	Deposit of Proxy	19
12.11	Validity of Proxy Vote	20
12.12	Form of Proxy	20
12.13	Revocation of Proxy	20
12.14	Revocation of Proxy Must Be Signed	20
12.15	Production of Evidence of Authority to Vote	21
Article 13
DIRECTORS
13.1	First Directors; Number of Directors	21
13.2	Change in Number of Directors	21
13.3	Directors’ Acts Valid Despite Vacancy	21
13.4	Qualifications of Directors	21
13.5	Remuneration of Directors	22
13.6	Reimbursement of Expenses of Directors	22
13.7	Special Remuneration for Directors	22
13.8	Gratuity, Pension or Allowance on Retirement of Director	22
Article 14
ELECTION AND REMOVAL OF DIRECTORS
14.1	Election at Annual General Meeting	22
14.2	Consent to be a Director	22
14.3	Failure to Elect or Appoint Directors	22
14.4	Places of Retiring Directors Not Filled	23
14.5	Directors May Fill Casual Vacancies	23
14.6	Remaining Directors Power to Act	23
14.7	Shareholders May Fill Vacancies	23
14.8	Additional Directors	23

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14.9	Ceasing to be a Director	24
14.10	Removal of Director by Shareholders	24
14.11	Removal of Director by Directors	24
Article 15
POWERS AND DUTIES OF DIRECTORS
15.1	Powers of Management	24
15.2	Appointment of Attorney of Company	24
Article 16
DISCLOSURE OF INTEREST OF DIRECTORS
16.1	Obligation to Account for Profits	24
16.2	Restrictions on Voting by Reason of Interest	25
16.3	Interested Director Counted in Quorum	25
16.4	Disclosure of Conflict of Interest or Property	25
16.5	Director Holding Other Office in the Company	25
16.6	No Disqualification	25
16.7	Professional Services by Director or Officer	25
16.8	Director or Officer in Other Corporations	25
Article 17
PROCEEDINGS OF DIRECTORS
17.1	Meetings of Directors	25
17.2	Voting at Meetings	26
17.3	Chair of Meetings	26
17.4	Meetings by Telephone or Other Communications Medium	26
17.5	Calling of Meetings	26
17.6	Notice of Meetings	26
17.7	When Notice Not Required	26
17.8	Meeting Valid Despite Failure to Give Notice	27
17.9	Waiver of Notice of Meetings	27
17.10	Quorum	27
17.11	Validity of Acts Where Appointment Defective	27
17.12	Consent Resolutions in Writing	27
Article 18
EXECUTIVE AND OTHER COMMITTEES
18.1	Appointment and Powers of Executive Committee	27
18.2	Appointment and Powers of Other Committees	28
18.3	Obligations of Committees	28
18.4	Powers of Board	28
18.5	Committee Meetings	28
Article 19
OFFICERS
19.1	Directors May Appoint Officers	29
19.2	Functions, Duties and Powers of Officers	29
19.3	Qualifications	29
19.4	Remuneration and Terms of Appointment	29

5

Article 20
INDEMNIFICATION
20.1	Definitions	29
20.2	Mandatory Indemnification of Directors and Former Directors	30
20.3	Indemnification of Other Persons	30
20.4	Non-Compliance with Business Corporations Act	30
20.5	Company May Purchase Insurance	30
Article 21
DIVIDENDS
21.1	Payment of Dividends Subject to Special Rights	30
21.2	Declaration of Dividends	30
21.3	No Notice Required	30
21.4	Record Date	30
21.5	Manner of Paying Dividend	31
21.6	Settlement of Difficulties	31
21.7	When Dividend Payable	31
21.8	Dividends to be Paid in Accordance with Number of Shares	31
21.9	Receipt by Joint Shareholders	31
21.10	Dividend Bears No Interest	31
21.11	Fractional Dividends	31
21.12	Payment of Dividends	31
21.13	Capitalization of Surplus	31
Article 22
DOCUMENTS, RECORDS AND REPORTS
22.1	Recording of Financial Affairs	31
22.2	Inspection of Accounting Records	32
Article 23
NOTICES
23.1	Method of Giving Notice	32
23.2	Deemed Receipt of Mailing	33
23.3	Certificate of Sending	33
23.4	Notice to Joint Shareholders	33
23.5	Notice to Trustees	33
Article 24
SEAL AND EXECUTION OF DOCUMENTS
24.1	Who May Attest Seal	33
24.2	Sealing Copies	33
24.3	Mechanical Reproduction of Seal	34
24.4	Execution of Documents Generally	34
Article 25
PROHIBITIONS
25.1	Definitions	34
25.2	Application	34
25.3	Consent Required for Transfer of Shares or Designated Securities	34

6

Certificate of Incorporation No. BC1075817

BUSINESS CORPORATIONS ACT

ARTICLES

of

Ero Copper Corp.

Article 1
INTERPRETATION

1.1                             Definitions. In these Articles, unless the context otherwise requires:

“board of directors”, “directors” and “board” mean the directors or sole director of the Company for the time being;

“Business Corporations Act” means the Business Corporations Act (British Columbia) from time to time in force and all amendments thereto and includes all regulations and amendments thereto made pursuant to that Act;

“legal personal representative” means the personal or other legal representative of the shareholder;

“registered address” of a shareholder means the shareholder’s address as recorded in the central securities register;

“seal” means the seal of the Company, if any.

1.2                             Business Corporations Act and Interpretation Act Definitions Applicable. The definitions in the Business Corporations Act and the definitions and rules of construction in the Interpretation Act, with the necessary changes, so far as applicable, and unless the context requires otherwise, apply to these Articles as if they were an enactment. If there is a conflict between a definition in the Business Corporations Act and a definition or rule in the Interpretation Act relating to a term used in these Articles, the definition in the Business Corporations Act will prevail in relation to the use of the term in these Articles. If there is a conflict between these Articles and the Business Corporations Act, the Business Corporations Act will prevail.

Article 2
SHARES AND SHARE CERTIFICATES

2.1                             Authorized Share Structure. The authorized share structure of the Company consists of shares of the class or classes and series, if any, described in the Notice of Articles of the Company.

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2.2                             Form of Share Certificate. Each share certificate issued by the Company must comply with, and be signed as required by, the Business Corporations Act.

2.3                             Shareholder Entitled to Certificate or Acknowledgement. Each shareholder is entitled, without charge, to (a) one share certificate representing the shares of each class or series of shares registered in the shareholder’s name or (b) a non-transferable written acknowledgement of the shareholder’s right to obtain such a share certificate, provided that in respect of a share held jointly by several persons, the Company is not bound to issue more than one share certificate and delivery of a share certificate for a share to one of several joint shareholders or to one of the shareholders’ duly authorized agents will be sufficient delivery to all.

2.4                             Delivery by Mail. Any share certificate or non-transferable written acknowledgement of a shareholder’s right to obtain a share certificate may be sent to the shareholder by mail at the shareholder’s registered address and neither the Company nor any director, officer or agent of the Company is liable for any loss to the shareholder because the share certificate or acknowledgement is lost in the mail or stolen.

2.5                             Replacement of Worn Out or Defaced Certificate or Acknowledgement. If the directors are satisfied that a share certificate or a non-transferable written acknowledgement of the shareholder’s right to obtain a share certificate is worn out or defaced, they must, on production to them of the share certificate or acknowledgement, as the case may be, and on such other terms, if any, as they think fit:

(a) order the share certificate or acknowledgement, as the case may be, to be cancelled; and

(b) issue a replacement share certificate or acknowledgement, as the case may be.

2.6                             Replacement of Lost, Stolen or Destroyed Certificate or Acknowledgement. If a share certificate or a non-transferable written acknowledgement of a shareholder’s right to obtain a share certificate is lost, stolen or destroyed, a replacement share certificate or acknowledgement, as the case may be, must be issued to the person entitled to that share certificate or acknowledgement, as the case may be, if the directors receive:

(a) proof satisfactory to them that the share certificate or acknowledgement is lost, stolen or destroyed; and

(b) any indemnity the directors consider adequate.

2.7                             Splitting Share Certificates. If a shareholder surrenders a share certificate to the Company with a written request that the Company issue in the shareholder’s name two or more share certificates, each representing a specified number of shares and in the aggregate representing the same number of shares as the share certificate so surrendered, the Company must cancel the surrendered share certificate and issue replacement share certificates in accordance with that request.

2.8                             Certificate Fee. There must be paid to the Company, in relation to the issue of any share certificate under Articles 2.5, 2.6 or 2.7, the amount, if any and which must not exceed the amount prescribed under the Business Corporations Act, determined by the directors.

2.9                             Recognition of Trusts. Except as required by law or statute or these Articles, no person will be recognized by the Company as holding any share upon any trust, and the Company is not bound by or compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share or fraction of a share or (except as by law or statute or these Articles provided or as ordered by a court of competent jurisdiction) any other rights in respect of any share except an absolute right to the entirety thereof in the shareholder.

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Article 3
ISSUE OF SHARES

3.1                             Directors Authorized. Subject to the Business Corporations Act and the rights of the holders of issued shares of the Company, the Company may issue, allot, sell or otherwise dispose of the unissued shares, and issued shares held by the Company, at the times, to the persons, including directors, in the manner, on the terms and conditions and for the issue prices (including any premium at which shares with par value may be issued) that the directors may determine. The issue price for a share with par value must be equal to or greater than the par value of the share.

3.2                             Commissions and Discounts. The Company may at any time, pay a reasonable commission or allow a reasonable discount to any person in consideration of that person purchasing or agreeing to purchase shares of the Company from the Company or any other person or procuring or agreeing to procure purchasers for shares of the Company.

3.3                             Brokerage. The Company may pay such brokerage fee or other consideration as may be lawful for or in connection with the sale or placement of its securities.

3.4                             Conditions of Issue. Except as provided for by the Business Corporations Act, no share may be issued until it is fully paid. A share is fully paid when:

(a) consideration is provided to the Company for the issue of the share by one or more of the following:

(i) past services performed for the Company;

(ii) property;

(iii) money; and

(b) the value of the consideration received by the Company equals or exceeds the issue price set for the share under Article 3.1.

3.5                          Share Purchase Warrants and Rights. Subject to the Business Corporations Act, the Company may issue share purchase warrants, options and rights upon such terms and conditions as the directors determine, which share purchase warrants, options and rights may be issued alone or in conjunction with debentures, debenture stock, bonds, shares or any other securities issued or created by the Company from time to time.

Article 4
SHARE REGISTERS

4.1                             Central Securities Register. As required by and subject to the Business Corporations Act, the Company must maintain in British Columbia a central securities register. The directors may, subject to the Business Corporations Act, appoint an agent to maintain the central securities register. The directors may also appoint one or more agents, including the agent which keeps the central securities register, as transfer agent for its shares or any class or series of its shares, as the case may be, and the same or another agent as registrar for its shares or such class or series of its shares, as the case may be. The directors may terminate such appointment of any agent at any time and may appoint another agent in its place.

9

4.2                             Closing Register. The Company must not at any time close its central securities register.

Article 5
SHARE TRANSFERS

5.1                             Registering Transfers. A transfer of a share of the Company must not be registered unless:

(a) a duly signed instrument of transfer in respect of the share has been received by the Company;

(b) if a share certificate has been issued by the Company in respect of the share to be transferred, that share certificate has been surrendered to the Company; and

(c) if a non-transferable written acknowledgement of the shareholder’s right to obtain a share certificate has been issued by the Company in respect of the share to be transferred, that acknowledgement has been surrendered to the Company.

5.2                             Form of Instrument of Transfer. The instrument of transfer in respect of any share of the Company must be either in the form, if any, on the back of the Company’s share certificates or in any other form that may be approved by the directors from time to time.

5.3                             Transferor Remains Shareholder. Except to the extent that the Business Corporations Act otherwise provides, the transferor of shares is deemed to remain the holder of the shares until the name of the transferee is entered in a securities register of the Company in respect of the transfer.

5.4                             Signing of Instrument of Transfer. If a shareholder, or his or her duly authorized attorney, signs an instrument of transfer in respect of shares registered in the name of the shareholder, the signed instrument of transfer constitutes a complete and sufficient authority to the Company and its directors, officers and agents to register the number of shares specified in the instrument of transfer or specified in any other manner, or, if no number is specified, all the shares represented by the share certificates or set out in the written acknowledgements deposited with the instrument of transfer:

(a) in the name of the person named as transferee in that instrument of transfer; or

(b) if no person is named as transferee in that instrument of transfer, in the name of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered.

5.5                             Enquiry as to Title Not Required. Neither the Company nor any director, officer or agent of the Company is bound to inquire into the title of the person named in the instrument of transfer as transferee or, if no person is named as transferee in the instrument of transfer, of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered or is liable for any claim related to registering the transfer by the shareholder or by any intermediate owner or holder of the shares, of any interest in the shares, of any share certificate representing such shares or of any written acknowledgement of a right to obtain a share certificate for such shares.

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5.6                             Transfer Fee. There must be paid to the Company, in relation to the registration of any transfer, the amount, if any, determined by the directors.

Article 6
TRANSMISSION OF SHARES

6.1                             Legal Personal Representative Recognized on Death. In case of the death of a shareholder, the legal personal representative, or if the shareholder was a joint holder, the surviving joint holder, will be the only person recognized by the Company as having any title to the shareholder’s interest in the shares. Before recognizing a person as a legal personal representative, the directors may require proof of appointment by a court of competent jurisdiction, a grant of letters probate, letters of administration or such other evidence or documents as the directors consider appropriate.

6.2                             Rights of Legal Personal Representative. The legal personal representative has the same rights, privileges and obligations that attach to the shares held by the shareholder, including the right to transfer the shares in accordance with these Articles, provided the documents required by the Business Corporations Act and the directors have been deposited with the Company.

Article 7
PURCHASE OF SHARES

7.1                             Company Authorized to Purchase Shares. Subject to Article 7.2, the special rights and restrictions attached to the shares of any class or series and the Business Corporations Act, the Company may, if authorized by the directors, purchase or otherwise acquire any of its shares at the price and upon the terms specified in such resolution.

7.2                             Purchase When Insolvent. The Company must not make a payment or provide any other consideration to purchase or otherwise acquire any of its shares if there are reasonable grounds for believing that:

(a) the Company is insolvent; or

(b) making the payment or providing the consideration would render the Company insolvent.

7.3                             Sale and Voting of Purchased Shares. If the Company retains a share redeemed, purchased or otherwise acquired by it, the Company may sell, gift or otherwise dispose of the share, but, while such share is held by the Company, it:

(a) is not entitled to vote the share at a meeting of its shareholders;

(b) must not pay a dividend in respect of the share; and

(c) must not make any other distribution in respect of the share.

Article 8
BORROWING POWERS

8.1 Borrowing Powers. The Company, if authorized by the directors, may:

(a) borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate;

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(b) issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as they consider appropriate;

(c) guarantee the repayment of money by any other person or the performance of any obligation of any other person; and

(d) mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company.

Article 9
ALTERATIONS

9.1                        Alteration of Authorized Share Structure. Subject to Article 9.2 and the Business Corporations Act, the Company may by special resolution:

(a) create one or more classes or series of shares or, if none of the shares of a class or series of shares are allotted or issued, eliminate that class or series of shares;

(b) increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue out of any class or series of shares or establish a maximum number of shares that the Company is authorized to issue out of any class or series of shares for which no maximum is established;

(c) subdivide or consolidate all or any of its unissued, or fully paid issued, shares;

(d) if the Company is authorized to issue shares of a class of shares with par value:

(i) decrease the par value of those shares; or

(ii) if none of the shares of that class of shares are allotted or issued, increase the par value of those shares;

(e) change all or any of its unissued, or fully paid issued, shares with par value into shares without par value or any of its unissued shares without par value into shares with par value;

(f) alter the identifying name of any of its shares; or

(g) otherwise alter its shares or authorized share structure when required or permitted to do so by the Business Corporations Act.

9.2                        Special Rights and Restrictions. Subject to the Business Corporations Act, the Company may by special resolution:

(a) create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, whether or not any or all of those shares have been issued; or

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(b) vary or delete any special rights or restrictions attached to the shares of any class or series of shares, whether or not any or all of those shares have been issued.

9.3                        Change of Name. The Company may by a resolution of the directors authorize an alteration of its Notice of Articles in order to change its name.

9.4                        Other Alterations. If the Business Corporations Act does not specify the type of resolution and these Articles do not specify another type of resolution, the Company may by special resolution alter these Articles.

Article 10
MEETINGS OF SHAREHOLDERS

10.1                      Annual General Meetings. Unless an annual general meeting is deferred or waived in accordance with the Business Corporations Act, the Company must hold its first annual general meeting within 18 months after the date on which it was incorporated or otherwise recognized, and after that must hold an annual general meeting at least once in each calendar year and not more than 15 months after the last annual reference date at such time and place as may be determined by the directors.

10.2                      Resolution Instead of Annual General Meeting. If all the shareholders who are entitled to vote at an annual general meeting consent by a unanimous resolution under the Business Corporations Act to all of the business that is required to be transacted at that annual general meeting, the annual general meeting is deemed to have been held on the date of the unanimous resolution. The shareholders must, in any unanimous resolution passed under this Article 10.2, select as the Company’s annual reference date a date that would be appropriate for the holding of the applicable annual general meeting.

10.3                        Calling of Meetings of Shareholders. The directors may, whenever they think fit, call a meeting of shareholders.

10.4                     Notice for Meetings of Shareholders. The Company must send notice of the date, time and location of any meeting of shareholders, in the manner provided in these Articles, or in such other manner, if any, as may be prescribed by ordinary resolution (whether previous notice of the resolution has been given or not), to each shareholder entitled to attend the meeting, to each director and to the auditor of the Company, unless these Articles otherwise provide, at least the following number of days before the meeting:

(a) if and for so long as the Company is a public company, 21 days;

(b) otherwise, 10 days.

10.5                     Record Date for Notice. The directors may set a date as the record date for the purpose of determining shareholders entitled to notice of any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Business Corporations Act, by more than four months. The record date must not precede the date on which the meeting is held by fewer than:

(a) if and for so long as the Company is a public company, 21 days;

(b) otherwise, 10 days.

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If no record date is set, the record date is 5 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.

10.6                   Record Date for Voting. The directors may set a date as the record date for the purpose of determining shareholders entitled to vote at any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Business Corporations Act, by more than four months. If no record date is set, the record date is 5 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.

10.7                    Failure to Give Notice and Waiver of Notice. The accidental omission to send notice of any meeting to, or the non-receipt of any notice by, any of the persons entitled to notice does not invalidate any proceedings at that meeting. Any person entitled to notice of a meeting of shareholders may, in writing or otherwise, waive or reduce the period of notice of such meeting.

10.8                      Notice of Special Business at Meetings of Shareholders. If a meeting of shareholders is to consider special business within the meaning of Article 11.1, the notice of meeting must:

(a) state the general nature of the special business; and

(b) if the special business includes considering, approving, ratifying, adopting or authorizing any document or the signing of or giving of effect to any document, have attached to it a copy of the document or state that a copy of the document will be available for inspection by shareholders:

(i) at the Company’s records office, or at such other reasonably accessible location in British Columbia as is specified in the notice; and

(ii) during statutory business hours on any one or more specified days before the day set for the holding of the meeting.

Article 11
PROCEEDINGS AT MEETINGS OF SHAREHOLDERS

11.1                      Special Business. At a meeting of shareholders, the following business is special business:

(a) at a meeting of shareholders that is not an annual general meeting, all business is special business except business relating to the conduct of or voting at the meeting;

(b) at an annual general meeting, all business is special business except for the following:

(i) business relating to the conduct of or voting at the meeting;

(ii) consideration of any financial statements of the Company presented to the meeting;

(iii) consideration of any reports of the directors or auditor;

(iv) the setting or changing of the number of directors;

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(v) the election or appointment of directors;

(vi) the appointment of an auditor;

(vii) the setting of the remuneration of an auditor;

(viii) business arising out of a report of the directors not requiring the passing of a special resolution or an exceptional resolution;

(ix) any other business which, under these Articles or the Business Corporations Act, may be transacted at a meeting of shareholders without prior notice of the business being given to the shareholders.

11.2                      Special Majority. The majority of votes required for the Company to pass a special resolution at a meeting of shareholders is two-thirds of the votes cast on the resolution.

11.3                     Quorum. Subject to the special rights and restrictions attached to the shares of any class or series of shares, the quorum for the transaction of business at a meeting of shareholders is two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 25% of the issued shares entitled to be voted at the meeting.

11.4                       One Shareholder May Constitute Quorum. If there is only one shareholder entitled to vote at a meeting of shareholders:

(a) the quorum is one person who is, or who represents by proxy, that shareholder, and

(b) that shareholder, present in person or by proxy, may constitute the meeting.

11.5                     Other Persons May Attend. The directors, the president (if any), the secretary (if any), the assistant secretary (if any), any lawyer for the Company, the auditor of the Company and any other persons invited by the directors are entitled to attend any meeting of shareholders, but if any of those persons does attend a meeting of shareholders, that person is not to be counted in the quorum and is not entitled to vote at the meeting unless that person is a shareholder or proxy holder entitled to vote at the meeting.

11.6                       Requirement of Quorum. No business, other than the election of a chair of the meeting and the adjournment of the meeting, may be transacted at any meeting of shareholders unless a quorum of shareholders entitled to vote is present at the commencement of the meeting, but such quorum need not be present throughout the meeting.

11.7                       Lack of Quorum. If, within one-half hour from the time set for the holding of a meeting of shareholders, a quorum is not present:

(a) in the case of a general meeting requisitioned by shareholders, the meeting is dissolved, and

(b) in the case of any other meeting of shareholders, the meeting stands adjourned to the same day in the next week at the same time and place.

11.8         Lack of Quorum at Succeeding Meeting. If, at the meeting to which the meeting referred to in Article 11.7(b) was adjourned, a quorum is not present within one-half hour from the time set for the holding of the meeting, the person or persons present and being, or representing by proxy, one or more shareholders entitled to attend and vote at the meeting constitute a quorum.

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11.9                        Chair. The following individual is entitled to preside as chair at a meeting of shareholders:

(a) the chair of the board, if any; or

(b) if the chair of the board is absent or unwilling to act as chair of the meeting, the president, if any.

11.10                   Selection of Alternate Chair. If, at any meeting of shareholders, there is no chair of the board or president present within 15 minutes after the time set for holding the meeting, or if the chair of the board and the president are unwilling to act as chair of the meeting, or if the chair of the board and the president have advised the secretary, if any, or any director present at the meeting, that they will not be present at the meeting, the directors present must choose one of their number to be chair of the meeting or if all of the directors present decline to take the chair or fail to so choose or if no director is present, the shareholders entitled to vote at the meeting who are present in person or by proxy may choose any person present at the meeting to chair the meeting.

11.11                   Adjournments. The chair of a meeting of shareholders may, and if so directed by the meeting must, adjourn the meeting from time to time and from place to place, but no business may be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.

11.12                  Notice of Adjourned Meeting. It is not necessary to give any notice of an adjourned meeting or of the business to be transacted at an adjourned meeting of shareholders except that, when a meeting is adjourned for 30 days or more, notice of the adjourned meeting must be given as in the case of the original meeting.

11.13                  Decision by Show of Hands or Poll. Subject to the Business Corporations Act, every motion put to a vote at a meeting of shareholders will be decided on a show of hands unless a poll, before or on the declaration of the result of the vote by show of hands, is directed by the chair or demanded by at least one shareholder entitled to vote who is present in person or by proxy.

11.14                   Declaration of Result. The chair of a meeting of shareholders must declare to the meeting the decision on every question in accordance with the result of the show of hands or the poll, as the case may be, and that decision must be entered in the minutes of the meeting. A declaration of the chair that a resolution is carried by the necessary majority or is defeated is, unless a poll is directed by the chair or demanded under Article 11.13, conclusive evidence without proof of the number or proportion of the votes recorded in favour of or against the resolution.

11.15                   Motion Need Not be Seconded. No motion proposed at a meeting of shareholders need be seconded unless the chair of the meeting rules otherwise, and the chair of any meeting of shareholders is entitled to propose or second a motion.

11.16                   Casting Vote. In case of an equality of votes, the chair of a meeting of shareholders does not, either on a show of hands or on a poll, have a second or casting vote in addition to the vote or votes to which the chair may be entitled as a shareholder.

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11.17                     Manner of Taking Poll. Subject to Article 11.18, if a poll is duly demanded at a meeting of shareholders:

(a) the poll must be taken:

(i) at the meeting, or within seven days after the date of the meeting, as the chair of the meeting directs; and

(ii) in the manner, at the time and at the place that the chair of the meeting directs;

(b) the result of the poll is deemed to be the decision of the meeting at which the poll is demanded; and

(c) the demand for the poll may be withdrawn by the person who demanded it.

11.18                     Demand for Poll on Adjournment. A poll demanded at a meeting of shareholders on a question of adjournment must be taken immediately at the meeting.

11.19                     Chair Must Resolve Dispute. In the case of any dispute as to the admission or rejection of a vote given on a poll, the chair of the meeting must determine the dispute, and his or her determination made in good faith is final and conclusive.

11.20                     Casting of Votes. On a poll, a shareholder entitled to more than one vote need not cast all the votes in the same way.

11.21                     Demand for Poll. No poll may be demanded in respect of the vote by which a chair of a meeting of shareholders is elected.

11.22                    Demand for Poll Not to Prevent Continuance of Meeting. The demand for a poll at a meeting of shareholders does not, unless the chair of the meeting so rules, prevent the continuation of a meeting for the transaction of any business other than the question on which a poll has been demanded.

11.23                  Retention of Ballots and Proxies. The Company must, for at least three months after a meeting of shareholders, keep each ballot cast on a poll and each proxy voted at the meeting, and, during that period, make them available for inspection during normal business hours by any shareholder or proxy holder entitled to vote at the meeting. At the end of such three month period, the Company may destroy such ballots and proxies.

11.24                   Meeting by Telephone or Other Communications Medium. A shareholder or proxy holder may participate in a meeting of the shareholders in person or by telephone if all shareholders or proxy holders participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other. A shareholder or proxy holder may participate in a meeting of the shareholders by a communications medium other than telephone if all shareholders or proxy holders participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other and if all shareholders or proxy holders who wish to participate in the meeting agree to such participation. A shareholder or proxy holder who participates in a meeting in a manner contemplated by this Article 11.24 is deemed for all purposes of the Business Corporations Act and these Articles to be present at the meeting and to have agreed to participate in that manner.

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Article 12
VOTES OF SHAREHOLDERS

12.1                     Number of Votes by Shareholder or by Shares. Subject to any special rights or restrictions attached to any shares and to the restrictions imposed on joint shareholders under Article 12.3:

(a) on a vote by show of hands, every person present who is a shareholder or proxy holder and entitled to vote on the matter has one vote; and

(b) on a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and held by that shareholder and may exercise that vote either in person or by proxy.

12.2                     Votes of Persons in Representative Capacity. A person who is not a shareholder may vote at a meeting of shareholders, whether on a show of hands or on a poll, and may appoint a proxy holder to act at the meeting, if, before doing so, the person satisfies the chair of the meeting, or the directors, that the person is a legal personal representative or a trustee in bankruptcy for a shareholder who is entitled to vote at the meeting.

12.3                     Votes by Joint Holders. If there are joint shareholders registered in respect of any share:

(a) any one of the joint shareholders may vote at any meeting, either personally or by proxy, in respect of the share as if that joint shareholder were solely entitled to it; or

(b) if more than one of the joint shareholders is present at any meeting, personally or by proxy, and more than one of them votes in respect of that share, then only the vote of the joint shareholder present whose name stands first on the central securities register in respect of the share will be counted.

12.4                     Legal Personal Representatives as Joint Shareholders. Two or more legal personal representatives of a shareholder in whose sole name any share is registered are, for the purposes of Article 12.3, deemed to be joint shareholders.

12.5                     Representative of a Corporate Shareholder. If a corporation, that is not a subsidiary of the Company, is a shareholder, that corporation may appoint a person to act as its representative at any meeting of shareholders of the Company, and:

(a) for that purpose, the instrument appointing a representative must:

(i) be received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least the number of business days specified in the notice for the receipt of proxies, or if no number of days is specified, two business days before the day set for the holding of the meeting; or

(ii) be provided, at the meeting, to the chair of the meeting or to a person designated by the chair of the meeting;

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(b) if a representative is appointed under this Article 12.5:

(i) the representative is entitled to exercise in respect of and at that meeting the same rights on behalf of the corporation that the representative represents as that corporation could exercise if it were a shareholder who is an individual, including, without limitation, the right to appoint a proxy holder; and

(ii) the representative, if present at the meeting, is to be counted for the purpose of forming a quorum and is deemed to be a shareholder present in person at the meeting.

Evidence of the appointment of any such representative may be sent to the Company by written instrument, fax or any other method of transmitting legibly recorded messages.

12.6                       Proxy Provisions Do Not Apply to All Companies. Articles 12.7 to 12.15 do not apply to the Company if and for so long as it is a public company or a pre-existing reporting company which has the Statutory Reporting Company Provisions as part of its Articles or to which the Statutory Reporting Company Provisions apply.

12.7                       Appointment of Proxy Holders. Every shareholder of the Company, including a corporation that is a shareholder but not a subsidiary of the Company, entitled to vote at a meeting of shareholders of the Company may, by proxy, appoint one or more (but not more than five) proxy holders to attend and act at the meeting in the manner, to the extent and with the powers conferred by the proxy.

12.8                       Alternate Proxy Holders. A shareholder may appoint one or more alternate proxy holders to act in the place of an absent proxy holder.

12.9                       When Proxy Holder Need Not Be Shareholder. A person must not be appointed as a proxy holder unless the person is a shareholder, although a person who is not a shareholder may be appointed as a proxy holder if:

(a) the person appointing the proxy holder is a corporation or a representative of a corporation appointed under Article 12.5;

(b) the Company has at the time of the meeting for which the proxy holder is to be appointed only one shareholder entitled to vote at the meeting; or

(c) the shareholders present in person or by proxy at and entitled to vote at the meeting for which the proxy holder is to be appointed, by a resolution on which the proxy holder is not entitled to vote but in respect of which the proxy holder is to be counted in the quorum, permit the proxy holder to attend and vote at the meeting.

12.10                     Deposit of Proxy. A proxy for a meeting of shareholders must:

(a) be received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least the number of business days specified in the notice, or if no number of days is specified, two business days before the day set for the holding of the meeting; or

(b) unless the notice provides otherwise, be provided, at the meeting, to the chair of the meeting or to a person designated by the chair of the meeting.

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A proxy may be sent to the Company by written instrument, fax or any other method of transmitting legibly recorded messages.

12.11                     Validity of Proxy Vote. A vote given in accordance with the terms of a proxy is valid notwithstanding the death or incapacity of the shareholder giving the proxy and despite the revocation of the proxy or the revocation of the authority under which the proxy is given, unless notice in writing of that death, incapacity or revocation is received:

(a) at the registered office of the Company, at any time up to and including the last business day before the day set for the holding of the meeting at which the proxy is to be used; or

(b) by the chair of the meeting, before the vote is taken.

12.12                     Form of Proxy. A proxy, whether for a specified meeting or otherwise, must be either in the following form or in any other form approved by the directors or the chair of the meeting:

[Name of Company]

(the “Company”)

The undersigned, being a shareholder of the Company, hereby appoints [name] or, failing that person, [name], as proxy holder for the undersigned to attend, act and vote for and on behalf of the undersigned at the meeting of shareholders of the Company to be held on [month, day, year] and at any adjournment of that meeting.

Number of shares in respect of which this proxy is given (if no number is specified, then this proxy if given in respect of all shares registered in the name of the shareholder): _______________.

Signed this ______ day of __________, _____.

(Signature of shareholder)

(Name of shareholder - printed)

12.13                     Revocation of Proxy. Subject to Article 12.14, every proxy may be revoked by an instrument in writing that is:

(a) received at the registered office of the Company at any time up to and including the last business day before the day set for the holding of the meeting at which the proxy is to be used; or

(b) provided, at the meeting, to the chair of the meeting.

12.14                     Revocation of Proxy Must Be Signed. An instrument referred to in Article 12.13 must be signed as follows:

(a) if the shareholder for whom the proxy holder is appointed is an individual, the instrument must be signed by the shareholder or his or her legal personal representative or trustee in bankruptcy;

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(b) if the shareholder for whom the proxy holder is appointed is a corporation, the instrument must be signed by the corporation or by a representative appointed for the corporation under Article 12.5.

12.15                     Production of Evidence of Authority to Vote. The chair of any meeting of shareholders may, but need not, inquire into the authority of any person to vote at the meeting and may, but need not, demand from that person production of evidence as to the existence of the authority to vote.

Article 13
DIRECTORS

13.1                       First Directors; Number of Directors. The first directors are the persons designated as directors of the Company in the Notice of Articles that applies to the Company when it is recognized under the Business Corporations Act. The number of directors, excluding additional directors appointed under Article 14.8, is set at:

(a) subject to paragraphs (b) and (c), the number of directors that is equal to the number of the Company’s first directors;

(b) if the Company is a public company, the greater of three and the most recently set of:

(i) the number of directors set by ordinary resolution (whether or not previous notice of the resolution was given); and

(ii) the number of directors set under Article 14.4;

(c) if the Company is not a public company, the most recently set of:

(i) the number of directors set by ordinary resolution (whether or not previous notice of the resolution was given); and

(ii) the number of directors set under Article 14.4.

13.2                       Change in Number of Directors. If the number of directors is set under Articles 13.1(b)(i) or 13.1(c)(i):

(a) the shareholders may elect or appoint the directors needed to fill any vacancies in the board of directors up to that number;

(b) if the shareholders do not elect or appoint the directors needed to fill any vacancies in the board of directors up to that number contemporaneously with the setting of that number, then the directors may appoint, or the shareholders may elect or appoint, directors to fill those vacancies.

13.3                       Directors’ Acts Valid Despite Vacancy. An act or proceeding of the directors is not invalid merely because fewer than the number of directors set or otherwise required under these Articles is in office.

13.4                       Qualifications of Directors. A director is not required to hold a share in the capital of the Company as qualification for his or her office but must be qualified as required by the Business Corporations Act to become, act or continue to act as a director.

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13.5                      Remuneration of Directors. The directors are entitled to the remuneration for acting as directors, if any, as the directors may from time to time determine. If the directors so decide, the remuneration of the directors, if any, will be determined by the shareholders. That remuneration may be in addition to any salary or other remuneration paid to any officer or employee of the Company as such, who is also a director.

13.6                      Reimbursement of Expenses of Directors. The Company must reimburse each director for the reasonable expenses that he or she may incur in and about the business of the Company.

13.7                      Special Remuneration for Directors. If any director performs any professional or other services for the Company that in the opinion of the directors are outside the ordinary duties of a director, or if any director is otherwise specially occupied in or about the Company’s business, he or she may be paid remuneration fixed by the directors, or, at the option of that director, fixed by ordinary resolution, and such remuneration may be either in addition to, or in substitution for, any other remuneration that he or she may be entitled to receive.

13.8                      Gratuity, Pension or Allowance on Retirement of Director. Unless otherwise determined by ordinary resolution, the directors on behalf of the Company may pay a gratuity or pension or allowance on retirement to any director who has held any salaried office or place of profit with the Company or to his or her spouse or dependants and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance.

Article 14
ELECTION AND REMOVAL OF DIRECTORS

14.1                      Election at Annual General Meeting. At every annual general meeting and in every unanimous resolution contemplated by Article 10.2:

(a) the shareholders entitled to vote at the annual general meeting for the election of directors must elect, or in the unanimous resolution appoint, a board of directors consisting of the number of directors for the time being set under these Articles; and

(b) all the directors cease to hold office immediately before the election or appointment of directors under paragraph (a), but are eligible for re-election or re-appointment.

14.2                      Consent to be a Director. No election, appointment or designation of an individual as a director is valid unless:

(a) that individual consents to be a director in the manner provided for in the Business Corporations Act;

(b) that individual is elected or appointed at a meeting at which the individual is present and the individual does not refuse, at the meeting, to be a director; or

(c) with respect to first directors, the designation is otherwise valid under the Business Corporations Act.

14.3                      Failure to Elect or Appoint Directors. If:

(a) the Company fails to hold an annual general meeting, and all the shareholders who are entitled to vote at an annual general meeting fail to pass the unanimous resolution contemplated by Article 10.2, on or before the date by which the annual general meeting is required to be held under the Business Corporations Act; or

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(b) the shareholders fail, at the annual general meeting or in the unanimous resolution contemplated by Article 10.2, to elect or appoint any directors;

then each director then in office continues to hold office until the earlier of:

(c) the date on which his or her successor is elected or appointed; and

(d) the date on which he or she otherwise ceases to hold office under the Business Corporations Act or these Articles.

14.4                     Places of Retiring Directors Not Filled. If, at any meeting of shareholders at which there should be an election of directors, the places of any of the retiring directors are not filled by that election, those retiring directors who are not re-elected and who are asked by the newly elected directors to continue in office will, if willing to do so, continue in office to complete the number of directors for the time being set pursuant to these Articles until further new directors are elected at a meeting of shareholders convened for that purpose. If any such election or continuance of directors does not result in the election or continuance of the number of directors for the time being set pursuant to these Articles, the number of directors of the Company is deemed to be set at the number of directors actually elected or continued in office.

14.5                      Directors May Fill Casual Vacancies. Any casual vacancy occurring in the board of directors may be filled by the directors.

14.6                     Remaining Directors Power to Act. The directors may act notwithstanding any vacancy in the board of directors, but if the Company has fewer directors in office than the number set pursuant to these Articles as the quorum of directors, the directors may only act for the purpose of appointing directors up to that number or of summoning a meeting of shareholders for the purpose of filling any vacancies on the board of directors or, subject to the Business Corporations Act, for any other purpose.

14.7                      Shareholders May Fill Vacancies. If the Company has no directors or fewer directors in office than the number set pursuant to these Articles as the quorum of directors, the shareholders may elect or appoint directors to fill any vacancies on the board of directors.

14.8                     Additional Directors. Notwithstanding Articles 13.1 and 13.2, between annual general meetings or unanimous resolutions contemplated by Article 10.2, the directors may appoint one or more additional directors, but the number of additional directors appointed under this Article 14.8 must not at any time exceed:

(a) one-third of the number of first directors, if, at the time of the appointments, one or more of the first directors have not yet completed their first term of office; or

(b) in any other case, one-third of the number of the current directors who were elected or appointed as directors other than under this Article 14.8.

Any director so appointed ceases to hold office immediately before the next election or appointment of directors under Article 14.1(a), but is eligible for re-election or re-appointment

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14.9                      Ceasing to be a Director. A director ceases to be a director when:

(a) the term of office of the director expires;

(b) the director dies;

(c) the director resigns as a director by notice in writing provided to the Company or a lawyer for the Company; or

(d) the director is removed from office pursuant to Articles 14.10 or 14.11.

14.10                   Removal of Director by Shareholders. The Company may remove any director before the expiration of his or her term of office by special resolution. In that event, the shareholders may elect, or appoint by ordinary resolution, a director to fill the resulting vacancy. If the shareholders do not elect or appoint a director to fill the resulting vacancy contemporaneously with the removal, then the directors may appoint or the shareholders may elect, or appoint by ordinary resolution, a director to fill that vacancy.

14.11                   Removal of Director by Directors. The directors may remove any director before the expiration of his or her term of office if the director is convicted of an indictable offence, or if the director ceases to be qualified to act as a director of a company and does not promptly resign, and the directors may appoint a director to fill the resulting vacancy.

Article 15
POWERS AND DUTIES OF DIRECTORS

15.1                     Powers of Management. The directors must, subject to the Business Corporations Act and these Articles, manage or supervise the management of the business and affairs of the Company and have the authority to exercise all such powers of the Company as are not, by the Business Corporations Act or by these Articles, required to be exercised by the shareholders of the Company.

15.2                     Appointment of Attorney of Company. The directors may from time to time, by power of attorney or other instrument, under seal if so required by law, appoint any person to be the attorney of the Company for such purposes, and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the directors under these Articles and excepting the power to fill vacancies in the board of directors, to remove a director, to change the membership of, or fill vacancies in, any committee of the directors, to appoint or remove officers appointed by the directors and to declare dividends) and for such period, and with such remuneration and subject to such conditions as the directors may think fit. Any such power of attorney may contain such provisions for the protection or convenience of persons dealing with such attorney as the directors think fit. Any such attorney may be authorized by the directors to sub-delegate all or any of the powers, authorities and discretions for the time being vested in him or her.

Article 16
DISCLOSURE OF INTEREST OF DIRECTORS

16.1                     Obligation to Account for Profits. A director or senior officer who holds a disclosable interest (as that term is used in the Business Corporations Act) in a contract or transaction into which the Company has entered or proposes to enter is liable to account to the Company for any profit that accrues to the director or senior officer under or as a result of the contract or transaction only if and to the extent provided in the Business Corporations Act.

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16.2                     Restrictions on Voting by Reason of Interest. A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter is not entitled to vote on any directors’ resolution to approve that contract or transaction, unless all the directors have a disclosable interest in that contract or transaction, in which case any or all of those directors may vote on such resolution.

16.3                      Interested Director Counted in Quorum. A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter and who is present at the meeting of directors at which the contract or transaction is considered for approval may be counted in the quorum at the meeting whether or not the director votes on any or all of the resolutions considered at the meeting.

16.4                     Disclosure of Conflict of Interest or Property. A director or senior officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual’s duty or interest as a director or senior officer, must disclose the nature and extent of the conflict as required by the Business Corporations Act.

16.5                     Director Holding Other Office in the Company. A director may hold any office or place of profit with the Company, other than the office of auditor of the Company, in addition to his or her office of director for the period and on the terms (as to remuneration or otherwise) that the directors may determine.

16.6                      No Disqualification. No director or intended director is disqualified by his or her office from contracting with the Company either with regard to the holding of any office or place of profit the director holds with the Company or as vendor, purchaser or otherwise, and no contract or transaction entered into by or on behalf of the Company in which a director is in any way interested is liable to be voided for that reason.

16.7                      Professional Services by Director or Officer. Subject to the Business Corporations Act, a director or officer, or any person in which a director or officer has an interest, may act in a professional capacity for the Company, except as auditor of the Company, and the director or officer or such person is entitled to remuneration for professional services as if that director or officer were not a director or officer.

16.8                      Director or Officer in Other Corporations. A director or officer may be or become a director, officer or employee of, or otherwise interested in, any person in which the Company may be interested as a shareholder or otherwise, and, subject to the Business Corporations Act, the director or officer is not accountable to the Company for any remuneration or other benefits received by him or her as director, officer or employee of, or from his or her interest in, such other person.

Article 17
PROCEEDINGS OF DIRECTORS

17.1                      Meetings of Directors. The directors may meet together for the conduct of business, adjourn and otherwise regulate their meetings as they think fit, and meetings of the directors held at regular intervals may be held at the place, at the time and on the notice, if any, as the directors may from time to time determine.

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17.2                      Voting at Meetings. Questions arising at any meeting of directors are to be decided by a majority of votes and, in the case of an equality of votes, the chair of the meeting does not have a second or casting vote.

17.3                      Chair of Meetings. The following individual is entitled to preside as chair at a meeting of directors:

(a) the chair of the board, if any;

(b) in the absence of the chair of the board, the president, if any, if the president is a director; or

(c) any other director chosen by the directors if:

(i) neither the chair of the board nor the president, if a director, is present at the meeting within 15 minutes after the time set for holding the meeting;

(ii) neither the chair of the board nor the president, if a director, is willing to chair the meeting; or

(iii) the chair of the board and the president, if a director, have advised the secretary, if any, or any other director, that they will not be present at the meeting.

17.4                      Meetings by Telephone or Other Communications Medium. A director may participate in a meeting of the directors or of any committee of the directors in person or by telephone if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other. A director may participate in a meeting of the directors or of any committee of the directors by a communications medium other than telephone if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other and if all directors who wish to participate in the meeting agree to such participation. A director who participates in a meeting in a manner contemplated by this Article 17.4 is deemed for all purposes of the Business Corporations Act and these Articles to be present at the meeting and to have agreed to participate in that manner.

17.5                      Calling of Meetings. A director may, and the secretary or an assistant secretary of the Company, if any, on the request of a director must, call a meeting of the directors at any time.

17.6                      Notice of Meetings. Other than for meetings held at regular intervals as determined by the directors pursuant to Article 17.1, reasonable notice of each meeting of the directors, specifying the place, day and time of that meeting must be given to each of the directors by any method set out in Article 23.1 or orally or by telephone.

17.7                     When Notice Not Required. It is not necessary to give notice of a meeting of the directors to a director if:

(a) the meeting is to be held immediately following a meeting of shareholders at which that director was elected or appointed, or is the meeting of the directors at which that director is appointed; or

(b) the director has waived notice of the meeting.

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17.8                      Meeting Valid Despite Failure to Give Notice. The accidental omission to give notice of any meeting of directors to, or the non-receipt of any notice by, any director does not invalidate any proceedings at that meeting.

17.9                      Waiver of Notice of Meetings. Any director may send to the Company a document signed by him or her waiving notice of any past, present or future meeting or meetings of the directors and may at any time withdraw that waiver with respect to meetings held after that withdrawal. After sending a waiver with respect to all future meetings and until that waiver is withdrawn, no notice of any meeting of the directors need be given to such director and all meetings of the directors so held are deemed not to be improperly called or constituted by reason of notice not having been given to such director.

17.10                   Quorum.The quorum necessary for the transaction of the business of the directors is deemed to be set at a majority of directors or, if the number of directors is set at one, is deemed to be set at one director, and that director may constitute a meeting.

17.11                   Validity of Acts Where Appointment Defective. Subject to the Business Corporations Act, an act of a director or officer is not invalid merely because of an irregularity in the election or appointment or a defect in the qualification of that director or officer.

17.12                   Consent Resolutions in Writing. A resolution of the directors or of any committee of the directors consented to in writing by all of the directors entitled to vote on it, whether by signed document, fax, email or any other method of transmitting legibly recorded messages, is as valid and effective as if it had been passed at a meeting of the directors or of the committee of the directors duly called and held. Such resolution may be in two or more counterparts which together are deemed to constitute one resolution in writing. A resolution passed in that manner is effective on the date stated in the resolution or on the latest date stated on any counterpart. A resolution of the directors or of any committee of the directors passed in accordance with this Article 17.12 is deemed to be a proceeding at a meeting of directors or of the committee of the directors and to be as valid and effective as if it had been passed at a meeting of the directors or of the committee of the directors that satisfies all the requirements of the Business Corporations Act and all the requirements of these Articles relating to meetings of the directors or of a committee of the directors.

Article 18
EXECUTIVE AND OTHER COMMITTEES

18.1                      Appointment and Powers of Executive Committee. The directors may, by resolution, appoint an executive committee consisting of the director or directors that they consider appropriate, and this committee has, during the intervals between meetings of the board of directors, all of the directors’ powers, except:

(a) the power to fill vacancies in the board of directors;

(b) the power to remove a director;

(c) the power to change the membership of, or fill vacancies in, any committee of the directors; and

(d) such other powers, if any, as may be set out in the resolution or any subsequent directors’ resolution.

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18.2                      Appointment and Powers of Other Committees. The directors may, by resolution:

(a) appoint one or more committees (other than the executive committee) consisting of the director or directors that they consider appropriate;

(b) delegate to a committee appointed under paragraph (a) any of the directors’ powers, except:

(i) the power to fill vacancies in the board of directors;

(ii) the power to remove a director;

(iii) the power to change the membership of, or fill vacancies in, any committee of the directors; and

(iv) the power to appoint or remove officers appointed by the directors; and

(c) make any delegation referred to in paragraph (b) subject to the conditions set out in the resolution or any subsequent directors’ resolution.

18.3                      Obligations of Committees. Any committee appointed under Articles 18.1 or 18.2, in the exercise of the powers delegated to it, must:

(a) conform to any rules that may from time to time be imposed on it by the directors; and

(b) report every act or thing done in exercise of those powers at such times as the directors may require.

18.4                      Powers of Board. The directors may, at any time, with respect to a committee appointed under Articles 18.1 or 18.2:

(a) revoke or alter the authority given to the committee, or override a decision made by the committee, except as to acts done before such revocation, alteration or overriding;

(b) terminate the appointment of, or change the membership of, the committee; and

(c) fill vacancies in the committee.

18.5                     Committee Meetings. Subject to Article 18.3(a) and unless the directors otherwise provide in the resolution appointing the committee or in any subsequent resolution, with respect to a committee appointed under Articles 18.1 or 18.2:

(a) the committee may meet and adjourn as it thinks proper;

(b) the committee may elect a chair of its meetings but, if no chair of a meeting is elected, or if at a meeting the chair of the meeting is not present within 15 minutes after the time set for holding the meeting, the directors present who are members of the committee may choose one of their number to chair the meeting;

(c) a majority of the members of the committee constitutes a quorum of the committee; and

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(d) questions arising at any meeting of the committee are determined by a majority of votes of the members present, and in case of an equality of votes, the chair of the meeting does not have a second or casting vote.

Article 19
OFFICERS

19.                        Directors May Appoint Officers. The directors may, from time to time, appoint such officers, if any, as the directors determine and the directors may, at any time, terminate any such appointment.

19.2                      Functions, Duties and Powers of Officers. The directors may, for each officer:

(a) determine the functions and duties of the officer;

(b) entrust to and confer on the officer any of the powers exercisable by the directors on such terms and conditions and with such restrictions as the directors think fit; and

(c) revoke, withdraw, alter or vary all or any of the functions, duties and powers of the officer.

19.3                      Qualifications. No officer may be appointed unless that officer is qualified in accordance with the Business Corporations Act. One person may hold more than one position as an officer of the Company. Any person appointed as the chair of the board or as the managing director must be a director. Any other officer need not be a director.

19.4                      Remuneration and Terms of Appointment. All appointments of officers are to be made on the terms and conditions and at the remuneration (whether by way of salary, fee, commission, participation in profits or otherwise) that the directors thinks fit and are subject to termination at the pleasure of the directors, and an officer may in addition to such remuneration be entitled to receive, after he or she ceases to hold such office or leaves the employment of the Company, a pension or gratuity.

Article 20
INDEMNIFICATION

20.1                      Definitions. In this Article 20:

(a) “eligible penalty” means a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding;

(b) “eligible proceeding” means a legal proceeding or investigative action, whether current, threatened, pending or completed, in which a director or former director of the Company (an “eligible party”) or any of the heirs and legal personal representatives of the eligible party, by reason of the eligible party being or having been a director of the Company:

(i) is or may be joined as a party; or

(ii) is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding;

(c) “expenses” has the meaning set out in the Business Corporations Act.

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20.2                     Mandatory Indemnification of Directors and Former Directors. Subject to the Business Corporations Act, the Company must indemnify a director or former director of the Company and his or her heirs and legal personal representatives against all eligible penalties to which such person is or may be liable, and the Company must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by such person in respect of that proceeding. Each director is deemed to have contracted with the Company on the terms of the indemnity contained in this Article 20.2.

20.3                      Indemnification of Other Persons. Subject to any restrictions in the Business Corporations Act, the Company may indemnify any person.

20.4                      Non-Compliance with Business Corporations Act. The failure of a director or officer of the Company to comply with the Business Corporations Act or these Articles does not invalidate any indemnity to which he or she is entitled under this Article 20.

20.5                      Company May Purchase Insurance. The Company may purchase and maintain insurance for the benefit of any person (or his or her heirs or legal personal representatives) who:

(a) is or was a director, officer, employee or agent of the Company;

(b) is or was a director, officer, employee or agent of a corporation at a time when the corporation is or was an affiliate of the Company;

(c) at the request of the Company, is or was a director, officer, employee or agent of a corporation or of a partnership, trust, joint venture or other unincorporated entity;

(d) at the request of the Company, holds or held a position equivalent to that of a director or officer of a partnership, trust, joint venture or other unincorporated entity;

against any liability incurred by him or her as such director, officer, employee or agent or person who holds or held such equivalent position.

Article 21
DIVIDENDS

21.1                      Payment of Dividends Subject to Special Rights. The provisions of this Article 21 are subject to the rights, if any, of shareholders holding shares with special rights as to dividends.

21.2                      Declaration of Dividends. Subject to the Business Corporations Act and the rights of the holders of issued shares of the Company, the directors may from time to time declare and authorize payment of such dividends as they may deem advisable.

21.3                      No Notice Required. The directors need not give notice to any shareholder of any declaration under Article 21.2.

21.4                      Record Date. The directors may set a date as the record date for the purpose of determining shareholders entitled to receive payment of a dividend. The record date must not precede the date on which the dividend is to be paid by more than two months. If no record date is set, the record date is 5 p.m. on the date on which the directors pass the resolution declaring the dividend.

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21.5                     Manner of Paying Dividend. A resolution declaring a dividend may direct payment of the dividend wholly or partly by the distribution of specific assets or of fully paid shares or of bonds, debentures or other securities of the Company, or in any one or more of those ways.

21.6                     Settlement of Difficulties. If any difficulty arises in regard to a distribution under Article 21.5, the directors may settle the difficulty as they deem advisable, and, in particular, may:

(a) set the value for distribution of specific assets;

(b) determine that cash payments in substitution for all or any part of the specific assets to which any shareholders are entitled may be made to any shareholders on the basis of the value so fixed in order to adjust the rights of all parties; and

(c) vest any such specific assets in trustees for the persons entitled to the dividend.

21.7                      When Dividend Payable. Any dividend may be made payable on such date as is fixed by the directors.

21.8                      Dividends to be Paid in Accordance with Number of Shares. All dividends on shares of any class or series of shares must be declared and paid according to the number of such shares held.

21.9                      Receipt by Joint Shareholders. If several persons are joint shareholders of any share, any one of them may give an effective receipt for any dividend, bonus or other money payable in respect of the share.

21.10                    Dividend Bears No Interest. No dividend bears interest against the Company.

21.11                    Fractional Dividends. If a dividend to which a shareholder is entitled includes a fraction of the smallest monetary unit of the currency of the dividend, that fraction may be disregarded in making payment of the dividend and that payment represents full payment of the dividend.

21.12                   Payment of Dividends. Any dividend or other distribution payable in cash in respect of shares may be paid by cheque, made payable to the order of the person to whom it is sent, and mailed to the address of the shareholder, or in the case of joint shareholders, to the address of the joint shareholder who is first named on the central securities register, or to the person and to the address the shareholder or joint shareholders may direct in writing. The mailing of such cheque will, to the extent of the sum represented by the cheque (plus the amount of the tax required by law to be deducted), discharge all liability for the dividend unless such cheque is not paid on presentation or the amount of tax so deducted is not paid to the appropriate taxing authority.

21.13                   Capitalization of Surplus. Notwithstanding anything contained in these Articles, the directors may from time to time capitalize any surplus of the Company and may from time to time issue, as fully paid, shares or any bonds, debentures or other securities of the Company as a dividend representing the surplus or any part of the surplus.

Article 22
DOCUMENTS, RECORDS AND REPORTS

22.1                      Recording of Financial Affairs. The directors must cause adequate accounting records to be kept to record properly the financial affairs and condition of the Company and to comply with the Business Corporations Act.

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22.2                        Inspection of Accounting Records. Unless the directors determine otherwise, or unless otherwise determined by ordinary resolution, no shareholder of the Company is entitled to inspect or obtain a copy of any accounting records of the Company.

Article 23
NOTICES

23.1                        Method of Giving Notice. Unless the Business Corporations Act or these Articles provides otherwise, a notice, statement, report or other record required or permitted by the Business Corporations Act or these Articles to be sent by or to a person may be sent by any one of the following methods:

(a) mail addressed to the person at the applicable address for that person as follows:

(i) for a record mailed to a shareholder, the shareholder’s registered address;

(ii) for a record mailed to a director or officer, the prescribed address for mailing shown for the director or officer in the records kept by the Company or the mailing address provided by the recipient for the sending of that record or records of that class;

(iii) in any other case, the mailing address of the intended recipient;

(b) delivery at the applicable address for that person as follows, addressed to the person:

(i) for a record delivered to a shareholder, the shareholder’s registered address;

(ii) for a record delivered to a director or officer, the prescribed address for delivery shown for the director or officer in the records kept by the Company or the delivery address provided by the recipient for the sending of that record or records of that class;

(iii) in any other case, the delivery address of the intended recipient;

(c) sending the record by fax to the fax number provided by the intended recipient for the sending of that record or records of that class;

(d) sending the record by email to the email address provided by the intended recipient for the sending of that record or records of that class;

(e) physical delivery to the intended recipient;

(f) as otherwise permitted by any securities legislation (together with all regulations and rules made and promulgated thereunder and all administrative policy statements, blanket orders, and rulings, notices, and other administrative directions issued by securities commissions or similar authorities appointed thereunder) in any province or territory of Canada or in the federal jurisdiction of the United States or in any state of the United States that is applicable to the Company.

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23.2                        Deemed Receipt of Mailing. A record that is mailed to a person by ordinary mail to the applicable address for that person referred to in Article 23.1 is deemed to be received by the person to whom it was mailed on the day, Saturdays, Sundays and holidays excepted, following the date of mailing.

23.3                        Certificate of Sending. A certificate signed by the secretary, if any, or other officer of the Company or of any other corporation acting in that behalf for the Company stating that a notice, statement, report or other record was addressed as required by Article 23.1, prepaid and mailed or otherwise sent as permitted by Article 23.1 is conclusive evidence of that fact.

23.4                        Notice to Joint Shareholders. A notice, statement, report or other record may be provided by the Company to the joint shareholders of a share by providing the notice to the joint shareholder first named in the central securities register in respect of the share.

23.5                        Notice to Trustees. A notice, statement, report or other record may be provided by the Company to the persons entitled to a share in consequence of the death, bankruptcy or incapacity of a shareholder by:

(a) mailing the record, addressed to them:

(i) by name, by the title of the legal personal representative of the deceased or incapacitated shareholder, by the title of trustee of the bankrupt shareholder or by any similar description; and

(ii) at the address, if any, supplied to the Company for that purpose by the persons claiming to be so entitled; or

(b) if an address referred to in paragraph (a)(ii) has not been supplied to the Company, by giving the notice in a manner in which it might have been given if the death, bankruptcy or incapacity had not occurred.

Article 24
SEAL AND EXECUTION OF DOCUMENTS

24.1                        Who May Attest Seal. Except as provided in Articles 24.2 and 24.3, the Company’s seal, if any, must not be impressed on any record except when that impression is attested by the signatures of:

(a) any two directors;

(b) any officer, together with any director;

(c) if the Company only has one director, that director; or

(d) any one or more directors or officers or persons as may be determined by the directors.

24.2                        Sealing Copies. For the purpose of certifying under seal a certificate of incumbency of the directors or officers of the Company or a true copy of any resolution or other document, despite Article 24.1, the impression of the seal may be attested by the signature of any director or officer.

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24.3                        Mechanical Reproduction of Seal. The directors may authorize the seal to be impressed by third parties on share certificates or bonds, debentures or other securities of the Company as they may determine appropriate from time to time. To enable the seal to be impressed on any share certificates or bonds, debentures or other securities of the Company, whether in definitive or interim form, on which facsimiles of any of the signatures of the directors or officers of the Company are, in accordance with the Business Corporations Act or these Articles, printed or otherwise mechanically reproduced, there may be delivered to the person employed to engrave, lithograph or print such definitive or interim share certificates or bonds, debentures or other securities one or more unmounted dies reproducing the seal and the chair of the board or any senior officer together with the secretary, treasurer, secretary-treasurer, an assistant secretary, an assistant treasurer or an assistant secretary-treasurer may in writing authorize such person to cause the seal to be impressed on such definitive or interim share certificates or bonds, debentures or other securities by the use of such dies. Share certificates or bonds, debentures or other securities to which the seal has been so impressed are for all purposes deemed to be under and to bear the seal impressed on them.

24.4                        Execution of Documents Generally. The Directors may from time to time by resolution appoint any one or more persons, officers or Directors for the purpose of executing any instrument, document or agreement in the name of and on behalf of the Company for which the seal need not be affixed, and if no such person, officer or Director is appointed, then any one officer or Director of the Company may execute such instrument, document or agreement.

Article 25
PROHIBITIONS

25.1                        Definitions. In this Article 25:

(a) “designated security” means:

(i) a voting security of the Company;

(ii) a security of the Company that is not a debt security and that carries a residual right to participate in the earnings of the Company or, on the liquidation or winding up of the Company, in its assets; or

(iii) a security of the Company convertible, directly or indirectly, into a security described in paragraph (i) or (ii);

(b) “security” has the meaning assigned in the Securities Act (British Columbia);

(c) “voting security” means a security of the Company that:

(i) is not a debt security, and

(ii) carries a voting right either under all circumstances or under some circumstances that have occurred and are continuing.

25.2                        Application. Article 25.3 does not apply to the Company if and for so long as it is a public company or a pre-existing reporting company which has the Statutory Reporting Company Provisions as part of its Articles or to which the Statutory Reporting Company Provisions apply.

25.3                        Consent Required for Transfer of Shares or Designated Securities. No share or designated security may be sold, transferred or otherwise disposed of without the consent of the directors and the directors are not required to give any reason for refusing to consent to any such sale, transfer or other disposition.

34

DATED: [●], 2020.

“David Strang”

DAVID STRANG (Incorporator)

“Noel Dunn”

NOEL DUNN (Incorporator)

APPENDIX “D”

ERO COPPER CORP.

BOARD OF DIRECTORS MANDATE

(See attached)

35

ERO COPPER CORP.
BOARD OF DIRECTORS MANDATE

1.            Purpose

The members of the Board of Directors (the “Board”) have the duty to supervise the management of the business and affairs of Ero Copper Corp. (“Ero” or the “Company”). The Board, directly and through its committees and the chair of the Board (the “Chair”), shall provide direction to senior management, generally through the Chief Executive Officer, to pursue the best interests of the Company.

2.            Duties and Responsibilities

The Board shall have the specific duties and responsibilities outlined below.

Strategic Planning

(a)           Strategic Plans

The Board will adopt a strategic plan for the Company. At least annually, the Board shall review and, if advisable, approve the Company’s strategic planning process and the Company’s annual strategic plan. In discharging this responsibility, the Board shall review the plan in light of management’s assessment of emerging trends, the competitive environment, the opportunities for the business of the Company, risk issues, and significant business practices and products.

(b)           Business and Capital Plans

At least annually, the Board shall review and, if advisable, approve the Company’s annual business and capital plans as well as policies and processes generated by management relating to the authorization of major investments and significant allocation of capital.

(c)           Monitoring

At least annually, the Board shall review management’s implementation of the Company’s strategic, business and capital plans. The Board shall review and, if advisable, approve any material amendments to, or variances from, these plans.

Risk Management

(a)           General

At least annually, the Board shall review reports provided by management of principal risks associated with the Company’s business and operations, review the implementation by management of appropriate systems to manage these risks, and review reports by management relating to the operation of, and any material deficiencies in, these systems.

(b)           Verification of Controls

The Board shall verify that internal, financial, non-financial and business control and management information systems have been established by management.

1

Human Resource Management

(a)            General

At least annually, the Board shall review a report of the Compensation Committee concerning the Company’s approach to human resource management and executive compensation.

(b)            Succession Review

At least annually, the Board shall review the succession plans of the Company for the Chair, the Lead Director, the Chief Executive Officer and other executive officers, including the appointment, training and monitoring of such persons.

(c)            Integrity of Senior Management

The Board shall, to the extent feasible, satisfy itself as to the integrity of the Chief Executive Officer and other executive officers of the Company and that the Chief Executive Officer and other senior officers strive to create a culture of integrity throughout the Company.

Corporate Governance

(a)            General

At least annually, the Board shall review a report of the Nominating and Corporate Governance Committee concerning the Company’s approach to corporate governance.

(b)            Director Independence

At least annually, the Board shall review a report of the Nominating and Corporate Governance Committee that evaluates the director independence standards established by the Board and the Board’s ability to act independently from management in fulfilling its duties.

(c)            Ethics Reporting

The Board has adopted a written Code of Business Conduct and Ethics (the “Code”) applicable to directors, officers and employees of the Company. At least annually, the Board shall review the report of the Nominating and Corporate Governance Committee relating to compliance with, or material deficiencies from, the Code and approve changes it considers appropriate. The Board shall review reports from the Nominating and Corporate Governance Committee concerning investigations and any resolutions of complaints received under the Code.

(d)            Board of Directors Mandate Review

At least annually, the Board shall review and assess the adequacy of its Mandate to ensure compliance with any rules of regulations promulgated by any regulatory body and approve any modifications to this Mandate as considered advisable.

1

Communications

(a)            General

The Board has adopted a Disclosure Policy for the Company. At least annually, the Board, in conjunction with the Chief Executive Officer, shall review the Company’s overall Disclosure Policy, including measures for receiving feedback from the Company’s stakeholders, and management’s compliance with such policy. The Board shall, if advisable, approve material changes to the Company’s Disclosure Policy.

(b)            Shareholders

The Company endeavors to keep its shareholders informed of its progress through an annual report, annual information form, quarterly interim reports and periodic press releases. Directors and management meet with the Company’s shareholders at the annual meeting and are available to respond to questions at that time.

3.            Composition

General

The composition and organization of the Board, including: the number, qualifications and remuneration of directors; the number of Board meetings; any Canadian residency requirements; quorum requirements; meeting procedures and notices of meetings are required by the Business Corporations Act (British Columbia), the Securities Act (British Columbia) and the notice of articles and articles of the Company, subject to any exemptions or relief that may be granted from such requirements.

Each director must have an understanding of the Company’s principal operational and financial objectives, plans and strategies, and financial position and performance. Directors must have sufficient time to carry out their duties and not assume responsibilities that would materially interfere with, or be incompatible with, Board membership. Directors who experience a significant change in their personal circumstances, including a change in their principal occupation, are expected to advise the chair of the Nominating and Corporate Governance Committee.

Independence

A majority of the Board must be independent, subject to any exemptions or relief that may be granted from such requirement. “Independent” shall have the meaning, as the context requires, given to it in National Policy 58-201 Corporate Governance Guidelines, as may be amended from time to time.

Chair of the Board

The Chair of the Board shall be an independent director, unless the Board determines that it is inappropriate to require the Chair to be independent. If the Board determines that it would be inappropriate to require the Chair of the Board to be independent, then the independent directors shall, from the time that the Company obtains a listing of its securities on a public market or stock exchange, select from among their number a director who will act as “Lead Director” and who will assume responsibility for providing leadership to enhance the effectiveness and independence of the Board. The Chair, if independent, or the Lead Director if the Chair is not independent, shall act as the effective leader of the Board and ensure that the Board’s agenda will enable it to successfully carry out its duties.

1

4.            Committees of the Board

The Board has established the following committees: the Compensation Committee, the Audit Committee, and the Nominating and Corporate Governance Committee. Subject to applicable law, the Board may establish other Board committees or merge or dispose of any Board committee.

Committee Mandates

The Board has approved mandates for each Board committee and shall approve mandates for each new Board committee. At least annually, each mandate shall be reviewed by the Nominating and Corporate Governance Committee and any suggested amendments brought to the Board for consideration and approval.

Delegation to Committees

The Board has delegated to the applicable committee those duties and responsibilities set out in each Board committee’s mandate.

Consideration of Committee Recommendations

As required by applicable law, by applicable committee Mandate or as the Board may consider advisable, the Board shall consider for approval the specific matters delegated for review to Board committees.

Board/Committee Communication

To facilitate communication between the Board and each Board committee, each committee chair shall provide a report to the Board on material matters considered by the committee at the first Board meeting after the committee’s meeting.

5.            Meetings

The Board will meet at least once in each quarter, with additional meeting held as deemed advisable. The Chair is primarily responsible for the agenda and for supervising the conduct of the meeting. Any director may propose the inclusion of items on the agenda, request the presence of, or a report by any member of senior management, or at any Board meeting raise subjects that are not on the agenda for that meeting.

Meetings of the Board shall be conducted in accordance with the Company’s articles.

Secretary and Minutes

The Corporate Secretary, his or her designate or any other person the Board requests shall act as secretary of Board meetings. Minutes of Board meetings shall be recorded and maintained by the Corporate Secretary and subsequently presented to the Board for approval.

Meetings Without Management

The independent members of the Board shall hold regularly scheduled meetings, or portions of regularly scheduled meetings, at which non-independent directors and members of management are not present.

1

Directors’ Responsibilities

Each director is expected to attend all meetings of the Board and any committee of which he or she is a member. Directors will be expected to have read and considered the materials sent to them in advance of each meeting and to actively participate in the meetings.

Access to Management and Outside Advisors

The Board shall have unrestricted access to management and employees of the Company. The Board shall have the authority to retain and terminate external legal counsel, consultants or other advisors to assist it in fulfilling its responsibilities and to set and pay the respective reasonable compensation of these advisors without consulting or obtaining the approval of any officer of the Company. The Company shall provide appropriate funding, as determined by the Board, for the services of these advisors.

Service on Other Boards and Audit Committee

Directors may serve on the boards of other public companies so long as these commitments do not materially interfere and are compatible with their ability to fulfill their duties as a member of the Board. Directors must advise the Chair in advance of accepting an invitation to serve on the board of another public company.

6.            Management

Position Descriptions for Directors

The Board has approved position descriptions for the Chair, the Lead Director and the chair of each Board committee. At least annually, the Board shall review such position descriptions.

Position Description for CEO

The Board has approved a position description for the Chief Executive Officer, which includes delineating management’s responsibilities. The Board has also approved the corporate goals and objectives that the Chief Executive Officer has responsibility for meeting. At least annually, the Board shall review a report of the Compensation Committee reviewing this position description and such corporate goals and objectives.

7.            Director development and evaluation

Each new director shall participate in the Company’s initial orientation program and each director shall participate in the Company’s continuing director development programs. At least annually, the Board shall review the Company’s initial orientation program and continuing director development programs.

8.            No Rights Created

This Mandate is a statement of broad policies and is intended as a component of the flexible governance framework within which the Board, assisted by its committees, directs the affairs of the Company. While it should be interpreted in the context of all applicable laws, regulations and listing requirements, as well as in the context of the Company’s Notice of Articles and Articles, it is not intended to establish any legally binding obligations.

Adopted: May 15, 2017

1

EX-99.22

Exhibit 99.22

 

REPORT ON VOTING RESULTS

In accordance with section 11.3 of National Instrument 51-102 – Continuous Disclosure Obligations, the following sets out the voting results on the items of business submitted at the Annual General and Special Meeting of Shareholders (the “Meeting”) of Ero Copper Corp. (“Ero” or the “Corporation”) held on May 7, 2020 in the Corporation’s head office located in Vancouver, British Columbia and by live teleconference. Each item of business voted upon at the Meeting is described in detail in the Management Information Circular dated March 12, 2020 (the “Circular”), which is available on the Corporation’s website (www.erocopper.com) and on SEDAR (www.sedar.com).

Common Shares represented at the Meeting:	76,357,768
Total issued and outstanding Common Shares as at March 10, 2020 (Record Date):	85,756,978
Percentage of issued and outstanding Common Shares represented:	89.04	%

1. Set the Number of Directors at Nine

The setting of the number of directors at nine was approved, and the outcome of the valid proxies received was as follows:

Number of Common Shares Voted				Percentage of Votes Cast
For		Against		For			Against
	75,117,161		619,273		99.18	%		0.82	%

2. Election of Directors

Each of the nine nominees in the Circular were re-elected as directors of the Corporation for the ensuing year, and the outcome of the valid proxies received was as follows:

	Number of Common Shares Voted				Percentage of Votes Cast
Director Nominee	For		Withheld			For			Withheld
Christopher Noel Dunn		75,143,611		592,823			99.22	%		0.78	%
David Strang		75,735,629		805			100.00	%		0.00	%
Lyle Braaten		72,926,657		2,809,777			96.29	%		3.71	%
Steven Busby		75,246,220		490,214			99.35	%		0.65	%
Dr. Sally Eyre		75,141,497		594,937			99.21	%		0.79	%
Robert Getz		74,417,015		1,319,419			98.26	%		1.74	%
Chantal Gosselin		75,711,632		24,802			99.97	%		0.03	%
John Wright		75,373,813		362,621			99.52	%		0.48	%
Matthew Wubs		74,926,225		810,209			98.93	%		1.07	%

Ero Copper Corp

625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

3. Appointment of Auditor

KPMG LLP, Chartered Professional Accountants, was re-appointed as the auditor of the Corporation for the ensuing year, and the directors of the Corporation were authorized to fix the remuneration to be paid to the auditor, and the outcome of the valid proxies received was as follows:

Number of Common Shares Voted				Percentage of Votes Cast
For		Withheld		For			Withheld
	75,740,505		617,261		99.19	%		0.81	%

4. Incentive Option Grants under the Stock Option Plan to New Directors

The granting of 8,086 incentive stock options on August 15, 2019 to each of Dr. Sally Eyre and Chantal Gosselin, upon appointment to the Board of Directors of the Corporation, was ratified, authorized and approved, and the outcome of the valid proxies received was as follows:

Number of Common Shares Voted				Percentage of Votes Cast
For		Against		For			Against
	74,294,664		1,441,770		98.10	%		1.90	%

5. Certain Matters Relating to the Stock Option Plan

The Corporation’s Stock Option Plan, including amendments thereto, and the unallocated options issuable thereunder was authorized and approved, and the outcome of the valid proxies received was as follows:

Number of Common Shares Voted				Percentage of Votes Cast
For		Against		For			Against
	74,079,017		1,657,417		97.81	%		2.19	%

6. Certain Matters Relating to the Share Unit Plan

The Corporation’s Share Unit Plan, including amendments thereto, and the unallocated units issuable thereunder was authorized and approved, and the outcome of the valid proxies received was as follows:

Number of Common Shares Voted				Percentage of Votes Cast
For		Against		For			Against
	74,270,259		1,466,175		98.06	%		1.94	%

7. Amendments to the Articles of the Corporation

The amendments to the Articles of the Corporation to (i) increase the quorum requirement for the Corporation’s shareholder meetings to two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 25% of the issued shares entitled to be voted at the meeting; and (ii) increase the quorum requirement for the transaction of the business of the directors to be set at a majority of the directors were authorized and approved, and the outcome of the valid proxies received was as follows:

Number of Common Shares Voted				Percentage of Votes Cast
For		Against		For			Against
	75,117,132		619,302		99.18	%		0.82	%

2

8. Advisory Vote on Executive Compensation

The non-binding advisory “say on pay” resolution accepting the Corporation’s approach to executive compensation as described in the Circular was approved, and the outcome of the valid proxies received was as follows:

Number of Common Shares Voted				Percentage of Votes Cast
For		Against		For			Against
	70,844,985		4,891,449		93.54	%		6.46	%

Dated this 8th day of May, 2020.
	ERO COPPER CORP.
	“Deepk Hundal”
	Deepk Hundal
	VP, General Counsel and Corporate Secretary

3

EX-99.23

Exhibit 99.23

FORM 51-102F3

Material Change Report

Item 1. Name and Address of Issuer

Ero Copper Corp. (“Ero” or the “Company”)

1050 – 625 Howe Street
Vancouver, BC V6C 2T6

Item 2. Date of Material Change

November 24, 2020.

Item 3. News Release

A news release dated November 24, 2020, announcing the material change referred to in this report, was disseminated through GlobeNewswire and filed on SEDAR (www.sedar.com) on November 24, 2020.

Item 4. Summary of Material Change

Ero announced its 2020 updated National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) compliant mineral reserve and resource estimate along with updated life of mine (“LOM”) production, capital and operating cost projections for its 97.6% owned NX Gold Mine, located in Mato Grosso State, Brazil.

Item 5. Full Description of Material Change

5.1 Full Description of Material Change

The Company is pleased to announce its 2020 updated National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) compliant mineral reserve and resource estimate along with updated life of mine (“LOM”) production, capital and operating cost projections for its 97.6% owned NX Gold Mine, located in Mato Grosso State, Brazil. The update incorporates the results of ongoing exploration efforts undertaken on the Santo Antonio Vein which was discovered in early 2019 and brought into operation in Q4 of 2019 by the Company. Highlights of the update include:

· A 55% increase in contained gold within the Indicated mineral resource category, inclusive of mineral reserves, as compared to the Indicated mineral resources set out in the 2019 Technical Report (as defined below), totalling 770,231 tonnes grading 10.90 grams per tonne containing 269,936 ounces of gold;

· A 78% increase in contained gold within the Probable mineral reserve category, as compared to the Probable mineral reserves set out in the 2019 Technical Report, totalling 862,134 tonnes grading 8.83 grams per tonne containing 244,650 ounces of gold;

· A 37% increase in contained gold, at a 13% increase in grade, within the Inferred mineral resource category as compared to the Inferred mineral resources set out in the 2019 Technical Report, providing a roadmap for ongoing exploration programs to further extend the mine’s life, with potential for higher grades, through conversion of this material in the future. The 2020 Inferred mineral resource totals 573,772 tonnes grading 10.55 grams per tonne containing approximately 194,556 ounces of gold; and,

· An updated LOM plan derived from the updated mineral reserve estimate, outlining a six-year mine life, producing a total of approximately 227,000 ounces of gold, at an average annual production rate of approximately 36,000 ounces of gold (approximately 41,400 over the first four years) at LOM average C1 cash costs* of US$505 per ounce of gold produced and LOM average all-in sustaining costs (“AISC”)* of US$720 per ounce.

Commenting on the NX Gold update, David Strang, President & CEO stated, “The positive results and significant extension of mine life at our NX Gold operations as outlined in our 2020 LOM update reflect the culmination of a multi-year commitment to organically grow our NX Gold operations. This effort began in mid-2018 with the first real exploration program conducted at the property since 2012. In a very short period of time, NX Gold has grown from a mine with no reserves in front of it (as outlined in our 2018 Technical Report) to a low-cost, highly profitable six-year operation featuring an actionable road-map to further grow production and extend mine-life through conversion of our newly defined high-grade Inferred mineral resource.

Our strong belief in the long-term future of NX Gold is best supported by our most recent quarterly exploration results that highlighted the best drill holes drilled to date, all located at the down-plunge limit of known mineralization within the Santo Antonio vein, a strong leading indicator of additional potential to depth. We believe that with continued exploration success, NX Gold has the ability to not only sustain production at these levels well into the future, but ultimately significantly increase production volumes from the mine, thereby utilizing more of the plant’s excess capacity. As outlined in our recently revised guidance for 2020, during the fourth quarter and into next year, we are fully committed to this growth effort as evidenced through the installation of a modular paste-fill plant and additional allocation to exploration at the mine. We expect to ramp up drilling efforts to encompass eight drill rigs by year-end operating on both near-mine and regional programs throughout the extensive land package controlled by NX Gold.

The emergence of NX Gold over these past few years is a real credit to our operating and exploration teams at the mine and the shared vision throughout our organization of what the NX Gold operations can be. For the first time in our Company’s history, we feel we have a LOM plan that is beginning to showcase NX Gold’s potential.

*C1 cash costs per ounce of gold produced and AISC are non-IFRS measures, as more particularly discussed under the “Technical and Scientific Information” section of this press release.

The updated NX Gold mineral reserve and resource estimate is shown in the following table:

Classification	Tonnage (000 tonnes)		Grade (gpt Au)		Au Contained (000 ounces)
Probable Mineral Reserve
Santo Antonio Vein		862.1		8.83		244.7
Brás Vein		-		-		-
Buracão Vein		-		-		-
Total Probable Reserve		862.1		8.83		244.7
Indicated Mineral Resource (inclusive of Reserves)
Santo Antonio Vein		763.3		10.97		269.2
Brás Vein		6.9		3.36		0.7
Buracão Vein		-		-		-
Total Indicated Resource		770.2		10.90		269.9
Inferred Mineral Resource
Santo Antonio Vein		267.8		13.08		112.6
Matinha Vein		149.0		12.15		58.2
Brás Vein		149.3		4.81		23.1
Buracão Vein		7.7		2.77		0.7
Total Inferred Resource		573.8		10.55		194.6

Mineral Reserve & Resource Notes:

1. Mineral Resource effective date of August 31, 2020.

2. Mineral Reserve effective date of September 30, 2020.

3. Presented Indicated mineral resources inclusive of mineral reserves. Indicated mineral resource totals are undiluted. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

4. Grade-shell 3D models using 1.20 gram per tonne (“gpt”) gold were used to generate a 3D mineralization model of the NX Gold Mine. Mineral resources were estimated using ordinary kriging within 2.5 meter by 2.5 meter by 0.5 meter block size. Mineral resource were constrained using a minimum stope dimension of 1.25 meters by 1.25 meters by 1.50 meters and a cut-off of 1.90 gpt based on gold price of US$1,900 per ounce of gold and total underground mining and processing costs of US$115.14 per tonne of ore mined and processed. The mineral resource estimates were prepared in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards for Mineral Resources and Mineral Reserves, adopted by the CIM Council on May 10, 2014 (the “CIM Standards”), and the CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines, adopted by CIM Council on November 23, 2003 (the ‘CIM Guidelines”), using geostatistical and/or classical methods, plus economic and mining parameters appropriate to the deposit.

5. Mineral reserve estimates were prepared in accordance with the CIM Standards and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate for the deposit. Mineral reserves are based on a long-term gold price of US$1,650 per ounce (“oz”), and a USD:BRL foreign exchange rate of 5.00. Mineral reserves are the economic portion of the Indicated mineral resources. Mineral reserve estimates include operational dilution of 17.4% plus planned dilution of approximately 8.5% within each stope for room-and-pillar mining areas and operational dilution of 3.2% plus planned dilution of 21.2% for cut-and-fill mining areas. Assumes mining recovery of 92.5% and 94.7% for room-and-pillar and cut-and-fill areas, respectively. Practical mining shapes (wireframes) were designed using geological wireframes / mineral resource block models as a guide.

Mineral resources which are not mineral reserves do not have demonstrated economic viability.

UPDATED LOM PRODUCTION PLAN

The Company’s updated LOM production plan, prepared in conjunction with the updated mineral reserve estimate, outlines a six-year LOM with total production of approximately 226,600 ounces and average annual production of approximately 41,400 ounces of gold over the first four years. In total, approximately 860,000 tonnes of ore are projected to be mined and processed grading an average of approximately 8.80 grams per tonne of gold.

	Q4 2020*			2021			2022			2023			2024			2025			2026
Ore Mined & Processed (000 tonnes)		46.5			167.0			179.4			170.9			139.4			80.6			78.4
Au Grade (gpt)		7.61			7.21			8.34			9.13			9.61			9.87			11.61
Recovery (%)		92.1	%		92.1	%		92.1	%		92.0	%		92.0	%		92.0	%		92.0	%
Gold Production (oz)		10,458			35,647			44,291			46,121			39,631			23,550			26,901
Silver Production (oz)		5,980			20,370			25,309			26,355			22,646			13,457			15,372

(*) 2020 production outlines the mineral reserve schedule for the three months from the effective date of September 30, 2020 to December 31, 2020. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

UPDATED LOM OPERATING & CAPITAL COSTS

The updated production plan has resulted in changes to the forecast operating and capital cost estimates. The tables below show the operating and capital costs for the updated LOM production schedule, and further reconciles C1 Cash Costs and AISC as outlined by the Company.

	Q4 2020[1]			2021			2022			2023			2024			2025			2026
Tonnes Processed (000s)		46.5			167.0			179.4			170.9			139.4			80.6			78.4
Exchange Rate (USD:BRL)		5.00			5.00			5.00			5.00			5.00			5.00			5.00
Gold Price (US$/oz)		1,750			1,750			1,750			1,750			1,750			1,750			1,750
Silver Price (US$/oz)		18.00			18.00			18.00			18.00			18.00			18.00			18.00
Operating Cost Detail (R$ 000s)
Mining Costs (incl. Development)		20,982			88,365			93,448			65,702			60,909			36,084			39,012
Processing Costs		7,618			35,352			36,064			35,308			32,537			19,255			20,787
Operational Support		5,113			19,640			17,333			17,333			17,333			10,400			11,440
Sub Total (R$ 000s)		33,714			143,357			146,845			118,343			110,778			65,739			71,238
less: Silver Credit		(538	)		(1,833	)		(2,278	)		(2,372	)		(2,038	)		(1,211	)		(1,383	)
less: Capitalized Development		(9,531	)		(36,964	)		(19,822	)		(1,705	)		(418	)		-			-
less: Operator Bonus Provision		(775	)		(6,154	)		(6,154	)		(6,154	)		(6,154	)		(6,154	)		(6,154	)
Total, C1 Basis (R$ 000s)		22,870			98,405			118,591			108,111			102,167			58,373			63,700
C1 Cast Cost (R$ per oz)	$	2,187		$	2,761		$	2,678		$	2,344		$	2,578		$	2,479		$	2,368
C1 Cash Cost (US$ per oz)	$	437		$	552		$	536		$	469		$	516		$	496		$	474
add: G&A (incl. Bonus Provision)		4,398			20,023			20,023			20,023			20,023			14,476			15,308
add: Sustaining Capital (incl. Development)[2]		12,201			43,543			32,109			5,652			3,257			2,484			-
add: CFEM Royalty (1.5%)		1,381			4,706			5,847			6,089			5,232			3,109			3,552
add: Transport & Insurance		20			72			72			72			72			72			72
Total, AISC Basis (R$ 000s)	$	40,870		$	166,750		$	176,643		$	139,947		$	130,752		$	78,514		$	82,632
AISC (R$ per oz)	$	3,908		$	4,678		$	3,988		$	3,034		$	3,299		$	3,334		$	3,072
AISC (US$ per oz)	$	782		$	936		$	798		$	607		$	660		$	667		$	614

C1 Cash Cost / AISC Notes:

1. 2020 operating costs are presented for the three months of the mineral reserve schedule from the effective date of September 30, 2020 to December 31, 2020.

2. Sustaining Capital (including Development) as further detailed in the “Capital Expenditures” table of this press release.

3. C1 cash costs per ounce of gold produced and AISC are non-IFRS measures, as more particularly discussed under the “Technical and Scientific Information” section of this press release.

4. Operating Costs presented in thousands, Brazilian real (“BRL”)

	Q4 2020[1]		2021		2022		2023		2024		2025		2026
Capital Expenditures (R$ 000s)
Development		9,531		36,964		19,822		1,705		418		-		-
Equipment		750		5,415		5,783		788		-		-		-
Ventilation & Safety Equipment		950		514		260		300		250		230		-
Environment		419		650		280		240		350		180		-
Other, Sustaining		552		0		5,964		2,618		2,239		2,074		-
Sustaining Capital, Sub-Total		12,201		43,543		32,109		5,652		3,257		2,484		-
Infrastructure		7,886		5,608		2,470		640		230		68		-
Other, Non-Sustaining (incl. Growth)		3,923		21,121		2,456		4,898		2,915		827		-
Exploration / Drilling		12,000		-		-		-		-		-		-
Reclamation & Closure Costs		-		-		-		-		-		-		24,939
Non-Sustaining Capital, Sub-Total		23,809		26,729		4,926		5,538		3,145		895		24,939
Total Capital Costs (R$ 000s)		36,010		70,272		37,035		11,189		6,402		3,379		24,939

Capital Expenditure Notes:

1. 2020 capital expenditure presented for the three months of the mineral reserve schedule from the effective date of September 30, 2020 to December 31, 2020.

2. Amounts shown do not include discretionary greenfield or brownfield exploration in years 2021 through 2026.

3. Capital expenditures presented in thousands, Brazilian real (“BRL”)

TECHNICAL AND SCIENTIFIC INFORMATION

Mineral Resources

Block model tonnage and grade estimates for the NX Gold Mine were classified according to the CIM Standards and the CIM Guidelines by Sr. Porfirio Cabaleiro Rodriguez of GE21 Consultoria Mineral Ltda. (“GE21”) who is an independent qualified person as such term is defined under NI 43-101.

Grade shells using a value of 1.20 gpt gold were used to generate a 3D mineralization model of the NX Gold Mine. Within the grade shells, mineral resources were estimated using ordinary kriging within 2.5 meter by 2.5 meter by 0.5 meter block size, and the mineral resource estimate was constrained using a minimum stope dimension of 1.25 meters by 1.25 meters by 1.50 meters and a cut-off of 1.90 gpt based on gold price of US$1,900 per ounce of gold, underground mining and processing costs of US$115.14 per tonne of ore mined and processed. Indicated mineral resources are presented undiluted and are shown inclusive of mineral reserves.

Mineral resource effective date of August 31, 2020.

Mineral Reserves

The mineral reserves for the NX Gold Mine are derived from the Indicated mineral resource as defined within the resource block model following the application of economic and other modifying factors further described below. Inferred mineral resources, where unavoidably mined within a defined mining shape have been assigned zero grade. Dilution occurring from Indicated resource blocks were assigned grade based upon the current mineral resource grade of the blocks included in the dilution envelope. Mineral reserves were classified according to the CIM Standards and the CIM Guidelines by Sr. Porfirio Cabaleiro Rodriguez of GE21, an independent qualified person as such term is defined under NI 43-101.

Mineral reserve cut-off grades and parameters applied to the mineral reserve estimate are summarized below:

· 3.14 gpt applied to mining stopes, in room and pillar mining areas, and 3.22 gpt to stopes in cut and fill mining areas, incorporating mining and development, processing, general and administrative (“G&A”) and indirect costs;

· 0.80 gpt applied to gallery development incorporating development and processing costs; and,

· 2.30 gpt applied to mining marginal material adjacent to planned mining stopes incorporating mining, development and processing costs.

Mineral reserve cost assumptions are based on actual operating cost data during the eight-month period from January 1, 2020 to August 30, 2020, expressed in USD per tonne run-of-mine (“ROM”), converted at a USD:BRL foreign exchange rate of 5.00 corresponding to the average foreign exchange rate during this same period.

A summary of the mineral reserve estimate parameters is provided below:

Mining Costs (US$/tonne ROM)	$	76.52
Processing Costs (US$/tonne ROM)	$	38.62
G&A Costs (US$/tonne ROM)	$	18.10
Indirect Costs (US$/tonne ROM)	$	22.07
Metallurgical Recovery (average)		91.00	%
Gold Price (US$/oz)	$	1,650
Foreign Exchange Rate (USD:BRL)		5.00

Other modifying factors considered in the determination of the mineral reserve estimate include:

· A cut-off grade of 3.14 gpt was applied to mining stopes within the room and pillar mining areas, and 3.22 gpt to stopes within the cut and fill mining areas, in the determination of planned mining stopes within the mineral resource blocks based on actual operating cost data and past operating performance of the mine.

· The mining method employed for the Santo Antônio vein is inclined room and pillar for the thicker lower-panel of the vein, and overhand cut and fill for the thinner upper panel of the vein incorporating paste-fill. A new paste-fill plant was designed, at cost of approximately US$2 million, with the aim of improving overhand cut and fill operations as well as enhancing pillar recovery throughout the mine.

· Maximum stope spans in the room and pillar mining area are based on a design stope of 6m by 4m between pillars. For cut and fill mining areas the size of stopes are based on a designed stope measuring 18m along strike with a frontal slice of 3 vertical meters.

· Within designed stopes, all contained material was assumed to be mined with no selectivity. Inferred mineral resources, where unavoidably included within a defined mining shape have been included in the mineral reserves estimate at zero grade. Mining dilution resulting from Indicated blocks was assigned the grade of those blocks captured in the dilution envelope using the current mineral resource estimate.

Mineral reserve effective date of September 30, 2020.

Non-IFRS Measures

The Company utilizes certain non-IFRS measures, including C1 cash cost of gold produced, which are not measures recognized under IFRS. The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

C1 cash cost of gold produced (per ounce) is the sum of production costs, net of capital expenditure development costs and silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. C1 cash cost of gold produced per ounce is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

AISC of gold produced (per ounce) is the sum of production costs including capital expenditure development costs, sustaining capital costs, on-site general and administrative costs, royalties, transport and insurance contract costs, net of silver by-product credits, divided by the gold ounces produced. By-product credits are calculated based on actual precious metal sales during the period divided by the total ounces of gold produced during the period. C1 cash cost of gold produced per ounce is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measure

QUALITY ASSURANCE / QUALITY CONTROL

Database QA/QC Validation

In order to validate the current mineral resource estimate, GE21 selected a series of quality assurance, quality control (“QA/QC”) samples, including blanks, duplicate and standard control samples from those performed by NX Gold. The set of samples was taken from the current mineral resource estimate zone as well as adjacent areas. In the opinion of GE21, blank, standard and duplicate sample analysis was found to be within the acceptance limits for the classification of mineral resources. No sample or database biases were detected. This work was supplemented by drill hole database validation performed using the Geovia Surpac software database tool which looks to validate final depth, overlapping results and drill hole collar information. No inconsistencies or errors were found in the drill database review.

QA/QC Program

Drill core is logged, photographed and split in half using a diamond core saw at NX Gold’s secure core logging and storage facilities. Half of the drill core is retained on site and the other half-core is used for analysis, with samples collected on a minimum of 0.2 meters and a maximum of 2.0 meters with an average length of 0.5 meters. Sampling commences at least 1.0 meter before the start of the mineralized zone and continues at least 1.0 meters beyond the limit of the mineralized zone. All sample preparation is performed in NX Gold’s secure on-site laboratory. Gold content is determined using fire assay. All sample results used in the preparation of the 2020 updated mineral resource and reserve estimate have been monitored through a QA/QC program that includes the insertion of certified standards, blanks, and pulp and reject duplicate samples at a rate of one standard, one blank, and one duplicate pulp sample per every 20 samples for a blended rate of approximately 5%.

Qualified Persons and the NI 43-101 Technical Report

Sr. Porfirio Cabaleiro Rodriguez, MAIG, has reviewed and approved the scientific and technical information contained in this press release. Mr. Rodriguez is independent of the Company and is a “qualified person” within the meanings of National Instrument 43-101, Standards of Disclosure for Mineral Projects (“NI 43-101”).

The Company will file the associated NI 43-101 compliant report on SEDAR (www.sedar.com) and on the Company’s website (www.erocopper.com) within 45 days of this press release, which will serve as an update to the technical report entitled “Mineral Resource and Mineral Reserve Estimate of the NX Gold Mine, Nova Xavantina”, dated February 3, 2020 with an effective date of September 30, 2019, prepared by Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, and Paulo Roberto Bergmann, FAusIMM, each of GE21 and a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “2019 Technical Report”). The preceding technical report entitled “Mineral Resource and Mineral Reserve Estimate of the NX Gold Mine, Nova Xavantina” prepared by Porfírio Cabaleiro Rodriguez, MAIG, Leonardo Apparicio da Silva, MAIG and Leonardo de Moraes Soares, MAIG all of GE21, who are independent qualified persons under NI 43-101, where applicable, is referenced herein as the “2018 Technical Report”.

5.2       Disclosure for Restructuring Transactions

Not applicable.

Item 6. Reliance On subsection 7.1(2) of National Instrument 51-102

Not applicable.

Item 7. Omitted Information

Not applicable.

Item 8. Executive Officer

Makko DeFilippo, Vice President, Corporate Development

Tel: (604) 429-9244 Email: info@erocopper.com

Item 9. Date of Report

November 24, 2020.

CAUTION REGARDING FORWARD LOOKING INFORMATION AND STATEMENTS This Press Release contains “forward-looking information” within the meaning of applicable Canadian securities laws. Forward-looking information includes statements that use forward-looking terminology such as “may”, “could”, “would”, “will”, “should”, “intend”, “target”, “plan”, “expect”, “budget”, “estimate”, “forecast”, “schedule”, “anticipate”, “believe”, “continue”, “potential”, “view” or the negative or grammatical variation thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, statements with respect to the Company's expected operations at the NX Gold Property, the estimation of mineral reserves and mineral resources, the significance of any particular exploration program or result and the Company’s expectations for current and future exploration plans including, but not limited to, planned areas of additional exploration, the potential to convert any portion of the inferred mineral resource base, the significance of any drill results or new discoveries and targets, including without limitation extensions of defined mineralized zones, possibilities for mine life extensions or continuity of down-plunge mineralization, further extensions and expansion of mineralization near the Company’s existing operations of the NX Gold Mine.

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this Press Release including, without limitation, assumptions about: favourable equity and debt capital markets; the ability to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Company’s properties and assets; future prices of copper and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any mineral reserve and mineral resource estimates; the geology of the Vale do Curaçá Property, NX Gold Mine and the Boa Esperança Property being as described in the technical reports for these properties; production costs; the accuracy of budgeted exploration and development costs and expenditures; the price of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to operate in a safe, efficient and effective manner; work force continues to remain healthy in the face of prevailing epidemics, pandemics or other health risks, political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favourable terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour stability; stability in financial and capital goods markets; availability of equipment and critical supplies, spare parts and consumables; positive relations with local groups and the Company’s ability to meet its obligations under its agreements with such groups; and satisfying the terms and conditions of the Company’s current loan arrangements. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.

Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. Such risks include, without limitation the risk factors listed under the heading “Risk Factors” in the Annual Information Form of the Company for the year ended December 31, 2019, dated March 12, 2020 (the “AIF”).

Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking information, there may be other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended.

The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained herein. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.

Forward-looking information contained herein is made as of the date of this press release and the Company disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.

Cautionary Notes Regarding Mineral Resource and Reserve Estimates In accordance with applicable Canadian securities regulatory requirements, all mineral reserve and mineral resource estimates of the Company disclosed or incorporated by reference in this press release have been prepared in accordance with NI 43-101 and are classified in accordance with the CIM Standards.

Mineral resources which are not mineral reserves do not have demonstrated economic viability. Pursuant to the CIM Standards, mineral resources have a higher degree of uncertainty than mineral reserves as to their existence as well as their economic and legal feasibility. Inferred mineral resources, when compared with Measured or Indicated mineral resources, have the least certainty as to their existence, and it cannot be assumed that all or any part of an Inferred mineral resource will be upgraded to an Indicated or Measured mineral resource as a result of continued exploration. Pursuant to NI 43-101, Inferred mineral resources may not form the basis of any economic analysis. Accordingly, readers are cautioned not to assume that all or any part of a mineral resource exists, will ever be converted into a mineral reserve, or is or will ever be economically or legally mineable or recovered.

EX-99.24

Exhibit 99.24

 

TSX: ERO

FORM 51-102F3

Material Change Report

Item 1. Name and Address of Issuer

Ero Copper Corp. (“Ero” or the “Company”)

1050 – 625 Howe Street

Vancouver, BC V6C 2T6

Item 2. Date of Material Change

November 30, 2020.

Item 3. News Release

A news release dated November 30, 2020, announcing the material change referred to in this report, was disseminated through GlobeNewswire and filed on SEDAR (www.sedar.com) on November 30, 2020.

Item 4. Summary of Material Change

Ero announced the release of its 2020 updated National Instrument 43-101 Standards of Disclosure for Mineral Projects compliant mineral reserve and resource estimate along with updated life of mine (“LOM”) production, capital and operating cost projections on its 99.6% owned Vale do Curaçá Property (herein referred to as the “Curaçá Valley”) located in Bahia State, Brazil.

For the 2020 update, the Company has included a LOM production plan, including the mineral reserves derived from the Measured and Indicated mineral resources from within the Deepening Extension Zone of the Pilar Mine (the “Deepening Extension Project”). In addition, the Company has included an independent preliminary economic assessment based upon the Inferred mineral resources within the Deepening Extension Zone of the Pilar Mine (the “Deepening Inferred Project”), that shows the expected synergies associated with utilizing the infrastructure that will be built in support of the Deepening Extension Project, to illustrate the potential of the Deepening Extension Zone.

Item 5. Full Description of Material Change

5.1 Full Description of Material Change

The Company is pleased to announce the release of its 2020 updated National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) compliant mineral reserve and resource estimate along with updated life of mine (“LOM”) production, capital and operating cost projections on its 99.6% owned Vale do Curaçá Property (herein referred to as the “Curaçá Valley”) located in Bahia State, Brazil.

Within the Curaçá Valley LOM production plan, for the 2020 update, the Company has included production, capital and operating cost projections based upon the mineral reserves derived from the Measured and Indicated mineral resources from within the Deepening Extension Zone of the Pilar Mine (the “Deepening Extension Project”). In addition, the Company has included an independent preliminary economic assessment based upon the Inferred mineral resources within the Deepening Extension Zone of the Pilar Mine (the “Deepening Inferred Project”), that shows the expected synergies associated with utilizing the infrastructure that will be built in support of the Deepening Extension Project, to illustrate the potential of the Deepening Extension Zone. 

 1 Ero Copper Corp
625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

TSX: ERO

PRESS RELEASE

Highlights of the 2020 update include:

· Significant increase in contained copper within the mineral reserves and resources of the Pilar Mine with the inclusion of the Deepening Extension Zone. Proven and Probable mineral reserves, at the same long-term copper price assumption of US$2.75 per pound, increased by 43%, while Measured and Indicated, and Inferred Resources increased by 28% and 155%, respectively. The mineralized extent of the Deepening Extension Zone has yet to be fully defined and remains open to the north, east and to depth.

· Overall Curaçá Valley contained copper within the Proven and Probable mineral reserves, Measured and Indicated, and Inferred mineral resources increased by 23%, 29% and 62% respectively, inclusive of the Deepening Extension Zone.

	Summary, 2020 Update(1,2)						Year-on-Year Change
	Tonnes (000s)		Grade (Cu %)		Contained Cu (kt)		Contained Cu (kt)			(%)
Deepening Extension Zone, Pilar Mine
Mineral Reserves
Proven		-		-		-		-			n/a
Probable		7,432		1.68		125		101			421	%
Proven & Probable		7,432		1.68		125		101			421	%
Mineral Resources
Measured		-		-		-		-			n/a
Indicated		7,527		1.86		140		110			373	%
Measured & Indicated		7,527		1.86		140		110			373	%
Inferred		4,476		2.12		95		70			284	%
Pilar Mine (including Deepening Extension Zone)
Mineral Reserves
Proven		5,835		1.41		82		(15	)		(16)	%
Probable		15,157		1.38		209		103			98	%
Proven & Probable		20,992		1.39		291		88			43	%
Mineral Resources
Measured		26,829		1.50		401		52			15	%
Indicated		21,518		1.37		295		101			52	%
Measured & Indicated		48,347		1.44		696		153			28	%
Inferred		17,266		1.20		206		126			155	%
Curaçá Valley, Total (including Pilar Mine)
Mineral Reserves
Proven		21,464		1.06		228		(26	)		(10)	%
Probable		28,990		1.06		308		126			69	%
Proven & Probable		50,454		1.06		536		100			23	%
Mineral Resources
Measured		49,158		1.27		624		69			12	%
Indicated		53,627		0.99		531		192			56	%
Measured & Indicated		102,786		1.12		1,155		260			29	%
Inferred		39,201		1.00		391		149			62	%

· LOM copper production targeting average C1 cash costs at or below US$1.00 per pound of copper is shown in the table below. The LOM production plan includes ongoing production from the Vermelhos and Pilar mines (including the Deepening Extension Project), open pit production utilizing ore sorting from the N8/N9 and Siriema open pit operations within the Vermelhos District and non-ore sorted production from the Surubim District open pit operations of Surubim and C12:

¹ Q4 2020 production outlines the mineral reserve schedule for the three months from the effective date of October 1, 2020 to December 31, 2020. Please refer to the detailed mineral reserve and mineral resource tables of this press release, as detailed in the “Mineral Reserves, 2020”, “Underground Mineral Resources, 2020”, and “Open Pit Mineral Resources, 2020” sections of this press release, as well as the “Technical and Scientific Information” below for additional information on the stated mineral reserves and mineral resources.

² Presented mineral resources inclusive of mineral reserves. Mineral resources that are not mineral reserves do not have a demonstrated economic viability. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

 2 Ero Copper Corp
625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

TSX: ERO

PRESS RELEASE

	Q4 2020(1)		2021		2022		2023		2024		2025		2026		2027		2028		2029		2030		2031		2032		2033
LOM Plan Cu Production (000s tonnes)		9.2		43.0		42.9		45.1		48.9		46.3		46.2		43.9		46.0		37.8		26.3		15.3		12.3		17.3
Deepening Inferred Project Cu Production (000s tonnes)		-		-		-		0.1		0.3		0.8		2.1		4.0		3.9		11.4		23.2		17.4		8.0		7.7

The Deepening Inferred Project is preliminary in nature and based on the Inferred mineral resources of the Deepening Extension Zone which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the Deepening Inferred Project will be realized. Mineral resources that are not mineral reserves do not have a demonstrated economic viability. Please refer to the “Deepening Inferred Project” section of this press release for additional technical and scientific information related to the Deepening Inferred Project

· Integration of ore sorting into the Company’s LOM plan for the Vermelhos District open pit deposits of N8/N9 and Siriema contribute to improved mill head-grades and maintaining first-quartile C1 cash costs over the LOM.

Ore Sorting Highlights
Vermelhos District, Mining (including fines)
Open Pit Production / Sort Feed (000s tonnes)	19,968
Copper Grade, Sort Feed (% Cu)	0.56	%
Sorted Production, Sent to Mill (including fines)
Sort Product, Sent to Mill (000s tonnes)	8,891
Copper Grade, Mill Feed (% Cu)	1.18	%

· With the inclusion of the Deepening Extension Project at the Pilar Mine, a significant increase in production from the current 1.2 Mtpa ore mined to approximately 2.2 Mtpa ore mined is planned. The expansion of the Pilar is supported by the installation of a new external shaft, scheduled to commence construction in Q3 2021, that will not only support the planned increases in copper production at the Pilar Mine but has also been designed to support the potential for longer term copper production increases from both the Deepening Inferred Project and as additional mineralization is defined. In keeping with the Company’s return on invested capital focus, the expansion of the mine and development of the infrastructure in support of the Deepening Extension Project is being delivered at a low capital-intensity ratio of approximately US$1,677 per tonne of incremental copper production delivered over the LOM.

LOM Plan & Pilar Deepening Highlights	LOM Plan including Deepening Extension Project, Pilar Mine			Deepening Inferred Project, Pilar Mine
Average Mill Throughput / Production (Mtpa)		3.0			n/a
Peak Mill Throughput / Production (Mtpa)		4.2			n/a
Total Tonnes Processed (000s tonnes)		39,378			4,203
Average Copper Head Grade (% Cu)		1.33	%		2.01	%
Average Metallurgical Recoveries (%)		91.5	%		93.2	%
Total Copper Production (000s tonnes)		480.8			78.9
Average LOM C1 Cash Costs (US$ per lb. Cu)[1]	US$	0.97		US$	0.25
Total LOM Capital Cost (USD million)	US$	553.9			-
Pilar Mine Deepening Capital Cost Only (USD million)	US$	190.3		US$	27.8
Pilar Mine Deepening Capital Intensity (US$ per tonne of Cu) [2]	US$	1,677		US$	353

 3 Ero Copper Corp
625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

TSX: ERO

PRESS RELEASE

Additional LOM Plan & Pilar Deepening Highlight Notes:

1. C1 Cash Costs expressed in US Dollars (“USD”), converted at a USD to Brazilian Real (“BRL”) foreign exchange rate of 5.00, assumes gold and silver price of $1,750 and $18.00 per ounce, respectively. Fixed processing costs and operational support for the Curaçá Valley are allocated to the Company’s LOM Plan.

2. Capital costs for capital intensity figures converted to USD at a USD:BRL foreign exchange rate of 5.00. Capital intensity figures based on recovered copper assuming average LOM metallurgical recovery, as disclosed in this table.

The Deepening Inferred Project is preliminary in nature and based on the Inferred mineral resources of the Deepening Extension Zone which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the Deepening Inferred Project will be realized. Mineral resources that are not mineral reserves do not have a demonstrated economic viability. Please refer to the “Deepening Inferred Project” section of this press release for additional technical and scientific information related to the Deepening Inferred Project.

Commenting on the update, David Strang, President and CEO stated, “Our 2020 updated mineral reserve and resource estimate and LOM plan reflects a considerable effort across our organization to deliver on several key initiatives that we commenced late last year. All of these initiatives were delivered under our corporate philosophy of maintaining a high return on invested capital for our shareholders and targeting LOM operating costs at or below US$1.00 per pound of copper.

First, and most significantly, this includes the delivery of the Deepening Extension Project at the Pilar Mine from initial concept in late 2019, through 12 months of aggressive drilling and extensive engineering and design work undertaken by our technical teams with the support of a large, diversified group of external consultants. While the Deepening Extension Project, technically, remains a mere extension of our existing operations at Pilar, the inclusion of the new shaft along with updated ventilation and cooling provides us with increased flexibility to not only increase overall production from Pilar but also improve the operating environment for our operations teams working in the mine, thereby increasing operating time at the working face.

Further, we believe the new shaft will support production from the deeper parts of the Pilar mine well beyond the currently defined mineral reserves within the Deepening Extension Project in this update. As we have stated, mineralization in the Deepening Extension Zone remains open to the north, to depth and to the east best evidenced by the high-grade Inferred mineral resources outlined in this update. These resources have been categorized as Inferred resources primarily as a result of variability in drill hole spacing due to the acute angles and limited availability of drill stations. During 2021, we will be developing exploration drives that we expect will enable holes to be drilled at angles that will allow for upgrading of these Inferred resources to the Measured and Indicated categories. These exploration drives will also assist in our ability to evaluate potential extensions to the current known limits of mineralization of the Deepening Extension Zone.

The second initiative reflected in our LOM update is the successful integration of ore-sorting into our operations following the completion of a comprehensive trial campaign earlier this year. The integration of ore-sorting within our operations will allow us to remove a significant amount of waste material mined, deliver feed to the plant at significantly higher copper grades and thereby lower transportation and processing costs while allowing our operations to use less water and power, and generate significantly less tailings. The integration of ore-sorting, like the Deepening Extension Project, is in-line with our corporate philosophy of maintaining high returns on invested capital, low capital intensity and first quartile operating costs.

With our updated LOM plan now in place, we have a solid production platform on which we can continue to grow. Relative to the mill’s original design capacity of 5.5 million tonnes per annum, our updated LOM plan retains excess capacity of up to 1.3 million tonnes per annum, which continues to provide flexibility to augment our near- to medium-term production profile with new discoveries. In 2021, we will be focusing our exploration efforts on defining new mineral resources and reserves within the Southern Vermelhos Corridor to extend the operational life at the Vermelhos Mine beyond 2026. We will also be focusing on upgrading the Inferred resources within the Deepening Extension Zone while continuing to define extensions of mineralization to the north, to depth and to the east as well as refocus some of our exploration efforts at Pilar on the West Limb to further define down plunge extensions. And of course, we will continue to advance our regional exploration programs in a post-Covid environment that will allow our geological team and consultants greater freedom to travel to site on a regular basis.”

 4 Ero Copper Corp
625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

TSX: ERO

PRESS RELEASE

The 2020 updated mineral reserve and resource estimate for the underground and open pit deposits and mines of the Curaçá Valley are shown in the tables below:

Mineral Reserves, 2020

			Tonnage		Grade		Cu Contained
	Classification		(000 tonnes)		(Cu %)		(000 tonnes)
Reserves, Underground
Deepening Extension Zone, Pilar UG Mine		Proven		-		-		-
(Pilar Mine below Level -965)		Probable		7,432		1.68		125
Pilar UG Mine Ex-Deepening Extension Zone		Proven		5,835		1.41		82
(Pilar Mine above Level -965)		Probable		7,725		1.09		84
Vermelhos UG Mine		Proven		3,359		2.09		70
		Probable		1,844		1.23		23
Surubim District, Underground		Proven		513		1.09		6
(C12 Underground)		Probable		515		0.83		4
Total Proven				9,707		1.63		158
Total Probable				17,516		1.34		236
Total Proven & Probable, Underground				27,224		1.45		394
Reserves, Open Pit
N8/N9 OP Mine		Proven		7,355		0.55		40
(Vermelhos District)		Probable		8,012		0.54		44
Siriema OP Mine		Proven		-		-		-
(Vermelhos District)		Probable		3,011		0.88		26
Surubim District, Open Pit		Proven		2,778		0.82		23
(Surubim & C12)		Probable		123		0.55		1
Suçuarana South OP Mine		Proven		1,623		0.42		7
(Pilar District)		Probable		328		0.46		2
Total Proven				11,757		0.60		70
Total Probable				11,474		0.63		72
Total Proven & Probable, Open Pit				23,230		0.61		142

Mineral Reserve Notes:

1. Mineral reserve effective date of October 1, 2020. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

2. Mineral reserve estimates were prepared in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards for Mineral Resources and Mineral Reserves, adopted by the CIM Council on May 10, 2014 (the “CIM Standards”), and the CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines, adopted by CIM Council on November 23, 2003 (the “CIM Guidelines”), using geostatistical and/or classical methods, plus economic and mining parameters appropriate for the deposit. Mineral reserves are based on a long-term copper price of US$2.75 per pound (“lb”), and a USD:BRL foreign exchange rate of 4.27, except for the C12 (Surubim District) and Suçuarana (Pilar District) open pit mines, whose design was not changed in 2020, and continued to assume a 3.70 USD:BRL foreign exchange rate. Mineral reserves are the economic portion of the Measured and Indicated mineral resources. Mining dilution and recovery factors vary for specific mineral reserve sources and are influenced by factors such as deposit type, deposit shape, stope orientation and selected mining method. Inferred resource blocks, where unavoidably mined, were assigned zero grade. Dilution occurring from Measured & Indicated resource blocks was assigned grade based upon the mineral resource grade of the blocks included in the dilution envelope. Please see “Technical and Scientific Information” for additional information on the stated mineral reserves.

 5 Ero Copper Corp
625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

TSX: ERO

PRESS RELEASE

Underground Mineral Resources, 2020

		Tonnage	Grade		Cu Contained
Underground Mine / Deposit	Classification	(000 tonnes)	(Cu %)		(000 tonnes)
Deepening Extension Zone, Pilar Mine	Measured	-		-		-
(Pilar Mine below Level -965)	Indicated	7,527		1.86		140.0
	Measured & Indicated	7,527		1.86		140.0
	Inferred	4,476		2.12		94.8
Pilar Mine Ex-Deepening Extension Zone	Measured	26,829		1.50		401.3
(Pilar Mine above Level -965)	Indicated	13,991		1.11		154.8
	Measured & Indicated	40,820		1.36		556.0
	Inferred	12,790		0.87		111.6
Pilar District, Other Underground (R75, Suçuarana)	Measured	816		0.72		5.9
	Indicated	1,045		0.89		9.3
	Measured & Indicated	1,861		0.82		15.2
	Inferred	742		0.60		4.5
	Measured	27,645		1.47		407.2
	Indicated	22,563		1.35		304.2
Pilar District Underground Total	Measured & Indicated	50,208		1.42		711.3
	Inferred	18,008		1.17		210.9
	Measured	3,389		2.80		94.9
Vermelhos Mine	Indicated	4,514		1.19		53.7
	Measured & Indicated	7,903		1.88		148.6
	Inferred	4,128		0.86		35.5
Vermelhos District, Other Underground	Measured	1,465		0.79		11.6
(Siriema, N8/N9)	Indicated	4,153		0.80		33.4
	Measured & Indicated	6,676		0.91		61.1
	Inferred	7,689		0.88		67.9
	Measured	4,402		2.33		102.4
Vermelhos District Underground Total	Indicated	8,667		1.00		87.1
	Measured & Indicated	13,069		1.45		189.5
	Inferred	13,781		0.93		127.6
Surubim District, Other Underground	Measured	1,841		0.96		17.7
(Surubim, C12, Cercado Velho, Lagoa da Mina, Terra do Sal)	Indicated	3,062		0.96		29.3
	Measured & Indicated	4,904		0.96		47.0
	Inferred	4,482		0.92		41.3
Surubim District Underground Total	Measured	1,841		0.96		17.7
	Indicated	3,062		0.96		29.3
	Measured & Indicated	4,904		0.96		47.0
	Inferred	4,482		0.92		41.3
Total, Underground	Measured	33,888		1.56		527.3
	Indicated	34,292		1.23		420.6
	Measured & Indicated	68,180		1.39		947.9
	Inferred	36,271		1.05		379.8

Underground Mineral Resource Notes:

1. Mineral resource effective date varies by deposit, with an effective date of August 8, 2020 except for P1P2 (July 24, 2020), R75 (July 9, 2019) and Suçuarana (July 3, 2020) within the Pilar District; Vermelhos Mine (July 29 2020), Siriema and N8 (July 4, 2020), N9 (July 9, 2019) within the Vermelhos District; and Surubim District effective date of July 9, 2019 except for Terra do Sal (July 3, 2020).

2. Presented mineral resources inclusive of mineral reserves. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

3. Mineral resources have been constrained within newly developed 3D lithology models applying a 0.45% and 0.20% copper grade envelope for high and marginal grade, respectively. Within these envelopes, mineral resources for underground deposits were constrained using varying stope dimensions of up to 20m by 10m by 35m applying a 0.51% copper cut-off grade, as well as a 0.32% copper marginal cut-off grade. Mineral resources have been estimated using ordinary kriging inside 5m by 5m by 5m block sizes. The mineral resource estimates were prepared in accordance with the CIM Standards, and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate to the deposit. Please see “Technical and Scientific Information” below for additional information on the stated mineral resources.

 6 Ero Copper Corp
625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

TSX: ERO

PRESS RELEASE

Open Pit Mineral Resources, 2020

		Tonnage		Grade		Cu Contained
Open Pit Mine / Deposit	Classification	(000 tonnes)		(Cu %)		(000 tonnes)
	Measured		3,172		0.49		15.4
Pilar District, Open Pit	Indicated		365		0.45		1.6
(R22W, Suçuarana, R75	Measured & Indicated		3,537		0.48		17.0
	Inferred		351		0.47		1.6
Pilar District Open Pit Total	Measured		3,172		0.49		15.4
	Indicated		365		0.45		1.6
	Measured & Indicated		3,537		0.48		17.0
	Inferred		351		0.47		1.6
	Measured		-		-		-
Siriema Deposit	Indicated		2,956		0.92		27.1
	Measured & Indicated		2,956		0.92		27.1
	Inferred		187		0.99		1.9
	Measured		7,420		0.55		41.1
N8/N9 Deposits	Indicated		13,562		0.48		64.9
	Measured & Indicated		20,982		0.51		106.0
	Inferred		858		0.40		3.4
	Measured		-		-		-
Vermelhos North	Indicated		-		-		-
	Measured & Indicated		-		-		-
	Inferred		121		0.88		1.1
	Measured		7,420		0.55		41.1
Vermelhos District Open Pit Total	Indicated		16,518		0.56		92.0
	Measured & Indicated		23,938		0.56		133.1
	Inferred		1,166		0.55		6.4
	Measured		2,340		0.93		21.7
Surubim Mine	Indicated		73		0.84		0.6
	Measured & Indicated		2,413		0.92		22.3
	Inferred		3		0.80		0.0
	Measured		1,272		0.94		11.9
C12 Deposit	Indicated		942		0.70		6.6
	Measured & Indicated		2,214		0.84		18.6
	Inferred		154		0.56		0.9
	Measured		1,067		0.61		6.5
Surubim District, Other Open Pit	Indicated		1,436		0.67		9.6
(Cercado Velho, Lagoa da Mina, Terra do Sal)	Measured & Indicated		2,503		0.64		16.1
	Inferred		1,255		0.15		1.9
	Measured		4,678		0.86		40.1
Surubim District Open Pit Total	Indicated		2,452		0.69		16.8
	Measured & Indicated		7,130		0.80		56.9
	Inferred		1,413		0.20		2.8
	Measured		15,270		0.63		96.6
Total, Open Pit	Indicated		19,335		0.57		110.5
	Measured & Indicated		34,605		0.60		207.0
	Inferred		2,930		0.37		10.8

Open Pit Mineral Resource Notes:

1.

Mineral resource effective date varies by deposit, with an effective date of August 8, 2020, except for Suçuarana (July 3, 2020), R22W and R75 (July 9, 2019) within the Pilar District; Siriema and N8 (July 4, 2020), N9 and Vermelhos North (July 9, 2019) within the Vermelhos District; and an effective date of July 9, 2019 for the Surubim District except Terra do Sal (July 3, 2020). Presented mineral resources inclusive of mineral reserves. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

2.

Mineral resources have been constrained within newly developed 3D lithology models using a 0.21% copper cut-off grade for open pit deposits. Mineral resources have been estimated using ordinary kriging inside 5m by 5m by 5m block sizes. The mineral resource estimates were prepared in accordance with the CIM Standards, and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate to the deposit. Please see “Technical and Scientific Information” below for additional information on the stated mineral resources.

Mineral resources which are not mineral reserves do not have demonstrated economic viability.

Ero Copper Corp

625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

 7 Ero Copper Corp
625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

TSX: ERO

PRESS RELEASE

UPDATED LOM PRODUCTION PLAN, OPERATING & CAPITAL COSTS

The Company’s updated LOM production plan, based upon updated mineral reserves within the Curaçá Valley, is highlighted by the inclusion of the Deepening Extension Project and integration of ore sorting into the Company’s operations. Copper production over the updated LOM plan totals approximately 481,000 tonnes of copper in concentrate, at average C1 cash costs of $0.97 per lb. of copper produced.

The tables below outline the updated production plan for the Curaçá Valley, as well as associated capital and operating cost projections, which do not include estimates for the Deepening Inferred Project which can be found later in this press release. Amounts are presented in thousands of Brazilian Real (“BRL”). Where applicable, C1 cash costs, as defined by the Company are presented in US Dollars (“USD”) per pound of copper produced, based on a USD:BRL foreign exchange rate of 5.00, and by-product gold and silver prices of $1,750 and $18.00 per ounce, respectively.

Ero Copper Corp

625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

 8 Ero Copper Corp
625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

TSX: ERO

PRESS RELEASE

LOM Production Plan

	Q4 2020*			2021			2022			2023			2024			2025			2026			2027			2028			2029			2030			2031			2032			2033
Underground Operations
Pilar UG Mine, Ex-Deepening
Tonnes Mined (000s)		233			945			1,146			1,232			1,010			644			749			1,100			778			851			875			-			-			-
Grade Mined (% Cu)		1.24	%		1.09	%		1.12	%		1.26	%		1.14	%		1.06	%		1.09	%		0.94	%		1.05	%		0.97	%		0.98	%		-			-			-
Pilar UG Mine, Deepening (below -965)
Tonnes Mined (000s)		-			-			6			184			650			979			1,007			939			946			555			244			397			664			757
Grade Mined (% Cu)		-			-			0.61	%		0.98	%		1.46	%		1.29	%		1.54	%		1.47	%		1.75	%		2.11	%		1.48	%		1.85	%		1.98	%		2.42	%
Pilar UG Mine, Deepening (above -965)
Tonnes Mined (000s)		131			556			540			680			564			693			575			9			194			55			-			-			-			-
Grade Mined (% Cu)		2.17	%		2.03	%		2.17	%		1.27	%		1.75	%		1.53	%		1.07	%		0.93	%		0.83	%		0.74	%		-			-			-			-
Vermelhos UG Mine
Tonnes Mined (000s)		184			839			851			882			813			876			700			-			-			-			-			-			-			-
Grade Mined (% Cu)		2.42	%		2.48	%		2.17	%		1.88	%		1.38	%		1.35	%		1.03	%		-			-			-			-			-			-			-
Surubim UG Mine
Tonnes Mined (000s)		-			-			-			-			-			-			-			8			184			206			630			-			-			-
Grade Mined (% Cu)		-			-			-			-			-			-			-			0.83	%		0.98	%		0.99	%		0.95	%		-			-			-
Open Pit Operations
Vermelhos District, Open Pit (ex-Ore Sorting)
Tonnes Mined (000s)		-			-			390			-			-			-			-			-			-			-			-			-			-			-
Grade Mined (% Cu)		-			-			0.54	%		-			-			-			-			-			-			-			-			-			-			-
Surubim District, Open Pit
Tonnes Mined (000s)		-			240			353			522			627			428			418			314			-			-			-			-			-			-
Grade Mined (% Cu)		-			0.43	%		0.64	%		0.96	%		1.33	%		1.08	%		1.41	%		0.79	%		-			-			-			-			-			-
Ore Sorting Operations
Vermelhos District, Open Pit
Tonnes Crushed & Sorted (000s)		-			-			-			635			840			1,140			1,755			2,681			4,046			3,777			1,920			3,175			-			-
Grade Crushed & Sorted (% Cu)		-			-			-			0.62	%		0.74	%		0.55	%		0.66	%		0.74	%		0.59	%		0.52	%		0.52	%		0.36	%		-			-
Sort Product, Vermelhos District
Sorted Tonnes to Mill (000s)		-			-			-			302			399			542			834			1,273			1,922			1,794			912			914			-			-
Sorted Grade to Mill (% Cu)		-			-			-			1.23	%		1.47	%		1.09	%		1.31	%		1.47	%		1.17	%		1.02	%		1.03	%		1.03	%		-			-
Production Plan
Tonnes Mined & Processed (000s)		482			2,722			3,196			3,686			4,162			4,129			4,007			3,940			3,959			3,555			2,808			1,311			664			757
Grade Mined & Processed (% Cu)		2.07	%		1.70	%		1.46	%		1.34	%		1.29	%		1.23	%		1.26	%		1.22	%		1.27	%		1.17	%		1.04	%		1.28	%		1.98	%		2.42	%
Recoveries (%)		92.5	%		92.8	%		92.0	%		91.5	%		91.3	%		91.1	%		91.2	%		91.0	%		91.2	%		90.8	%		90.2	%		91.3	%		93.5	%		94.5	%
Copper in Concentrate (000 tonnes)		9.2			43.0			42.9			45.1			48.9			46.3			46.2			43.9			46.0			37.8			26.3			15.3			12.3			17.3

(*) Q4 2020 production outlines the mineral reserve schedule for the three months from the effective date of October 1, 2020 to December 31, 2020. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding. LOM plan operating and capital costs totals are based on mineral reserves and do not include the Deepening Inferred Project. See “Deepening Inferred Project” section of this press release for additional details.

Ero Copper Corp

625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

 9 Ero Copper Corp
625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

TSX: ERO

PRESS RELEASE

LOM Plan Operating & Capital Costs (R$ 000s)

	Q4 2020*			2021			2022			2023			2024			2025			2026			2027			2028			2029			2030			2031			2032			2033
Operating Costs (R$000s)
Mining Costs (incl. transport and sorting)		67,830			299,064			369,784			413,498			448,932			543,247			493,964			404,625			415,249			330,385			254,303			158,982			86,495			89,983
Processing		22,558			97,774			107,541			117,623			127,424			126,737			124,240			122,857			123,246			114,924			99,558			68,765			55,454			57,370
Operational Support		15,459			67,107			63,409			64,238			65,731			64,728			64,672			59,096			55,699			48,760			40,896			33,565			29,505			28,952
less: Precious Metal Credits		(18,531	)		(70,776	)		(72,701	)		(76,323	)		(82,851	)		(78,467	)		(78,223	)		(74,297	)		(77,850	)		(64,079	)		(44,609	)		(25,982	)		(20,498	)		(28,944	)
plus: TC/RCs, Net of Tax		(6,223	)		(6,834	)		(41,893	)		(48,268	)		(50,641	)		(48,164	)		(48,992	)		(44,973	)		(49,791	)		(39,351	)		(28,557	)		(18,049	)		(13,511	)		(17,723	)
C1 Cash Costs Basis (R$ 000s)		81,093			386,336			426,141			470,767			508,594			608,082			555,662			467,308			466,553			390,639			321,592			217,282			137,444			129,638
C1 Cash Costs (US$/lb)	$	0.80		$	0.81		$	0.90		$	0.95		$	0.94		$	1.19		$	1.09		$	0.97		$	0.92		$	0.94		$	1.11		$	1.28		$	1.02		$	0.68
Capital Costs (R$ 000s)
Deepening below -965
Equipment		-			34,818			23,548			5,841			20,957			9,277			24,346			4,364			-			-			-			-			-			-
Ventilation and Cooling		-			29,248			49,566			19,708			2,754			4,954			6,603			3,377			3,998			5,901			-			-			-			-
Development		-			21,909			47,031			46,677			38,026			49,448			56,384			39,723			21,716			9,833			-			-			-			-
Shaft		-			13,245			42,573			124,399			135,778			63			-			-			-			-			-			-			-			-
Infrastructure/Other		2,314			9,198			8,492			7,808			8,524			14,275			2,256			2,481			53			53			53			-			-			-
Pilar District (ex-Deepening below -965)
Development		30,433			98,496			75,020			75,371			80,481			65,210			49,951			25,861			506			-			-			-			-			-
Equipment		1,909			7,872			12,079			7,626			2,748			-			-			-			-			-			-			-			-			-
Mill Improvements		-			-			-			50,000			-			-			-			-			-			-			-			-			-			-
Other (incl. Ventilation & Cooling)		64,632			123,335			78,905			28,742			20,975			13,800			9,415			19,042			14,497			14,171			16,418			6,647			-			-
Vermelhos Underground
Development		5,576			32,920			33,421			32,596			30,495			13,628			-			-			-			-			-			-			-			-
Equipment		300			1,521			2,346			700			-			-			-			-			-			-			-			-			-			-
Other		3,308			9,874			14,521			6,580			10,225			410			395			595			495			495			495			395			-			-
Vermelhos Open Pit
Pre-Stripping		2,650			-			9,295			886			35,059			1,345			398			66,348			356			-			32			-			-			-
Equipment		-			23,949			5,489			32,355			-			-			-			-			-			-			-			-			-			-
Ore Sorting		-			-			49,950			-			21,600			21,600			64,350			-			-			-			-			-			-			-
Other		-			5,870			4,500			-			370			-			-			-			-			-			7,472			-			-			-
Surubim Underground
Development		-			-			-			-			-			-			-			7,680			12,530			11,470			3,290			-			-			-
Equipment		-			-			-			-			-			-			-			-			-			-			-			-			-			-
Other		-			-			-			-			-			-			-			500			650			650			-			-			-			-
Surubim Open Pit
Pre-Stripping		3,049			47,418			52,165			50,998			44,933			3,920			2,330			3,280			-			-			-			-			-			-
Equipment		-			2,099			-			-			-			-			-			-			-			-			-			-			-			-
Other		257			2,698			2,035			1,324			1,139			955			8,586			914			331			338			345			353			-			-
Total Capital Costs (R$ 000s)		114,429			464,470			510,935			491,611			454,062			198,886			225,012			174,166			55,132			42,910			28,105			7,395			-			-

C1 Cash Cost & Capital Expenditure Notes:

1. Presented C1 Cash Costs assumes USD:BRL FX rate of 5.00, gold price of US$1,750 per ounce and silver price of US$18.00 per ounce.

2. C1 Cash Cost of copper produced is a non-IFRS measure, as more particularly discussed under the “Non-IFRS Measures” section of this press release.

3. Capital expenditures shown do not include discretionary greenfield or brownfield exploration.

Ero Copper Corp

625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

 10 Ero Copper Corp
625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

TSX: ERO

MINERAL RESOURCE GROWTH

The following section discusses the updated mineral reserve and resource estimates as they relate to the Pilar and Vermelhos Districts, and target areas for continued growth. Relative comparisons of 2020 to 2019, where applicable, refers to the 2020 updated mineral resource and reserve estimate discussed herein and the 2019 Technical Report, respectively. A more fulsome discussion of each of the deposits of the Curaçá Valley and the installed infrastructure within each of the mineral districts can be found in the 2019 Technical Report.

The mineral resources, planned development and exploration target areas within the Pilar and Vermelhos Districts outlined in this press release will be made available on the Company’s Curaçá Valley site tour and interactive three-dimensional models for the Pilar Mine and the Vermelhos System, which can be accessed via the Company’s website (www.erocopper.com) or via VRIFY Technology Inc. (“VRIFY”) (www.vrify.com).

Pilar District

The Pilar District encompasses the Pilar underground mine (which includes the zones of: Baraúna, the Deepening Extension Zone, East Limb, MSB South, the West Limb, P1P2N, R22 and P1P2W) as well as the open pit deposits of R75, and Suçuarana. In total, contained copper within the Measured and Indicated resource categories increased by approximately 166,000 tonnes of copper as compared to the 2019 Technical report, based on 30.8 million tonnes grading 1.37% copper of Measured mineral resources and 23.0 million tonnes grading 1.33% copper of Indicated mineral resources.

A major focus of the Company’s 2020 mineral resource and reserve update was to extend the known limits of the Pilar Mine at depth, targeting high-grade mineralization within the Deepening Extension Zone. During the period from September 2019 to August 2020, a total of 19,600 meters of drilling were completed in support of this objective. In total, contained copper within the Indicated mineral resource category of the Deepening Extension Zone increased by approximately 110,000 tonnes of copper (comprised of 7.5 million tonnes grading 1.86% copper vs. 1.4 million tonnes grading 2.19% copper as set out in the 2019 Technical Report). Additionally, approximately 70,000 tonnes of additional contained copper added within newly defined, high-grade, Inferred mineral resources of the Deepening Extension Zone totalling 4.5 million tonnes grading 2.12% copper, representing a 284% increase in contained copper at a 14% improvement in grade (compared to 1.3 million tonnes grading 1.86% copper as set out in the 2019 Technical Report). A drill program focused on upgrading portions of this new high-grade Inferred mineral resources within the Deepening Extension Zone is underway. Recent drilling in this area is highlighted by hole FC5367 that intercepted 29.9 meters grading 5.90% copper and FC5514 that intercepted 22.0 meters grading 2.14% copper including 9.0 meters grading 3.22% copper (please refer to the Company’s press releases dated June 23, 2020 and September 22, 2020 for additional details).

Based on a review of historical data, including structural analysis and compilation work of all drill intercepts and previously mined areas above 8.00% copper within the Pilar Mine, the Company has developed an interpolated north-plunging structural zone of high-grade potential extending to depth. Many of the Company’s best holes drilled to date in the Deepening Extension Zone are intercepts within this structural corridor. A long-section of the Pilar Mine, including the interpolated zone and historical drill intercepts above 8.00% copper is shown in Figure 1. Drilling from underground and surface utilizing directional drilling technology is currently underway to better evaluate mineralized continuity of this high-grade target area.

Vermelhos District

The Vermelhos District encompasses the Vermelhos underground mine, the N8/N9 and Siriema open pit deposits. In total, contained copper within the Measured and Indicated resource categories increased by approximately 72,000 tonnes of copper as compared to the 2019 Technical report, based on 11.8 million tonnes grading 1.21% copper of Measured mineral resources and 25.2 million tonnes grading 0.71% copper of Indicated mineral resources.

The most significant increases in contained copper within the Vermelhos District occurred within the N8/N9 deposit and Siriema, both near-surface and to depth, combined with increases within the Vermelhos Mine, were more than sufficient to offset mine depletion from 2019 to 2020. The underground additions to Measured and Indicated mineral resources within the Vermelhos District totaled 41,000 tonnes of contained copper based on 4.4 million tonnes grading 2.33% copper in Measured mineral resources and 8.7 million tonnes grading 1.00% copper in Indicated mineral resources. Contributions from the open pit deposits resulted in additions of 32,000 tonnes of contained copper based on 7.4 million tonnes grading 0.55% copper in Measured mineral resources and 16.5 million tonnes grading 0.56% in Indicated mineral resources.

 11 Ero Copper Corp
625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

TSX: ERO

Down-hole electromagnetic (“EM”) work, and follow-up drilling performed in the third quarter of 2020 identified a new target zone of mineralization supportive of the potential for multiple “stacked” mineralized structures being present between the Siriema deposit and the Vermelhos Mine, a distance of approximately 700 meters in strike-length. This new zone, now known as the “Southern Vermelhos Corridor”, extends approximately 700 meters in a north-south direction between the Siriema deposit and UG1 mining area, approximately 300 meters on east-west section and approximately 400 meters to depth. Drilling within this zone is highlighted by FSI-40, which was extended from its original length of 396 meters to 660 meters down-hole, and intersected 10.0 meters grading 4.50% copper and 0.68% nickel including 4.0 meters grading 8.53% copper and 1.25% nickel at the location of an EM anomaly. The zone was confirmed with a second hole, FSI-99, that intersected 13.2 meters grading 1.92% copper and 0.78% nickel including 2.5 meters grading 5.73% copper and 3.33% nickel, representing some of the highest copper grades discovered in the Vermelhos District outside of the Vermelhos Mine, and highest nickel grades intercepted outside of the Siriema Keel Zone to date. Extensional results along this zone are highlighted by hole FSI-92 that intersected 17.0 meters grading 0.78% copper including 7.0 meters grading 1.23% copper and hole FSI-93 that intersected 12.8 meters grading 0.68% copper including 6.0 meters grading 1.00% copper (please refer to the Company’s press release dated June 23, 2020 and September 22, 2020 for additional details). Five drill rigs are planned to be operating within the Southern Vermelhos Corridor.

TECHNICAL AND SCIENTIFIC INFORMATION

Mineral Resources

Block model tonnage and grade estimates for the Curaçá Valley were classified according to the CIM Standards and the CIM Guidelines by Sr. Porfirio Cabaleiro Rodriguez, MAIG (#3708), Mining Engineer and Director of GE21 Consultoria Mineral Ltda. (“GE21”) who is an independent qualified person as such term is defined under NI 43-101.

Mineral resources have been constrained within newly developed 3D lithology models applying a 0.45% and 0.20% copper grade envelope for high and marginal grade, respectively. Within these envelopes, mineral resources for underground (“UG”) deposits were constrained using varying stope dimensions of up to 20m by 10m by 35m applying a 0.51% copper cut-off grade, as well as a 0.32% copper marginal cut-off grade. For open pit (“OP”) deposits a cut-off grade of 0.21% copper was applied. Mineral resources are based on copper prices of US$2.90 per pound, net smelter return (“NSR”) of 94.53%, average metallurgical recoveries of 90.7%, processing costs of US$5.65 per tonne (run of mine), sorting costs for open pit deposits of US$1.00 per tonne of sorter feed and variable transportation costs to the mill (assuming an average 50% mass recovery). These variable costs, per tonne shipped to the mill are: Surubim District equal to US$4.61 per tonne; Suçuarana (Pilar District) equal to US$2.73 per tonne; and Vermelhos District equal to US$8.91 per tonne. Mining costs of US$3.10 and US$17.30 per tonne were applied for open pit and underground deposits, respectively. Mineral resources were estimated using ordinary kriging within 5m by 5m by 5m block sizes. Mineral resources associated with underground deposits were further constrained using Datamine MSO tool varying stopes dimensions from 20m by 10m by 35m to 5m by 5m by 5m. Mineral resources associated with open-pit operations were limited using a Whittle (4.7.1) 3D optimized pit. Mineral resources presented are shown inclusive of mineral reserves.

A low-grade envelope using a cut-off grade of 0.20% copper for UG deposits was used to develop a dilution envelope and development block model that was included to define the grade of blocks within the dilution envelope in the planning and design of stopes within the mineral resources and mineral reserve estimate.

Mineral resource effective date varies by deposit, with an effective date of August 8, 2020 except for P1P2 (July 24, 2020), R22W and R75 (July 9, 2019) and Suçuarana (July 3, 2020) within the Pilar District; Vermelhos Mine (July 29 2020), Siriema and N8 (July 4, 2020), N9 and Vermelhos North (July 9, 2019) within the Vermelhos District; and Surubim District effective date of July 9, 2019 except for Terra do Sal (July 3, 2020). Presented mineral resources inclusive of mineral reserves. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding.

 12 Ero Copper Corp
625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

TSX: ERO

Mineral Reserves

The mineral reserves for the Pilar, Vermelhos, and Surubim Districts are derived from the Measured and Indicated mineral resources as defined within the resource block models following the application of economic and other modifying factors further described below. Inferred mineral resources, where unavoidably mined within a defined mining shape have been assigned zero grade. Dilution occurring from Measured and Indicated resource blocks within the mineral reserve plan was assigned grade based upon the estimated mineral resource grade of the blocks included in the dilution envelope. Mineral reserves were classified according to the CIM Standards and the CIM Guidelines by Dr. Beck Nadar of BNA Mining Solutions, in association with GE21, who is an independent qualified person as such term is defined under NI 43-101.

Mineral reserve cost assumptions are based on actual operating cost data during the 18-month period from January 1, 2019 to June 30, 2020. The USD:BRL rate of 4.27 was selected based on the average rate during this same period.

A summary of the mineral reserve estimate parameters is provided below:

Mining Costs (US$/tonne ore mined)
Pilar UG Mine	$	23.52
Vermelhos UG Mine	$	21.95
C12 UG Mine	$	18.66
Surubim OP Mine	$	2.65
Suçuarana & C12 OP Mine	$	3.06
N8/N9 & Siriema OP Mines	$	2.17
Transportation Costs (US$/tonne to mill)
Pilar Mine		(none	)
Vermelhos Mine	$	10.96
Surubim OP Mine	$	5.48
C12 OP/UG Mine	$	5.98
Suçuarana mine	$	3.54
Processing Costs (US$/tonne milled)
Pilar & Vermelhos Mines	$	7.41
Suçuarana & C12 OP/UG Mine	$	7.90
Surubim, Siriema & N8/N9 OP Mines	$	4.12
Metallurgical Recovery (average)
Pilar UG Mine		90.39	%
Vermelhos UG Mine		91.49	%
N8/N9, Siriema, Suçuarana & C12 OP/UG Mines		89.0	%
Surubim OP Mine		85.0	%
LME Copper Price (US$/lb)	$	2.75
Net Smelter Return		94.53	%
Transport & Sales Costs (US$/tonne copper)	$	82.15
CFEM Royalty (after tax)		1.58	%
Foreign Exchange Rate (USD:BRL)		4.27

 13 Ero Copper Corp
625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

TSX: ERO

Reserve Parameters Note

All road-maintenance costs associated with the Curaçá Valley haul road have been allocated to Vermelhos. Calculated differences between open pit mining and processing costs are a result of additional incurred costs related to contract mining vs. employee operated and allocation of mining and processing administrative / fixed costs between mines. Metallurgical recoveries vary by area as outlined. G&A costs of US$4.16 per tonne were applied to the current operating underground mining operations of Pilar and Vermelhos. USD:BRL foreign exchange rate of 4.27 applied to all mines, except Suçuarana and C12 OP/UG mines, as the mine designs did not change from 2019, thus remain based on a USD:BRL foreign exchange rate of 3.70.

Other modifying factors considered in the determination of the mineral reserve estimate include:

· 10% dilution has been applied to all mines, with the exception of the Pilar UG Mine which varies with stope height. For planned stopes within the Pilar UG Mine with a height above 35 meters, dilution of 15% has been applied, while for planned stopes with a height of 26 meters, dilution of 7% has been applied.

· Maximum bench height of 15 meters for open pit mines. Maximum underground stope dimensions based on geotechnical assessments from previous studies and past operating experience within each mining area, combined with evaluation of induced stresses and the Rock Mass Rating (“RMR”).  

· The Vertical Retreat Mining (“VRM”) method with cemented paste fill was selected for the Pilar UG Mine, where the method is currently in use. For the Vermelhos UG Mine, Sublevel with cemented rockfill (“CRF”) is the mining method currently in use on consideration of the dip, plunge and thickness of the ore-bodies, the rock quality designation (“RQD”) and overall competence of the host rock.

· Mining recovery of 100% has been applied for open pit mines. The Pilar UG Mine and Vermelhos UG Mine assume 96% and 95% mine recovery, respectively.

· Within designed stopes, all contained material was assumed to be mined with no selectivity. Inferred mineral resources, where unavoidably included within a defined mining shape have been included in the mineral reserves estimate at zero grade. Mining dilution resulting from Measured and Indicated blocks was assigned the grade of those blocks captured in the dilution envelope using the estimated grade within the blocks of the dilution and development model.

DEEPENING INFERRED PROJECT

Approximately 19,600 meters of drilling was performed between September 2019 and August 2020 in support of the updated mineral resource estimate of the Deepening Extension Zone. While a significant portion of the Company’s target area was upgraded to Indicated mineral resource, a portion of higher-grade material within the zone remained unconverted due to drilling access and orientation of the zone.

Inferred mineral resources within the Deepening Extension Zone totals approximately 4.5 million tonnes grading 2.12% copper, resulting in contained copper of approximately 95,000 tonnes. An independent preliminary economic assessment was prepared on this material utilizing the infrastructure that will be built to support development and mining of the mineral reserves of the Deepening Extension Project, as more fully described in the Company’s updated LOM Plan, presented elsewhere in this press release.

The Deepening Inferred Project is preliminary in nature and based on the Inferred mineral resources of the Deepening Extension Zone which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the Deepening Inferred Project will be realized. Mineral resources that are not mineral reserves do not have a demonstrated economic viability. The Company has commenced a program to continue infill drilling of the Inferred resource to further upgrade this material; however, until this work is completed and the Inferred resources have been upgraded to reserves, there is no certainty this material will be converted into mineral reserves.

 14 Ero Copper Corp
625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

TSX: ERO

Inferred Mineral Resource Captured in Deepening Inferred Project

The Deepening Inferred Project envisions application of the same mining and recovery methods as the Deepening Extension Project. As a result, the same mining recovery and dilution assumptions have been applied as elsewhere within the Pilar Mine. Specifically, these include: mining recovery of 96% and dilution which varies with stope height. For planned stopes with a height above 35 meters, dilution of 15% has been applied, while for planned stopes with a height of 26 meters, dilution of 7% has been applied.

The technical and scientific information related to the Deepening Inferred Project has been reviewed and approved by Sr. Porfirio Cabaleiro Rodriguez, MAIG (#3708), Mining Engineer and Director of GE21 who is an independent qualified person as such term is defined under NI 43-101.

	Deepening Extension Zone, Inferred Resources		Deepening Inferred Project,   Captured Inferred Resource
Tonnes (000s)		4,476		4,203
Grade (% Cu)		2.12		2.01
Contained Cu (000 tonnes)		94.8		84.5

Deepening Inferred Project Notes:

1. Mineral resource effective date of August 8, 2020. All figures have been rounded to the relative accuracy of the estimates. Summed amounts may not add due to rounding. Mineral resources which are not mineral reserves do not have demonstrated economic viability.

2. The Inferred mineral resources (undiluted) outlined in this table are further detailed in the “Mineral Resources, 2020” table, presented elsewhere in this press release. Mineral resources of the Pilar Mine are based on copper prices of US$2.90 per pound, net smelter return (“NSR”) of 94.53%, average metallurgical recoveries of 90.7%, processing costs of US$5.65 per tonne (run of mine) and mining costs of US$17.30 per tonne.

3. Mineral resources have been constrained within newly developed 3D lithology models applying a 0.45% and 0.20% copper grade envelope for high and marginal grade, respectively. Within these envelopes, mineral resources for underground deposits were constrained using varying stope dimensions of up to 20m by 10m by 35m applying a 0.51% copper cut-off grade, as well as a 0.32% copper marginal cut-off grade. Mineral resources have been estimated using ordinary kriging inside 5m by 5m by 5m block sizes. The mineral resource estimates were prepared in accordance with the CIM Standards, and the CIM Guidelines, using geostatistical and/or classical methods, plus economic and mining parameters appropriate to the deposit. Please see “Technical and Scientific Information” below for additional information on the stated mineral resources.

Deepening Inferred Project Results

The Deepening Inferred Project is expected to utilize the same infrastructure that will be built in support of the Deepening Extension Project, including the new external shaft. Over the LOM of the Deepening Inferred Project, approximately 4.2 million tonnes grading 2.01% copper are expected to be mined, producing at total of approximately 78,900 tonnes of copper after average metallurgical recoveries of 93.2%. Initial production from the Deepening Inferred Project is expected to commence in 2023 after completion of the new external shaft and associated development in support of the Deepening Extension Project of the Pilar Mine.

As a result of shared infrastructure and associated synergies with the Deepening Extension Project as reflected in the Company’s LOM production plan, total capital costs, comprised of only equipment and development, are expected to total R$193.5 million over the LOM of the Deepening Inferred Project. As there is no certainty that the Deepening Inferred Project will be realized, fixed processing costs and the majority of operational support costs, other than variable operational support costs associated with concentrate transport for copper produced from the Deepening Inferred Project, have been allocated to the Company’s LOM production plan, as described elsewhere in this press release. As such, C1 cash costs for the Deepening Inferred Project are expected to average US$0.25 per lb. of copper produced.

Where applicable, C1 cash costs, as defined by the Company are presented in US Dollars (“USD”) per pound of copper produced, based on a USD:BRL foreign exchange rate of 5.00, and by-product gold and silver prices of $1,750 and $18.00 per ounce, respectively.

 15 Ero Copper Corp
625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

TSX: ERO

PRESS RELEASE

Deepening Inferred Project: Production, Capital & Operating Costs

	Q4 2020*		2021		2022		2023			2024			2025			2026			2027			2028			2029			2030			2031			2032			2033
Production Plan
Tonnes Mined & Processed (000s)		-		-		-		19.4			40			71			193			260			254			645			956			803			536			426
Grade Mined & Processed (% Cu)		-		-		-		0.62	%		0.77	%		1.30	%		1.20	%		1.68	%		1.66	%		1.90	%		2.59	%		2.30	%		1.61	%		1.94	%
Recoveries (%)		-		-		-		85.6	%		87.8	%		91.3	%		90.9	%		92.4	%		92.4	%		92.9	%		93.8	%		93.9	%		92.3	%		93.3	%
Copper in Concentrate (000 tonnes)		-		-		-		0.1			0.3			0.8			2.1			4.0			3.9			11.4			23.2			17.4			8.0			7.7
Operating Costs (R$ 000s)
Mining Costs		-		-		-		650			3,226			6,709			15,602			24,456			27,593			62,295			66,358			52,316			34,314			25,890
Processing		-		-		-		398			830			1,462			3,960			5,342			5,216			13,275			19,665			16,515			11,027			8,767
Operational Support		-		-		-		40			106			327			811			1,562			1,505			4,420			8,994			6,727			3,080			2,980
less: Precious Metal Credits		-		-		-		(174	)		(464	)		(1,431	)		(3,546	)		(6,828	)		(6,580	)		(19,320	)		(39,315	)		(29,406	)		(13,270	)		(12,838	)
plus: TC/RCs, Net of Tax		-		-		-		(110	)		(284	)		(878	)		(2,221	)		(4,133	)		(4,208	)		(11,864	)		(25,168	)		(20,427	)		(8,747	)		(7,861	)
C1 Cash Costs Basis (R$ 000s)		-		-		-		805			3,414			6,189			14,606			20,399			23,526			48,806			30,534			25,726			26,403			16,937
C1 Cash Costs (US$/lb)		-		-		-	$	0.71		$	1.13		$	0.66		$	0.63		$	0.46		$	0.55		$	0.39		$	0.12		$	0.13		$	0.30		$	0.20
Capital Costs (R$ 000s)
Deepening below -965
Equipment		-		-		-		-			-			-			-			18,678			13,392			-			20,146			-			-			-
Ventilation and Cooling		-		-		-		-			-			-			-			-			-			-			-			-			-			-
Development		-		-		-		1,010			5,486			4,571			5,761			14,960			32,820			22,165			105			-			-			-
Shaft		-		-		-		-			-			-			-			-			-			-			-			-			-			-
Infrastructure		-		-		-		-			-			-			-			-			-			-			-			-			-			-
Total Capital Costs (R$ 000s)		-		-		-		1,010			5,486			4,571			5,761			33,638			46,212			22,165			20,251			-			-			-

Deepening Inferred Project, C1 Cash Cost & Capital Expenditure Notes:

1. Presented C1 Cash Costs assumes USD:BRL FX rate of 5.00, gold price of US$1,750 per ounce and silver price of US$18.00 per ounce. Fixed processing costs and the majority of operational support costs, other than variable operating support costs associated with concentrate transport from the Deepening Extension Project, are allocated to the Company’s LOM Plan.

2. C1 Cash Cost of copper produced is a non-IFRS measure, as more particularly discussed under the “Non-IFRS Measures” section of this press release.

3. The Deepening Inferred Project is preliminary in nature and based on the Inferred mineral resources of the Deepening Extension Zone which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the Deepening Inferred Project will be realized. Mineral resources that are not mineral reserves do not have a demonstrated economic viability. The Company has commenced a program to continue infill drilling of the Inferred resource to further upgrade this material; however, until this work is completed and the Inferred resources have been upgraded to reserves, there is no certainty this material will be converted into mineral reserves.

4. Capital expenditures shown do not include discretionary greenfield or brownfield exploration.

 16 Ero Copper Corp
625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

TSX: ERO

PRESS RELEASE

Non-IFRS Measures

The Company utilizes certain non-IFRS measures, including C1 cash cost of copper produced, which are not measures recognized under IFRS, as more particularly described in the Company’s management’s discussion and analysis for the three and nine months ended September 30, 2020, a copy of which can be found on the Company’s website (www.erocopper.com) and on SEDAR (www.sedar.com). The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

C1 cash cost of copper produced (per lb) is the sum of production costs, net of capital expenditure development costs and by-product credits, divided by the copper pounds produced. C1 cash costs reported by the Company include treatment, refining charges, offsite costs, and certain tax credits relating to sales invoiced to the Company’s Brazilian customer on sales. By-product credits are calculated based on actual precious metal sales (net of treatment costs) during the period divided by the total pounds of copper produced during the period. C1 cash cost of copper produced per pound is a non-IFRS measure used by the Company to manage and evaluate operating performance of the Company’s operating mining unit and is widely reported in the mining industry as benchmarks for performance but does not have a standardized meaning and is disclosed in addition to IFRS measures.

QUALITY ASSURANCE / QUALITY CONTROL

Current QA/QC Program

The Company is currently drilling underground with core drill rigs using a combination of owned and third-party contracted drill rigs. During the period from September 2019 to September 2020, third party drill rigs were operated by Major Drilling, DrillGeo Geologia e Sondagem Ltda., and Layne Christensen Co., all of whom are independent of the Company. Drill core is logged, photographed and split in half using a diamond core saw at MCSA’s secure core logging and storage facilities. Half of the drill core is retained on site and the other half-core is used for analysis, with samples collected on one-meter sample intervals unless an interval crosses a geological contact. Reverse circulation cuttings are split at the drill rig using one-meter sample intervals. All sample preparation is performed in the secure on-site laboratory of Mineraҫão Caraíba S.A. (“MCSA”). Total copper is determined using a nitric-hydrochloric acid digestion and Atomic Absorption Spectrometry (“AAS”) and/or Titration. Oxide copper values are determined using sulfuric acid digestion followed by AAS. All such sample results have been monitored through a quality assurance and quality control (“QA/QC”) program that includes the insertion of certified standards, blanks, and pulp and reject duplicate samples. Regular check-assays are submitted to ALS Brasil LTDA’s facility located in Vespasiano, Minas Gerais, Brazil, at a rate of approximately 5%. ALS Brasil LTDA is independent of the Company.

Historic Database QA/QC Validation

Samples that were analyzed prior to the implementation of MCSA’s current QA/QC program in 2007 have been subjected to the same quality control tools used currently to allow for an evaluation of the accuracy and precision of the grades that were obtained. Based on the demonstrated quality associated with the current sampling procedures and the post-2007 performance of MCSA’s laboratory, which is evaluated through daily QA/QC campaigns, MCSA conducted a post mortem QA/QC analysis, with the aim of validating the samples that were analyzed before the QA/QC program was effectively implemented. The post-mortem QA/QC analysis involved re-analyzing a minimum of 10% of the total number of samples with no corresponding QA/QC data to validate the historic assays. Please refer to the 2019 Technical Report for additional information related the post-mortem QA/QC analysis.

 17 Ero Copper Corp
625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

TSX: ERO

Qualified Persons and the NI 43-101 Technical Report

Sr. Porfirio Cabaleiro Rodriguez, MAIG, has reviewed and approved the scientific and technical information contained in this press release. Mr. Rodriguez is independent of the Company and a qualified person as defined by NI 43-101.

The Company will file the associated NI 43-101 compliant report on SEDAR (www.sedar.com) and on the Company’s website (www.erocopper.com) within 45 days of this press release, which will serve as an update to the technical report entitled “2019 Updated Mineral Resources and Mineral Reserves Statements of Mineração Caraíba’s Vale do Curaçá Mineral Assets, Curaçá Valley”, dated November 25, 2019 with an effective date of September 18, 2019, prepared by Rubens Jose De Mendonça, MAusIMM, of Planminas – Projectos e Consultoria em Mineração Ltd. (“Planminas”), Porfirio Cabaleiro Rodrigues, MAIG, Leonardo de Moraes Soares, MAIG, and Bernardo Horta de Cerqueira Viana, MAIG, all of GE21, and each a “qualified person” and “independent” of the Company within the meanings of NI 43-101 (the “2019 Technical Report”).

5.2       Disclosure for Restructuring Transactions

Not applicable.

Item 6. Reliance On subsection 7.1(2) of National Instrument 51-102

Not applicable.

Item 7. Omitted Information

Not applicable.

Item 8. Executive Officer

Makko DeFilippo, Vice President, Corporate Development
Tel:         (604) 429-9244         Email: info@erocopper.com

Item 9. Date of Report

December 1, 2020.

 18 Ero Copper Corp
625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

TSX: ERO

CAUTION REGARDING FORWARD LOOKING INFORMATION AND STATEMENTS This press release contains “forward-looking information” within the meaning of applicable Canadian securities laws. Forward-looking information includes statements that use forward-looking terminology such as “may”, “could”, “would”, “will”, “should”, “intend”, “target”, “plan”, “expect”, “budget”, “estimate”, “forecast”, “schedule”, “anticipate”, “believe”, “continue”, “potential”, “view” or the negative or grammatical variation thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, statements with respect to the Company's expected operations at the Vale do Curaçá Property, the estimation of mineral reserves and mineral resources, the significance of any particular exploration program or result and the Company’s expectations for current and future exploration plans including, but not limited to, planned areas of additional exploration, the potential to convert any portion of the inferred mineral resource base, the significance of any drill results or new discoveries and targets, including without limitation extensions of defined mineralized zones, possibilities for mine life extensions or continuity of down-plunge mineralization, further extensions and expansion of mineralization near the Company’s existing operations of the Vale do Curaçá Property, statements with respect to any benefits of ore sorting implementation including sustainability objectives and statements with respect to any potential positive outcomes from the Deepening Inferred Project.  

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this Press Release including, without limitation, assumptions about: favourable equity and debt capital markets; the ability to raise any necessary additional capital on reasonable terms to advance the production, development and exploration of the Company’s properties and assets; future prices of copper and other metal prices; the timing and results of exploration and drilling programs; the accuracy of any mineral reserve and mineral resource estimates; the geology of the Vale do Curaçá Property, NX Gold Mine and the Boa Esperança Property being as described in the technical reports for these properties; production costs; the accuracy of budgeted exploration and development costs and expenditures; the price of other commodities such as fuel; future currency exchange rates and interest rates; operating conditions being favourable such that the Company is able to operate in a safe, efficient and effective manner; work force continues to remain healthy in the face of prevailing epidemics, pandemics or other health risks, political and regulatory stability; the receipt of governmental, regulatory and third party approvals, licenses and permits on favourable terms; obtaining required renewals for existing approvals, licenses and permits on favourable terms; requirements under applicable laws; sustained labour stability; stability in financial and capital goods markets; availability of equipment and critical supplies, spare parts and consumables; positive relations with local groups and the Company’s ability to meet its obligations under its agreements with such groups; and satisfying the terms and conditions of the Company’s current loan arrangements. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.  

Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. Such risks include, without limitation the risk factors listed under the heading “Risk Factors” in the Annual Information Form of the Company for the year ended December 31, 2019, dated March 12, 2020 (the “AIF”).  

Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking information, there may be other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended.  

The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained herein. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information.  

Forward-looking information contained herein is made as of the date of this press release and the Company disclaims any obligation to update or revise any forward-looking information, whether as a result of new information, future events or results or otherwise, except as and to the extent required by applicable securities laws.  

Cautionary Notes Regarding Mineral Resource and Reserve Estimates In accordance with applicable Canadian securities regulatory requirements, all mineral reserve and mineral resource estimates of the Company disclosed or incorporated by reference in this press release have been prepared in accordance with NI 43-101 and are classified in accordance with the CIM Standards.  

Mineral resources which are not mineral reserves do not have demonstrated economic viability. Pursuant to the CIM Standards, mineral resources have a higher degree of uncertainty than mineral reserves as to their existence as well as their economic and legal feasibility. Inferred mineral resources, when compared with Measured or Indicated mineral resources, have the least certainty as to their existence, and it cannot be assumed that all or any part of an Inferred mineral resource will be upgraded to an Indicated or Measured mineral resource as a result of continued exploration. Pursuant to NI 43-101, Inferred mineral resources may not form the basis of any economic analysis. Accordingly, readers are cautioned not to assume that all or any part of a mineral resource exists, will ever be converted into a mineral reserve, or is or will ever be economically or legally mineable or recovered.

 19 Ero Copper Corp
625 Howe Street | Suite 1050 | Vancouver | BC | V6C 2T6 | Canada

EX-99.28

Exhibit 99.28

 

KPMG LLP
Chartered Professional Accountants
PO Box 10426 777 Dunsmuir Street
Vancouver BC V7Y 1K3
Canada Telephone (604) 691-3000
Fax (604) 691-3031
Internet www.kpmg.ca

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of Ero Copper Corp.

We, KPMG LLP, consent to the use of:

· our Independent Auditors’ Report dated March 16, 2021 on the consolidated financial statements of Ero Copper Corp., which comprise the consolidated statements of financial position as at December 31, 2020 and December 31, 2019, and the related consolidated statements of operations and comprehensive income, changes in shareholders’ equity and cash flows for the years then ended and notes to the consolidated statements, including a summary of significant accounting policies; and

· our Independent Auditors’ Report dated March 12, 2020 on the consolidated financial statements of Ero Copper Corp., which comprise the consolidated statements of financial position as at December 31, 2019 and December 31, 2018, and the related consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity and cash flows for the years then ended and notes to the consolidated statements, including a summary of significant accounting policies;

 
included in this Registration Statement on Form 40-F being filed by Ero Copper Corp. with the United States Securities and Exchange Commission.

/s/ KPMG LLP

Chartered Professional Accountants

June 4, 2021

Vancouver, Canada

KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.