QS Research · Michael Burry's Scion Capital analyst template · 2006
Ero Copper Corp. (ERO)
As of 2026-11-08 · 11/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case -38% · downside -71% · upside +170%
Section 13's FY2025/TTM base is stale because Q3 2026 TTM adjusted EBITDA was $656.6M and net debt was $353.5M at 2026-09-30; I therefore keep six-year normalized EBITDA as the base and show the current TTM beside it. The market is pricing ERO on the Q3 2026 record, but the FY2020-FY2025 normalized record is only $172.2M average EBITDA, $107.1M average net income and -$39.0M average FCF (S2, S5, N13). At the company's own 12.9x FY2025 EV/EBITDA (N24), normalized EBITDA is worth about $17.93/share (-38% vs $28.86), while the same multiple on current TTM adjusted EBITDA is about $77.90/share (+170%); the gap is the normalization, not the multiple. I call it watch: the current earnings power may be real, but the deep-value rule is not met because the normalized base is below price while the current-TTM upside is far above it.
Key numbers
- Share price: $28.86
- Market cap: $3.01B
- Latest financial period: FY Dec 2025 to Dec 31, 2025
- Revenue (FY Dec 2025): $785.8M
- EV / EBITDA (FY Dec 2025): 12.9x
- P/E (FY Dec 2025): 11.4x
- Price / book: 3.21x
The 15 boxes
- ✓ 1. Long-form business notes
Ero is a Brazil-only copper producer that sells copper concentrate (with gold/silver by-products) from the Caraíba hub-and-spoke complex and, since July 1, 2025, from the Tucumã Operation, plus gold doré and, from Q4 2025, stockpiled gold concentrate from Xavantina. FY2025 (year to Dec 31, 2025) revenue was US$785.8M (copper concentrate US$619.7M, gold US$166.1M), gross profit US$344.6M, operating income US$270.6M and operating cash flow US$395.1M against US$262.8M capex. The business changed shape between the oldest annual report on file (FY2021, dated 2022-03-11) and the newest (FY2025, dated 2026-03-30): the then-unbuilt Boa Esperança project became the Tucumã Operation, MCSA Mining Complex and NX Gold Property were renamed Caraíba and Xavantina, and Caraíba's head grade roughly halved while mill throughput grew. The six-year record is cyclical — revenue US$489.9M (FY2021) to US$426.4M (FY2022), net income US$201.1M (FY2021) to a US$68.5M loss (FY2024) and US$263.7M (FY2025) — and the newest figures in the sources are FY2025 plus 2026 guidance; no quarterly or 2026 results and no share price/market cap are provided.
- ✓ 2. Competitive advantage
No durable advantage is supported by the sources: Ero is a price taker on copper and gold, and its own 40-F says its competitive position rests mainly on cost versus other producers, not on brand, switching costs or network. The margin record is cyclical, not improving: operating margin 55.6% in FY2021 fell to 22.3% in FY2023 and was 34.4% in FY2025, averaging about 35% over FY2020-FY2025 (computed from the XBRL table). Returns follow the same rhythm (FY2024 net loss of -$68.5M on $108.9M of operating income; FY2025 net income $263.7M), and the asset base is 100% Brazil, ~97% of assets in-country at 2025-12-31.
- ✓ 3. 10-Q takeaways
Q3 2026 (three months to Sep 30, 2026) was a record quarter: revenue $348.0M vs $177.1M in Q3 2025, gross profit $169.6M, cash flow from operations $191.2M, adjusted EBITDA $200.6M, net income attributable to owners $116.2M ($1.10 diluted) and adjusted net income attributable to owners $129.3M ($1.22 diluted) — the adjusted figure is higher than reported, so one-offs net reduced, not boosted, earnings. Volumes rose and realized prices jumped (copper $6.21/lb, gold $3,876/oz), but unit costs rose too: consolidated copper C1 $2.51/lb vs $2.00 in Q3 2025, mined gold AISC $3,607/oz. Cash and liquidity built ($114.1M cash, $264.1M available liquidity) and net debt fell to $353.5M from $452.7M at Q2 2026. Guidance given in both the interim MD&A and the same-quarter release is numeric: copper output unchanged at 67,500-77,500 t, copper C1 cost raised to $2.25-$2.45/lb, Xavantina total gold raised to 75,000-80,000 oz but mined gold cut to 30,000-35,000 oz, capex unchanged at $285-$330M.
- ○ 4. Corporate governance
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ○ 9. Insider trading interpretation
- ○ 10. Earnings-call notes
- ✓ 11. Impression of the shareholder letter
Filled; members read this box.
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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