Ero Copper - Earnings Call - Q4 2024

Transcript

Operator (participant)

Thank you for standing by. This is the conference operator. Welcome to the Ero Copper fourth quarter 2024 operating and financial results conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one, on your telephone keypad. If you need assistance during the conference call, you may signal an operator by pressing star, then zero. I would now like to turn the conference over to Courtney Lynn, Executive Vice President, External Affairs and Strategy. Please go ahead.

Courtney Lynn (EVP of External Affairs and Strategy)

Thank you, Operator. Good morning and welcome to Ero Copper's fourth quarter and full year 2024 earnings call. Our operating and financial results were released yesterday afternoon and are available on our website, along with our financial statements and MD&A for the three and twelve months ended December 31, 2024. A corresponding earnings presentation can be downloaded directly from the webcast and is also available in the presentations section of our website. Joining me on the call today are Makko DeFilippo, President and Chief Executive Officer; Wayne Drier, Executive Vice President and Chief Financial Officer; and Gelson Batista, Executive Vice President and Chief Operating Officer. Before we begin, I'd like to remind everyone that today's discussion will include forward-looking statements, which involve risks and uncertainties that may cause actual results to differ materially.

For a detailed discussion of these risks and their potential impact on our business, please refer to our most recent annual information form available on our website, as well as on SEDAR and EDGAR. Unless otherwise noted, all figures discussed today are in U.S. dollars. With that, I'll now turn the call over to Makko DeFilippo.

Makko DeFilippo (President and CEO)

Thank you, Courtney, and thank you, everyone, for taking the time to join us today. As we previously released operating results in February, I thought I would take a moment here to outline our strategy, reflect on some of Ero's achievements in 2024, and set expectations on cadence for 2025. First and foremost, Ero is an incredible business. We have a committed leadership team, a passionate workforce, a diverse portfolio of operating assets, and an enviable long-term growth project in front of us. It is an honor to be stepping into this role at such a pivotal time for the company. There are several moving pieces in our portfolio over the next few quarters, which we will have ample time to address on this call. Our near-term strategy is simple and can be summarized by four steps. Step one: achieve commercial production at Tucumã. Two: deleverage our balance sheet.

Three: aggressively advance the long-term growth initiatives we have in our portfolio, including our partnership on Furnas. Four: initiate returns to shareholders. With that said, let's start with Tucumã. Before diving into the challenges we've worked through, I want to highlight some key positives. Since completing the project on schedule last year with a local workforce and doing it without a single lost-time injury, our mining operations have continued to track ahead of schedule. The grades from our infill drill program have been higher than we expected. Of particular note, our process plant has consistently achieved at or above design met recoveries and concentrate grades for months now. I am deeply proud of these achievements. At the same time, I acknowledge we've had several challenges that impacted production, both outside and inside our mine gate.

External to our operation at Tucumã, we faced a multi-week power outage due to an extreme weather event, as well as extended periods of low power quality, which required intervention. Since resolving these factors, we encountered conventional teething pains as we ramped up throughput volumes. These teething pains can broadly be described as material flow constraints, which range from minor equipment issues such as valve dimensioning, small component, and pipe weld failures, as well as more substantial constraints, including damage sustained to one of our three tailings filters, which impacted operating flexibility in that portion of the circuit. While the dollar quantum for these fixes and adjustments is small, on the order of $2 million, each one of these adjustments required dedicated engineering, manufacturing, delivery to our site in Pará, and installation during a scheduled maintenance period. This is a long-winded way of saying they all required time.

Working closely with our operational teams and third-party providers at the end of last year, we developed a plan to implement these changes during two extended periods of planned downtime in January and February. These shutdowns were completed, and I'm pleased to report that we are already seeing substantial improvement with performance strengthening from late February into March. The final repair to our third tailings filter remains on track for completion by the end of Q1. With these improvements either completed or on track for completion this month, we are already seeing and expect to continue to see increased plant reliability and throughput volumes, and consequently, increasing production beginning in the second quarter. I want to stress this production cadence is aligned with our reaffirmed full-year guidance.

Switching gears slightly to production cadence at Caraíba and Xavantina, for different reasons, we expect Q1 to be the softest of the year as we work to set these operations for long-term success. At Caraíba, as I outlined in our Q3 conference call, we only expect to see the benefit from additional development we are doing at Pilar to emerge over the next several quarters. Mobilization of a second development contractor is well underway. If you have any specific questions on how that work is progressing, Gelson can provide details during our Q&A. At Xavantina, we are working to transition the mine to a fully mechanized operation to increase productivity, reduce costs, and most importantly, reduce exposure to our workforce, which is our top priority.

We have a capital investment cycle occurring at Xavantina this year, which includes the purchase of equipment to complete the mechanization of the mine, ventilation and cooling upgrades, as well as an asset integrity program to ensure that we can operate through the duration of our now extended reserve life. Again, it is worth noting that our full-year guidance, including elevated all-in sustaining cost guide for 2025, reflects these investments. We are excited about the future prospects for the Xavantina operations and see considerable potential for further growth. For both of these assets, we expect softness to be isolated to the first half of the year as these changes are implemented and expect the impact to be the most evident during the first quarter. Again, our guidance ranges reflect this. With that backdrop, let's discuss the second step of our strategy: deleveraging the balance sheet.

There are two key points to highlight here. Firstly, we see a clear pathway to an inflection as Tucumã production ramps up, and we expect a fairly significant deleveraging to occur with the achievement of commercial production. Near to medium term, we are targeting a normalized net debt leverage ratio of 1.5 times. While the pace of achieving this milestone will be influenced by copper price, we are confident that the quality of our assets and consolidated operating margins will support our ability to meet this objective. Second, regarding overall liquidity, we remain well positioned as Tucumã rounds the corner and the recent expansion of our evolving credit facility, which Wayne will touch on. The next two steps of our strategy, advancing long-term growth and shareholder returns, will emerge over the coming quarters.

While long-term growth remains a priority, we intend to pursue shareholder returns more proactively once we make meaningful progress on deleveraging our balance sheet. Touching on Furnas quickly, we have five drill rigs on site right now and expect to complete the 28,000-meter phase one drill program by mid-year and the majority of the 17,000-meter phase two drill program by year-end. In parallel, we are advancing key technical work streams, including a geotechnical program, hydrogeology studies, as well as additional metallurgical test work on the high-grade zones we are drilling. We are also progressing initial mine and infrastructure layout designs to support a preliminary economic assessment, which we expect to complete in the first half of 2026. We have a great partner on this project in Vale Base Metals, and we are very encouraged by the results we are seeing thus far.

To ensure we have sufficient time for Q&A, I will leave it there and pass the call to Wayne, who will provide more detail on our financial results.

Wayne Drier (EVP and CFO)

Thank you, Makko. Our financial results reflect record copper production in the fourth quarter, as well as improved metal prices and stronger operating margins for the full year. These factors contributed to cash flow from operations of $60.8 million for the quarter and $145.4 million for the full year. Adjusted EBITDA for the quarter and year were equally strong at $59.1 million and $216.2 million, respectively. During the fourth quarter, we experienced increased foreign exchange volatility, particularly around the U.S. presidential election. This included significant fluctuations in the U.S. dollar to Brazilian real exchange rate, and the real ended the year at over 6 to the dollar. As a result, we reported realized losses of $5.9 million for the quarter and $8.2 million for the year on foreign exchange hedges we implemented in late 2023 to mitigate the risk of the real strengthening against the U.S.

dollar during Tucumã's construction and ramp-up. At quarter end, our total notional foreign exchange derivative positions stood at $390 million, consisting of zero-cost collars with a weighted average floor and ceiling of 5.43 and 6.49 real per dollar, respectively, extending through the end of 2025. These realized foreign exchange losses impacted adjusted net income by approximately $0.06 per share for the quarter and $0.08 per share for the year. As a result, adjusted net income attributable to the owners of the company was $17.4 million in the fourth quarter, or $0.17 per diluted share, and $80.4 million for the full year, or $0.78 per diluted share. Our liquidity position remained strong at approximately $90 million at year-end. As noted in our financials, we further enhanced our financial flexibility shortly after year-end by amending our existing credit facility to support our expanded operating footprint.

This amendment increased total commitments from $150 million to $200 million, extended the maturity date from December 2026 to December 2028, and secured a 25 basis point reduction in the applicable margin on drawn funds at certain leverage ratios. As a result, our pro forma available liquidity at year-end was $140.4 million. I'll now pass the call back to Makko to share some concluding remarks.

Makko DeFilippo (President and CEO)

Thank you, Wayne. Before we move into the Q&A session, I'll just quickly thank our global management team for all the hard work we have put in over the past several months. We have reorganized our business, made substantial operational improvements across our portfolio, and are well positioned as ever to execute on our vision for Ero. I look forward to delivering continued progress in the quarters ahead. Now I'll turn the call back to the operator to open the line for questions.

Operator (participant)

Thank you. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. The first question comes from Orest Wowkodaw with Scotiabank. Please go ahead.

Orest Wowkodaw (Managing Director and Senior Equity Research Analyst)

Hi, good morning. A couple of follow-up questions on the ramp-up at Tucumã. I guess the first one, are you still experiencing intermittent power outages that's impacting the mill, or is that now pretty much settled down?

Makko DeFilippo (President and CEO)

Yeah, thanks, Orest. I guess we outlined on our last quarterly conference call, we're still working to implement a longer-term solution, so we're still seeing some oscillations in power quality. I would just note that the adjustments we made at the end of last year have significantly improved our plant's ability to accommodate that volatility. To put that into context, last year, when we were experiencing the interruptions in power quality, we were having between 15 and 20 mill power trips per day, which, as I like to say, was a bit like trying to run a marathon with your shoelaces tied together. Since we made the changes late last year, we've experienced just a handful a month, so significantly reduced. Obviously, we still want to put in the long-term solution, which we've been working on here, and expect to have that done pretty imminently here.

I think, as I outlined on our last quarter conference call, the investment there is quite small. We've finalized the engineering work and are working hard with our third-party provider to put that in place. That installation's off-site. We don't anticipate any interruption to operations going forward. Again, for the long term, it's the right investment to make.

Orest Wowkodaw (Managing Director and Senior Equity Research Analyst)

Is that expected then should we think about by end of Q2 that that off-site solution is finished?

Makko DeFilippo (President and CEO)

Yeah. Yeah. As I said, so far, what we're seeing here coming out of the shutdowns in January-February, we haven't seen any impact to our progress on ramp-up related to power quality because of the changes that we made in Q4.

Orest Wowkodaw (Managing Director and Senior Equity Research Analyst)

Okay. You mentioned the tailings filtration issue. I think expect to be resolved by the end of the quarter. Anything else that's notable at this point that we should be thinking about that could impede the ramp-up beyond sort of your normal teething pains?

Makko DeFilippo (President and CEO)

Orest, this is a great question. Nothing notable that we see now. I mean, I think, like all ramp-ups, there's uncertainty in the pace once we complete the we jump over the hurdles that are in front of us, which I feel comfortable that we've worked very hard in Q3 and Q4 to identify those constraints. All I can say is that there's nothing notable that we see in front of us right now. However, I would note that we were very thoughtful in putting our guidance range together for Tucumã to reflect some of the uncertainties in resolving these issues. I'd say so far, things are on track. We're pretty happy with performance coming out of these shutdowns in January-February, and nothing new or notable that we see right now.

Orest Wowkodaw (Managing Director and Senior Equity Research Analyst)

Okay. And just one more quick one, if I could. If we start to see some volatility in the copper price and there's potentially some teething pains on the ramp-up, can you just remind us sort of what are the order of operations on financial levers that you would pull to try to protect liquidity? I assume that means cutting the exploration and others, but I'm just curious on sort of what the pecking order is, if required.

Makko DeFilippo (President and CEO)

Yeah. Look, I mean, I think I said in the call, we're pretty confident where we're at. Obviously, copper price uncertainty remains topical. I think the reality is where we're at now with the expanded credit facility, we feel comfortable that we can execute on our strategy, particularly with Tucumã rounding the corner here. As you mentioned, we have some levers in our portfolio, particularly around the work we're doing at Furnas. As outlined, we have 40,000 meters of drilling planned this year. Our criteria and under the earn-in agreement, we're only required to do 28,000 meters of drilling. So we've got quite a bit of flexibility on those work programs. There's some other areas that I think we're investing for the long term that are really important that we'd like to continue, which is infill drilling, the deepening, obviously working hard to get the shaft completed at Pilar.

Those are all some of the levers we have on the investment side. Again, we'd like to keep those programs going. They're reflected in our guidance ranges for the year, but certainly some flexibility on that side. We also have, as I outlined, a pretty large investment cycle at Xavantina this year. We continue to be frustrated by the value that we get for that asset in our portfolio, and we have a great partner there. We could potentially look to isolate that from our CapEx spend for the year. Again, all these longer-term solutions or all these levers, I think, are about dislocations of value, and we feel pretty comfortable with where we're at right now.

Orest Wowkodaw (Managing Director and Senior Equity Research Analyst)

Thank you. Appreciate the color.

Operator (participant)

The next question comes from Guilherme Rosito with Bank of America. Please go ahead.

Guilherme Rosito (Equity Research Associate)

Hi. Good morning, everyone. Thank you for taking my questions. I have two questions. First is on the C1 guidance. I just wanted to go over and understand what's driving the large C1 increase this year, especially as we consider year-end is now at $570-$575, and you should have some volume improvement throughout the year, especially in the second half. Just trying to understand what's driving and how should we expect C1 throughout the year. My second question is on Xavantina. I just wanted to understand what drove the large increase in AISC this quarter, the C1 increase, but the increase was quite substantial in AISC. Just trying to go through that as well. Thank you.

Makko DeFilippo (President and CEO)

Yeah, thank you. Let's start with Caraíba on C1. Great question. Thanks for raising it. C1 guidance for the year, I would say that if you look back at history, partly because of the consistent over the last eight years, the Brazilian real, as you quite well know, has consistently depreciated against the U.S. dollar. We've been consistently, I'd say, fairly conservative with FX when we put together our guidance for the year. Obviously, with the BRL on the path that it is on now, we expect that to benefit our C1 cash costs relative to our guidance range, which was done at a lower BRL. Given the volatility in diesel prices and kind of where we see our business, we felt comfortable with the range we put forward and certainly the FX.

The macro environment is highly uncertain right now, and we were pretty thoughtful about putting our C1 cash cost guidance together for both assets. I would say the biggest drivers are going to be FX, as you mentioned, being substantially more conservative than spot pricing on the BRL. We're also mining. Our contribution from the deeper part of the mine has increased year-on-year, so that's driving a bit of additional costs in our business. Then grades as well. A bit lower grades across the portfolio, a combination of factors there, Surubim and Vermelhos, obviously being top of mind on driving a bit lower consolidated grade. That all has an impact on our operating margins at Caraíba. I think we've been pretty thoughtful about putting a range there and some of the levers that we have in our portfolio that we're working on.

I think I've talked last couple of years about the Full Potential program that we initiated across the company. We've continued to work on that, and I expect to continue to see cost reductions, particularly coming out of this reorganization that we did here in the first quarter. Stay tuned. We were pretty thoughtful about our guidance range there at Caraíba. On Xavantina, on sustaining costs, a couple of things there. It's really just it's a relatively small operation, so high-grade, small tonnage. When you get fluctuations in grade or volume, just because of the denominator being small, it tends to magnify the impacts on all-in sustaining costs and C1. Those are the main drivers there. I'd say it's volume-related, nothing intrinsic to the asset.

When you look ahead to our 2025 guidance, as I mentioned, the biggest step up in all-in sustaining costs year-on-year is all the investments that we're making in asset integrity, mine improvement, and that's fully reflected in our guidance and in our all-in sustaining costs.

Guilherme Rosito (Equity Research Associate)

Great. That's very clear. Thank you, guys.

Operator (participant)

The next question comes from Craig Hutchison with TD Cowen. Please go ahead.

Craig Hutchison (Mining Equity Research Analyst)

Hi. Good morning, guys. I just wanted to circle back on the power issue at Tucumã. Can you just give us an explanation or me an explanation with regards to what the off-site power solution is? Is there any further work you guys are doing on the on-site power solution? Is there a potential for some standby power at some point in the future?

Makko DeFilippo (President and CEO)

Yeah. Thanks, Craig. Good questions. Let's start with the easy one, and then we'll get into some technical aspects on the electrical side. On-site, no. The answer is no. We're not considering that at the moment. We don't think that the situation requires alternative on-site energy like generators. Obviously, we could do that in the future, but we don't see a need. I would say that the windstorm that happened last year, I just want to remind you, not only did it knock out power to our operations, but it took out power to 230,000 people in the region. You're talking about a major infrastructure outage. It was a unique situation that we certainly don't expect to happen again. On the power quality, I'm going to say this as simplistically as possible. If you've got questions afterwards, I'm happy to get into the engineering aspects.

Effectively, there's two alternatives. We're looking at both solutions right now to see which one's the most cost-effective, given the work that we did on power monitoring. Effectively, it's a series of capacitors or batteries that when there's an overvoltage, they absorb energy. When there's undervoltage, it discharges energy so that everything downstream is experiencing stable power quality, even though what's coming into that piece of equipment has volatility. That's a very, very, very simplified way of explaining an electrical engineering problem. If you've got any questions, you can give me a call afterwards, and I'll explain it in more detail.

Craig Hutchison (Mining Equity Research Analyst)

I appreciate that. Maybe just one follow-up question for me. Just on Xavantina, you mentioned, I think, Q1 is going to be the biggest quarter. Is Q1 going to look a lot like Q4 with respect to grades and throughput, or should we expect maybe slightly lower grades, slightly higher throughput?

Makko DeFilippo (President and CEO)

Yeah. I'd expect to be down quarter on quarter. Obviously, we're only in early March here. Team's working still on achieving a good plan. I think there's a number of factors there that are contributing. Just as a reminder, Xavantina had significant grade outperformance for, I think, the better part of two years relative to plan. We obviously see that grade coming down just based on the levels that we're operating. Then some of the, again, renewed focus on asset integrity and some operational changes that we made on procedures and protocols and preparation for mechanized mining. We pushed out some of the pillar recovery that we had in Q1 and that we did in Q4. Those are very high-grade areas. We have a pastefill plant that we invested in. That process involves putting paste in and then recovering those high-grade pillars.

We have been very successful at doing that over the years, but the timing of that pillar recovery tends to influence the consolidated grade quarter on quarter. The area that we had, the way that we have outlined it, was Q1 is really about setting up some of those areas to make sure that we could do it safely and effectively. I would expect a drop in tonnage as we set up that mine for mechanization and do some additional development, change the interlevel spacing, and then a bit on grade just because of the timing of that pillar recovery program and some of the additional work that we are doing there.

Craig Hutchison (Mining Equity Research Analyst)

Thanks, guys.

Operator (participant)

Once again, if you have a question, please press star, then one. The next question comes from Marcio Farid with Goldman Sachs. Please go ahead.

Marcio Farid (VP)

Thank you. Good afternoon, Makko. Thanks for the time. Does feel like you're going to have a busy emission, obviously, with focus on Tucumã's commercial declaration. Caraíba offers you a spotlight as well. I'm just wondering, I mean, do you need to see all those four strategic pillars or capital allocation drivers to be solved before you take the next steps, either M&A or further partnerships as well? Can you see that new levers happening before you actually leverage the balance sheet and deliver Tucumã and make sure that you advance your Furnas? Just thinking about the next steps, please. Thank you.

Makko DeFilippo (President and CEO)

Yeah. Thank you. The questions did not come in crystal clear for us on our end. I heard a couple of points that I am going to address. I probably missed a couple of things, so just let me know what I missed. I heard you talk about prioritization of those steps and potential M&A opportunities as it relates to continued growth. I would say, look, our focus as an executive team, as a company, is on the four steps we outlined. Obviously, it is critical that we achieve commercial production for Tucumã. It is the gateway to the next three steps of the strategy. That is our main focus right now. Obviously, we look at things. We have a corporate development team, some of which are sitting here next to me.

I would say that as our stakeholders and shareholders expect us to look at things, particularly when they're in our backyard. We are crystal clear about our priorities. I would say that M&A isn't an immediate focus. Obviously, we look at things to see if it makes sense. We think we have an incredible development asset in front of us. I look at the world through that lens. Obviously, it's a bit longer term and not producing right now, but it's a really high-quality asset. We are doing the work on that project. I think as our technical and operational teams dig in there, I think we get more and more excited about the prospects and what that asset means for our company. We have an incredible asset or incredible partnership with Vale Base Metals on that project.

We expect to continue to talk about what we're doing there in the quarters ahead. I'd say, again, crystal clear focus on the four steps we outlined unless there's a major value dislocation, but hard to see that right now given our priorities. That was one. I'm getting my notes passed to me, but it says, "Would M&A happen before Tucumã is delivered?" I'd say no. I don't think we get the value for yeah, no, it won't happen.

Marcio Farid (VP)

Perfect. Thank you.

Operator (participant)

The next question comes from Dalton Baretto with Canaccord Genuity. Please go ahead.

Dalton Baretto (Managing Director)

Thanks, guys. Makko, congrats on your first call as CEO. A couple of questions for me. I want to start on Caraíba. The second contractor, it sounds like they're mobilized. Sounds like they're going to be done by the end of Q1. What sort of steps are you putting in place to ensure that once they're done and you're back to one contractor, that you don't sort of fall behind again?

Makko DeFilippo (President and CEO)

Good question. And thanks, Dalton. I welcome any constructive feedback after the call's over. On a contractor, maybe I'll just start out here, and then I'll let Gelson dive in on mobilization and how we're doing there.

I think when you go back all the way to our long-term production plans, I think it's important to note that we always had third party, in fact, up until 2021, third-party contractor being as part of our operating strategy and our fleet was always the case. When I look ahead on our development rates, we continue to expect about a third of our development in the future to be allocated to a third-party contractor. When I look over the long term, I expect us to continue to focus on making sure that we maintain and increase development. Obviously, the deepening that we have over the years, we've been doing additional development there. All I can say, Dalton, for assurance is that on the development, it's something that we track on a monthly basis, development sufficiency.

It's something that we're focused on increasing this year, obviously, with the second contractor coming in. Yeah, it's part of our strategy going forward. It's reflected in our guidance, and I continue to expect it to be reflected in our guidance going forward. Maybe I'll just hand the call over to Gelson for an update on mobilization.

Gelson Batista (EVP and COO)

Thanks, Makko. Just to clarify on the second contractor, they're finishing what we called on-the-job training. It's about a 45-day process that we do regularly on site. They are in the process of finishing that. We hope that we finish that by the end of this month. We're talking about 290 people, right, and a large fleet. This is a very good contractor. It's been benchmarking, equipment checked. Looking at what you ask about how we're going to make sure that the performance of this contractor will be aligned with our expectation. I think they'll be working in separate areas. We've been operating in various areas where we're improving conditions on the infrastructure side, which, of course, impacts the contractor. Also checking very carefully about the conditions of the equipment that they bring in on site.

The previous contractor that we have in there, they actually did a pretty good month in February so far from what we're waiting for them, mostly related to equipment availability and quality of the equipment, also the people. We will be working very closely with all the operations and the contractor putting this together moving forward. I expect that, yes, there will be a transition period there, but we expect these development rates that will increase further.

Dalton Baretto (Managing Director)

Great. Thank you for that, Gelson. Maybe I can switch gears to Tucumã. Makko, I know you said that you're almost there or pretty much there on the recovery front. On the throughput side, I know you're taking sort of multiple scheduled shutdowns. When the mill is up and running, can you give us a sense for how it's doing and what sort of the cadence for shutdowns is over the next sort of weeks and months?

Makko DeFilippo (President and CEO)

Yeah. Thanks, Dalton. Yeah. As I outlined, again, pretty much from the day that we turned on that plant, we've achieved recoveries and concentrate grades above our design targets. I think you see that pretty well in Q4 with approaching 89% recovery, obviously pretty high grades as well, 2.2% or close to it. I think there's a couple of things that are happening right now, Dalton. Obviously, we came through these shutdowns in January/February. We're in the process of increasing production volumes on the front of the plant. I'd say one of the realities is that even if you look at Q4, 2.2% copper through the plant, that's about two and a half to three times above the life-of-mine average feed. And so where we're seeing really strong performance, I would say, is the back end of the plant, particularly our concentrate filter, which is operating near.

It's currently coming out of these shutdowns, is operating near its design. Obviously, recoveries and concentrate grades are hanging in there. When I think about the front of the plant and what throughput volumes we're achieving there, it's probably less relevant to the overall total contained copper in the system. That's where I feel like the performance is, we're seeing really strong performance. Day on day, we're increasing. Obviously, we don't expect, I would hope, but we're not expecting the lifetime line average grade to remain at 2.2% copper. What we'll be doing over here the next couple of weeks and months is ratcheting down the grade and increasing throughput volumes. We expect overall copper production to maintain somewhat stable from what we're achieving right now. Again, this is relatively early days.

We just came out of the shutdown in late February, seeing very strong performance. We hope it continues. Let's see how we go here. Yeah, pretty excited about what we're seeing overall.

Dalton Baretto (Managing Director)

Great. Thanks for that, Makko. Maybe if I can ask one last one. It's interesting to hear you talk about starting to initiate capital returns, particularly given the grade profile at Tucumã. I'm just wondering if you've given any thought to what form that would take. Are you leaning more towards buybacks, maybe a small dividend, or the supplementary, depending on performance? Just any thoughts there?

Makko DeFilippo (President and CEO)

Yeah. Thanks, Dalton. I think it's a bit too early to talk about the playoffs. We're focused on getting Tucumã up and running, delivering the balance sheet. I think I would say having discussions with shareholders on what form that looks like. Let's get through steps one and two of the four-step program and then have a discussion about what step four looks like.

Dalton Baretto (Managing Director)

Great. Thanks, guys. That's awesome. Thanks.

Operator (participant)

This concludes the question and answer session. I would like to turn the conference back over to Makko DeFilippo for any closing remarks. Please go ahead.

Makko DeFilippo (President and CEO)

Yeah. Thanks, everyone. Really appreciate you joining this morning. If you've got any questions, our team is always available. We look forward to catching up in just a couple of months here. Thanks, everyone.

Operator (participant)

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