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Price Forecast:

Bullish Case: With the ERO implied volatility showing a steady flattening and historical returns indicating potential upside for longer holding periods, bullish momentum is likely. Successful developments at the Furnas project can further enhance investor sentiment and drive prices upwards.

Bearish Case: Potential share dilution from upcoming equity raises and production delays at Tucumã could pressure ERO's stock price. High implied volatility, particularly on short-term puts, suggests market caution over near-term uncertainties.

Potential Outcomes:

1) Successful Furnas development: 65%.

2) Further equity raises causing dilution: 80%.

3) Production delays at Tucumã: 30%.

4) Strong copper price recovery: 60%. These estimates are based on historical performance and current market trends.

Trading Oracle: Consider a bullish long call debit spread using ERO 12/20/2024 $22.50C and selling $25C to capitalize on increasing implied volatility. Targeting ERO's potential price recovery and upcoming project news, this strategy provides high reward:risk with a favorable profit probability.

August 27, 2024