• Total Consolidated Net Revenues: $709 million, up by 9% year-over-year.
• Adjusted EBITDA: $183 million, 111% higher than the same quarter last year.
• Adjusted EBITDA Margin: Approximately 26%, expanding by 12 basis points.
• Net Leverage Ratio: Improved to 2.2 times from 2.7 times in the previous quarter.
• Zinc Production: 83,000 tonnes, down by 5% year-over-year.
• Cash Cost: Decreased to minus $0.01 per pound from $0.34 per pound year-over-year.
• Metal Sales: 153,000 tonnes, down 1% year-over-year.
• Smelting Cash Cost: $1.16 per pound, up from $1.01 per pound year-over-year.
• Free Cash Flow Generation: $51 million for the third quarter of 2024.
• Available Liquidity: Approximately $845 million.
• Average Debt Maturity: 5.7 years with an average cost of debt of 6.36%.
• Zinc Market Price: Averaged $2,779 per tonne, up by 14% year-over-year.
• Copper Market Price: Averaged $9,210 per tonne, up by 10% year-over-year.
• Silver Market Price: Averaged $29 per ounce, up by 25% year-over-year.

• Warning! GuruFocus has detected 7 Warning Signs with NEXA.

Release Date: November 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Nexa Resources SA (NYSE:NEXA) reported a 9% year-over-year increase in total consolidated net revenues for the third quarter, reaching $709 million, driven by higher average LME prices.
• Adjusted EBITDA for the third quarter was $183 million, a significant 111% increase from the same quarter last year, with an adjusted EBITDA margin of around 26%.
• The company successfully reduced its net leverage ratio to 2.2 times, down from 2.7 times in the previous quarter and 3.1 times in the third quarter of last year.
• Aripuana marked its third consecutive quarter of EBITDA growth and generated positive operating cash flow, with significant improvements in treated ore volumes.
• Nexa Resources SA (NYSE:NEXA) has reduced its cash cost guidance for 2024 by 64% from the previous guidance, reflecting higher LME metal prices and increased byproduct contributions.

Negative Points

• Zinc production declined by 5% year-over-year due to the absence of contributions from Morro Agudo and lower zinc average grades at Vazante and El Porvenir.
• Copper production decreased by 4% in the third quarter due to lower grade areas.
• The smelting segment faced a 15% increase in cash costs year-over-year, attributed to higher raw material costs and lower treatment charges.
• Aripuana's zinc production experienced a minor dip in the third quarter due to lower grades and increased talc levels in the flotation circuit.
• The performance of tailings filters at Aripuana is currently limiting capacity, necessitating the acquisition of a fourth filter, which will not be operational until 2025.

Q & A Highlights

Q: Can you provide more details on the status of Aripuana and the need for a new tailings filter? A: Ignacio Rosado, CEO: Aripuana is currently operating at 90% capacity, processing 130,000 to 140,000 tonnes per month. The existing filters are not suitable for the fines in the ore, limiting capacity. A fourth filter, necessary to increase capacity, will be approved soon and is expected to be operational in 10 to 14 months, costing between $12 million and $14 million. This will allow us to potentially exceed current design capacity if mine development progresses as expected.

Q: How do recent trends in TC/RCs impact Nexa, given your exposure? A: Ignacio Rosado, CEO: The market is experiencing negative TCs due to a concentrate shortage, an unusual situation. This affects smelter income, and we are evaluating contract by contract. If buying concentrate at negative terms and selling at lower premiums is not viable, we will cut production. Our vertical integration helps mitigate some impacts, with 50% of Cajamarquilla's feed and 80-90% of Brazil's feed coming from our mines.

Q: What is Nexa's approach to capital allocation and potential M&A, given rising free cash flow? A: Ignacio Rosado, CEO: We aim to reduce gross debt due to high interest costs and focus on developing our mines, particularly the Pasco project. We are actively looking for copper M&A opportunities to diversify and reduce volatility. Our target is around $800 million for 50,000 to 60,000 tonnes of copper production.

Q: What are your expectations for year-end reserves, particularly at Cerro Lindo, Vazante, and Aripuana? A: Ignacio Rosado, CEO: At Cerro Lindo, we aim to extend the life of mine by drilling near existing deposits. We have 8 to 10 years of life of mine and are exploring new anomalies. Aripuana has potential for 30 to 35 years of reserves, and we are focusing on infill drilling. At Pasco, we are integrating mines to increase NSR and profitability.

Q: How do you view the supply-demand dynamics for zinc going forward? A: Jose Carlos Del Valle, CFO: Zinc fundamentals remain strong, with supply constraints in concentrate markets. We expect prices to stay above previous lows, supported by consistent demand growth and zinc's role in the energy transition. We anticipate continued tightness in supply, which should support prices.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.