Nexa Resources S.A.(NEXA) - 2022 Q1 - Quarterly Report

Financial Performance - Nexa reported net revenues of US$722 million in Q1 2022, a 20% increase from US$603 million in Q1 2021[5]. - Adjusted EBITDA reached a record US$208 million in Q1 2022, up 15.6% from US$180 million in Q1 2021[14]. - Adjusted net income was US$94 million in Q1 2022, compared to US$32 million in Q1 2021, resulting in adjusted EPS of US$0.62[14]. - In Q1 2022, net revenues reached $722 million, a 20% increase year-over-year, driven by higher LME prices, despite lower volumes[44]. - Adjusted EBITDA for Q1 2022 was $208 million, up from $180 million in Q1 2021, primarily due to a $74 million increase from higher LME metal prices[50]. - The company recorded a gross profit of US$128.7 million in Q1 2022, reflecting a 44.1% increase from US$89.3 million in Q1 2021[112]. - Net revenues for 1Q22 were US$561.7 million, a 19.9% increase compared to US$468.3 million in 1Q21, primarily driven by higher LME prices[156]. Production and Sales - Zinc production decreased to 66.3kt in Q1 2022, down from 77.4kt in Q1 2021, due to lower grades and temporary capacity reduction[10]. - In Q1 2022, the cost of sales amounted to $525 million, a 22% increase year-over-year, mainly due to higher metal prices and inflationary pressures[45]. - Treated ore volume in 1Q22 was 2,753kt, a 7% decrease from 1Q21 and a 12% decrease from 4Q21, with production declines noted across several mines[63]. - Zinc production at Atacocha increased by 97% year-over-year to 2.4kt, with an average grade of 1.00%[89]. - Zinc production at Vazante decreased by 28% year-over-year to 24.9kt, impacted by heavy rainfall and flooding[97]. - In 1Q22, zinc metal production at Cajamarquilla was 76.7kt, down 9% from 4Q21 and 7% from 1Q21, while zinc metal sales were 74.3kt, a decrease of 17% from 4Q21 and 4% year-over-year[129][132]. Costs and Expenses - Total cash decreased to US$599 million as of March 31, 2022, primarily due to early redemption of debt and continued investments[19]. - Free cash flow in Q1 2022 was negative US$168 million, impacted by working capital changes and higher LME prices[19]. - Cost of sales increased by 30% in 1Q22, totaling US$502.9 million compared to US$386.7 million in 1Q21, mainly due to higher metal prices and operating costs[158]. - Cash cost net of by-products increased to US$1.26/lb in 1Q22, up 26.5% from US$0.99/lb in 1Q21, driven by higher LME prices and operating costs[170]. - Cash cost net of by-products for Cajamarquilla in 1Q22 was US$1.12/lb, up from US$1.01/lb in 1Q21, but down 15% from 4Q21[135]. Capital Expenditures and Investments - Total planned capital expenditures (CAPEX) for 2022 are projected at $385 million, with $83 million spent in Q1 2022, of which 35% was allocated to expansion projects[26]. - Sustaining capital expenditures in 1Q22 amounted to US$7.3 million, focused on mine development and infrastructure[76]. - The company expects production to improve in 2Q22 compared to 1Q22, despite scheduled maintenance in early April[137][149]. - The company is evaluating its capital allocation strategy and potential partnerships for growth projects, including the Magistral project[192]. Market Conditions and Outlook - The average LME prices for zinc, copper, and lead increased by 37%, 18%, and 16%, respectively, compared to the same period in 2021[44]. - Zinc prices were supported by limited supply, with record metal spot premiums reaching US$450/t in NW Europe and US$570/t in the U.S.[199]. - The company expects treated ore volume to increase in upcoming quarters, despite a projected lower zinc ore grade, maintaining 2022 production guidance[76]. - In China, demand for zinc in 1Q22 was seasonally low, with economic growth at 4.8% year-over-year due to COVID-19 outbreaks[200]. Projects and Exploration - The Aripuanã project is on track for commercial production to begin in Q3 2022, with cumulative CAPEX of US$593 million invested to date[19]. - The Aripuanã project achieved 100% physical progress by the end of Q1 2022, with commercial production expected in Q3 2022[32]. - The company plans to drill 1,600 meters in 2Q22 to test the Hilarión West and San Martin Targets for resource expansion[194]. - The Hilarión project is in the exploration stage, focusing on geological mapping and revision of recent findings in 1Q22[194]. - The Magistral project is in FEL 3 stage, with the mEIA amendment application admitted by SENACE in 1Q22[194].