Nexa Resources S.A.(NEXA) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Zinc production was slightly lower year-over-year at 91,000 tons, with a decrease in Cerro Lindo offset by increases from other mines [5][22] - Adjusted EBITDA was $118 million, down 28% from the same period a year ago, but up around 10% compared to the first quarter [7][24] - The company recorded a net income of $23 million in the quarter, reversing a net loss of $35 million from the previous year [8][24] - Liquidity remained strong with a leverage of 1.3x [8][30] Business Line Data and Key Metrics Changes - Smelting operations saw metallic zinc sales increase by 3% year-over-year and around 8% quarter-over-quarter, driven by stronger seasonal demand [7][28] - Mining segment net revenues were $246 million, down 18% year-over-year due to lower metal prices, with EBITDA of $44 million [27] - Smelting EBITDA was $73 million, 57% higher than the same quarter of last year, attributed to higher treatment charges and by-product prices [28] Market Data and Key Metrics Changes - Average zinc price was $2,763 per ton, down 11% year-over-year but up 2% compared to the previous quarter [36] - Zinc benchmark prices remained high at around $245 per ton, indicating persistent pressure on defined zinc supply [37] Company Strategy and Development Direction - The company aims for an average life of mine of 12 years, focusing on identifying new ore bodies and validating mineral resources [13] - Major projects include Aripuanã, with 58% of total CapEx committed, and ongoing exploration in Cerro Lindo, Vazante, and Pasco [10][15][17] - The company is committed to maintaining a robust project pipeline to support long-term growth, with a focus on both zinc and copper [39] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about production stability in the second half of the year, following operational setbacks in Cerro Lindo [43] - The company remains focused on efficiency, productivity, and cost gains, despite challenges in the market [43] - Management anticipates that the market will stabilize, with expectations for zinc prices to rise due to low warehouse stocks [70] Other Important Information - The company reaffirmed its 2019 CapEx guidance of $420 million, with $95 million invested in the second quarter [32] - The company is facing a 30-day delay in the Jarosite conversion at Cajamarquilla, expected to conclude by November [43] Q&A Session Summary Question: Can you provide more color on declining ore grades and how this incorporates into your guidance? - Management indicated that while there was a slight decrease in ore grades due to geomechanical instability, they expect grades to improve in the third quarter [49] Question: What are your expectations for other operating expenses? - Management expects a decrease in other operating expenses due to one-off provisions and FX impacts [62] Question: Will production increase in the second half of the year to meet guidance? - Management confirmed expectations for stable production in the second half, with no anticipated instability [65] Question: How do you view the impact of weaker copper and zinc prices on expansion plans? - Management stated that they are maintaining their investment plans despite current price trends, focusing on long-term growth [74] Question: What options are available to improve liquidity? - Management acknowledged liquidity concerns and is exploring options to enhance market performance and transparency [100][101]