Nexa Resources S.A.(NEXA) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net revenues of $708 million, a 13% increase compared to the previous quarter, and adjusted EBITDA of $161 million, reflecting a 28% sequential increase driven by higher sales volumes and stronger byproduct prices [11][26] - Free cash flow improved to $17 million, supported by better working capital management [11][30] - The consolidated adjusted EBITDA margin for the quarter was 23%, up three percentage points from the previous quarter [28] Business Line Data and Key Metrics Changes - The mining segment produced 74,000 tonnes of zinc, a 9% increase quarter over quarter, while total zinc sales in the smelting segment reached 145,000 tonnes, a 12% increase compared to the first quarter [11][16] - Consolidated mining cash cost net of byproducts decreased to -$0.11 per pound, a significant improvement from $0.11 per pound in the first quarter [14] - The smelting conversion cost stood at $0.39 per pound, up 19% quarter over quarter, primarily due to higher maintenance expenses [17] Market Data and Key Metrics Changes - The average LME zinc price during the second quarter was $2,641 per ton, marking a 7% decline both year over year and quarter over quarter [14] - The average LME copper price was $9,524 per ton, down 2% year over year but up 2% quarter over quarter [38] - The average LME silver price reached $34 per ounce, representing a 17% increase both year over year and quarter over quarter [39] Company Strategy and Development Direction - The company is focused on the Aripuana project, which is expected to unlock full production capacity and improve cash flow once the fourth tailings filter is operational [7][21] - The Cerro Del Pasco integration project is progressing well, with key milestones achieved, which is critical for long-term sustainability and production expansion [22] - The integrated mine smelter business model continues to be a core competitive advantage, reducing exposure to market volatility [9] Management Comments on Operating Environment and Future Outlook - Management acknowledged operational challenges in the first quarter but expressed confidence in the recovery and long-term fundamentals of the Aripuana asset [41][87] - The company remains positive on the medium to long-term outlook for zinc, driven by structural demand from sectors such as energy transition [37][44] - Management emphasized the importance of maintaining a solid balance sheet and improving financial flexibility through proactive liability management [33][34] Other Important Information - The company invested $137 million in CapEx during the year, with a significant portion allocated to sustaining activities [28][29] - The liquidity position remains healthy, with available liquidity of approximately $738 million [33] Q&A Session Summary Question: Guidance changes for metals production - Management explained that guidance changes were primarily due to challenges at Aripuana and Vasante, which impacted production forecasts [50][51] Question: Geotechnical challenges at Vasante - Management clarified that the geotechnical issues were related to a specific area, and they are taking precautions to ensure safe production [56][59] Question: Exploration results and reserve replacement - Management indicated that they expect to replace reserves mined this year and will incorporate positive exploration results into year-end resources [62][64] Question: Timing for filter installation at Aripuana - Management confirmed that the commissioning of the new filter is on track for March-April next year, with no expected delays [70][81] Question: Balance between deleveraging, dividends, and CapEx - Management stated that they prioritize extending mine life and reducing gross debt, aiming for a leverage level around one time [74][75] Question: Negative working capital changes - Management expects to reverse the negative working capital trend by the end of the year, similar to previous years [82][85]