Nexa Resources S.A.(NEXA) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2025, the company reported net revenues of $903 million, an 18% increase sequentially and a 22% increase year-over-year [16] - Adjusted EBITDA for Q4 was $300 million, reflecting a 33% EBITDA margin, with a full-year adjusted EBITDA of $772 million, an 8% increase compared to 2024 [16][17] - The company recorded a net income of $81 million or $0.38 per share for Q4, and a full-year net income of $223 million or $1 per share [5][7] - Free cash flow for the full year was negative $105 million, impacted by debt reductions and dividends [20] Business Line Data and Key Metrics Changes - Zinc production in Q4 reached 91,000 tons, a 9% increase from Q3, with full-year production totaling 316,000 tons, meeting guidance [4][6][8] - The mining segment generated net revenues of $532 million and adjusted EBITDA of $266 million in Q4, resulting in a 50% EBITDA margin [9] - In the smelting segment, total metal sales were 142,000 tons for Q4 and 567,000 tons for the full year, with net revenues of $573 million and adjusted EBITDA of $34 million in Q4 [13][14] Market Data and Key Metrics Changes - Zinc prices remained well-supported throughout 2025 due to persistent concentrate tightness and low LME inventories [23] - Treatment charges in China averaged negative levels during the year, reflecting raw material scarcity [23] - Copper prices appreciated in 2025 driven by supply discipline and sustained demand, particularly from electrification [24] Company Strategy and Development Direction - The company is focused on operational stability and disciplined capital allocation, with key projects like Aripuanã and Cerro Pasco Integration Project being central to long-term value creation [29] - The company aims to generate sustainable cash flow to strengthen its balance sheet and support a balanced capital allocation approach, including deleveraging and shareholder returns [30] - The company is actively looking for opportunities in the copper market, with a focus on maintaining a solid financial position [62] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational stability and cash generation potential of Aripuanã, especially with the upcoming commissioning of the fourth filter [10][29] - The company remains committed to reducing gross debt and enhancing financial flexibility, with a target of lowering interest expenses over time [22] - Management acknowledged the political environment in Peru but emphasized the strong economic context and good relationships with local communities [56][58] Other Important Information - The company maintained a robust liquidity position with total liquidity of $842 million, including an undrawn $320 million revolving credit facility [22] - The average debt maturity increased to 7.6 years, reflecting proactive liability management [22] - The company is advancing its ESG strategy, focusing on climate action, community engagement, and governance improvements [27] Q&A Session Summary Question: Impact of seasonal rains on Aripuanã production - Management confirmed that the rainy season has not significantly impacted production, with expectations to reach full capacity in the second half of the year [34][35] Question: Consideration of additional silver streaming - Management stated that while they are aware of the interest in silver, they are not currently considering additional silver streaming as a priority [41][43] Question: Cash flow impact of Cerro Lindo silver stream - Management explained that the silver streaming agreement will step down from 65% to 25%, which will positively impact cash flow [46] Question: Update on Ayawilca project and Tinka Resources investment - Management indicated that they are assessing the Ayawilca project following the disapproval of the environmental impact study and have decided not to pursue further investment in Tinka Resources [54] Question: Debt repayment plans for 2026 and 2027 - Management confirmed that debt repayment remains a priority, with plans to use excess cash for debt reduction [59] Question: Details on hedging program for silver and gold - Management provided details on the hedging program, with a floor around $52 and a cap around $84 for silver [60] Question: CapEx for Cerro Pasco integration project - Management confirmed that CapEx for the Cerro Pasco project is on track, with expectations to spend around $42 million this year [68]