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, driven by higher average metal prices and improved mining performance [16][5] - Adjusted EBITDA for Q4 reached $300 million, reflecting a 33% margin, with full-year adjusted EBITDA totaling $772 million, an 8% increase compared to 2024 [16][17] - Net income for the year was $223 million, or $1 per share, while free cash flow was negative $105 million due to debt reductions and dividends [7][20] Business Line Data and Key Metrics Changes - Zinc production in Q4 was 91,000 tons, a 9% increase from Q3, with full-year production totaling 316,000 tons, meeting guidance [8][6] - The mining segment generated net revenues of $532 million in Q4, with adjusted EBITDA of $266 million, 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 in Q4 and $2 billion for the full year [13][14] Market Data and Key Metrics Changes - Zinc prices remained well-supported throughout 2025 due to persistent concentrate tightness and low LME inventories, with treatment charges in China averaging negative levels [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 enhancing operational stability and cash generation, particularly through the Aripuanã project, which is expected to reach full capacity in 2026 [10][29] - The Cerro Pasco Integration Project aims for a life-of-mine extension of over 15 years, enhancing profitability and solidifying the company's presence in Peru [11][29] - The company is actively evaluating value-accretive opportunities, particularly in copper, as it aims to strengthen its balance sheet and reduce debt [29][63] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational stability and cash flow generation for 2026, despite potential challenges from the rainy season and political uncertainties in Peru [35][57] - The company remains committed to reducing gross debt and enhancing financial flexibility while maintaining a strong investment-grade rating [22][30] Other Important Information - The company reported a net debt reduction of $96 million, reflecting its liability management efforts [20] - The liquidity position remains robust, with total liquidity of $842 million, supporting financial commitments over the next five years [22] Q&A Session Summary Question: Impact of seasonal rains on Aripuanã production - Management indicated that the rainy season has not significantly impacted production, with expectations to reach full capacity in the second half of the year due to the installation of the fourth filter [34][35] Question: Consideration of additional silver streaming - Management confirmed that while they are aware of the interest in silver, they are not currently prioritizing additional silver streaming agreements [41][43] Question: Cash flow impact of Cerro Lindo silver stream - Management noted that the silver streaming agreement will step down from 65% to 25%, which will positively impact cash flow [46][47] Question: Update on Ayawilca project and Tinka Resources investment - Management stated 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 at this time [54][55] Question: Current electoral environment in Peru - Management acknowledged the political instability but emphasized that the economic context remains strong and that relationships with local communities are stable [57][59] Question: Debt repayment plans for 2026 and 2027 - Management indicated that any excess cash generated will be used for dividends and debt repayment, with a focus on reducing debt [60][62] Question: Details on hedging program for silver and gold - Management confirmed a small portion of silver production has been hedged, with a floor around $52 and a cap around $84 [60] Question: CapEx for Cerro Pasco project - Management confirmed that CapEx for the Cerro Pasco project is on track, with expectations to spend around $42 million this year [68]