Nexa Resources S.A.(NEXA) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated adjusted EBITDA for the first nine months of 2023 reached $286 million, down by 55% from the same period last year [19] - Total revenue for the third quarter was $649 million, down 8% year-over-year, mainly due to lower Zinc LME prices and smelting sales volumes [36] - Adjusted EBITDA for the third quarter decreased by 32% year-over-year, reaching $82 million, primarily due to lower LME prices [42] - Net debt to adjusted EBITDA ratio increased from 2.8 to 3.06 times quarter-over-quarter, mainly due to lower adjusted EBITDA [20] Business Line Data and Key Metrics Changes - Zinc production increased to 87,000 tons in the third quarter, up 15% year-over-year, attributed to higher volumes from various mines [39] - Smelting segment metal sales totaled 154,000 tons in the third quarter, down 5% from the previous year [59] - Cash cost in the mining segment decreased to $0.35 per pound compared to $0.57 per pound in the third quarter of last year [39] Market Data and Key Metrics Changes - LME Zinc price averaged $2,428 per ton in the third quarter, down by 26% from the same quarter last year [20] - LME Copper price averaged $8,356 per ton, up by 8% year-over-year [20] - The company noted that the declining LME Zinc prices were influenced by speculation regarding the global economy and the performance of the Chinese economy [20] Company Strategy and Development Direction - The company is focused on completing the ramp-up of the Aripuanã mine, with an emphasis on improving recoveries and concentrate quality [64] - Priorities include reducing debt, optimizing costs, and advancing the Cerro Pasco Integration Project [26][64] - The company is assessing options for inorganic growth but prioritizes organic growth opportunities [26] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges due to inflation and high interest rates, impacting metal prices [15] - Despite current challenges, the long-term outlook for Zinc and Copper prices remains positive, driven by demand in construction and infrastructure [63] - Management expressed confidence in the company's ability to generate cash flow and improve financial discipline [78] Other Important Information - The company successfully closed a $320 million sustainability-linked revolving credit facility, effective October 20, 2023 [43] - Cash balance increased, and net debt declined in the third quarter, with total cash sufficient to cover obligations maturing in the next four years [43] Q&A Session Summary Question: What is the interest rate in the new sustainability-linked RCF? - The interest rate is SOFR plus 1.6%, with potential adjustments based on compliance with ESG targets [5] Question: What production should we expect from Aripuanã next year? - Full production is expected by the second quarter of next year, with a running duration of about 2.2 million tons per year [27] Question: Why did costs increase in Cajamarquilla despite lower raw materials? - Costs increased mainly due to energy cost inflation, and management is implementing measures to reduce costs and improve productivity [25] Question: When would you expect Aripuanã to reach breakeven? - Breakeven is anticipated towards the end of the first quarter of next year, influenced by ongoing capital expenditures [76] Question: What can we expect in terms of free cash flow impact in Q4 and 1Q '24 from Aripuanã? - Management indicated that guidance will be provided in January, and cash flow expectations will depend on ramp-up progress [8]