Nexa Resources S.A. ("Nexa Resources", "Nexa", or "Company") announces today its results for the three and nine months ended September 30, 2022
LUXEMBOURG / ACCESSWIRE / October 27, 2022 / Nexa Resources S.A. ("Nexa Resources", "Nexa", or "Company") announces today its results for the three and nine months ended September 30, 2022.
CEO Message - Ignacio Rosado
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"Market expectations for a global recession driven by rising inflation resulted in aggressive monetary policy tightening, increasing commodity price volatility, and which has put base metal prices under significant pressure since mid-second quarter. Although we believe the fundamental value for zinc will be strong in the coming months, given low inventory levels and a decrease or shutdown of production in smelters in Europe, we are taking appropriate measures to maintain a healthy balance sheet through consistent execution of our cost reduction programs, CAPEX optimization and improved cash flow generation strategy.
The adaptability of our organization as well as our operational efficiencies, have helped us overcome obstacles during the pandemic. We expect this resilience to help us navigate the current global macroeconomic challenges that our industry is facing. In 3Q22, we have delivered on production and costs guidance, however, our financial results have been impacted by the decrease in metal prices.
As we continue the ramp up process at Aripuanã, we are focused on optimizing process plant stability and recoveries while steadily increasing the plant throughput rate. We believe we are on track to commence commercial production in December. We are proud to have completed our first greenfield project during an extremely challenging global environment.
We remain confident about the long-term fundamentals of our industry. Our solid balance sheet and our ability to adapt to the ever-changing circumstances will enable us to generate sustainable cash flow. In the short-term, we are prioritizing to deliver on guidance, the extension of our life-of-mines and cash flow generation.
Lastly, we recently updated our ESG program and have issued targets and long-term commitments aiming at our new purpose - ‘mining that changes with the world', which will guide all our initiatives."
Summary of Financial Performance
US$ million (except per share amounts)3Q223Q219M229M21
Net revenues7036552,2541,944
Net income (loss)(40)(9)158145
Basic and diluted earnings per share ("EPS")(0.31)(0.14)0.990.85
Adjusted net income (loss) (1)(48)(9)141145
Adjusted EBITDA (1)103155598568
Adjusted basic and diluted EPS (1)(0.37)(0.14)0.860.85
Cash provided by operating activities before working capital (1) (2)93137561546
Free cash flows (1)(87)(260)(226)(300)
Total cash (3)538807538807
Net debt (1)1,1159081,115908
(1) Refer to "Use of Non-IFRS Financial Measures" for further information. Adjusted EBITDA, adjusted net income (loss) and adjusted EPS exclude the non-cash impact related to the offtake agreement. Please refer to the adjusted EBITDA reconciliation and "Offtake agreement" on pages 14 and 38 of this earnings release. For details on segment definition and accounting policy, please refer to explanatory note 2 - "Information by business segment" in the Condensed Consolidated Financial Statements ended on September 30, 2022.
(2) Working capital changes in 3Q22 had a negative impact of US$23 million, totaling a negative variation of US$203 million in 9M22. Working capital in 3Q21 had a negative impact of US$21 million, totaling a negative variation of US$43 million in 9M21.
(3) Cash, cash equivalents and financial investments.
Mining production (metal in concentrate)3Q222Q221Q229M221Q212Q213Q214Q212021
kt76.079.266.3221.577.481.679.981.1319.9
kt7.49.66.923.97.96.97.87.029.6
kt15.314.212.441.810.411.710.812.745.6
MMoz2.62.62.27.42.12.22.22.38.8
koz7.16.96.420.34.86.16.48.225.5
Smelting sales3Q222Q221Q229M221Q212Q213Q214Q212021
kt162.3152.1134.3448.8148.4156.6155.5158.4618.8
Zinc metal151.7141.4124.0417.0138.5146.7144.6148.1577.9
Zinc oxide10.710.810.431.89.89.910.910.340.9
Financial Position and Financing
ESG and Corporate Highlights
On October 6, 2022, Nexa updated its ESG program, announcing its new long-term environmental, social, and governance commitments. In line with the Paris Agreement and focused on reducing the impacts of climate change, we plan to reach net-zero greenhouse gas emissions ("GHG") by 2050, and net neutrality - the balance between carbon emissions and absorption by 2040. The 8 long-term commitments are segmented into 4 main topics: Emission Reduction and Neutrality; Safety; Water Usage and Disposal; and Plurality aimed at creating value and emphasizing the Company's new Purpose. Additionally, a new website was launched. Find out more information and details about Nexa's ESG strategy and commitments at www.nexaresources.com/esg .
On October 13, 2022, Nexa hosted its first Investor Day at the New York Stock Exchange, which marked the five-year anniversary of the Company's IPO.
In the short term, we continue to work to improve our operational performance while generating cash in our mines and smelters, expanding our current resources through infill and exploratory drilling in all our mines.
We continuously evaluate our capital allocation strategy, our existing project portfolio, and the jurisdictions in which we operate.
Ramp-up activities have continued to progress and are currently focused on steadily increasing the plant throughput rate and increasing asset reliability. In 3Q22, we produced our first tonnes of copper, lead, and zinc in concentrate. The milling capacity utilization reached 32% at the end of 3Q22 and we believe we are on track to reach 70% by the end of December 2022 with our stability work to continue into 2023. We expect commercial production to commence in December 2022, subject to risks around the ramp-up of a new mine, among other factors.
We continue with mine development activities in both the Arex and Link mines. At the end of September, approximately 646kt of ore was available in stockpiles, which is enough to cover five months of plant production in the ramp-up period.
We invested US$9 million, totaling US$63 million in 9M22, including the negative FX impact of US$5.4 million in 9M22. The cumulative CAPEX since the beginning of construction is US$629 million. Our 2022 Aripuanã expansion CAPEX is expected to be slightly higher than our annual guidance and we expect our 4Q22 Aripuanã investment to be approximately US$5 million depending on FX and inflation, due to additional contract expenses.
Refer to our "Aripuanã project" section for further details.
Production, Sales and Cash Cost Guidance
Zinc metal sales guidance also remains unchanged at 565-590kt and is tracking to achieve the upper range of the guidance.
Peru: we expect production in 4Q22 to remain stable and at the same levels as last quarters.
Brazil: in Três Marias we estimate production in 4Q22 will increase following production stability. As a result, smelters production in Brazil should be slightly higher in the next quarter compared to 3Q22.
Nexa also estimates 2022 consolidated cash cost guidance for mining and smelting segments will be achieved.
Mining and smelting volumes are expected to increase in 4Q22 compared to 3Q22 and to be in the guidance range, as noted above.
Continuous improvements in operational efficiency and cost management are expected to continue to offset some of the ongoing inflationary pressures.
We do not expect significant changes in commodity prices in 4Q22 from current levels. Nexa's C1 cash cost is sensitive to by-products prices and volumes, which may affect our final costs results.
Foreign exchange rates assumptions are maintained (BRL/USD: 5.10 and Soles/USD: 3.75).
Zinc treatment charges ("TCs") assumptions of US$230/t.
Nexa continues to monitor risks associated with global supply chain disruptions, which could be exacerbated by the Russia-Ukraine war, unusual weather conditions and/or increased restrictions related to the COVID-19 pandemic; global recession, and the potential impact on the demand for our products; inflationary cost pressure; lower metal prices; communities protests and changes to the regulatory framework in the countries we operated that could affect our production levels; among others. Refer to "Risks and uncertainties" and "Cautionary Statement" for further information.
Mining segment - productionMining production (metal in concentrate)9M222022e
Mining segment - costsCost ROMCash cost (1) net of by-product (US$/lb)
Operating costs9M22 (US$/t)9M222022e
Cerro Lindo39.7(0.22)(0.26)
(1) 2022 C1 Weighted Cash cost net of by-products credits is measured with respect to zinc sold per mine.
Smelting segment - salesSmelting sales9M222022e
Smelting segment - costsConversion costCash cost (2) net of by-product (US$/lb)
Operating costs9M22 (US$/lb)9M222022e
Cajamarquilla0.281.321.38
(2) 2022 C1 Weighted Cash cost net of by-products credits is measured with respect to zinc sold per smelter.
Capital Expenditures ("CAPEX") Guidance
CAPEX (US$ million)9M222022e
Reconciliation to Financial Statements (4)(2)-
(1) Including Vazante LOM extension. Greenfield project portfolio is under review.
(2) Investments in tailing dams are included in sustaining expenses.
(3) Modernization, IT and others.
(4) The amounts are mainly related to capitalization of interest net of advanced payments for imported materials.
Exploration & Project Evaluation and Other Expenses Guidance
Other Operating Expenses (US$ million)9M222022e
Sustaining (mine development)1213
Exploration & Project Evaluation6482
Nexa is a large-scale, low-cost integrated zinc producer with over 60 years of experience developing and operating mining and smelting assets in Latin America. Nexa currently owns and operates five long-life underground mines - three located in the Central Andes of Peru and two located in the state of Minas Gerais in Brazil - and is starting the Aripuanã project as its sixth underground mine in Mato Grosso, Brazil. Nexa also currently owns and operates three smelters, two located in Brazil and one in Peru, Cajamarquilla, which is the largest smelter in the Americas. Nexa was among the top five producers of mined zinc globally in 2021 and also one of the top five metallic zinc producers worldwide in 2021, according to Wood Mackenzie.
1 Our cash cost net of by-products credits is measured with respect to zinc sold.
2 Adjusted EBITDA excludes the non-cash impact related to the offtake agreement - US$8 million in 3Q22, totaling US$17 million in 9M22.
3 Cash and cash equivalents and financial investments.
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