- Zinc production of 87,000 tons in 1Q24 increased by 17% compared to 1Q23.
- Net revenues totaled US$ 580 million, while consolidated adjusted EBITDA reached US$ 123 million in the period, mainly explained by lower zinc prices and lower metal demand due to seasonality.
- The company successfully extended its debt profile through the issuance of new debentures and bonds in April 2024, optimizing the financial structure and enhancing liquidity position.
Nexa Resources, one of the world’s leading zinc producers, increased its zinc production to 87,000 tons in 1Q24, up 17% from 1Q23, driven by an increase in treated ore volume and higher average zinc grades, particularly at the Cerro Lindo, Vazante and Aripuanã mines.
Copper production reached 7,500 tons, up 23% from 1Q23 due to positive progress in the Aripuanã ramp-up, while lead production rose by 20%, primarily due to production at the Cerro Lindo and Aripuanã mines, totaling 18,000 tons. Additionally, silver production increased by 26% year-over-year to 3 million ounces.
In the smelting segment, zinc metal and oxide sales totaled 139,000 tons in 1Q24, down 4% from 1Q23, following lower production volumes and the typical seasonality of demand in the period.
In terms of financial performance, net revenues in 1Q24 were US$580 million compared with US$667 million in 1Q23. This decrease was mainly due to lower zinc prices, lower net premium and lower smelting sales volume, which was partially offset by higher mining sales volumes.
Adjusted EBITDA for the same period totaled US$123 million compared with US$133 million in 1Q23. The year-over-year decrease was mainly driven by lower zinc prices and lower smelting sales volume, partially offset by higher by-products contribution and higher mining sales volumes. Meanwhile, the adjusted net loss was US$10 million in 1Q24.
“We began the year on a positive note, with solid operating performance in the first quarter, thanks to the commitment of our teams in reinforcing our operational strategies, enhancing our capabilities, and doubling down on execution,” stated Ignacio Rosado, CEO of Nexa.
“Despite the challenges faced by our industry, such as weak macro conditions, commodity price volatility, and lower metal demand due to seasonality, we continued to make steady progress and remained focused on executing our core priorities. These include disciplined capital allocation, the completion of the ramp-up at Aripuanã – boosting our consolidated metal production and paving the way for increased cash generation – along with the advancement of our studies related to the Cerro Pasco Integration Project,” continued Mr. Rosado.
Strengthening Financial Position Through ESG-Linked Initiatives and Bonds
In March, Nexa achieved a significant milestone by entering into a new credit line agreement of R$200 million (approximately US$40 million) with the Brazilian Development Bank (“BNDES”) as part of the “BNDES ESG Credit program”. This marked the first ESG-linked BNDES facility within the mining sector and underscores Nexa’s commitment to sustainable practices. The disbursement, expected over the year, is subject to certain conditions, aiming to support Nexa’s efforts towards decarbonization and socio-environmental responsibility. These initiatives align with Nexa’s target of achieving carbon neutrality by 2050 and a 20% reduction in direct emissions by 2030.
Furthermore, in April, Nexa successfully extended its debt profile through the issuance of new debentures and bonds. This strategic move allowed Nexa to optimize its financial structure, diversify funding sources, enhance liquidity position, and extend debt maturity profile. As part of this strategy, Nexa Brazil, a subsidiary of Nexa Resources, issued its first ESG-linked debenture with a 6-year term, in the amount of R$650 million (approximately US$130 million). This issuance not only signifies Nexa’s entry into the Brazilian market but also underscores its commitment to ESG principles.
Simultaneously, Nexa completed a new bond offering totaling US$600 million 6.750% senior unsecured notes due in April 2034, with net proceeds directed towards funding a cash tender offer for the existing notes due in 2027 and 2028. The extension of Nexa’s debt profile underscores its commitment to prudent financial management and confidence in the long-term prospects of its business. Nonetheless, these transactions are in line with Nexa’s liability management strategy, aiming to improve free cash flow while maintaining its disciplined capital allocation framework.
Suspension and Divestment of Morro Agudo Complex, in Paracatu (MG, Brazil)
Nexa announced, in March, the suspension of mining operations at the Morro Agudo Complex effective May 1st. Additionally, in April, the company announced the signing of a definitive agreement to divest the Morro Agudo Complex, which encompasses the Morro Agudo and Ambrósia mines for a purchase price of R$80 million (approximately US$16 million) less working capital adjustments and including the assumption of closure costs. This transaction is part of Nexa’s portfolio optimization process to improve free cash flow in line with its operational efficiency and disciplined capital allocation.
It is worth noting that Nexa is committed to conducting a structured transition to the buyer (“Casaverde Holding Ltda”), with the highest regard for the individuals involved. The company has adopted several initiatives to ensure equal relocation opportunities for all Morro Agudo employees, such as internal and external job fairs, career coaching sessions, and assistance programs, among others.
Growth strategy and asset portfolio
Nexa remains focused on generating free cash flow and evaluating its capital allocation framework. This strategy prioritizes investments in sustaining capital, brownfield mineral exploration, and ESG initiatives, alongside robust Health, Safety, and Environment (HS&E) measures. This holistic approach ensures the efficient allocation of capital to high-return assets.
In this regard, Nexa continue advancing the studies related to the “Cerro Pasco Integration Project”, which is a substantial organic growth opportunity for the company. As a result of this progress, a Technical Report Summary was recently release, which supported an increase of 59% in Mineral Reserves at the El Porvenir and Atacocha mines within the complex. Additionally, Nexa increased its overall Mineral Reserves by 10% year-over-year totaling 110 million tons.
ESG Update
Unfortunately, in early March, we had a fatal incident involving one of our employees at the El Porvenir mine, and earlier this week, another fatal incident occurred involving one of our employees at the Vazante mine. This is a very difficult time for Nexa, and it becomes clear that we need to work even harder in reinforcing our safety system. We extend our heartfelt condolences to the families of our two employees and reassure them, and all our stakeholders, that the safety and well-being of every person who works at Nexa are our main values and remain our utmost priority. We are committed more than ever to enhancing employee safety and achieving zero fatalities.
In addition to our safety initiatives, the first quarter was also marked by continued efforts in our environmental, social, and governance area:
- In January, we inaugurated the Teaching and Research Center at our Vazantes Mineiras project, in Vazante (MG, Brazil), providing essential infrastructure to foster researchers’ engagement and promote our social-environmental initiatives.
- Nexa also initiated a pioneering partnership with a cement company in Peru to repurpose waste material from our Cajamarquilla smelter in Lima. In the first quarter, industrial trials were conducted to explore the use of plaster generated during water treatment as block-type pavers, which is currently assessing its economic and technological viability for integration into cement production.
- Nexa supported approximately 30 families in Cerro Pasco (Peru) by providing shelters to safeguard their livestock from frost, thereby improving the quality of ovine production in the Huancamachay community. This initiative not only enhances local economic development but also reaffirms our dedication to supporting the communities in which we operate.
- Recognition of our ESG efforts continued as Nexa was honored as the “Company of the Year” by Business Concept magazine and received the “International CSR Excellence Award for 2023”. These accolades underscore the effectiveness of our ESG strategy and the positive impact of our social initiatives in Brazilian communities.
Finally, on April 24, Nexa released its “2023 Annual Sustainability Report”. This document is available at http://nexaresources.com/en/esg/performance and outlines the company’s economic, financial, environmental, and social achievements throughout the past year, providing transparency and insights into our ongoing commitment to sustainable practices.
About Nexa
Nexa Resources is one of the world’s leading zinc mining companies. Operating for over 65 years in the mining and metallurgy segments, with locations in Brazil and Peru and offices in Luxembourg and the United States, supplying its products to every continent. Every day, its employees work with a commitment to building the mining that changes with the world, aiming for sustainability, innovation, and upholding the best safety practices, respect for people, and the environment. Since 2017, its shares have been traded on the New York Stock Exchange, with its majority shareholder being Votorantim S.A. For more information about Nexa and its ESG strategy and commitments, please visit our website.