Nexa Resources SA Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Financial Performance: Adjusted EBITDA for Q4 2024 was $197 million, up 79% year-over-year; full year 2024 adjusted EBITDA was $714 million, the second highest in company history. Achieved positive consolidated cash flow for the first time since initiating the Aripuanã investment cycle.
• Divestments and Projects: Divested Morro Agudo complex, Pucacaca project, and Chapi mine. Approved the first phase of the Cerro Pasco integration project, including tailings pumping and piping systems.
• Aripuanã Progress: Made significant performance improvements in 2024; approved a fourth tailings filter to reach maximum capacity, expected to be delivered and installed in 2025 with commissioning in Q1 2026.
• CapEx and Exploration: 2024 CapEx totaled $277 million, below revised guidance; exploration investment was $64 million, with $37 million allocated to mineral exploration and mine development.

Segment Performance

• Mining Segment: In the fourth quarter of 2024, zinc production was 74,000 tons, down 19% year-over-year. Cash cost dropped to $0.00 per pound in Q4 2024 from $0.44 per pound in the same period 2023. For the full year 2024, zinc, lead, and silver production met annual guidance, while copper production exceeded the upper range of guidance. Cost per run of mine was $44 per ton in Q4 2024, a 6% year-over-year decrease.
• Smelting Segment: Fourth quarter sales totaled 152,000 tons, up 6% year-over-year. Cash cost in the fourth quarter was $1.26 per pound, up from $1.00 per pound in the same period 2023. For the full year 2024, total sales were 591,000 tons, in line with annual guidance.
• Aripuanã: In Q4 2024, production of zinc, lead, and silver was higher than Q3 2024, while copper production declined. For the full year 2024, zinc production increased 43% year-over-year, copper 24%, lead 106%, and silver 114%. Approved a fourth tailings filter to enhance capacity, expected to be commissioned in Q1 2026.

Guidance

• 2025 Outlook: Expect revenue growth supported by pricing and volume expansion. Aripuanã expected to have positive EBITDA in 2025, higher than 2024.
• Dividend Policy: Pay 20% of free cash flow after sustaining CapEx, with a minimum dividend of 8 cents per common share.
• Sustaining CapEx: Sustaining CapEx in 2025 expected to be around $316 million.

Risks

• Macroeconomic/Geopolitical: Macro uncertainties (US trade protectionism, tariff hikes, trade wars) affecting zinc prices.
• Operational: Tailing filter operational issues at Aripuanã impacting capacity.
• Environmental: Delays in projects like Magistral due to environmental approval challenges and community issues.

Question and Answer

• Q: Follow-up on tailing filter CapEx and Aripuanã capacity. A: CapEx for the fourth tailings filter is ~$14 million, with full capacity expected in Q2 2025.
• Q: Aripuanã EBITDA in 2025. A: Expected to be higher than 2024.
• Q: Dividend policy details. A: Pay 20% of free cash flow after sustaining CapEx, with a minimum of 8 cents per share.
• Q: Sustaining CapEx in 2025. A: Around $316 million.
• Q: Other assets for sale. A: No other assets to sell, focus on developing existing mines.
• Q: Cost of additional filter and Aripuanã nameplate capacity. A: Cost of additional filter is ~$14 million, nameplate capacity expected in Q2 2025.
• Q: Magistral project status. A: Environmental study disapproved, negotiating next steps with authorities