Nexa's Q1 2025: Discrepancies Unveiled on Aripuanã Production, Working Capital, and Zinc Market Dynamics

Aripuanã production and capacity expansion, working capital expectations, Aripuanã production and tailings filters, zinc market and pricing outlook, Aripuesto



Production Challenges and Recovery:
- Nexa Resources reported zinc production of 67,000 tons in Q1 2025, a 23% year-over-year decrease.
- This decline was primarily due to heavy rainfall impacting mines in Pasco and Aripuanã, as well as operational challenges at other sites.
- The company expects to recover production levels in the coming quarters, particularly with improved weather conditions and completion of the tailing filter project at Aripuanã.

Adjusted EBITDA and Financial Performance:
- Nexa reported an adjusted EBITDA of $125 million for Q1, with margins remaining within historical ranges.
- Consolidated net revenues totaled $627 million, despite lower smelting sales volumes.
- The financial results were influenced by seasonal working capital intensity early in the year, which is expected to normalize in subsequent quarters.

Impact of Zinc Treatment Charges (TCs):
- Nexa anticipates a year-over-year reduction of approximately 15,000 tons in smelter volumes for 2025, reflecting a volatile market environment and lower TCs.
- The recent agreement of a $80 per ton TC between Teck and Korea Zinc is expected to negatively impact smelter profitability.
- The company's production costs and margins are affected by these market conditions, with potential supply constraints and possible zinc price increases.

Capital Expenditure and Debt Management:
- Nexa's CapEx for Q1 2025 was $50 million, primarily for sustaining activities, with no significant changes to the annual guidance.
- The company's net debt-to-adjusted EBITDA ratio rose to 2.1x, mainly due to seasonal cash flow variations.
- Nexa successfully extended its debt maturity profile through new bond issuance and tender offers, enhancing financial flexibility and reducing refinancing risk.