Nexa Resources: Unlocking Value Through Operational Resilience and Strategic Expansion in 2025

In the volatile world of polymetallic mining, where commodity prices swing wildly and operational challenges abound, Nexa Resources stands out as a rare blend of resilience, discipline, and strategic foresight. As 2025 unfolds, the company's ability to navigate a turbulent zinc market while executing on a multi-year turnaround plan has positioned it as a compelling high-conviction investment.

Operational Turnaround: A Foundation for Growth
Nexa's second-quarter 2025 results underscore its operational resilience. Despite a 12% year-over-year decline in zinc production to 74 kilotonnes (kt), the company achieved a 9% sequential increase, driven by improved performance in Peru. This resilience is no accident—it reflects a disciplined focus on optimizing existing assets. For example, the Cerro Lindo mine in Peru confirmed the continuity of high-grade zinc mineralization at depth, with an intercept of 2.92% zinc over 4.2 meters. Such results not only validate Nexa's geological models but also extend mine life, a critical factor in an industry where capital efficiency is king.

Meanwhile, the Aripuanã mine in Brazil, though delayed by technical challenges, remains a cornerstone of Nexa's long-term growth. Its Massaranduba target returned 7.59% zinc over 10.8 meters, including a 16.60% zinc section over 4.8 meters—far above the global average. These high-grade intercepts suggest that Aripuanã could become a major contributor to Nexa's production by 2027–2028, even as the company navigates short-term bottlenecks.

Cost Discipline in a High-Cost Environment
Nexa's cost management has been equally impressive. For 2Q25, mining cash costs rose to $49.9/tonne, a modest increase from 1Q25 but in line with 2Q24. The smelting segment's cash costs, at $1.23/lb, were higher than previous quarters due to lower treatment charges and operational adjustments, yet the company maintained its full-year guidance. This stability is a testament to Nexa's ability to absorb incremental costs without sacrificing profitability—a rare trait in an industry prone to margin compression.

The company's capital allocation strategy further reinforces its cost discipline. Nexa's 2025 CAPEX of $347 million is focused on sustaining investments, with $17 million allocated to Phase I of the Cerro Pasco Integration Project. This initiative, which includes tailings pumping system upgrades, is designed to enhance operational efficiency at El Porvenir and Atacocha, two of Nexa's key Peruvian assets. By prioritizing projects that directly improve throughput and reduce long-term costs, Nexa is building a foundation for sustainable earnings growth.

Strategic Expansion: A Catalyst for Long-Term Value
Nexa's growth story hinges on its ability to expand its resource base while extending the life of its existing mines. The company's 2025 exploration program—131,910 meters of drilling, including 28,145 meters of exploration—has already yielded promising results. Notably, the Vazante mine in Brazil reported a standout intercept of 22.14% zinc over 6.3 meters, a result that could redefine the mine's economic viability.

The company's 2025 drilling strategy, which prioritizes near-mine expansion and brownfield projects, is expected to unlock additional value. With 47,245 meters of planned drilling in the second half of 2025, Nexa is accelerating its resource replacement cycle. This is critical in an industry where reserve depletion is a constant threat. By focusing on high-impact projects like the Integración target at El Porvenir—a 18.6-meter polymetallic zone—Nexa is not just extending mine life but also diversifying its revenue streams through copper, lead, and silver.

Financial Strength: A Buffer Against Volatility
Nexa's financial prudence has been a key enabler of its operational and strategic success. The company's $500 million, 12-year bond issuance in 2025, with a 6.600% coupon, was a masterstroke. By using the proceeds to redeem 2027 notes and repurchase 72% of its 2028 bonds, Nexa extended its debt maturity profile and reduced refinancing risks. This has given the company greater flexibility to fund its CAPEX and exploration programs without overleveraging.

Moreover, Nexa's $347 million CAPEX guidance for 2025 is aligned with its long-term capital allocation framework. The allocation of $70 million to exploration and $18 million to project evaluation—including IT system upgrades and tailings dam life extensions—demonstrates a balanced approach to growth and risk mitigation.

ESG and Innovation: Building a Resilient Future
Nexa's commitment to ESG and innovation further strengthens its competitive position. The company's renewable energy initiatives in the Topará Valley and its participation in Brazil's largest charcoal forum highlight its proactive stance on decarbonization. Additionally, the launch of the SmartSupply digital solution underscores Nexa's embrace of technology to enhance operational efficiency and transparency.

In a sector increasingly scrutinized for its environmental impact, Nexa's ESG initiatives not only mitigate regulatory risks but also enhance its reputation with stakeholders. This is particularly relevant in Peru and Brazil, where community engagement and environmental stewardship are critical to project success.

Investment Thesis: A High-Conviction Play
Nexa Resources is a rare combination of operational excellence, disciplined cost management, and strategic foresight. While the zinc market remains volatile, the company's low-cost, integrated model and diversified portfolio of polymetallic assets position it to outperform. The Aripuanã mine's ramp-up, the Cerro Pasco Integration Project's progress, and the company's aggressive exploration program are all catalysts for near- and long-term value creation.

For investors, Nexa represents a high-conviction opportunity. The company's ability to generate free cash flow, extend mine life, and navigate geopolitical and environmental challenges makes it a resilient player in a cyclical sector. With zinc demand expected to remain robust due to its role in green technologies and infrastructure, Nexa's growth trajectory is well-aligned with macroeconomic trends.

In a world where operational execution often separates winners from losers, Nexa Resources is proving why it deserves a place in the core of a diversified mining portfolio.