Nexa Resources S.A. (NEXA) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed outlook. While operational improvements and a positive liquidity position are noted, challenges such as high workforce turnover, unclear guidance on CapEx adjustments, and operational challenges at Aripuana persist. The Q&A reveals some management vagueness, particularly concerning CapEx flexibility and workforce turnover. Despite positive long-term market outlooks and improved leverage, these uncertainties and operational issues balance out the positive elements, leading to a neutral sentiment.
Key Financial Performance
Net revenues $764 million, up 8% sequentially and year-over-year, driven by higher zinc prices, byproduct credits, and stronger operational performance.
Adjusted EBITDA $186 million, a 16% increase from the last quarter and a 2% increase year-over-year, supported by higher sales volumes and improved byproduct revenues.
Net income $100 million or $0.52 per share, reflecting improved operational and financial performance.
Free cash flow $52 million, up versus the previous quarter, supported by stronger cash generation and working capital optimization.
Zinc production 84,000 tons, a 14% increase from the second quarter, driven by a solid recovery at Vazante and a record quarter at Aripuana.
Mining segment net revenues $372 million, supported by stronger prices and improved operational performance.
Mining segment adjusted EBITDA $164 million with a 44% EBITDA margin, reflecting stronger prices and operational improvements.
Smelting segment sales 150,000 tons, a 3% sequential increase, driven by higher production across all units.
Smelting segment net revenues $541 million, reflecting the current margin environment and cost dynamics.
Smelting segment adjusted EBITDA $23 million, reflecting the current margin environment and cost dynamics.
Consolidated mining cash cost net of byproducts Minus $0.49 per pound, driven by higher byproduct credits and lower TCs.
Year-to-date mining cash cost Minus $0.18 per pound, better than guidance.
Cost per run of mine $51 per ton, stable quarter-over-quarter and in line with guidance.
CapEx $90 million in the quarter, with $227 million year-to-date, primarily allocated to sustaining activities and aligned with operational priorities.
Exploration and project evaluation investments $21 million in the third quarter, totaling $53 million year-to-date, directed towards exploration drilling and mine development.
Liquidity position $790 million, including an undrawn $320 million sustainability-linked revolving credit facility, with net leverage improving to 2.2x from 2.3x last quarter.
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Operating Highlights
Aripuana Tailings Filter Installation: The fourth tailings filter is en route to the mine site, with installation beginning in Q4 2025 and commissioning expected in early 2026. This will enable full production capacity by the second half of 2026.
Cerro Pasco Integration Project: Phase 1 progresses with new tailings pumping and piping system. Earthworks and civil construction are advancing, and major procurement packages are secured. Phase 2 studies are ongoing to define long-term configurations.
Exploration Results: Recent drilling confirmed new mineralized extensions at Aripuana, enhancing geological upside and potential mine life extensions.
Zinc Market Position: Zinc prices trended higher, closing September at $3,010/ton, supported by low inventories and a weaker USD. Demand is driven by global infrastructure and renewable energy investments.
Copper and Silver Market: Copper prices remain strong at $10,300/ton, driven by electrification and infrastructure spending. Silver prices increased by 58% YoY, supported by industrial demand and monetary dynamics.
Zinc Production: Quarterly zinc production reached 84,000 tons, a 14% increase from Q2 2025, driven by record production at Aripuana and recovery at Vazante.
Smelting Performance: Zinc sales reached 150,000 tons, with Cajamarquilla achieving its highest quarterly output. Cash costs were $1.32/pound, aligned with guidance.
Financial Performance: Net revenues were $764 million, and adjusted EBITDA was $186 million, reflecting higher volumes and stronger byproduct prices. Free cash flow was $52 million.
Growth Strategy: Actively evaluating opportunities in mining-friendly jurisdictions with a focus on disciplined capital allocation, operational excellence, and sustainability.
ESG Achievements: Received PERUMIN Seal of Excellence in Gender Equity, GHG Protocol Brazil Gold Seal, and compliance with LME Responsible Sourcing standards.
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Risk or Challenges
Aripuana Tailings Filter Installation: The fourth tailings filter installation at Aripuana is critical for achieving full production capacity by 2026. Delays or issues in installation could impact operational stability and cash generation.
Cerro Pasco Integration Project: Execution challenges in Phase 1 and Phase 2 of the Cerro Pasco integration project, including technical assessments and construction, could delay long-term sustainability and production in this mineral district.
Mining Cash Costs: While cash costs have improved, any reversal in byproduct credits or increase in treatment charges (TCs) could negatively impact cost efficiency and margins.
Smelting Segment Margins: The smelting segment faces margin pressures due to higher operational costs and lower sales volumes earlier in the year. Sustained cost pressures could further erode profitability.
Debt and Leverage: Although net leverage has slightly decreased, maintaining a healthy balance sheet requires continued deleveraging and cash flow generation. Any disruptions in cash flow could strain financial flexibility.
Market and Supply Chain Risks: Potential export restrictions and logistical issues in China could disrupt material flows, impacting Nexa's operations and market positioning.
Commodity Price Volatility: Fluctuations in zinc, copper, and silver prices could impact revenues and profitability, especially if prices fall below operational breakeven levels.
Regulatory and ESG Compliance: Compliance with ESG standards and regulatory requirements, such as LME Responsible Sourcing standards, requires ongoing investment and monitoring. Non-compliance could harm reputation and market access.
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Guidance & Outlook
Aripuana Mine: The fourth tailings filter is expected to be installed in Q4 2025, with commissioning in early 2026. This upgrade will enable the mine to reach full production capacity by the second half of 2026, ensuring long-term operational stability and cash generation.
Cerro Pasco Integration Project: Phase 1 is progressing on schedule, with investments in tailings pumping and piping systems. Phase 2 studies are underway to define the most efficient long-term configuration. The project is expected to support long-term sustainability and production in the Peruvian district.
Smelting Segment: Sales guidance for 2025 remains on track, with year-to-date sales of 425,000 tons. Cash costs are aligned with revised guidance, and the segment is expected to maintain stable performance.
Capital Expenditures (CapEx): Total 2025 CapEx guidance remains unchanged at $347 million, with $44 million allocated to the Cerro Pasco project. Investments in exploration and project evaluation are expected to total $88 million for the year.
Market Outlook: Zinc prices are expected to remain near $3,000 per ton, supported by tight supply outside China and robust demand from infrastructure and renewable energy investments. Copper and silver markets are also expected to remain strong, driven by electrification and industrial demand.
Exploration and Mine Life Extensions: Exploration results indicate potential for further mine life extensions and enhanced mine-smelter integration, supporting long-term value creation.
Financial Position: Working capital is expected to remain positive in Q4 2025, with stronger cash generation supporting financial flexibility. Net leverage is projected to improve further, maintaining a solid balance sheet.
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Shareholder Return Plan
Dividends to noncontrolling interests: We also paid $16 million in dividends to noncontrolling interests.
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Key Q&A
Q:How should we see the leverage level of the company behaving in the short to medium term?
A:The company is committed to deleveraging, with a target to reduce gross debt by $500 million to $600 million over the next 4 years. They aim to bring net leverage closer to one-time levels for more flexibility, while maintaining investment grade. The speed of deleveraging depends on operational results and favorable price levels.
Q:What are the next steps to install the fourth filter at Aripuana?
A:The fourth filter has arrived in Brazil and will be operational next week. Infrastructure, piping systems, and earthworks are advancing well. Commissioning is expected to start in April next year, with full benefits realized by mid-year. The fourth filter will add 35%-40% capacity, enabling full production at the plant.
Q:Do you expect working capital in the fourth quarter to generate cash and bring full-year working capital to neutral?
A:Yes, the expectation is for a positive contribution from working capital in Q4, making the full-year working capital impact neutral. This is based on intra-year seasonality, and the same assumption is used for planning purposes.
Q:What are the early views on CapEx for 2026?
A:The company is still in the budgeting process, but no drastic changes are expected compared to 2025. For practical purposes, CapEx is expected to be in the same neighborhood as 2025.
Q:Does the CapEx for next year have flexibility to adjust in case of lower zinc prices?
A:Yes, there is some flexibility in CapEx. Projects like the fourth filter and Cerro Pasco are priorities and will proceed. Sustaining CapEx is somewhat flexible but necessary for operations. About 20%-25% of total CapEx is flexible and can be adjusted if needed. The company uses conservative zinc price scenarios for budgeting.
Q:What is the current status of workforce turnover at Aripuana and efforts to address it?
A:Turnover has improved from 35%-40% to 18%-20%, though it is still high. Efforts include improving local infrastructure, schools, health programs, and retention bonuses for senior staff. Backup plans are in place to manage turnover, but costs remain high due to these measures.
Q:What is the guidance for Cerro Lindo's silver production in Q4?
A:Silver production at Cerro Lindo is expected to be flat quarter-over-quarter, based on the current mine plan. However, short-term plans may be revised to access higher silver grades.
Q:What is the company's view on the political environment in Peru and its impact on mining?
A:The political environment is challenging but isolated from day-to-day mining operations. Strong relationships with communities and authorities are key. Mining contributes 12%-15% of Peru's GDP, so governments generally support the sector. The upcoming election's impact is uncertain, but mining is expected to remain a priority.
Q:Is Nexa pursuing opportunities to increase silver production given higher silver prices?
A:No, silver is a byproduct and production is tied to existing mining plans. However, a silver streaming agreement will reduce the share of Cerro Lindo's silver production going to the streamer from 65% to 25% by mid-2026, potentially adding $70-$75 million in cash flow at current prices.
Q:Review of Unclear Management Responses
A:Management avoided providing specific guidance on CapEx for 2026, citing the ongoing budgeting process. They also used vague language regarding flexibility in CapEx adjustments and did not provide detailed plans for addressing lower zinc prices. Additionally, while they acknowledged high workforce turnover at Aripuana, their response lacked clarity on measurable outcomes or timelines for improvement.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
China
EVs
LME Week
Nexa
Pasco integration
Phase
Seal
Slide
Smelting
TCs date
Treasury
USD ton
Western Hemisphere
backdrop
cash generation
cash pound
catalyst
concentrate availability
date cash
date revenue
debt capital
depletion
differentiator
dynamic
electrification
environment
export
increase month
integration project
investment month
mineral district
month sale
portfolio term
price USD
production ton
recognition zinc
record
revenue margin
segment revenue
term cash
ton recovery
ton zinc
zinc increase
NEXA Transcript
Nexa Resources S.A. (NEXA) Q4 2025 Earnings Call Transcript
Unknown2-27
The earnings call reveals stable operational performance and positive cash flow expectations, but the lack of specific guidance on key projects and unresolved environmental issues temper optimism. The Q&A session highlights management's confidence in cash flow and debt reduction, yet uncertainties in project timelines and political stability in Peru persist. The company's market cap suggests moderate sensitivity to these factors, leading to a neutral stock price reaction prediction.
Nexa Resources S.A. (NEXA) Q3 2025 Earnings Call Transcript
Unknown10-31
The earnings call presents a mixed outlook. While operational improvements and a positive liquidity position are noted, challenges such as high workforce turnover, unclear guidance on CapEx adjustments, and operational challenges at Aripuana persist. The Q&A reveals some management vagueness, particularly concerning CapEx flexibility and workforce turnover. Despite positive long-term market outlooks and improved leverage, these uncertainties and operational issues balance out the positive elements, leading to a neutral sentiment.
Nexa Resources S.A. (NEXA) Q2 2025 Earnings Call Transcript
Unknown8-1
The earnings call summary shows mixed results: strong free cash flow and improved cash costs are positive, but increased costs and lower YoY zinc production are concerning. The Q&A reveals uncertainties, particularly around guidance downgrades and management's unclear responses. Despite the company's strategic initiatives and financial discipline, these mixed signals and market cap suggest a neutral stock price movement.
Nexa Resources S.A. (NYSE:NEXA) Q1 2025 Earnings Call Transcript
Unknown5-1
The earnings call highlights several negative factors: operational challenges due to heavy rainfall, increased net debt-to-EBITDA ratio, and a decline in zinc production. The Q&A session reveals concerns about geotechnical issues and vague responses on TCRCs. Despite positive cash flow and debt management, these issues, combined with unchanged revenue and decreased EBITDA margin, suggest a negative sentiment. Given the company's small market cap, the stock is likely to react negatively, potentially falling between 2% to 8%.
NEXA Report
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
