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01/11 03:34
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
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.
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.
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.
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.
Dividends to noncontrolling interests: We also paid $16 million in dividends to noncontrolling interests.
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.
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.
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%.
The earnings call presents a mixed picture with negative leanings. While revenue grew by 8% and zinc prices increased, production challenges, lower smelting sales, and increased debt leverage are concerning. The Q&A reveals operational disruptions and unclear future profitability impacts due to TCs. Despite optimistic recovery expectations, the negative working capital and increased debt leverage weigh heavily. The new bond issuance and repurchase plans do not sufficiently offset these negatives. Given the small market cap, these issues may lead to a negative stock reaction in the short term.
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