Nexa Resources S.A.

Good morning, and welcome to Nexa Resources' second quarter 2023 conference call. All participants will be in a listen-only mode, and should you need any assistance, please signal a conference specialist by pressing the star key followed by zero. This event is being recorded and is also being broadcast via webcast and may be accessed through Nexa's Investor Relations website, where the presentation is also available. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. And to withdraw your question, please press star, then two. Remember that the participants of the webcast will be able to register via website questions. Simply type your question in the box and click send, and that will soon be answered. I would now like to turn the conference over to Mr. Rodrigo Camarasano, Head of Investor Relations, for opening remarks. Please go ahead.

Good morning, everyone, and welcome to Nexa Resources' second quarter 2023 earnings conference call. Thanks for joining us today. During the call, we will be discussing the company's performance as per the earnings release that we issued yesterday. We encourage you to follow along with this on-screen presentation through the webcast. Before we begin, I would like to draw your attention to slide number two, as we will be making forward-looking statements about our business. And we just ask that you refer to the disclaimer and the conditions surrounding those statements. It is now my pleasure to introduce our speakers. Joining us today is our CEO, Inácio Rosado, our CFO, José Carlos Del Valle, and our Senior Vice President of Mining, Leonardo Coelho. So now I will turn the call over to Inácio for his comments. Inácio, please go ahead.

Thank you Rodrigo and thanks to everyone for joining us this morning. Please let's move now to slide number three, where we will begin our presentation. Let me begin by giving you a brief overview of our second quarter of 2023. We continue to experience a volatile macroeconomic scenario as weak economic indicators from China came in below expectations. Additionally, Concerns over the global growth outlook, in addition to persistent inflation in some sectors of important economies, and tight monetary policy are negatively affecting base metal prices, especially zinc, the main metal in our portfolio. In the second quarter, zinc price fell 19% quarter over quarter and 35% year over year. In this difficult scenario, we are working on a portfolio of initiatives focused on cost reduction, capex, and working capital optimization, which I will discuss in more detail later in the presentation. Our net revenue for the quarter reached $627 million, 24% down year over year, mainly driven by lower LME metal prices compared to the second quarter of 2022. Net revenues decreased by 6% quarter over quarter, also reflecting the lower LME metal prices, which was partially offset by higher mining production and metal sales volumes. Our adjusted EBITDA in the second quarter of this year was $72 million compared to the $133 million in the first quarter of this year. This performance was mainly explained by the impact of lower LME metal prices as explained initially. Despite this significant drop in prices, we were able to deliver a positive cash generation and we would like to reaffirm that our 2023 annual guidance remains unchanged. Aripuana is progressing well and at the end of June the plant downtime hours reduced significantly. The plant reached 76% of that nameplain capacity while the recovery rates improved as well as the quality of the concentrates. In terms of exploration activities, our brownfield exploration programs are moving towards increasing the life of the mine in our mining operations. As mentioned also in our previous presentation, we are prioritizing the studies related to the PASCO integration project to consolidate a robust strategic organic growth option for NEXA in the near future. We remain confident in the long-term fundamentals of our industry and our business. We will continue focusing on safety, productivity, and cost control in order to create value for all of our shareholders. Now moving to slide number four. In slide number four, regarding the operating performance of the mining segment, You can see that zinc production increased to 81,000 tons up 2% year over year, mainly explained by an increase in treated ore volume and the startup of the Aripuana mine. Compared to the first quarter of this year, zinc production was up 8% explained by the resumption of operations at Cerro Lindo and higher volumes from Aripuana. In relation to cash costs, mining cash costs in the second quarter of this year increased to 37 cents per pound compared to 16 cents per pound in the second quarter of last year, mainly explained by lower byproduct prices and higher TCs. However, our cash costs in the first half of 2023 positively exceeded what we forecasted in our guidance for the year, decreasing almost 10 cents per pound compared to the lower end of the range. Looking at the cost per run of mine, which is the one metric that we control, it decreased quarter over quarter due to higher ore mine and the implementation of initiatives to reduce our costs. Now moving to slide number five. In slide number five, regarding the operating performance of the smelting segment, metal sales total 149,000 tons in the second quarter of 2023, down 2% from the second quarter of last year and up 4% compared to the first quarter of this year. The quarter-over-quarter performance is mainly explained by slightly higher production volumes and sales strategy in line with our working capital improvement initiatives. Smelting cash costs in the second quarter of this year decreased to $1.12 per pound compared to $1.46 per pound in the second quarter of last year and $1.25 per pound in the first quarter of this year. In both periods, this decrease was mainly explained by lower LME sink prices affecting the cost of concentrate purchases, which were partially offset by lower byproducts prices. Our conversion cost, which is the metric that we control, remained flat quarter over quarter. Now moving to slide number 6. On this slide, I would like to highlight the competitive position of our mining and smelting segments. In times of tight prices, it is important to understand how resilient and competitive our portfolio of operations is. As you can see, our mining and smelting segments are positioned in the lower quartiles of the cost curves. This competitiveness is supported by flagship polymetallic mines and smelter operations with competitive energy costs, access to raw materials under competitive conditions, in addition to adequate logistic costs and operational efficiency. Now moving to the next slide. In slide number seven, I would like to highlight the productivity program we are performing at some of our mining operations. It is a broad program that seeks to operate on different efficiency levels, including initiatives such as higher availability of mine equipment, manpower reduction, optimization of mining methods, and reduction of scope and rates of our main contractors. All of these initiatives are aimed to increase productivity, reduce our headcount, reduce fixed and variable costs, and optimize investments and working capital. The next stage of this problem will extend to our other mines and our smelter operations which we expect to start in the next few weeks. Ramp-up activities at Aripona continue to progress significantly, and we are currently focused on steadily increasing plant throughput rate, asset reliability, reduction of plant downtime hours, as well as improving metal recoveries and concentrate rates and quality. During the quarter, treated ore volume was 372,000 tons, an increase of 100,000 tons from previous quarter, while zinc production reached 6.5,000 tons, up 166% quarter over quarter. In the next slides, we will see some of these improvements. For the upcoming quarters, we expect to conclude the adjustments related to the bottlenecks in the pumping and piping systems that we mentioned in the previous quarter, and further improve the recovery and concentrate rates. We also continue with mine development activities at ADEX and LINC mines. The exploration activities in the quarter progress as planned, And we are focused on upgrading the mineral resource at the Babassu deposit and expanding again our mineral reserves at the end of 2023. Now moving to the next slide. On this slide, I will talk about the progress of some of our main KPIs for the ramp-up phase of Aripuana. Starting with the plant downtime in the upper left side, we noted a reduction of 32% quarter over quarter. Average plant capacity utilization increased by 32% in the second quarter to 66%, and in June, utilization reached 76%. This utilization already includes the plant downtime hours. Therefore, if we do not consider those hours, the utilization would be at much higher levels. That is why we are focused on plant reliability. Finally, we can see the progress of zinc recovery, which reached 63% in June compared to 48% in March, and the quality of concentrate in zinc increased significantly. Now moving to the next slide. On slide number 10, you can see that compared to the first quarter of 2023, Zinc production grew by 156%, reaching 6,500 tons in the second quarter. Copper grew by 36%, while lead and silver production grew by 37% and 61% respectively. That said, we are confident with the progress of the operation and we will remain focused on completing the ramp-up in the coming months. Now moving to slide number 11. On this slide, I would like to highlight that we continue to advance with the technical studies for the PASCO integration project. As we have been discussing in previous calls, this is a project with the potential to unlock important value for NEXA through economies of scale, cost improvement, and extension of the life of the asset. We have four work fronts underway, focusing on the integration of the underground mines, increasing the capacity of the El Porvenir plant, increasing the capacity of tailings storage facilities, as well as studies for support functions. Exploration activities are following our program for the year, which already included activities focused on supporting the mineral inventory for the project. We are moving forward with a project and expect to submit it for approval by our board of directors in the fourth quarter of this year. Now, I will turn over the call to Jose Carlos del Valle, our CFO, who will present our financial results. Jose, please go ahead.