Nexa Resources S.A.

Good morning and welcome to Nexa Resources' fourth quarter and full year 2024 conference call. All participants will be in a listen-only mode. Should you need 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. 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 questions in the box and click send, and that will be answered soon. 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' fourth quarter and full year 2024 earnings conference call. Thank you for joining us today. During this call, we will discuss the company's performance as outlined in our earnings release 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, where we will outline our forward-looking statements about our business. Please refer to the disclaimer regarding these statements and their associated conditions. Now, it is my pleasure to introduce our speakers. Joining us today is our CEO, Ignacio Rosado, our CFO, José Carlos Del Valle, and our Senior Vice President of Mining Operations, Leonardo Coelho. With that, I will turn the call over to Ignacio for his comments. Ignacio, please go ahead.

Thank you, Rodrigo, and good morning, everyone. Thank you for joining us today as we review our fourth quarter and full year 2024 results. Let's move to slide number three, where we highlight our main achievements for the year. As we close out 2024, we are very pleased with our performance. We achieved the second highest adjusted EBITDA in our history, and for the first time since initiating the investment cycle in Adipona, generated positive consolidated cash flow. Our financial position also improved with a notable increase in our cash balance, a reduction in the gross debt, and an improvement in our net leverage ratio from 2.2 times in the third quarter to 1.7 times. In the fourth quarter, adjusted EBITDA reached $197 million, a 79% increase from the 110 reported in the same period last year. For the full year, adjusted EBITDA totaled $714 million. This strong performance was driven by several key factors, including higher byproduct contribution, increased zinc prices, lower environmental liabilities, and foreign exchange gains. On the operational front, we continue to make steady progress, meeting our 2024 production and cost guidance, while accelerating both revenue growth and margin expansion. Total consolidated net revenues for the fourth quarter reached $741 million, up 18%, compared to the fourth quarter of last year, and a 4% increase compared to the third quarter of this year. In terms of mining production, zinc output decreased by 11% quarter over quarter, while lead and silver production increased by 2% and 1% respectively, driven by higher grades. Copper production saw a slight decrease compared to the previous quarter, but was in line with our mine sequencing plan. Regarding Aripuaná, I will share more details shortly, but I would like to highlight that the operation made a fully positive contribution to our adjusted EBITDA in 2024. Aripuaná has been a very challenging project to build. And as previously mentioned, we approved a purchase of a fourth tailings filter which will enhance utilization capacity, given that the three filters in place have limited capacity and present operational issues. With these four filters, the plant will achieve its maximum capacity. In terms of zinc metal and oxide sales, we saw a minor 1% dip quarter over quarter. Those sales increased by 6% year over year. Throughout 2024, we made significant progress in optimizing our portfolio and successfully executing strategic divestments, including the sale of the Morraudo complex, the Pucacaca project, and our non-operational Chapi mine in Peru. These divestments allow us to concentrate on our high return assets. In line with this strategy, I am proud to announce that the first phase of the Cerro Pasco integration project has been officially approved. This phase includes the implementation of tailings pumping and piping systems and represents an important milestone extending the life of this mining complex. I will provide more details later in this presentation. Now let's move to slide number four to discuss our operating performance. Turning to the operating performance of our mining segment, zinc production in the fourth quarter of 2024 reached 74,000 tons, down 19% compared to the fourth quarter of last year. This decrease was primarily driven by lower output at Cerro Lindo, El Porvenir and Basante, as well as the absence of contributions from Morro Odu. These impacts were partially offset by higher production volumes from Aripona and Atacocha. Compared to the third quarter of 24, SIN production decreased by 11%, mainly due to lower volumes at Cerro Lindo, Basante and Atacocha. However, this was partially offset by increased output from Aripona. SIN production was 2% lower compared to the full year of 2023. In terms of our guidance, we made our annual production guidance for zinc, lead, and silver, while copper production exceeded the upper range of our guidance. Looking at the cash cost in the fourth quarter, our mining cash cost significantly dropped to zero cents per pound compared to 44 cents per pound in the same period last year. This sharp reduction was mainly driven by higher byproduct contribution lower treatment charges, and reduce operational costs, partially offset by lower zinc volumes in the period. Compared to the third quarter, mining cash costs slightly increased by one cents per pound due to lower zinc volumes, which was partially offset by higher product contribution, particularly at Cerro Lindo, due to stronger LME price and lower operational costs. For the full year, our cash costs remain in line with our updated 2024 guidance, which we revised down by 64% in October 2024. These results reflect our discipline cost control measures, operational improvements, consistent execution of our mining plans, and foreign exchange gains, particularly from our Brazilian operations. Our cost per run of mine in the quarter was $44 per ton, a 6% decrease year over year. This improvement was mainly due to lower maintenance and personal expenses, reductions in energy and material costs, along with foreign exchange gains. These benefits were partially offset by lower treated ore volumes following the cessation of mining operations at Moragul. For the full year, cost per run of mine averaged $46 per ton remaining within our guidance range. Now let's move to slide number five. Turning to our smelting segment, total sales in the fourth quarter reached 152,000 tons, and increased by 6% year over year. This growth was primarily driven by higher production volumes at Cajamarquilla and a sales backlog from the third quarter, which resulted from demand adjustments in our domestic market. Compared to the previous quarter, total sales decreased by 1%, mainly due to reduced production at Tres Marias, especially for zinc oxide due to lower demand. In 2024, total sales amounted to 591,000 tons in line with the mid-range of our annual guidance and relatively stable compared to 2023. Looking at costs, consolidating smelting cost in the quarter was $1.26 per cent per pound up from $1 per pound in the same period last year. This increase was mainly due to higher raw material costs driven by increased zinc prices and lower TCs, as well as higher operating costs. These effects were partially offset by higher sales volume and favorable foreign exchange variations. Compared to the third quarter, cash costs increased by 8%, mainly reflecting higher zinc prices, which impacted concentrate purchases and lower by product contribution. However, these effects were partially offset by lower operational costs and foreign exchange gains. Our conversion cost for the fourth quarter was 30 cents per pound compared to the 29 cents per pound in the fourth quarter of 23. This slight increase was mainly due to higher variable costs, but partially offset by lower energy expenses at Cajamarquilla, favorable foreign exchange variations, and increased sales volume. Compared to the third quarter, conversion costs decreased by 6%, driven by lower variable costs, including energy expenses and maintenance expenses, along with foreign exchange gains and lower third-party expenses. It is worth highlighting that both conversion costs of 30 cents per pound and cash cost of $1.15 per pound remain within our guidance range for the year. Now, let's move to slide number six, where we will begin discussing Aripuana. In the fourth quarter, Aripuana reported higher production of zinc, lead, and silver compared to the third quarter of 24, while copper production declined, driven by lower grades in the period. Adjusted EBITDA remained positive. The quality of concentrates remained stable and within commercial specifications, while metallurgical recoveries performed close to or at target levels. Additionally, the talc-related challenges faced in the third quarter were effectively addressed. The feed rate remained stable, contributing to the overall performance. In November, we conducted a scheduled five-day maintenance shutdown to replace the mill lining. Additionally, above-average rainfall during the period led to an 8% reduction in treated ore volumes compared to the previous quarter. During the quarter, we also approved the acquisition of a fourth tailings filter, a critical step in enhancing our filtering capacity and supporting full production. As previously disclosed, this investment will significantly improve operational efficiency. We expect that filter to be delivered and installed in 2025 with commissioning plan for the first quarter of 2026. Looking at the full year 2024, Aripuana significantly improved its performance. Annual sink production increased by 43% compared to 2023, while copper rose by 24%, lead grew 106%, and silver production more than doubled, growing 114%. This performance is attributed to the commitment and hard work of our teams. Let's move to slide number seven to discuss the latest advancements in the Cerro de Pasco integration project. On this slide, I would like to highlight our progress with the Cerro de Pasco integration project. As we have discussed in previous calls, this project has the potential to unlock substantial value for NEX. During the quarter, we made important strides across multiple work fronts, including the approval of the tailings pumping system, a crucial step in enhancing operational efficiency. This phase involves the construction of a tailings treatment plant at El Porvenir and the building of a six kilometer tailings pipeline to connect El Porvenir plants to the Atacocha tailings storage facilities. The detailed engineering has been completed and construction is set to begin in the second quarter of 2025. Beyond the tailings pumping system, phase one includes investments to raise the El Porvenir tailings dam which is already underway, as well as future investments to increase Atacocha's tailings storage capacity. The ultimate goal of this phase is to significantly extend the operational capacity of the tailings storage facilities, ensuring the long-term sustainability of operations at the Cerro Pasco complex. Meanwhile, studies of phase two, which includes the underground connection of the mines and the El Porvenir shaft upgrade are progressing well. We expect these studies to be completed by the third quarter of 2025. Now moving to slide number eight, where I will provide details on our exploration upside. As explained in the previous slide, the strategic rationale of the Cerro Pasco project includes the importance of the tailings storage capacity, aiming to extend the assets operational life significantly. the connection of the underground mines of Atacocha and El Porvenir, and the upgrade of the El Porvenir ore shaft. The execution of these milestones will enable to access to a substantial volume of high quality mineral resources from the Atacocha underground mine, significantly enhancing the acid flexibility, increasing its mineral base, and extending the life of the mine complex. Furthermore, our exploration focus remains steadfast on the integration target. This area boasts high geological potential and presents a promising and highly attractive upside for the project. We aim to unlock additional value and ensure long-term success for the Cerro Pasco complex. Now let's move to slide number nine. On this slide, I would like to emphasize the continued progress of our exploration program. Our 2024 plan has yielded positive results across both brownfield and greenfield activities. At Cerro Lindo, the exploration program remained focused on expanding known ore bodies southeast of Cerro Lindo, with really targeting the extensions of the mineralized zones in ore bodies 8b and 8c. In Aripuana, efforts were concentrated on the Mazaran Duba target, aiming to identify new mineralized areas. In Basante, the brownfield exploration program continues to focus on expanding the mineralized zones near the mine. Finally, at Cerro de Pasco, as mentioned before, the exploration program delivered notable results, particularly around the integration target. I will turn the call over to Jose Carlos Del Valle, our CFO, who will walk us through our financial results. Jose, please go ahead.

Thank you, Ignacio. Good morning, everyone. I will now continue with slide number 10. Starting with the chart on the upper left, we can see that total consolidated revenues for the fourth quarter increased by 18% year over year. This was mainly driven by higher metal prices, except for lead, and higher smelting sales volumes. These gains were partially offset by lower net premiums. Compared to the third quarter of 2024, net revenues grew by 4%, supported by higher zinc, silver, and gold prices. For the full year 2024, consolidated net revenues reached $2,766 million, an 8% increase compared to 2023. This growth was mainly driven by favorable metal prices, higher copper and lead sales, and higher silver and gold payables from our mining operations. Moving on to profitability, our consolidated adjusted EBITDA for the fourth quarter reached $197 million, reflecting a strong 79% increase year-over-year. This performance was primarily driven by higher buy-pro contribution, increased metal sales volume, higher sink prices, and foreign exchange gain. Compared to the third quarter of 2024, adjusted EBITDA also grew by 8%, as the impact of higher sink prices was partially offset by higher variable costs. For the full year 2024, consolidated adjusted EBITDA totaled $714 million, a significant 76% increase compared to 2023, making it the second highest annual adjusted EBITDA in Nexus history. This was mainly supported by favorable metal prices, foreign exchange benefits, higher BIPRO contribution, and ongoing improvements in both operational and financial management. Finally, it is worth noting that our consolidated adjusted EBITDA margin reached 26% in 2024, 10 percentage points better than in the previous year. Now let's move on to slide number 11. Looking at the top of our left slide, we can see that in 2024 we invested $277 million in CAPEX, with nearly all of this amount directed towards sustaining activities, including mining development and tailing storage facilities. Our total CAPEX investment for the year came in below our revised guidance from October 2024, which had already been adjusted downward by $11 million as part of our portfolio optimization efforts. With respect to mineral exploration and project evaluation, we invested a total of $64 million in 2024. Of this amount, $37 million was specifically allocated to mineral exploration and mine development, fully aligned with our annual plan to support ongoing exploration activities. Now, let's move on to the next slide where I will discuss our cash flow generation for the quarter. Starting with our $714 million of adjusted EBITDA net of non-operational items, we can see that Nexa generated a strong operating cash flow before working capital variations, totally $514 million for the year. From this amount, we paid $175 million in interest and taxes and invested $265 million in total CapEx across our operations. As part of our liability management strategy, loans and investments had a positive net impact of $98 million. This was mainly driven by our new bond offering at the venture issuance and the BMDS credit line, all executed in the second quarter of 2024. Included here is also a cash dividend received from NRCan. These cash inflows were partially offset by loans and financing, lease liability payments, and premium paid on our bond repurchase program, including cash tenders for a portion of our bonds maturing in 2027 and 2028. Additionally, we paid $60 million in contractual dividends to non-controlling interests. Another impact was related to foreign exchange variations, which had a negative effect of $11 million on our cash and cash equivalents, primarily due to the depreciation of the Brazilian real against the U.S. dollar. Finally, working capital had a positive contribution of $18 million as our initiative to optimize nexus working capital cycles throughout 2024 successfully reversed the negative impact seen in the first nine months of the year. Combining all these factors, our total free cash flow generation in 2024 reached $163 million. Now let's move to slide number 13. As you can see, our liquidity positions strengthened during 2024, which allows us to continue to maintain a solid balance sheet and an improved and extended debt maturity and profit. At the end of 2024, our available liquidity stood at approximately $960 million, including our undrawn $320 million sustainability link revolving credit facility. Looking at our debt profile, the average maturity in the fourth quarter of 2024 was 5.6 years, with an average cost of debt of 6.4%. More importantly, as of December 31st, our total cash position was sufficient to cover all obligations maturing over the next five years. In terms of leverage, our net debt to adjusted EBITDA ratio significantly improved quarter over quarter and year over year. dropping from 2.2 and 3.3 times to 1.7 times, respectively. These improvements were primarily driven by higher adjusted EBITDA and by a reduction in net debt over the last 12 months. I want to emphasize that we continuously evaluate opportunities to further optimize our capital structure, diversify our funding sources, and strengthen our liquidity. As I have mentioned before, maintaining a debt maturity profile that is aligned with the long life of our assets while securing the most competitive financing costs is always a priority. In line with this, we always explore strategic initiatives to extend maturities, reduce the average cost of debt, and assess financing alternatives. The goal is to further enhance our financial position and long-term resilience. Moving now to slide 14. Regarding the zinc market fundamentals, it's important to note that in the fourth quarter, the LME zinc price averaged $3,050 per ton, a 22% increase year-over-year, and a 10% increase compared to the third quarter. Despite macroeconomic and geopolitical uncertainties, including concerns over U.S. trade protectionism, potential tariff hikes, and risks of trade wars, SIG market fundamentals remain solid, providing positive support for prices. These fundamentals are driven by a still constrained concentrate supply, which led TCs to remain at very low levels throughout the second half of the year. As a result, global refined metal production decreased by 2% in 2024 compared to 2023, tightening inventory levels even further. Since the beginning of the fourth quarter, spot pieces in China have slowly started to recover, as illustrated in the lower part of the slide. However, they remain at historically low levels, continuing to pressure smelter margins due to higher raw material costs. Looking ahead, we believe these market conditions are unlikely to ease in the short term, leading us to expect continued price support for zinc. Moving now to slide number 15. During the last quarter, the LME copper price averaged $9,193 per tonne. up 13% from the fourth quarter of 2023, but marginally down by 0.2% compared to the third quarter of 2024. Despite macroeconomic challenges, corporate demand is expected to remain resilient in the short term, driven by strong activity across the energy, technology, and infrastructure sectors globally. As for silver, The LME price averaged $31 per ounce in the fourth quarter, up 35% year-over-year and 7% quarter-over-quarter. Short-term fundamentals for silver are also positive, largely driven by concerns over future silver availability. Since the majority of silver is produced as a byproduct of other metals, the industry is dependent on new mine projects to come online. Nexa is a significant global silver producer, producing 12 million ounces in 2024. Looking ahead, copper and silver prices are likely to remain volatile as markets react to shifts in U.S. trade policy and China's economic stimulus measures. Now, I will hand the presentation back to Ignacio for his final remarks.

Thank you, José Carlos. As we conclude today's call, I want to highlight the recent adoption of our new dividend policy This policy is designed to enhance transparency, provide consistent returns to shareholders, and maintain the financial flexibility needed to support our growth targets. In 2024, both Standard & Poor's and Fitch reaffirmed NEXA's investment rating with a stable outlook. Additionally, last November, Standard & Poor's assigned NEXA Recursos Mineraes, our Brazilian subsidiary, its first ever rating also investment grade with a stable outlook. This rating underscores the expectation of resilient operations in Brazil in the coming years. Last week, Standard & Poor's conducted its annual review and once again reaffirmed Nexa's investment grade rating, maintaining a stable outlook. This recognition highlights our commitment to the financial discipline of the company. I also want to emphasize that in 2025, safety will remain a top priority. We are fully committed to strengthening our safety culture and continuously improving our protocols to ensure our employees' well-being. 2024 was a year marked by resilience and innovation, and as we move into 2025, We expect revenue growth supported by positive contributions from pricing and volume expansion. Our DCP approach to capital allocation remains unchanged. We will prioritize CapEx investments in enhancing production capacity, extending the life of our mines, and ensuring long-term sustainable growth. Before I close, I want to express my gratitude to our exceptional team of dedicated professionals and our shareholders for their trust and support. Thank you for your attention. We truly appreciate your engagement and now look forward to your questions. Operator, please open the line for questions.

We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press stars and two. You also may send questions via chat at the webcast platform. The first question today comes from Camilla Barter with Verdesco. Please go ahead.

Hi, everyone. My name is Camilla Barter. Hi, good morning. Thank you for the opportunity for making my questions. I have two questions. The first, just some thoughts on Aripuana. You mentioned you expect higher contributions in terms of EBITDA and free cash flow from Aripuana this year. I was just wondering if you can share any quantitative estimates on that. And on the tailing filter, do you have an estimate on CAPEX for the filter? And after it's implemented next year, how much potential do you see for a capacity increase in Arepona? And the second question here on Cerro Pasco, as you mentioned in the call, the project's moving ahead. First phase was approved and second phase studies should be concluded in the second semester. So I just wondered if you could share any additional details of the project, topics, if you see any risk for startups, and more details on finance. It would be helpful. Thank you.

Pardon me, this is the conference operator.

I believe our speaker lines are muted.

So, if you can listen to me now, I was telling you that the total capex of PASCO is around $140 million. $85 million comprises the implementation of the pumping system of El Porvenir to Atacocha. What happens here is that the life of mine of the tailings dam of El Porvenir is getting towards the end of its life of mine. So the idea is to pump all these tailings to the Atacocha dam that has many, many, many years going forward. This is, as I said, a project cost $85 million. And the rest of the CAPEX comprises the interconnection of the two mines in the underground. This is very important because it will allow us to access all these resources that are in Atacocha. that we will be able to extract them through the infrastructure of El Porvenir. And for that, not only we need the interconnecting the two mines by... but also upgrading the shaft of El Porvenir to accommodate also the ore of Atacoche. So this project is between two and three years. We already approved the pumping, as we said. This pumping is going to be for two years. We are starting the civil works in the second quarter of the pumping, and we already have some equipment. So in the next year, this will finish. And then in parallel, this upgrade of the shaft and interconnecting the mine will come probably in 2026, depending on how the studies go. That is regarding Cerro Pasco. Regarding Aripona, it's very difficult to project EBITDA or cash flow, yeah, because it will depend on prices. I will tell you this. The Aripona project has been a very difficult one to implement. I mentioned this many times. There were several factors that involved some flaws on the implementation of the project, COVID, an isolated area to develop this project, etc. So the project in 2024 really advance in terms of operational performance. But the problem is that we have mainly a bottleneck in the tailings filters because the capacity of the three filters that we have is not taking us to 100% of the production. So to give you an idea, we can, in the dry season, we can... have 140,000 to 150,000 tons, but the capacity could be 170,000 to 180,000. So you don't know this until you stabilize the operation, and we started to see that only in June 2024. Having said that, in October, we're starting to do all the tests to order a different filter. It's a filter that is from a different provider. It's a more automated filter. And the capacity of the four filters is much higher than the rest of the three. So the idea is we order already that filter. It's not an easy implementation because it's a new area and that has a lot of civil works and infrastructure. Towards the end of the year, we will have the filter in the area. And then the commission, as we said, is going to be doing the first quarter of next year. With this additional filter, we will achieve the capacity. So when we tell the market that, let's say, the projection on production on Aripuana has delayed a year, This is mainly because of this. And I mean, it's difficult for us to digest this because these were filters that were ordered many years ago. These were filters that don't have a capacity and didn't perform. But the good part is that in 2026, we will be at full capacity and having all this upside on exploration and on the reserves that we have today, this new mine is going to be very profitable going forward. So we have to look forward. Aripuana, as I said, was a difficult project to build, but we are towards the end of these stages, and 2026 is going to be much better than this year. What I can say in this year is that we will have positive cash flow, and the EBITDA is going to be positive as well, and we believe that it's going to be higher than in 2024.

As a reminder, if you would like to ask a question, please press star then one to join the question queue. The next question comes from Carlos D'Alba with Morgan Stanley. Please go ahead.

Yeah, thank you very much. Good morning. Just to confirm what you just said at the end of the last answer, do you expect Alipurna to have positive EBITDA in 2025 and be higher than 2024? Did I get that right? Yes, yes.

And this is, I would say, simple mathematics. We will have a higher production that costs are still high because we are not diluting fixed costs in this throughput limitation of the throughput. But the costs are going to be lower than in 2024. The production is going to be higher. CapEx should be similar. The new filter is costing us $14 million, more or less. But yes, with these prices and the products that we have and with the CapEx, yes, we believe that EBITDA and cash flow should be higher than in 2024.

All right, makes sense. My second question is regarding the dividend policy. I just want to make sure that I get what it means. Basically, it's a minimum of 20%, so not a minimum, but a 20% of free cash flow with a minimum payment of $0.08 per common share. And so basically, if I just look at our forecast of cash flow operations minus CAPEX, that amount, that free cash flow times 20%, is what you will pay. Is that right?

Yeah, I'm going to turn to Jose Carlos so he can explain better this. Jose Carlos, please.

Sure. Hi, Carlos. Good morning. Yes, the minimum is $0.08 per share. So what we wanted to do is, well, first of all, as you know, we have this new policy that we have already approved, and it's $0.08 per share so that we put a floor on the dividend payment, but in a way that is transparent and more predictable. And the idea will be to pay 20% based on the cash flow that we generate each year, which is basically after sustaining capex, right? So we pay 20% on that free cash flow that internally we call pre-events. You would have a more predictable and consistent dividend flow over the years. And this is effective as of 2024 results.

Okay, so... Basically, it's the cash from operations minus your sustaining capex, 20% of that.

Right. Okay.

And what is the sustaining capex that you are expecting for 2025?

This year, we were about 270 in 2025. Is that plus what we have on Cerro de Pasco, because at the end of the day, the tailings pumping system is part of the sustaining capex. If I remember correctly, it's about 330. So that would be a slight change compared to the capex that we have in 2024. And obviously, what we have to do take into consideration is that we don't know what prices are going to be in 2025. But assuming that we have prices that are similar to 2024 and based on the improved performance that we expect from Maripuana and the continuous improvement from our operations, we expect a positive trend in our cash flow generation going forward. So therefore, that should benefit the dividends that we're going to pay out.

So the total sustaining capex expected in 2025 is around $330 million. Right.

I can confirm that number. It's around that number.

Sorry, this is Rodrigo here. Just confirming the sustaining capex for 2025 is going to be $316 million, right? This is the number that we released in our guidance on the beginning of February.

360. 360. No, 316, 316.

Okay, 316.

Okay, good. All right, excellent. And then my last question is on working capital. Obviously, big swings throughout the year. How should we think about working capital in Q1, Q2, Q3, Q4, just given how significant the volatility is?

Yes, I can comment on that, Carlos. We don't expect a different trend from what we saw in 2024 and 2023. There is a seasonality in how our working capital behaves throughout the year. But on average, going forward, I would say that it will be safe to assume that working capital effects should be close to neutral on an annual basis. However, we would still see that volatility quarter to quarter as we have seen in the last three years.

Okay, yeah, that's clear. Thank you very much, Ignacio, José Carlos, and Rodrigo.

You're welcome.

We will now take questions from the webcast. I'd like to hand the call back over to Rodrigo.

Thank you, operator. We have some follow-up questions from the audience here in the web. So I would start with the Well, Inácio already mentioned about the fourth filter in 91A. So there's one question from Henrique from Morgan Stanley. So in terms of adding more color and why the developing the fourth filter now. So I believe this was already answered. So there's another question. One question from Hernan Kilslik from Medlife. So what should we expect in terms of cash flow generation for 2025? And what are your plans for capital allocation? Well, Zach, can you address this one?

Yes, yes. I mean, we have somehow already addressed the cash flow question. I mean, without knowing exactly what prices are going to be, our expectation is that our performance is going to continue to improve in 2025. Even though we won't have the Aripana filter in place yet, there is an expectation that the performance there will be better. We always have this constant initiative to control our costs. As you remember from 2024, we were within guidance. So, on those aspects that we control, we expect that we will have better performance, and depending on prices, if prices are better, obviously, that will translate into better cash flow generation. So, the expectation is positive. In terms of capital allocation, I think we have mentioned before that we have a very clear strategy of, obviously, Focusing on extending the life of mine of our minds. Secondly, I would say the reduction of gross debt is not just a matter of reducing leverage or net debt, but also reducing gross debt so that we can also reduce our interest expense obligations. And then we also have this newly approved dividend policy so that we can also provide a consistent return to shareholders over time. So I would say that those are the pillars.

Okay, thank you, Jose. We have one question from Omar from Compass Group. So actually, there are three questions. The first one, is there any other asset you are willing to sell? The second question is regarding Aripuanã, what is the cost of the additional filter? And when do you expect the plant to work at the nameplate capacity? And the last question is to comment on the status of our magistral project.

Yes. So as we said, we sold mostly all the assets that we wanted to get rid of because there were no transformational assets. They were small assets for us. And part of this strategy is to make sure that the four mines that we have get developed, increase the life of the mine, and we operational executed them in the best way possible. But that growth will come from a new project that we have to look for in terms of M&A. It has to be an advanced brownfield project or a producing mine. As we said before, mainly copper and zinc. So we are not willing to sell any other. I already said that the additional cost is $14 million. The full capacity will come in the second quarter of next year. And regarding Magistral, as we know, the mayor was disapproved. The environmental impact study was disapproved. It wasn't. It was disapproved because the community, we had problems with the community, especially in the pandemic, that blocked all these roads and all these areas. And there were some costs not allocated to NEXA. Now we are negotiating with ProInversión, that is the entity from the government, on what are our next steps. And this is going to take some months. Having said that, we are still very interested in Magistral, but Magistral, as we already said also in other calls, is a project that has to compete with other projects that we might have in our radar because we want to make sure that we build the most profitable mine. So Magistral has to compete in that regard. We will update the market in these conversations and negotiations with the authorities. And we believe, as I said, that they will come in the next months.

Thank you, Inácio. We have one question from Rodrigo Murieta from AFP Integra. So, based on the guidance provided at the beginning of February, El Povinir and Atacocha for the mid-term are including part of the PASCO integration project mineralization in the guidance?

Hi, Rodrigo. Thank you for the question. We are not considering yet the mineralization of the integration area. The guidance considers only the reserve base that we have currently. And we expect to publish some resources by this year and to convert into reserve by next year. And then you can assume a part of it in our plan.

Okay. Okay.

This concludes our question and answer session. Now we will hand the call over to Ignacio for his final remarks.

Thank you. Thank you very much all for attending this call. We appreciate very much your interest in the company. We had a very good 2024 year, regardless of the problems in Aripuaná. We still believe Aripuaná is going to be a fantastic mine going forward. We're very committed to our challenges, to achieve our challenges for 2025. 2025 is going to be still a challenging year, but we have a very important group of people committed and clear in the strategies that we have to follow. Thank you very much, and we look forward to speak to you in the closing of the first quarter of 2025. Have a great weekend.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.