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.