Nexa Res Q2 2026 Earnings Call: Complete Transcript

On Thursday, Nexa Res (NYSE: NEXA ) discussed second-quarter financial results during its earnings call. The full transcript is provided below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

The full earnings call is available at Summary Nexa Res reported a 78% year-over-year increase in adjusted EBITDA to $286 million, with a net income of $98 million, supported by a favorable metal price environment and improved production at Peruvian mines. Zinc production rose 8% year-over-year, while smelting sales volumes were down due to a fire at Cajamarquilla, which is expected to recover in the second half of 2026. The company installed a fourth tailings filter at Aripuanã and implemented block caving at Cerro Lindo, enhancing production capacity and cost-efficiency.

Free cash flow was negatively impacted by a $131 million tax settlement payment in Peru, but positive cash flow is anticipated in upcoming quarters. 4 times, with a focus on reducing gross debt and maintaining a strong liquidity position. Nexa Res maintained its production and cost guidance for 2026, expecting increased production and cost improvements in the second half. Full Transcript OPERATOR Good morning, ladies and gentlemen, and welcome to Nexa Res second quarter 2026 earnings conference call.

Please note that today's event is being recorded and broadcast live via Zoom, with access also through Nexa Res investor relations website. A slide presentation accompanying the webcast is available for download, as well as the replay of the conference call following its conclusion. As a reminder, all participants are currently in listen-only mode. Following today's presentation, we will open the floor for questions.

If you are joined via Zoom, please click the Raise Hand button. If your question is answered, you can lower your hand by clicking Put Hand Down. You may also submit your questions via the Q&A icon at the bottom of your screen. Please include your name and company when submitting your question.

For participants joined by phone, press star followed by 9 to raise or lower your hand. Once announced, press star followed by 6 to mute or unmute your microphone. Written questions that are not addressed during the call will be answered afterward by the investor relations team. Questions from media outlets will be handled separately by our corporate affairs team.

Now I would like to turn the conference over to Mr. Rodrigo Camarozano, Head of Investor Relations and Treasury, for his opening remarks. Please go ahead. Rodrigo Camarozano, Head of Investor Relations and Treasury Good morning, everyone, and welcome to Nexa Res second quarter 2026 earnings call.

Thank you for joining us today. We will walk through the results we published yesterday if you would like to follow along. The presentation is available through the webcast. Before we begin, please take a moment to look at slide number two.

It contains our forward-looking statements disclaimer, and we ask that you review it along with the related risk factors. Here with me today are Inacio Rosado, our CEO, Jose Carlos Dovalle, our CFO, and Leonardo Coelho, our Senior Vice President of Mining Operations. Ignacio, over to you. Inacio Rosado, CEO Thank you, Rodrigo, and good morning, everyone.

Let me start on slide number three. The operational inflection we have been pursuing becomes visible this quarter. Adjusted EBITDA grew 78% year over year to 286 million, with a margin of about 31%. 4 times, a steep drop from where we were a year ago, supported by last 12 months adjusted EBITDA of over 1 billion.

Three things drove the results. First, a constructive price environment across our entire metal mix, most notably silver, where prices averaged 117% above the second quarter of last year. Second, the recovery of production at our Peruvian mines after the first quarter setbacks as those assets returned to normal run rates. And third, better performance at our Brazilian smelters, including the contribution from byproducts, which partially offset the challenges at Cajamarquilla.

Two milestones position us well for the second half of the year. At Aripuana, the fourth tailings filter is now up and running. That removes a key bottleneck and gives us more production flexibility going forward. And at Cerro Lindo we implemented the block caving mining method.

It is an important milestone, and over time we expect it to contribute to lower unit costs and better access to higher-grade areas in mining. Zinc production reached 79,000 tonnes, up 8% year over year on better grades. In smelting, zinc metal and oxide sales totaled 134,000 tons, down 7% year over year and 8% quarter over quarter, impacted by the fire at Cajamarquilla in May. It is important to mention that the event affected the casting house, not upstream processing, so we continued producing cathodes while we restored operations.

Activities resumed gradually and returned to normal levels in June. That cathode inventory underpins the recovery of the affected volume in the second half. Free cash flow was slightly negative in the quarter, mainly reflecting a 131 million dollar tax settlement payment in Peru related to the Cerro Lindo Stability Agreement. Looking ahead, we expect positive cash flow in the coming quarters, supported by improved production at Aripuana, the recovery of production at Cajamarquilla, and a resilient pricing environment.

Let's move to slide number four for a closer look at the mining. Year over year, the 8% increase in zinc production comes from better ore grades across key assets. Sequentially, production was broadly flat. The recovery in Peru offset temporarily lower grades at Aripuana, the commissioning of the fourth tailings filter, and the scheduled ball mill liner replacement.

04 per pound in the quarter. 35 per pound, well below our 2026 guidance range. The drivers were strong byproduct credits from higher copper, silver, and gold prices, and lower treatment charges. Cost per ton of run-of-mine was $57 per tonne in the quarter and $57 per tonne for the first half, in line with full-year guidance.

The year-over-year increase came from the appreciation of the Brazilian real against the US dollar and from higher personnel and maintenance costs at most of our units, partially offset by a stronger byproduct contribution. The financial picture for the segment is strong: net revenues of 524 million and adjusted EBITDA of 220 million, a 42% EBITDA margin. That is the kind of operating leverage we expect when prices and volumes both move in the right direction. Let me turn to Aripuana on slide number five.

Aripuana delivered strong year-over-year performance. 8 thousand tonnes. That reflects higher throughput and better grades as the operation keeps moving towards design capacity. Sequentially, the decline was expected.

It reflects the commissioning of the fourth tailings filter during the quarter together with the scheduled ball mill liner replacement, and we are already beginning to see the benefit of the new liner material. The filter itself was the milestone of the quarter. The new capacity processed more than 50,000 tons of tailings and supported average plant feed rates of 249 tons per hour in June. That is more than 86% capacity utilization.

For the quarter as a whole, plant utilization averaged 71%, with peak daily rates above 92%. What that tells us is that the operation can now sustain higher throughput with more flexibility and, importantly, with materially less exposure to weather disruptions during the rainy season. As the new filter stabilizes, we expect utilization rates and production to increase further in the second half of the year. On exploration, we did not conduct exploration drilling at Aripuana in the first half, but we completed over 23,000 meters of infill drilling.

For the second half, the priority is the geophysical program: generating and refining targets, expanding known mineralization, and identifying new opportunities to support future mineral resource growth. Now to slide number six for the Cerro de Pasco integration project. This quarter, alongside continued progress on phase one, we completed a review of the project's long-term configuration. With a more favorable metal price environment, we reassessed some operating parameters at the Atacocha open pit mine, including a review of economically mineable areas.

Based on these results, we now expect the open pit to remain in operation for longer than originally anticipated. And because the open pit will sustain production longer, we are able to defer phase two, spreading capital over a longer period without reducing the complex's expected production. On capex, total estimated investment moves from 138 million to 180 million, concentrated in phase one. The capex review was primarily driven by the incorporation of a geomembrane lining in the Atacocha tailings, together with engineering updates and a decision to anticipate an Atacocha tailings storage facility raise into the current project phase.

Our 2026 capex for the project remains unchanged at 31 million dollars, with the incremental investment allocated to 2027 and beyond, and phase two is deferred to 2032. On execution, this quarter we completed the main civil works, started electromechanical assembly, including the tailings thickener, and concluded the structural assembly of the pumping building. Looking ahead, the third-quarter focus is on completing assembly and starting commissioning. Mechanical completion of the pumping system is expected in December.

From there, we expect approval of the MEIA by SENACE and the start of the operating authorization process in the first quarter of 2027. Cerro de Pasco is a well-known high-potential polymetallic district. This review further de-risks the project and strengthens our integrated position there, sequencing the ore body to maximize value and minimize risk while preserving the long-term production of the complex. Now on slide number seven, I will talk about our exploration results.

Our first-half exploration results reinforce the quality and depth of the portfolio. On slide number seven you can see the high-grade intersections from our bright brownfield programs. The two highlights came from Vazante and El Porvenir. At Vazante, drilling at the Conexao Sucuri Norte target returned strong zinc mineralization close to existing infrastructure, which supports resource growth within the current mine plan.

At El Porvenir, drilling at the integration target continued to confirm high-grade polymetallic mineralization and extended known zones, which reinforces the strategic upside of the Cerro de Pasco integration project. At Cerro Lindo and Aripuana, our geological and target generation programs advanced priority targets and opened new opportunities for future drilling campaigns. Taken together, these results support the potential for future mineral resource growth and life-of-mine extensions across our assets. Let's turn to slide number eight for smelting.

In smelting, zinc metal and oxide sales were 134,000 tonnes, down 7% year over year and 8% quarter over quarter. Both declines mainly reflect the temporary suspension at Cajamarquilla after the fire in May. That was partially offset by higher volumes at both Brazilian smelters year over year. Sequentially, we expect to recover the affected volume in the second half, supported by the cathode inventory built during the quarter, and our 2026 sales guidance remains unchanged.

Byproducts continue to gain weight in the segment year over year. Sulfuric acid sales rose 4%, silver content sales 22%, and copper cement sales were up 40%. 42 per pound in the first half, above the upper end of our annual guidance. That reflects higher zinc LME prices impacting raw materials costs, together with temporarily higher operating costs at Cajamarquilla due to the fire and the appreciation of the Brazilian real.

35 per pound in the first half, slightly above guidance, mainly on lower volumes at Cajamarquilla. As volumes recover through the second half, we expect conversion cost to move back towards the guidance range. Despite the lower volumes, the segment delivered a strong financial performance: net revenues of 584 million and adjusted EBITDA of 66 million, up 162% year over year and an 11% margin. The year-over-year improvement came from lower raw material costs driven by the consumption of calcined inventory with lower unit costs and a higher share of zinc concentrate from our own mines, together with a stronger byproducts contribution.

With that I will hand over to Jose Carlos, our CFO, for the financial slide. Jose Carlos Dovalle (CFO) Thank you, Inacio, and good morning everyone. Let's go to slide number nine for an overview of the financials. The momentum we achieved in the fourth quarter of last year has carried through into the second quarter of 2026, supported by a favorable price environment and by the normalization of our Peruvian mining operations.

Despite a softer quarter in smelting, net revenues totaled $908 million, up 28% year over year and 2% quarter over quarter. The year-over-year increase came from higher metal prices across the portfolio, including a $99 million larger byproduct contribution together with higher zinc prices. This was partially offset by lower smelting sales volume. The sequential improvement was more modest, reflecting continued strength in metal prices and higher mining volumes, again partially offset by lower smelting sales volume.

5%. The year-over-year improvement reflects price realization, which translates into a stronger byproduct contribution along with higher volumes in mining. Sequentially, adjusted EBITDA was broadly stable. The positives were lower raw material costs in smelting, lower maintenance expenses in Peru, and a higher share of zinc concentrate sourced from our own mines.

Those were partially offset by lower byproduct contribution, mainly on lower silver prices, and by lower smelting sales volume. Let's move to investments on slide number 10. We invested $89 million in CapEx during the quarter, bringing the first half total to $160 million, about 42% of our full-year guidance. Most of it went into sustaining activities, mine development, and tailings storage facilities.

Phase one of the Cerro de Pasco integration project accounted for $9 million in the quarter and $17 million in the first half versus our $31 million guidance for the full year. Our total 2026 CapEx guidance of $381 million remains unchanged, with disbursements weighted toward the second half as execution intensifies, mainly on Cerro de Pasco Phase 1, on exploration and project evaluation. We invested $17 million in the quarter mainly in exploration drilling and mine development. First-half investment represents about 38% of the full-year guidance, which is broadly in line with our typical first-half pace.

We expect disbursements to weight toward the second half as drilling programs advance at Vazante, Aripuanã, and the Cerro de Pasco complex. Our full-year guidance of $86 million remains unchanged. Let's now turn to slide number 11 to discuss cash flow generation for the quarter. Starting from adjusted EBITDA of $286 million and adjusting for non-operational items, operating cash flow before working capital and CapEx was strong at $286 million.

From there, $92 million went to CapEx and $93 million to interest and taxes. Foreign exchange had a negative impact of $3 million. On the financing side, regular debt service and lease payments resulted in a net outflow of $22 million. Dividends were a net negative of $4 million, reflecting dividends paid to non-controlling interests partially offset by dividends received by our subsidiary Polarix from Enercan.

Working capital and other variations were negative at $82 million in the quarter. This was mainly driven by the $131 million payment made in June related to a tax settlement in Peru associated with the Cerro Lindo Stability Agreement controversy with SUNAT following the final ruling issued by the Peruvian tax authority in May. Let me be clear on what this payment represents. Following a reassessment of uncertain tax positions, we made the required payment to preserve our legal right to continue disputing the assessments in the Peruvian judicial system.

By doing so, we also secured reductions in penalties and interest available under the Peruvian tax law. This payment does not represent in any way acceptance of the positions asserted by the tax authority. Furthermore, we continue to believe our technical and legal positions provide strong basis for recovering the disputed amounts in the next few years. Excluding that payment, free cash flow for the quarter would have been positive $120 million.

Including this one-off payment to SUNAT, free cash flow closed slightly negative at $10 million on the remaining working capital items. The second quarter showed a meaningful recovery from the seasonal outflow recorded in the first quarter. We expect further improvement in the quarters ahead. Let's move to slide number 12 to talk about liquidity, indebtedness and credit rating.

Our liquidity position remains healthy. We ended the quarter with $707 million in total liquidity, including our undrawn $320 million sustainability-linked revolving credit facility.