Nexa Resources presented its 2Q18 results which showed:
- Revenue increased 11% to $637 million due to higher metal sales volumes and prices.
- Adjusted EBITDA rose 17% to $163 million mainly from improved mining and smelting margins.
- Zinc production was in line with 2Q17 while smelting sales increased 4.4% versus the same period benefiting from higher plant utilization.
- Cash costs were impacted by lower by-product credits and higher costs from safety revisions.
2. This presentation, prepared by Nexa Resources S.A. (formerly VM Holding S.A., herein referred to as the “Company” or “Nexa”), is solely for informational purposes.
Disclosure of this presentation, its contents, extracts or abstracts to third parties is not authorized without express and prior written consent from the Company.
Certain statements disclosed herein are “forward-looking statements” in which statements contained herein that the information is not clearly historical in nature are forward-
looking, and the words “anticipate,” “believe,” “continues,” “expect,” “estimate,” “intend,” ”strategy,” “project” and similar expressions and future or conditional verbs such
as “will,” “would,” “should,” “could,” “might,” “can,” “may,” or similar expressions are generally intended to identify forward-looking such statements. These forward-looking
statements speak only as of the date hereof and are based on the Company’s current plans and expectations and are subject to a number of known and unknown
uncertainties and risks, many of which are beyond the Company’s control. As a consequence, current plans, anticipated actions, and future financial position and results of
operations may differ significantly from those expressed in any forward-looking statements in the presentation. You are cautioned not to unduly rely on such forward-looking
statements when evaluating the information presented herein and we do not intend to update any of these forward-looking statements.
This presentation includes the Company’s unaudited non-IFRS measures, including: adjusted EBITDA; net debt; working capital. The Company presents non-IFRS measures
when we due to the belief that the additional information is useful and meaningful to investors. Non-IFRS measures do not have any standardized meaning and are therefore
unlikely to be comparable to similar measures presented by other companies. The presentation of non-IFRS measures is not intended to be a substitute for, and should not
be considered in isolation from, the financial measures reported in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International
Accounting Standards Board.
The information and opinions contained herein should not be construed as a recommendation to potential investors and no investment decision should be based on the
truthfulness, timeliness or completeness of such information or opinions. None of the advisors to the Company or any parties related to them or their representatives shall be
liable for any losses that may result from the use or contents of this presentation.
This presentation also contains information concerning the Company’s industry that are based on industry publications, surveys and forecasts. The information contained
herein involves and assumes a number of assumptions and limitations, and the Company did not independently verified the accuracy or completeness of such information.
All dollar amounts referenced in this presentation, unless otherwise indicated, are expressed in United States dollars. The contents hereof should not be construed as
investment, legal, tax or other advice and you should consult your own advisers as to legal, business, tax and other related matters concerning an investment in the
Company. The Company is not acting on your behalf and does not regard you as a customer or a client. It will not be responsible to you for providing protections afforded to
clients or for advising you on the relevant transaction. There is no obligation to update the information included in this presentation.
Certain information contained in this presentation with respect to the Company’s Morro Agudo, Aripuanã, Shalipayco, Magistral and Florida Canyon Zinc projects are
preliminary economic assessments within the meaning of NI 43-101 (as defined herein). Such preliminary economic assessments are preliminary in nature, including certain
information as of inferred mineral resources that are too speculative geologically to have the economic considerations applied to them that would enable them to be
categorized as mineral reserves, and there is no certainty that such preliminary economic assessments will be realized. The bases for such preliminary economic assessments
(including certain qualifications and assumptions) are described in the Company’s documents filed with the SEC and in each of the provinces and territories of Canada.
Disclaimer
Important information concerning this presentation
2
3. • CEO Message and Highlights
Tito Martins, Nexa CEO
• Nexa Results
Mario Bertoncini, Nexa CFO
• Projects & Closing Remarks
Tito Martins, Nexa CEO
Agenda
3
4. Aripuanã greenfield project
• Project is currently in feasibility study (FEL3) and is
95% completed as of June 30, 2018.
• In early July 2018, the construction permit request
was submitted to the Mato Grosso state
environmental authorities (SEMA).
• The project is expected to be submitted to Nexa’s
Board of Directors approval in 2H18.
CEO Message
4
Share Buyback proposal
• Nexa’s Board determined to convene a shareholders
meeting in order to consider the approval of share
repurchases
• The proposal reinforces our confidence in the
fundamentals and long term outlook of Nexa
• This share repurchase will not impact our growth
strategy and ability to keep paying dividends
according to the dividend policy
Mineral exploration results
• The Company is advancing in its exploration and
drilling campaigns
• In the first half of 2018, a total of US$36.6 million
was spent on drilling totaling 147,382 meters
• This aims new resource discovery and resource
conversion into measured and indicated around
existing assets and on greenfield projects
• Authorisation to explore the Northern part of Cerro
Lindo
Growth on metal sales¹, 4.4% higher
compared to 2Q17
• 152kton sales volume¹, leveraged by a higher
production output in the quarter.
1Metallic zinc and zinc oxide
Continuously improving debt profile
• US$200 million in outstanding debt renegotiated
during the quarter
• Average maturity extended by 1.5 years
• All-in cost reduced by more than 120 b.p.
5. 5
Performance Highlights
Zinc mining production in line with 2Q17, mainly due to better performance in
El Porvenir and Vazante
4.4% higher metal¹ zinc sales volume in the 2Q18, with smelters
operating at capacity
2Q18 revenue of US$ 637 million up 11% compared to 2Q17, driven by
higher sales volumes from our smelters and higher metal prices.
US$163 million adjusted EBITDA in 2Q18 compared to US$140 million in
2Q17 an increase of 17%.
Net Debt/Adj. EBITDA of 0.35x as of June 30, 2018, with an average debt
maturity of 6.4 years
1Metallic zinc and zinc oxide
6. 1Source: Wood Mackenzie
Market Fundamentals
Zinc resilient deficit resulted from constraints in mining production, specially in China
6
-199 kt
China
RoW
1.55 1.97 2.11 1.93
1.01 0.92
47
57 60
53
28 26
2012 2013 2014 2015 2016 2017
Zn Conc stocks (Mt)
Zn Conc stocks - days of requirement
12.5 12.9 13.2 13.7 13.6 13.512.7 13.2 13.7 13.8 14.1 14.4
2012 201620142013 2015 2017
-0.3 -0.2 -0.4 -0.1 -0.5 -0.9
Supply Demand
20172012
12.8
4.6
2013
4.9
8.2
4.7
8.2
4.9
8.1
2014
4.8
8.4
2015
4.7
7.4
2016
7.9
12.8 12.9 13.0 13.1 12.1
China RoW
Global concentrate output (Mt of Zn content)¹
-47 kt
-152 kt
+157 kt
China
RoW
+313 kt
-155 kt
Zinc concentrate stocks (Mt of Zn Content)¹
Mining production
has decreased
worldwide since
2014 specially due
to China lower
production…
1
2
…resulting in
reduction of
concentrate
stocks, as demand
remained strong.
2012 2014 20162013 2015 2017
3.3
4.0 3.7
3.2
2.7
1.8
-9%
-18%
Zn implied stocks (Mt)SHFE LME
Zinc metal stocks (Mt) ¹
Global Refined Zinc Balance (Mt)¹
3
4
The deficit in Zn
metal caused by
constraints in
mining
production…
…has accelerated
the decrease in
metal stocks.
113 103 88 85 70 46Days of stocks
More recently, base metals LME prices has been more volatile amid worries about potential trade war and impacts
of US monetary policy on world economy. However, in our view, base metals, particularly zinc, has kept its sound
market fundamentals, including very low levels of inventories.
7. 1Based on daily stocks, as reported by the London Metal Exchange
2Based on daily prices, as traded in the London Metal Exchange
3Woodmackenzie forecast for total stocks (LME+SMM+shadow) for December 31, 2018
2,596
3,112
2,690
3,268
2Q17 2Q18 1H17 1H18
LME average price2
US$/ton
LME price evolution
US$/ton
LME stocks1
kton
The good fundamentals for base metals were not enough to hold LME prices recently, since the potential trade war, in
addition to fears about Treasury rate hikes, clouds the market with concerns and directly affects the global economy.
2,783 2,948
2Q17 3Q17 4Q17 1Q18 2Q18
Market Fundamentals
Strong LME prices across base metals markets
Zinc Copper Lead
7
LME average price2
US$/ton
LME price evolution
US$/ton
LME average price2
US$/ton
LME price evolution
US$/ton
+20% +22% 254
245
2 Jan 09 29 Jun 186 Dec 12
5,662
6,872
5,749
6,917
2Q17 2Q18 1H17 1H18
+21% +20%
2,161
2,388 2,221 2,456
2Q17 2Q18 1H17 1H18
+11%
+11%
2,287
2,432
2Q17 3Q17 4Q17 1Q18 2Q18
5,817
6,646
2Q17 3Q17 4Q17 1Q18 2Q18
Total stocks³ forecast:
29 days of consumption
at Dec 18
8. Mining Production
2Q18 zinc production in line with plan
8 1Copper, lead, silver and gold contents in concentrate production, converted to a zinc equivalent grade at FY17 benchmark prices (average LME, LBMA and Gold prices)
Mining production per metal
Mining production per mine
Metal contained in concentrates (kton)
Zinc equivalent¹ (kton)
Metal 2Q17 1Q18 2Q18 1H17 1H18
Zinc 92 87 92 184 180
Lead 13 12 13 25 25
Copper 12 11 9 21 20
Silver (kOz) 2,046 1,884 1,847 3,752 3,731
Gold (kOz) 9 7 7 17 15
Zinc Equivalent¹ 144 134 135 279 269
Metal 2Q17 1Q18 2Q18 1H17 1H18
Cerro Lindo 70 57 59 137 116
Vazante 33 36 36 68 72
El Porvenir 20 24 23 36 46
Atacocha 13 12 11 24 23
Morro Agudo 7 5 7 13 12
Zinc Equivalent¹ 144 134 135 279 269
• Production of contained zinc in 2Q18 in line with 2Q17
• 2Q18 zinc equivalent production benefited from better
performance in Vazante and El Porvenir
• In Cerro Lindo, an increase in mine development was
planned to sustain a high level of production in 2H18
• Zinc equivalent production in 2Q18 reached 97% of the
volume planned for the quarter and 99% in 1H18
• Cash cost increased mainly due to lower by-products credits
and higher cost due to the revision of safety procedures
Cash cost after by-products credits
US$ per pound zinc sold
-0.07
0.47
-0.39
0.35
0.73
0.21
-0.06
0.37
0.64
0.41
0.70
0.25
EPVZCL AT MA Combined
-4%
-20% +17%
-4%
+20%
2Q18
2Q17
9. Smelting Sales
Smelters operating at capacity
9
Smelting sales per product
Smelting sales per plant
(kton)
(kton)
Metal + ZnO 2Q17 1Q18 2Q18 1H17 1H18
Cajamarquilla 72 79 82 145 161
Três Marias 51 49 51 98 100
Juiz de Fora 23 18 19 43 37
Total 146 146 152 285 299
Metal 2Q17 1Q18 2Q18 1H17 1H18
Metallic zinc 136 137 143 267 280
Zinc oxide 10 9 9 19 18
Total 146 146 152 285 299
• 2Q18 smelting sales were 4.4% higher than 2Q17, driven by
higher production
• Cajamarquilla smelting sales were 13.7% higher than 2Q17
• Smelters operating at almost full capacity
• Cash cost impacted by higher LME prices and lower TCs
Cash cost after by-product credits
US$ per pound zinc sold
1.02
1.15 1.08 1.08
1.28
1.20
1.34 1.30
CombinedTM JF CJM
+26%
+5%
+23% +21%
2Q17
2Q18
10. Mining EBITDA rose 6% in 2Q18
compared to 2Q17 mainly due to higher
metal prices and stable by-product credits
10
Revenue per segment
(US$ million)
Adj. EBITDA per segment
(US$ million)
1Includes intersegment revenues
110 116
211
277
2Q17 2Q18 1H17 1H18
35
47
80 77
2Q17 2Q18 1H17 1H18
274 301
532
629
2Q17 2Q18 1H17 1H18
443
520
889
1,078
2Q17 2Q18 1H17 1H18
+18%
Mining¹Smelting
40% 44%
Margin
Smelting EBITDA increased 32% in 2Q18
compared to 2Q17 mainly due to higher
sales volume and Zn prices. Increase of
56% when compared to 1Q18
40% 39%
9% 7%
Margin
8% 9%
+10%
+6%
+31%
+17%
+21%
-5%
Results improving for both mining and smelting
+32%
Segments
11. • Adjusted EBITDA increased as a result of higher
revenues, mostly driven by higher metal sales and
base metals prices
• Sound cash conversion4 of 26% in the 1H18
571
637
1,121
1,313
2Q17 2Q18 1H17 1H18
140 163
284
354
2Q17 2Q18 1H17 1H18
Financial Results
Robust EBITDA due to base metals prices and higher metal sales
11
Net Revenues
(US$ million)
Adjusted EBITDA
(US$ million)
+11%
+17%
24% 26%
Margin
+17%
+25%
25% 27%
Capex
1H18 Cash Flow
(US$ million)
354
91
41
73
91
38
Income taxes
paid
Interest paidAdjusted
EBITDA¹
Working
Capital²
Operational FCF
before
debt/investment
principals and
distributions
Capex
20
Others³
By Business
(1H18, %)
By Category
(US$ million)
55.0 58.5
85.7 91.5
15.9 19.2 24.8 28.9
39.1 39.3
60.9
62.6
2Q17 2Q18 1H17 1H18
Expansion Non-Expansion
6.3%
6.8%
60%
32%
8%
Mining Smelting Others
(1) Reconciliation of adj. EBITDA to Net Income available at the Earnings Release; (2) Trade accounts receivable, -US$28.5m; inventory, US$7.1m; other taxes recoverable, -US$10.1m; other assets, US$1.4m; trade payable, -US$2.2m;
confirming payable, US$4.6m; salaries and payroll charges, -US$24.5m; taxes payable, US$33.8m; other liabilities, -US$22.8m; (3) Deferred Revenues, -US$15.1m; Proceeds from sale of non-current assets, US$1.0m; effects of exchange
rates on cash and cash equivalents, -US$5.8m; (4) cash conversion = Operational FCF before debt/investment principals and distributions divided by Adjusted EBITDA
12. 2018 Guidance
12
Main assumptions
• Increase in total treated ore
• Lower grades, especially in the Cerro
Lindo mine, in line with expectations
Main assumptions
• Increase in the performance of the
roasters in all Company’s smelters
• Regular production through 2018
compared to a 2017
These estimates should be considered preliminary and subject to change. These estimates are based on a number of assumptions that management believes to be reasonable and reflect the
Company’s expectations as of February 15, 2018. Our independent registered public accounting firm has not audited, compiled, performed any procedures on or reviewed these estimates, and
accordingly does not express an opinion or any other form of assurance with respect to these estimates. Accordingly, you should not place undue reliance on these estimates, which may differ
materially from our final results.
Metal Contained (in
concentrate)
2017
actual
YTD 2018 2018 estimated
Zinc (kton) 375.4 179.5 370 - 390
Lead (kton) 52.6 25.0 55 - 60
Copper (kton) 44.2 19.6 39 - 42
Silver (koz) 7,946 3,731 7,600 - 8,000
Gold (koz) 32.5 14.5 17 - 19
Smelting sales
2017
actual
YTD 2018 2018 estimated
Zinc Metal (kton) 555.4 280.4 560 - 580
Zinc Oxide (kton) 38.5 18.1 37 - 39
Total 593.9 298.6 597 - 619
We are reiterating our 2018 guidance
13. 2018 Guidance
13
Main projects for 2018 are:
• Vazante life of mine extension (US$43 million)
• Implementation of dry stacking tailings in Vazante
(US$22 million)
• FEL 3 and potential execution of Aripuanã (US$20
million)
• Process conversion at the Cajamarquila Smelter –
Goethite to Jarosite – to increase recovery of zinc (US$20
million)
As Nexa advances with its exploration and drilling
campaigns and further develops its pipeline of projects, the
expenses estimated for 2018 are expected to meet the
guidance.
These estimates should be considered preliminary and subject to change. These estimates are based on a number of assumptions that management believes to be reasonable and reflect the
Company’s expectations as of February 15, 2018. Our independent registered public accounting firm has not audited, compiled, performed any procedures on or reviewed these estimates, and
accordingly does not express an opinion or any other form of assurance with respect to these estimates. Accordingly, you should not place undue reliance on these estimates, which may differ
materially from our final results.
Capex per segment (US$million) 2017 actual YTD 2018 2018 estimated
Mining 107.1 55.2 172
Smelter 81.0 29.2 108
Others 9.5 7.0 -
Total 197.6 91.5 280
Capex per category (US$million) 2017 actual YTD 2018 2018 estimated
Expansion/Greenfield 48.8 28.9 90
Modernization 21.4 1.7 20
Sustaining 59.4 24.3 68
HS&E/Tailing dams 62.1 31.7 92
IT/Others 5.9 4.9 10
Total 197.6 91.5 280
Exploration and Project Development
(US$million)
2017 actual YTD 2018 2018 estimated
Mineral exploration 77.7 36.6 86
Project development 15.0 10.0 30¹
Total 92.7 46.6 116
¹ US$14 million were reclassified to CAPEX and US$10 million to Corporate Projects expenses reducing the previously
disclosed guidance of US$140 million to US$116 million
14. 1,153
21 39 32 108 104
395
11 10 6
700
Cash 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
73%
14%
5%
5%
3%
Debt repayment schedule (US$ million)
Average debt maturity: 6.4 years @4.8% avg cost
Bonds
Banks
BNDES
FINEP
Others
92%
8%
USD
BRL
261.4 260.8
Mar 18 Jun 18
0.37x 0.35x
Net Debt/EBITDA
Debt by Category
Total debt: 1,425
Liquidity and Indebtedness
Extended debt profile and unleveraged position
14 1Principal only / 2Considering interest accrual and costs, according to the Company’s covenants criteria
Debt profile1 (as of June 2018) Net debt2
Following our financial discipline and cash and leverage targets, we continue to analyze opportunities to keep reducing
debt cost and extend the average maturity of our debt
(US$ million)
Mar 18 Jun 18
Mar 18 Jun 18
Positive credit revision from major rating agencies
BB+ Stable Jan 2018
Ba2 Stable Apr 2018
BBB- Stable Mar 2018
15. Highlights for mineral exploration results
15
In 1H18, Nexa spent US$36.6mm in 147,382 meters of diamond drilling in order to guarantee the long-term sustainability
and growth of the business through the increase of mineral resources.
Cerro Lindo¹
OB3-4
OB 9
OB 6SE
OB 1X
Máquina
140-08
Máquina
140-04
Máquina
140-D02
Máquina
140-02
Máquina
710-12
Máquina
140-01
OB 5C
OB 8
B
OB8A
• The drilling program in Cerro Lindo aims to
explore the extensions of mineralized zones
within the mine and in addition to explore for new
massive sulphide Zn/Cu deposits in
surrounding areas near the mine.
• 1H18: 58 drill holes totaling 30,770m of
drilling
• 25,094m inside the mine to extend mineralized
zones
• 5,675m in satellite areas
• The program for 2018 is estimated at
60,000m of drilling
• Agreement with the community of Chavin,
granting rights for the development of 20 diamond
drilling platforms in the area of Topará North in
Cerro Lindo
¹The most recent NI 43-101 technical report with respect to Cerro Lindo is the technical report titled “Cerro Lindo Polymetallic Mine, Chavín District, Chincha Province, Peru, NI 43-101 Technical Report on
Operations” with an effective date of June 30, 2017 available on SEDAR in accordance with NI 43-101. Please refer to Nexa 2Q18 Earnings Release appendix for a comprehensive disclosure of drilling results.
16. Highlights for mineral exploration results (cont’d)
16
¹The most recent NI 43-101 technical report with respect to Aripuanã is the technical report titled “Technical Report on the Preliminary Economic Assessment of Aripuanã Zinc Project, State of Mato Grosso, Brazil”
with an effective date of July 31, 2017 available on SEDAR in accordance with NI 43-101. Please refer to Nexa 2Q18 Earnings Release appendix for a comprehensive disclosure of drilling results.
Aripuanã (Ambrex extension)¹
• The mineral exploration campaign developed on
Aripuanã project focused on Babaçu target,
which represents a potential southeastern
extension of Ambrex deposit (additional to the
project that is under the scope of the feasibility
study).
• 9 drill holes totaling 4,737m of drilling
• The program for 2018 is estimated at ~11,000m
of drilling
In 1H18, Nexa spent US$36.6mm for 147,382 meters of diamond drilling in order to guarantee the long-term sustainability
and growth of the business through the increase of mineral resources.
Babaçu
Aripuanã
Project
17. Important milestones achieved
Construction license granted for waste disposal deposit
Replacement of the seawater pipeline completed vendor selection in 2Q18
Dry Stacking Disposal Project
Overall physical progress: 28% completed
Detailed engineering 90% completed and
Long lead time items manufacturing is progressing as expected
Life of Mine Extension (Deepening)
Overall physical progress: 69% completed
Pumping Station EB140 and long lead time items delivered
Conclusion of the excavation of the main reservoir (37,000 m³)
Cerro Lindo
Projects and Operations Highlights
17
Vazante
Aripuanã
95% of project FEL3 development concluded
Mining plan and design are concluded and under RPA review
Plant engineering being developed by SNC Lavalin
Magistral and
Pukaqaqa
Magistral: drilling campaign concluded in June 2018 allowed the start of samples selection
to initiate metallurgical testwork
Pukaqaqa: Granted social license to initiate drilling and PFS studies in progress
Shalipayco
Concluded bidding process to select the company to develop a scoping study (FEL1)
Environmental impact assessment is being prepared to allow Nexa to start a hydrogeological
campaign during the second half of 2018
18. Guidance reiterated with production expected to improve in the 2H18
Focus on mineral exploration and drilling campaigns in order to ensure the
long-term sustainability of the business
Aripuanã reaching milestones and on track to Board approval
Other projects on schedule
Sound financial performance, solid cash generation and commitment to deliver
value to shareholders
The share buyback authorisation being proposed reinforces our confidence in the
fundamentals and long-term outlook of Nexa
Closing Remarks
18