2Q20 Financial Results | July 31, 2020 | ||
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Disclaimer
Important information concerning this presentation
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, 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.
2
Nexa | 2Q20 Highlights
The health and safety of our people and local communities are our highest priority
COVID-19
- International benchmark protocols implemented in all of our operations and projects.
- In 2Q10, COVID-19related-measures amounted to US$4 million, including:
- COVID antibody tests and health check;
- Increased site cleaning and hygiene services, and acquisition of protective equipment;
- Social distance related measures;
- Community support; among others.
Business continuity
- Mine operations in Peru have restarted.
- Smelters operating at full capacity.
- Production and sales guidance for the year remains unchanged.
- Disciplined capital allocation.
- Strong liquidity.
- New bond: US$500 million due 2028;
- New loan agreement of R$750 million (or US$140 million) with BNDES.
3
Nexa balance sheet strategy
Liquidity - Proactive management to preserve and strengthen our balance sheet
1,213 | ||||||||||||||||||||||||||||||||||
975 | 495 | (495) | 300 | |||||||||||||||||||||||||||||||
300 | ||||||||||||||||||||||||||||||||||
300 | ||||||||||||||||||||||||||||||||||
(6) | ||||||||||||||||||||||||||||||||||
(60) | ||||||||||||||||||||||||||||||||||
19 | (28) | (33) | 45 | 913 | ||||||||||||||||||||||||||||||
675 | ||||||||||||||||||||||||||||||||||
Liquidity Mar | Dividends | Capex | Working | Interest paid | Other | Export | Revolving | New Bond | RCF and | Current | ||||||||||||||||||||||||
31, 2020 | Payment | Capital | Expenses | Credit Notes | Credit | 20281 | Bank Loan | Liquidity | ||||||||||||||||||||||||||
Facility | repayments |
- Issuance of US$500 million 6.5% 2028 Senior Unsecured Notes in June to refinance certain existing debts
- RCF of US$300 million remains committed until October 2024.
Net Debt²
Revolving Credit Facility
(US$ million)
9411,026
Mar 31, 2020 | June 30, 2020 | |
Net Debt/LTM | 3.30x | 4.97x |
Adj. EBITDA | ||
- Nexa successfully obtained waivers in respect of certain financial covenants
(1) Net of commissions, fees, and expenses of bond issuance. (2) Gross debt (US$1,916 million) minus cash and cash equivalents (US$796 | 4 |
million), minus financial investments (US$118 million), plus negative derivatives (US$869 thousand), plus Lease Liabilities (US$25 million). |
Cash Flow | 2Q20
US$ million
(32)343
405
40 | ||||||||||||||||||||||
(2) | ||||||||||||||||||||||
19 | ||||||||||||||||||||||
(19) | (28) | 10 | ||||||||||||||||||||
(41) | ||||||||||||||||||||||
Adjusted | Working | Taxes | Sustaining Interest paid | FCF before | Other Capex³ Loans/ | Other | FCF4 | |||||||||||||||
EBITDA | Capital¹ | CAPEX² | expansion | Investments | non- | |||||||||||||||||
and others | (Includes decrease | operational | ||||||||||||||||||||
in financial | ||||||||||||||||||||||
investments of | ||||||||||||||||||||||
US$65 million) | ||||||||||||||||||||||
FCF before expansion positively impacted | Positive FCF reflecting mainly new | |||||||||||||||||||||
by changes in working capital primarily due | debt assumption in 2Q20 | |||||||||||||||||||||
to increase in average supplier terms |
(1) Breakdown available at Financial Statement explanatory note "Changes in operating assets and liabilities". / (2) "Sustaining CAPEX" includes Sustaining, HS&E, Tailing Dams, (3) "Other CAPEX" includes Expansion/Greenfield, | 5 |
Modernization, IT & Others (detailed breakdown available in the Earnings Release). / (4) Adjustments to reconcile Adjusted EBITDA to cash income (loss) before income tax. |
Investments | 1H20 and 2020e guidance
2020 real and trend
Capital expenditures
- Guidance for the year remains unchanged but capital allocation has been revised.
- In 2Q20, CAPEX was US$69 million with a total of US$149 million in 1H20. Expansion projects amounted to US$94 million and responded for 63% of total investments:
- Aripuanã: US$75 million;
- Vazante mine deepening: US$8 million.
300
172 | Aripuanã | |||||||||||
149 | Others (1) | |||||||||||
75 | 25 | Sustaining | ||||||||||
HSE (2) | ||||||||||||
75 | ||||||||||||
40 | 19 | Others (3) | ||||||||||
16 | ||||||||||||
12 | ||||||||||||
12 | ||||||||||||
3 | ||||||||||||
1H20 | 2020e Guidance |
Mineral exploration and Proj. Development
- 2020 guidance also remains unchanged.
- In 2Q20, investments were US$9 million with a total of US$24 million in 1H20.
- Exploration expenses, including sustaining and mineral rights, totaled US$14 million and responded for 58% of total investments.
68 | |||||||||||
26 | Mineral Exploration | ||||||||||
14 | Sustaining and mineral rights | ||||||||||
24 | Project Development | ||||||||||
Technology | |||||||||||
9 | 17 | ||||||||||
Communities | |||||||||||
5 | |||||||||||
5 | |||||||||||
7 | 1 | 5 | |||||||||
1 | |||||||||||
1H20 | 2020e Guidance |
(1) Including US$13 million related to Vazante mine deepening brownfield project; (2) Investments in tailings dams are included in HSE expenses. (3) Modernization, IT and others.
6
2Q20 review
7
2Q20 Consolidated results
Mine production
Smelter sales
Net Revenue
000 ton
Zinc
000 ton | Metallic zinc |
(US$ million)
Copper
-32% | |||
91 | |||
77 | |||
62 | |||
8 | 7 | 5 | |
2Q19 | 1Q20 | 2Q20 |
- Zinc and copper in concentrate production decreased 32% and 44% Y-o-Y, impacted primarily by our
Peruvian mines stoppage. - Treated ore volume was down 43% with the suspension of Peruvian operations until mid-May, offsetting the strong performance of our Brazilian mines
Zinc oxide | ||||||||||
-23% | ||||||||||
156 | 145 | |||||||||
120 | ||||||||||
147 | 137 | 114 | ||||||||
9 | 8 | |||||||||
6 | ||||||||||
2Q19 | 1Q20 | 2Q20 |
- Smelting sales were 23% lower, given the reduced operating capacity in both Cajamarquilla and Juiz de Fora smelters.
-45%
613
442
337
2Q19 1Q20 2Q20
- Net revenue decreased 45%, due to lower average LME prices and lower sales volume, as demand was negatively affected by COVID-19.
8
Adj. EBITDA | 2Q20 vs. 2Q19
US$ million
-66%
118
(36) | |||||||||||||||||
17 | 40 | ||||||||||||||||
14 | 27 | 16 | |||||||||||||||
(69) | |||||||||||||||||
(47) | (1) | ||||||||||||||||
2Q19 | Volume | Price effect | FX | By-products Other variable | Min. Exp./ | Other | 2Q20 | ||||||||||
and fixed | Proj. Dev. | ||||||||||||||||
costs + G&A |
- EBITDA decrease mainly driven by:
- a negative variation of US$36 million from lower sales volumes and US$69 million price effect related to lower LME prices and changes in market prices in respect of quotation period adjustments;
- the decrease in by-products revenue due to lower volume and LME prices.
- Positive impacts: lower operating costs and expenses, lower mineral exploration & project development spending, and U.S. dollar appreciation against Brazilian real. The decrease in corporate expenses also positively affected our results.
(1) Includes: Other income and expenses. | 9 |
Mining segment
2Q20 Operational performance
Zinc equivalent | Zinc | Guidance | ||
000 ton | 000 ton | 000 ton |
PRODUCTION | -39% | |
139 | ||
85 | ||
2Q19 | 2Q20 |
-32% | |
91 | |
62 | |
2Q19 | 2Q20 |
Metal Contained | 2020e | 1H20 | |||
(in concentrate) | Guidance | ||||
Zinc Equivalent | kt | 446 | - | 498 | 199 |
Zinc | kt | 300 | - | 335 | 139 |
C opper | kt | 30 | - | 33 | 12 |
Lead | kt | 33 | - | 38 | 14 |
Silver | koz | 6,072 | - | 6,761 | 2,599 |
Comments
- Guidance disclosure updates:
- 2020 zinc production is estimated to be between 300-335kton, subject to the performance of the Peruvian mines in 2H20 as planned
- Atacocha underground mine remains suspended
- Resumption of mine development activities in Cerro Lindo and El
Porvenir
Cash cost
US$/t
2020 cash cost guidance (US$/lb) | 2020e | 1H20 |
Guidance | ||
Mining cash cost(1)(2) | 0.59 | 0.45 |
Cerro Lindo | 0.33 | 0.17 |
El Porvenir | 0.83 | 0.41 |
Atacocha | 0.59 | 0.50 |
Vazante | 0.60 | 0.53 |
Morro Agudo | 1.00 | 0.86 |
(1) C1 weighted mining cash cost net of by-products credits is measured with respect to zinc sold per mine. (2) Cash cost per ton sold does not include the impact of the cost of idleness in the Peruvian mines. | 10 |
US$ million
Mining segment
2Q20 results mainly impacted by market related factors
-93%
44 | ||||||||||||||||||||
14 | 6 | 3 | ||||||||||||||||||
41 | ||||||||||||||||||||
7 | ||||||||||||||||||||
(77) | (6) | (7) | (19) | |||||||||||||||||
2Q19 Adj. | Volume | Price effect | TC | FX | By-products Other variable | Min. Exp./ | Other (1) | 2Q20 Adj. | ||||||||||||
EBITDA | and fixed | Proj. Dev. | EBITDA | |||||||||||||||||
Market-related | costs + G&A | |||||||||||||||||||
Comments | (2) Consolidated Mining C1 Normal Cash Cost Curve (US$/t) | |
- The decrease in EBITDA year-over-year was mainly driven by lower volumes, partially offset by the decrease in operating costs
- Market related factors had a negative variation impact of US$13 million
- Mineral exploration and project development had a positive contribution of US$14 million
- Other income and expenses. (2) Wood Mackenzie 2019 Zinc - Dataset 2020 Q2.
4.000 | ||||||||||
2.000 | 55% | |||||||||
0 | ||||||||||
0% | 10% | 20% | 30% | 40% | 50% | 60% | 70% | 80% | 90% | 100% |
-2.000 | ||||||||||
-4.000 | ||||||||||
-6.000 | ||||||||||
-8.000 |
Cumulative Production (%)
11
Smelting segment
2Q20 Operational performance
Smelter Sales
000 ton
-23% | |||
PRODUCTION | 156 | ||
120 | |||
147 | 114 | Zinc oxide | |
Zinc metal | |||
2Q19 | 2Q20 | ||
Comments |
- Guidance disclosure updates:
- Smelters are estimated to operate at normal capacity during 2H20
- Cajamarquilla smelter gradually improved its operating rate in 2Q20 and is now running at normal levels
- After operating at 60% of its nominal production capacity during May and June, Juiz de Fora smelter is operating close to full production in July
- Três Marias continue to run at normal levels
Guidance Metal sales (Mid-range)
000 ton
560 | ||
265 | 533 | Zinc oxide |
251 | Zinc metal | |
1H20 | Guidance 2020e |
Cash cost
US$/t
2020 cash cost guidance (US$/lb) | 2020e | 1H20 |
Guidance | ||
Smelting cash cost(1)(2) | 0.74 | 0.76 |
Cajamarquilla | 0.77 | 0.82 |
Três Marias | 0.65 | 0.63 |
Juiz de Fora | 0.87 | 0.84 |
(1) C1 weighted smelting cash cost net of by-products credits is measured with respect to zinc sold per smelter. (2) Cash cost per ton sold does not include the impact of the cost of idleness in the smelter operations. | 12 |
US$ million
Smelting segment
2Q20 results mainly impacted by market related factors
-47%
73
(19) | 16 | 39 | ||
7 | 15 | |||
11 | ||||
(59) | (5) | |||
2Q19 Adj. | Volume | Price effect | TC | FX | By-products Other variable | Other (1) | 2Q20 Adj. |
EBITDA | and fixed | EBITDA | |||||
costs + G&A |
Market-related
Comments | (2) Consolidated Smelter Normal Cash Cost Curve (US$/t) | |
- EBITDA was US$39 million compared with US$73 million in 2Q19 mainly due to lower volumes and prices
-
These factors were partially offset by cost reduction and lower
G&A expenses
2.500 | 28% | |||||||||
2.000 | ||||||||||
1.500 | ||||||||||
1.000 | ||||||||||
500 | ||||||||||
0 | ||||||||||
0% | 10% | 20% | 30% | 40% | 50% | 60% | 70% | 80% | 90% | 100% |
Cumulative Production (%)
(1) Includes: Other income and expenses and Proj. Dev. (2) Wood Mackenzie 2019 Zinc - Dataset 2020 Q2.
13
Aripuanã and project pipeline
14
Aripuanã | Project
Competitive cash cost position with attractive returns
Project overview
- 13 years LOM¹ with excellent potential to extend mine life beyond 20 years2 based on current inferred resources and exploration drilling campaigns
- Zinc equivalent³ average production¹ 120kt/yr
- Sustainable project:
- Tailings disposal: 50% dry stacks and 50% cement paste backfill
- 100% process water recirculation, with minimal discharge to the environment
Highlights
- New rebaseline in progress and should be available during 2H20. The impact of COVID-19on the rebaseline and CAPEX continue to be assessed.
- Mobilization at the site at reduced pace due to COVID-19.
- Overall project physical progress reached 42.8% in July, 2020.
- 2Q20 CAPEX totaled US$46 million.
- For 2020, we revised our CAPEX to US$172 million.
- Mine Development reaching 3,618 meters in 2Q20 vs 2,444 meters in 1Q20.
- COVID-19protocols remains in place, i.e. antibody tests before mobilize people to Aripuanã.
Aripuanã
Morro Agudo
VazanteTrês Marias
Juiz de Fora
1Based only on current mineral reserves; ²Based on significant currently inferred mineral resources and Nexa's good track record of conversion to indicated resources; 3Consolidated mining production in kton of zinc equivalent | 15 |
calculated by converting copper, lead, silver and gold contents to a zinc equivalent grade based on consensus LT forecasts |
Main projects portfolio
Development timeline
Peru
ESTIMATED TIMELINE | Magistral | ||||||||||||||||
PROJECTS | Hilarión | ||||||||||||||||
Lima | |||||||||||||||||
Pukaqaqa | |||||||||||||||||
2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | |||||||||
Aripuanã | +120kt¹ | ||||||||||||||||
Polymetallic | |||||||||||||||||
Magistral | Stage: FEL3 | On going | ||||||||||||||||
Copper | Molybdenum | |||||||||||||||||
Pukaqaqa | Stage: Pre Feasibility | On Hold² | ||||||||||||||||
Copper | Molybdenum | |||||||||||||||||
Hilarión | Stage: Pre Feasibility | On Hold² | ||||||||||||||||
Polymetallic (Zn-Pb) | |||||||||||||||||
EXPLORATION AND | FEASIBILITY | CONSTRUCTION | |||||||||||||||
PRE FEASIBILITY | |||||||||||||||||
Brazil
Aripuanã
Sao Paulo
Nexa Greenfield Projects
Project timeline is expected to extend following COVID-19 response and potential restrictions, and our capital allocation strategy
Note: Estimated timeline as of July 2020. Hilarión is still in Exploration Stage - feasibility studies pipeline to be confirmed; ¹Annual zinc equivalent production; ²Due to COVID-19, this project is under evaluation as | 16 |
to the new date for further studies |
Market Fundamentals
2Q20 Lower LME prices across base metals due to COVID-19 but already showing signs of recovery
Zinc
LME average price¹ | LME price evolution¹ | LME stocks² | SHFE stocks² | ||||
US$/ton | US$/ton | kt | kt | ||||
-29% | -8% | ||||||
2,763 | |||||||
2,128 1,961
2Q19 1Q20 2Q20
Copper | Lead | |||||||||||||||
LME average price¹ | LME price evolution¹ | LME average price¹ | LME price evolution¹ | |||||||||||||
US$/ton | US$/ton | US$/ton | US$/ton | |||||||||||||
-12% | -5% | -11% | -9% | |||||||||||||
6,113 | 1,885 | 1,847 | ||||||||||||||
5,637 | 5,356 | 1,673 | ||||||||||||||
2Q19 | 1Q20 | 2Q20 | 2Q19 | 1Q20 | 2Q20 |
(¹) Based on daily prices, as traded in the London Metal Exchange. (²) Based on daily stocks until June 30th, as reported by the London Metal Exchange and Shanghai Futures Exchange. | 17 |
Nexa | final remarks
Support our host communities and local governments
Nexa Way program: solid foundations to improve efficiency and productivity, as well as strengthen our culture Continue to deliver on guidance with expected recovery in 2H20
Business continuity measures
Advance on the construction of Aripuanã's mine and plant at the adequate pace given market conditions Financial discipline with focus on balance sheet strength and leverage ratios improvement with market recovery
We maintain our strategy, remaining committed to building the mining of the future
supported by operational and financial discipline with a highly qualified team
18
thankyou
IR Contact:
ir@nexaresources.com
https://ir.nexaresources.com
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Nexa Resources SA published this content on 31 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 31 July 2020 13:56:04 UTC