Good morning, and welcome to Nexa Resources First Quarter 2021 Conference Call. [Operator Instructions] The presenters on this call are Mr. Tito Martins, CEO of Nexa Resources; Mr. Rodrigo Menck, CFO of Nexa Resources; and Ms. Roberta Varella, Head of Investor Relations. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Tito Martins. Please go ahead.

Thank you. Good morning, and good afternoon, everyone. Welcome to Nexa's earnings conference call. I hope you and your loved ones remain safe and healthy. Today, we'll be talking about our results for the first quarter of 2021. But before I begin our presentation, I would like to thank our entire team for their resilience and commitment to our business, our customers and our host communities and all of our stakeholders. Please, let's move now to Slide 3. As still unprecedented scenario with COVID-19 case increasing in Peru and Brazil during the quarter, our commitment to protect and preserve the well-being of our people in the host communities remain our highest priority. We have safely continued to operate, developed our Aripuanã project and progressing with our exploration program. Our financial performance recovered from the same period a year ago and we delivered the third highest EBITDA of our history. This strong result could not be achieved without the continuous commitment of our team, the desire to transform and capital allocation discipline. We ended the quarter in a strong financial position with cash above $1 billion and leverage down to 1.73x. Further details of our financials will be provided by Menck in his speech. In March, we announced the acquisition of approximately 9% of Tinka Resources. Tinka owns 100% of the Ayawilca project, one of the largest zinc projects in develop in Peru with excellent potential. We maintain our efforts to build a sustainable business model, generating value for all of our stakeholders. Now please move to Slide 4. On this slide, you can see our road map with regard to ESG. It's worth mentioning that our commitment with ESG comes even before the time line presented here. By nature, I dare to say, mining companies are since day 1 committed…

Thank you, Tito. Good morning, everyone. Please, let's move to Slide 8. Beginning with the chart on your upper left, consolidated net revenue in first quarter of 2021 was $603 million, up 36% compared to the same period a year ago, mainly driven by higher metal prices. Adjusted EBITDA stood at $180 million, strongly recovering from the $44 million in first quarter 2020. As Tito mentioned, this is the third highest figure in our trajectory, a milestone for us. This performance reflects not only the increase in metal prices, but also our cost reduction initiatives and improved the operational performance from Nexa Way program. It's were mentioned that this number was affected by the impact of approximately $6 million related to the update of the environmental provision for the Três Marias smelter. On the next slide, we will discuss in further details our segment's performance. On Slides 9 and 10, we will discuss our mining segment operational results. Zinc equivalent production reached 130,000 tonnes, up 7% year-over-year, mainly driven by Cerro Lindo and El Porvenir mines. Note that mining production in Peru was temporarily suspended by mid-March 2020 due to the mandatory measures announced by the Peruvian government to control COVID-19 spread. In first quarter 2021, zinc production was slightly higher compared to the same quarter a year ago, while copper production increased by almost 13%. As previously disclosed, Atacocha production was temporarily suspended due to community blockades. Going forward, we expect a decrease in zinc production in Vazante as Extremo Norte mine is expected to remain suspended until the end of the second quarter. Consequently, we decreased our annual zinc production guidance by 10,000 tonnes. Production guidance for copper, lead and silver are maintained. In terms of net revenue, we've reached $255 million in the first quarter of 2021,…

Thank you, Roberta. Good morning, and good afternoon, everyone. I am now on Slide 13. As demonstrated in the upper left graph, our liquidity remains strong, and we continue to report a healthy balance sheet with extended debt profile. By the end of the first quarter, our available liquidity was $1.3 billion, which includes our undrawn revolving credit facility of $300 million. As of March 31, the average maturity of our total debt was 5.3 years, with an average debt cost of 4.7%. Our leverage, measured by the net debt-to-adjusted EBITDA ratio decreased to 1.73x from 2.29x, mainly driven by the recovery of our cash generation, replacing a much lower first Q of 2020. The debt breakdown graphs are shown on the right side of the slide, both by debt category and by currency. Now moving to Slide 14. For 2021, our investment guidance remains unchanged. In the first quarter, we invested $84 million in CapEx. The Aripuanã project amounted to $40 million, 50% of total approximately. For the year, as previously disclosed, we estimate to invest $232 million to further develop Aripuanã. Sustaining investments, including HSE amounted to $31 million in the quarter. As projects advance, we expect disbursements to increase over the quarters, meeting guidance. In terms of mineral exploration and project evaluation, we invested a total of $14 million in the quarter. For 2021, we expect to continue our mineral exploration and project evaluation investments as we will maintain our efforts to replace and increase mineral reserves and resources, supporting our business growth. As we anticipated to the market, this quarter, we published our first exploration report. I encourage all of you to read it and hope the document provides further clarity on our exploration program strategy and its results. Turning now to the next slide, Slide 15. On this slide, we present Nexa's free cash flow generation. During the quarter, we consumed $80 million of our liquidity. Describing it further and starting from our $180 million adjusted EBITDA, we had a $13 million gain in working capital, which was more than offset by sustaining CapEx, interest paid and taxes. Still, Nexa has generated $105 million of cash flow before expansion projects during the annualized period. After that, we invested $52 million in nonsustaining CapEx, which includes mainly our Aripuanã development project. Also, we had $42 million from loans due in the quarter, $6 million of the acquisition of 9% equity interest in Tinka Resources, $33 million in net dividend payments and finally, other nonoperational impacts of $51 million, including FX. I will now hand the call back to Tito. Tito, please.

Thank you, Menck. We are now on Slide 17. Here, we will make some comments about the market fundamentals. During the quarter, zinc price were up by 29% compared to the same quarter a year ago and around 5% compared to the fourth quarter of 2020. This increase continued to be driven by strong economic activity in China and also by better sentiment towards commodities in general. The robust recovery in manufacturing achieved in addition to expectations of global economic growth in '21 are also supporting this performance. In terms of zinc supply, both mines in LatAm resumed their activities last year with no further production back in Q1. In China, on the other hand, some mines reduced production in Q1 due to the winter season disruptions and Chinese New Year, which caused a reduction of concentrate availability. This contribute additional pressure to an already highly competitive market. And Chinese spot TCs have increased dramatically in the quarter, affecting smelters profitability. In terms of our home markets, LatAm, zinc metal demand remained strong, exceeding pre-pandemic levels. We know that demand recovery has been sustained mostly by construction, infrastructure, energy and agri business sectors. Base metals demonstrated strong performance during the quarter. Looking ahead, we believe this trend will remain at least in the first half of the year. Now please move to the last slide. As I stated earlier, we recorded the third highest quarterly result in our history. We were able to overcome the challenges we faced and deliver a strong performance. COVID-19 remains a risky factor, not only for our business, but for the global GDP recovery. Our health protocols to mitigate the spread of the virus remain in place in our operations and projects. And we will continue to monitor and evaluate COVID-19 potential impact in our value chain. In order to navigate in this still uncertain scenario, we'll continue to maintain our capital discipline and cost control. We believe we have an attractive pipeline of projects, and we have been preparing ourselves to generate long-term value, building the mine of the future. Thank you all for your time, and let's move on to the Q&A session.

[Operator Instructions] And the first question will come from Gabriel Galvão with Crédit Suisse. Gabriel Galvão: All right. First of all, congratulations on the results. So my first question would be regarding the Nexa Way program. So you said you found additional opportunities in light of the COVID-19 outbreak. It has been some quarters already that we have been saying that, that could unlock additional $600 million -- I'm sorry, $60 million in annualized savings, right, with these additional opportunities. So maybe you could comment a little bit on why these initiatives were not identified before, and it would also be helpful if you guys could give us some examples and practical examples of these initiatives, so we can better understand their nature. And my second question would be regarding treatment charges. So could you comment on your expectations for TCs for the rest of the year?

Hello, Gabriel, thank you very much for your question. This is Rodrigo Menck. Nexa Way. Nexa Way, the way we -- we disclosed right at the beginning of the program, we anticipated up to $120 million to the end of this year, of which we have captured to this first quarter $105 million, right? The program officially ended to last September, and we didn't want the market to mix new initiatives that could arise after this -- the first number was disclosed. So then the efforts that we did, this is a continuous process. It's a dynamic process, and that we intend to incorporate in our culture here in the company. But initiatives that came up during the period from September last year to December, they were estimated to be reaching up to $60 million additional to $120 million. And that's why we are dividing -- sometimes it might get confusing, but this is why we did it so that we can have different controls over the amounts. We are really seeing which was the impact during this period ever since December. And probably in the second quarter, we have an additional figure to disclose to you. So this is what we have from numbers. Initiatives come from all sorts of activities within the company. It can be efficiency programs in terms of financial flows. It can be procedures in terms of how we spend our CapEx, how we analyze projects in terms of being one after the other, not doing everything altogether. So there are many efficiency aspects that are being pursued, that really caused the gains that you are seeing. So the $60 million that are additional initiatives were the ones that were not initially anticipated or were caused by the other initiatives that were contributing to $120 million. So this is a continuous process, and we will be able to follow throughout the year. This addresses your question. And Tito address the TCs.

Hi Gabriel, thank you for your question. Regarding TCs, as you probably know, the benchmark was set less than a month ago, and now it's $159. It's interesting to mention that we are still seeing TCs in a very low level in Asia. The average TCs in Asia right now is around $80, $90 per tonne. In our case, as we said before, we have what we call the brief contracts. So most of our TCs on an annual basis are only affected by -- our contracts are only affected by 1/3 when the new benchmark is set. Usually, our TCs with our suppliers, they stay in the range in between 5% to 10% below or above the benchmark. They are negotiating on an individual basis. We have to see what's going to happen next year because, interesting or not, this situation in Asia, mostly in China, having TCs at a very low level can actually have an impact on the smelters there. Our expectation is TCs, they drop in a very fast way. I mean coming down from $300 to $159 is huge. It's a huge difference. I don't think that we ever saw anything like this, anyways, but in our case, we benefit because we are balancing between mining and smelter. And we have to see how it's going to be reacting in the next year.

And the next question will come from Jackie Przybylowski with BMO Capital.

I just wanted to ask you about the investment that you made in Tinka. Can you tell us a little bit about your rationale for that investment? Is it something that you're planning to do -- to work more closely with Tinka going forward? Or is this really just an investment? And if so, is -- should we just think that this is sort of the best use of your cash for now? Or there's no alternative growth projects in your own company? Like what -- how should we be thinking about this?

Hi Jack, thank you for your question. Basically, what happened is the following. We see Tinka, the Ayawilca project specifically, as a very attractive one, I mean. And our interest in this investment up to now has to be a position to potentially follow-up the project. Of course, in the future -- we have our pipeline of projects, but in the future, we have the obligation to pay attention to different projects mostly in our area of influence, right? So when you look at the pipeline of projects to be developed in Peru, clear, there are not many, except by 2 or 3 that belong to us and 1 or 2 that belong to other company, there are not many. So the idea is to follow-up and see if there's an opportunity in the future with them. But so far, it's just a follow-up, I would say. And investment was not a significant one, right? So it was an opportunistic approach, I would say.

Got it. Got it. So are you thinking that, that this might be something that would be -- would make sense to acquire, but in the future, and you're just sort of using the investment as a way to monitor it. Sorry?

Right now, just a way to monitor it. I cannot say that we're going to have -- we'll do something else or not. Not today, would not be appropriate. I would -- but we are not 100% sure what we're going to do with that.

Got it. Okay. And maybe just more broadly, can you talk about what Nexa's view or what your view is of the political landscape in Peru right now? And specifically on the presidential runoff election?

This is an excellent question. Because, to be honest with you, everybody was really surprised with the first round. Listen to what the candidates ahead of the polls is saying right now. It scares everybody for sure because he has very radical positions, some -- when the matter is our business, specifically mining. But at the same time, we have to consider that democracy in Peru has been well established. The law works very well. We already know that if this candidate means you will not have the commerce on his side because the commerce has a more center approach. So as long as the situation, the formal situation prevails, we should not be worried about who is going to win. But by the way, it's too early to say that he really will win. We've seen in the past changes at the last minute in previous elections. So we have to just wait and see. If you ask anybody in Peru today, what we think about the situation they are living there, there are lots of different opinions. But everybody agrees that Castillo being ahead of the polls is a huge surprise, really huge surprise. Early, it can change.

The next question will be from Isabella Vasconcelos with Bradesco BBI.

I have 2 questions on my side. The first 1, Tito, you were talking about demand exceeding pre-pandemic levels in the home market. My question is regarding inventory throughout the chain. Do you see restocking already supporting demand already or has the process not really happened yet? And the second question on the Aripuanã project. It seems to be making good progress now. Is there any possibility of anticipating the start-up date or not really?

Hello, Isabella, thank you for your questions. Regarding demand, no, we are not seeing any imbalancing in the stocks. There were -- there was a restocking sometime last half. That's 6 months. But what we are seeing today is really demand and the management is strong not only in the home market. The management is strong everywhere. I mean if we have a drop in demand in Latin America today, I'm sure that we would easily sell anywhere in the world. Why it's happening? It's a huge impact from the incentives provided by the different governments, not only LatAm, but everywhere. And when you look at the situation in the U.S. and China, you see clearly that the incentives are working and the demand for base metals are really strong. I don't see the situation changing at least for the next 6 months. I remember the last call we had, I was saying that we were sure that demand was strong for the first half. Now we already can see what's going to happen in the third quarter. And looks that situation remain pretty much the same. You may have, for example, Brazil suddenly demanding less material, but it will be compensated by the other countries in LatAm. So -- but we are not concerned about what the short-term shows us today. In terms of Aripuanã, Aripuanã is doing well. It is, despite the difficulties we are still facing with COVID-19. You have to remember, Aripuanã is located in a very remote area. So we have to implement a lot of different protocols and measures in order to keep people safe. Just to give an example, we have more than 3,000 people right now working on our site in Aripuanã. It's a lot of people working together. In a city with 25,000 people, total population. So more than 10% of the people in Aripuanã are working for us. So our involvement with the authorities to implement measures was huge. Do we expect to anticipate? No, I would not say that. I think maybe if we were not facing the difficulties with COVID, the situation would be different, and we could try to anticipate. But given what we have today, I don't think -- we are on schedule, and we expect to be on schedule.

The next question is from Orest Wowkodaw with Scotiabank.

Tito, I was wondering if you could give us some more color on how the operations are faring given the COVID situation in both Peru and Brazil. And specifically, I was wondering, there's a comment in your release about that the Cajamarquilla smelter, I guess, some of the feed that you were anticipating in Peru has been, I think, shut down. I'm just wondering if that's COVID related or how the mines and smelters are handling the supply chains right now?

Hello Orest, thank you for your question. Let's explain how we are operating. In Brazil, we are not -- we do not -- we have protocols in our sites. We try to have on-site the number of people that are -- the minimum number of people. So administrative people, they are not working on our sites. They are working from home. And we have the operators just only. They follow specific protocols. We have implemented active testing, which means that 100% of our people have been passed from time to time, which gave us more assurance that we would not have problems with the disease internally, the contamination internally. We also start to make some specific programs with the families of our employees exactly to educate them and having them being careful about the contamination. So we had some people contaminated, mostly because they go back home and they interact with others, but we were never affected in Brazil. In the case of Peru, it's a little bit different because we have turn shifts. So people move to the mines. They spend 14 days there, then they go back home for 7 days. So we have to test everybody who comes in. And after 7 days, we test them again. At some point last year, when we came back to production after the lockdown in Peru, we -- it took us almost 1.5 months to reach 100% production because we have a lot of people being tested positive. This does not happen anymore. Despite the level of contamination we are seeing in Peru, fortunately, our protocols and the education we provide about the disease worked well and the number of contaminated people in our operations was reduced. We are also with active testing there. So things are going well in…

And just getting back to Jackie's question about Peru, does the political theme there make you rethink any of your future growth projects in that country? Like could we see you shift more of an allocation or priority to Brazil versus Peru? Or is it too premature for that?

No Orest, they are premature, they are premature. As I said before, we believe that the loss should prevail. So we are not -- yes, of course, there are concerns about very far-leftist politician. But when you look back, Peru has had presidents along the last 2 decades from left, from right, from center. And the law always was stronger than that. And as I said, the Congress has a lot of power in Peru. They impeached last year 2 Presidents, right? So and this Congress is not supporting the leftists. So we should have more stable behavior from the future President if he is elected. So it's not time actually, it's premature to decide about anything.

Okay. Okay. Just 1 more follow-up, if I could. I noticed on your slide of projects, Page 5 of your presentation, that Florida Canyon is not on there. Just wondering if that -- what's happened there, if that's just been pushed out from a time line perspective?

No, no, no, it's because -- it's because Florida Canyon, it's not yet considered as a project. It's in -- it's still in the phase of drilling. The campaigns are going well. Sometime last year, we had to interrupt it because of the COVID, but now we are back. And when it turns to the route of the FEL1, then it's become a real project. But we -- we rely on that, still looking at that.

Just adding to that, Orest. This is Rodrigo. It's not on the presentation, but it's on the earnings release on Page 27, so that you can have a reference.

Good, good.

And is the expectation here that as Aripuanã reaches completion around the end of the year, that we should anticipate one of Magistral or Bonsucesso to move forward giving -- given the feasibility stage they're in?

We are ending the feasibility study of Magistral. Given the delay we had in Aripuanã and even the COVID had some impact in the project because we were not allowed to access the area for some time. So that's why we are a little bit late with FEL3 of Magistral. But the idea is actually to spend the rest of the year trying to derisk the project. And if the project shows as a -- shows a good return, we should be approving it to be implemented, I would say, the beginning of next year, soon after we finish the deployment. But we still have -- not concerns, but we still have some things to be addressed in order to derisk the project. But if everything goes as we expected, we should start implementation next year. Next year -- sorry, yes, '22.

[Operator Instructions] The next question comes from Carlos De Alba with Morgan Stanley.

A couple of questions, if I may. First 1 is on your seeing cash cost, the mining cash cost. So they came out at $0.24. The guidance for the year is $0.33. How do you feel about the guidance? Are you being conservative because of COVID? I know that matters, maybe the reduction in zinc production kept you a little bit on the conservative side on the cost guidance. But if you could elaborate a little bit more on what you see in the coming quarters, that will be very useful. And the second question if we can get a little bit more color on how you are seeing the situation of metal purchased from third parties in Brazil to complement what the company smelters there are producing given the strong demand.

Hi Carlos, thank you for the question. This is Rodrigo. On the mining cash cost, it's not about being conservative at all. It's just that there are 3 elements there. One of which is the efficiency program that comes with the brand of Nexa Way, but it permeates all the procedures that we have. So it accounts for a share of it. We have higher byproduct prices, which impacts positively the mining cash costs. And also the FX devaluation, especially in Brazil, but also in Peru recently, Peru was more recent. It's much more about the Brazilian currency devaluation, which are highly impacted. When you look at the graph that we included in our presentation, we kind of highlight the market-related effects, but there's also a fair share of our internal processes and savings. Could you repeat the second question, please?

I can answer that, right? No matter, we are acquiring. Well, basically, what happened is the following. We were surprised by the level of demand we had from some of our main customers, our contracts, they have a range for volumes on an annual basis. And because of that, at the end of the day, we had to bring in some metal from abroad. Actually we bought it from Mexico. It's not a relevant amount, but was just to balance the stocks. Just to give an example, we started the year with stocks below our regular levels because of the demand we're having. I don't know if it explains what your question -- it answers your question.

Yes, so -- and is that -- do you think that, that will continue in the coming months?

I hope it continues. We don't know why because we make money, we make money with that. And I said that in the last call, if you were able to produce more, we would sell it. And we are not foreseeing a major change in the market at least for the next, I would say, 3, 6 months. It's good. It's really good.

And then -- so in general, the market must be quite tight in Latin America because Grupo México's smelter had a fine first quarter. Their sales of refined metal were lower than expected. So they are still just ramping up. So you probably are experiencing very good premiums in -- around the whole region, right, Peru and South America?

Yes, yes, yes. It's important to mention half of what we produce we sell in LatAm, right, and half we export to other places. So every time we have this excess demand, we actually reduce what we sell to outside LatAm.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to hand the conference back over to Tito for his final remarks. Mr. Martins, please go ahead.

Thank you. I'm not repeating myself, but I would like to tell you, we are very confident about '21. If you look back in the last 3 quarters, we managed to face the COVID difficulties and we delivered what we were planning to deliver. So second half of last year and first quarter of this year in terms of operations performance were really very good. And despite the challenge we are still facing, has to do with COVID, some issues we had in Vazante with Extremo Norte, some difficulties with the local communities at the beginning of the year, we managed to overcome them and deliver what we have planned. Of course, market is helping. Prices are good. We are not foreseeing the prices coming down to the levels we saw last year. It seems to us that we should see price ranging between the beginning of -- what we saw at the beginning of the year and what we have seen today. And as I said, demand has been the main reason for that so -- and the incentives that the different economies in the world are providing to the business. So we are confident about the year and the message here is hope to talk to you next quarter, saying the same, good quarter, good performance. Once more, thank you for you being here with us. And myself, Menck, Roberta and the Investor Relations teams are available any time you want to speak with us. Have a good day and a good weekend and stay healthy. Thank you.

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