Good morning everyone and welcome to Nexa Resources Fourth Quarter and Full-year 2022 Conference Call. All participants will be in listen-only mode. [Operator Instructions] This event is being recorded and 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. [Operator Instructions] Remember that the participants of the webcast will be able to register via website questions, simply type your question in the box and click sent and that will be answered soon. I would now like to turn the conference over to Ms. Roberta Varella, Head of Investor Relations, for opening remarks. Please go ahead.

Good day and good afternoon, everyone, and welcome to Nexa Resources fourth quarter and full-year 2022 earnings conference call. Thanks for joining us today. During the call, we will be discussing the company’s performance as per the earnings release that we 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 2, as we will be making forward-looking statements about our business, and we just ask that you refer to the disclaimer and the conditions surrounding those statements. It is now my pleasure to introduce our speakers. Joining us today is Ignacio Rosado, our CEO; Jose Carlos del Valle, our CFO; Leonardo Coelho, our Senior Vice President of Mining. So now I will turn the call over to Ignacio for his comments. Ignacio, please go ahead.

Thank you, Roberta, and thanks to everyone for joining us this morning. Please let’s move now to a Slide number 3, where we will begin our presentation. Let me begin by saying that despite a very challenging environment with significant volatility in commodity prices and ongoing inflationary cost pressures, we are pleased with our fourth quarter and full-year operational performance. I’m closing my first year as CEO of Nexa and I’m very proud of the important work we have done throughout 2022. I would like to reflect on some of the key accomplishments of the year. We deployed a set of initiatives and new ways of working, better streamline our corporate structure and supported our strategic priorities. We achieved our operational guidance in all metrics. Mining production was close to the upper range, while metal sales were at the high-end, exceeding the guidance range. Mining cash cost was in-line with guidance and smelting cash cost was slightly below guidance. Aripuanã ramp up has continued to progress and the fourth quarter marked Aripuanã’s first revenue. We are also pleased to inform that, we process zinc in concentrate from Aripuanã at our - smelter in Brazil. The average capacity of the plant at the beginning of February is above 60% and our exploratory drilling activities in this mine also indicated a potential increase in mineral reserves and resources. Another important milestone here is the adjusted EBITDA achieved by our operations, which was $120 million in the fourth quarter and a record high of [$6760] (Ph) million for the year. Cash flow generated from operations in 2022 before expansion was $285 million. And I would also like to emphasize our strong balance sheet with a solid cash position, almost $820 million and a net debt-to-EBITDA ratio of 1.5 times All these achievements reaffirm…

Thank you, Ignacio. Good morning and good afternoon to everyone. I will continue on Slide 9. I’m pleased to report solid financial results for the full-year 2022. As you can see, beginning with a chart on your upper left, total consolidated net revenue for the fourth quarter increased by 15% year-over-year, due mainly to higher metal sales, compared to third quarter of 2022, net revenues increased by 11%, mainly driven by the mining sector. Looking at the full-year in 2022 consolidated net revenues reach $3 billion versus $2.6 billion in the same period last year, an increase of 16% primarily due to higher prices. In terms of adjusted EBITDA, consolidated adjusted EBIT in the fourth quarter of 2022 was 120 million, compared to 153 million in the fourth quarter of 2021 and 121 million in the third quarter of 2022. For the full-year, consolidated adjusted EBITDA increased by 2% to $760 million, the highest annual adjusted EBITA ever achieved by Nexa. In relation to these figures, it is important to mention that in December 2022 Nexa revise its adjusted EBITDA definition aiming to provide a better understanding of its operational and financial performance. Prior period comparatives have also been adjusted based on the updated definition. We now move to Slide 10, where I will explain our results in further detail. In the mining segment, net revenues for the fourth quarter of 2022 totaled 350 million down 3% versus the same period of last year. This is explained mainly by higher TCs and lower LME base metal prices. These negative effects were partially offset by higher copper, lead and silver volumes. For 2022 as a whole, net revenue for the mining segment totaled 1.25 billion compared to 1.16 billion a year-ago, mainly due to higher sync LME prices and the increase…

Thank you, Jose Carlos. I would like to close this presentation by briefly reinforcing our priorities. This year, we have been able to consistently perform and deliver strong results with operational flexibility and a rigorous discipline in costs and investments. Nonetheless, we are aware that uncertainty of today’s economic landscape is likely to extend into the entire of 2023 affecting the demand for our products as well as putting pressure on our costs. In Nexa, we will remain focused on optimizing costs OpEx and CapEx to properly navigate in the current environment. With respect to Peru, despite the current political instability, we believe we have strong relationships with our host communities, which will continue to support our operational objectives. We also go into 2023 with a strong balance sheet. We will keep delivering based on our purpose, executing on our ESG study, and advancing the many initiatives we have underway throughout 2023. Finally, I would like to emphasize that we remain confident that our long-term dynamics of our industry are promising as the fundamental value for zinc and other base metals is robust. Thank you all for attending the presentation. With that we will be happy to take your questions.

[Operator Instructions]

So we have one question here from the web [indiscernible] When is the commercial production of Aripuanã expected to begin?

Okay. Thank you, Roberto. This is Ignacio Rosado. As we said in the presentation, Aripuanã reached a 53% capacity in December, 60% capacity in January and more than 60% in February and we start transporting commercial concentrate from Aripuanã in January. So officially, Aripuanã is in commercial production in January. We are expecting as we said in the call that, in the second half of this year, we will be at full capacity and we can comment more during the coming months.

So the next question from the web is from [Hernan Kisluki] (Ph) from MetLife. The cost guidance for 2023 includes a 2% increase in ROM but 84% increase in cash costs. Is the difference that contributed to lower byproduct prices or are there other factors?

Thank you Roberto. In relation to this question, I would first say that, obviously our focus is to control costs in all the aspects that are under our control and that is reflected in the 2% increase in the mining cost of ROM that is what we can control. In terms of the mining cash cost, it is mainly related to our assumptions related to byproduct contributions, the trades and slightly lower production in zinc, noting to in Aripuanã from the existing mines. So the focus continues to be on controlling our costs, the ones that we can control. The other ones are based on assumptions.

A continuum from the web. What is the expected contribution to EBITDA for Aripuanã in 2023 and 2024?

Yes. So again, Aripuanã ramp up is going really well. However, as you may know in the ramp up period, things move forward and it is difficult for us to predict what is going to be the EBITDA for the rest of this year and 2024. As I said, Aripuanã will be at full capacity in the second half of this year. So in the coming months, we can give you more guidance on the progress of Aripuanã. But today, I would say it is early to project an EBITDA for this year and the following one.

And everyone, we do have a question from the audio side from Jens Spiess from Morgan Stanley. Please go ahead with your question.

Hello. Thanks for taking my question. I guess, along those lines, I just wanted to ask, why didn’t you include Aripuanã in your cash cost guidance and run of mine and cost guidance for 2023, considering that you will have considerable volumes coming from that mine? And secondly, looking at your cash flow statement, you had around $18 million off accruals and impairment at that. Could you maybe elaborate on what those are related to? And how much are accruals and how much are impairments?

So Aripuanã is not included in the cash flows guidance, because as I was saying, during the ramp up period we are adjusting our concentrate or plant and this is a process, as I was saying, we are at 60% way, in the coming months is going to go up, so it is very difficult to predict what is going to be the cash cost of Aripuanã, because it is in the ramp up. In the coming months, when we stabilize the plants, and we reduce all the costs that we are improving right now, because of the ramp up, we can give you more flavor on Aripuanã. And that is why we couldn’t include that in the guidance. Regarding the second question. I’m going to turn it to Jose Carlos to answer that question.

Yes. I didn’t hear you very well. Could you please repeat? I know you are referring to the cash flow, right?

Exactly. The cash flow from operations where you reported a cash out back into accruals and impairments. I think, it was $82 million. Just want to understand what that is related to and how much is actually accrual curl and how much is impairment?

From what I can remember that in terms of impairments, there are a number of things, mainly two factors. There is an impairment reversal related to Cerro Pasco based on the new scenario that we use to evaluate the assets. And this has to do with something that we have mentioned before related to the future of Cerro Pasco one the potential integration of El Porvenir and Atacocha. And in terms of impairments, we did a write down off a Shalipayco and Puka at the end of this year, which had a net effect combined with the impairment reversal, related to Cerro Pasco. I’m not sure if that answers your question.

Yes, I mean, you have two lines. One says impairment loss of long lived assets is 32.5 million. I guess that is what you are saying.

Yes. That is really tied to that type improvement.

And then there is a second line that says changes in accruals and other asset impairment that is 84 million. So just want to understand. It is different.

Yes. Cerro Pasco is an impairment reversal was about 82 million if I remember correctly.

Okay. Alright, thank you.

Thank you.

[Operator Instructions] We do have an additional question from [Alexandra Andrade] (Ph) from JPMorgan.

Thank you so much for taking my question. Just a quick one for me. Would you be interested at all in looking at M&A possibilities improved to increase your sync production there? There is obviously been headlines over the new asset that will be for sale. So just curious to see what you think there?

Thank you Alexandra. Actually we are a very active looking for opportunities in zinc and copper in older jurisdictions in many countries. Peru is going through a difficult situation today. As you know, we have a very good portfolio of gold market standard, for example. So we assess the projects and the operating mines there. But in Peru today, as you know, we have to be cautious about the country. And given that our concentration, we have spent a lot of CapEx in Aripuanã, and our concentration today is to make sure that that Aripuanã ramp up a continues to progress very well. We are concentrating our efforts today in making sure that this happens, and also in making sure that we can increase the production especially in our pastoral complex. So today, even if we are active looking for opportunities today, we are cautious about things.

Great, thank you

Continue the questions from the web. We have here one from [Victor Vidal] (Ph). Hi, Ignacio. Thanks for the opportunity and congratulations for the results. I have two questions. The first one with regard to Aripuanã volumes. The guidance for 2022 were not achieved and compared to the technical report, I have the impression that metal volumes in the new guidance for 2023, 2025 are below the potential and also below the last guidance. Are you being more conservative or there was something significant change in the mine exploration plan? If you are being more conservative, what is the main motive? If there are changes in the mind exploration plan, these are related to a slower ramp up with less or being treated or related to lower grades?

Yes, no, I would say that you know that during that period of ramp up, we are always facing with some problems. So far, we don’t have any fatal flaws. And as I was saying, Aripuanã is progressing towards being in full production towards the end of - I mean, during the second half of this year. However, we have to be conservative in our projections for this year. We are being conservative, but again, it is advancing in a solid way. As we informed in our earnings release, Aripuanã is increased in its life of mine. The [indiscernible] body, they show that we can increase reserves of more or less 35%. So with this and the potential that we see in [indiscernible] in deposits, we believe that in 2024, we can potentially increase the capacity or the production of Aripuanã. However, this is early days and we rather comply with a what we see today. And that is why we are trying to be conservative. But again Aripuana is going through a period that is very solid in advancing towards a full product.

If I may also ask about CapEx with regard to Aripuanã, I would like to understand better is sustaining CapEx needs. I noticed you expected increase in sustaining CapEx in 2022 to 2023 related to this mine. Could you provide more details on this matter and your view on this line going forward?

Yes. We published a number of 54 million in Aripuanã. A part of it is sustaining. Today is almost 40 million and $14 million was related some issues around the tailings, okay. However, it is easily again to say what is going to be the sustaining CapEx for Aripuanã because today, given that we are in the ramp up period, we have a lot of contractors, we are trying to make sure that, the plant and the mine is ready for full production. So we have some additional cost and additional CapEx that we are incurring to make sure that Aripuanã is in full production during the second half of the year. Having said that, this 54 million is a number that is going to be optimized in 2024. And I believe that, during the second half of the year, we can give you more flavor around what is going to be the sustaining CapEx on a yearly basis going forward.

Next question comes from [Isabella Vasconcelos] (Ph) from Bradesco. Thank you for all the detail. Three questions. Could you remind us please the TC level expected for 2023? How has the ramp up of Aripuanã been versus initial expectations? Have there been larger challenges, positive surprises and regarding capital allocation, is expanding copper production is still a strategic focus?

I will start with the last one. The copper production is still strategically important for us. We said that, we want to diversify more from zinc. We think it is growing and it is going in a solid way going forward. But we believe that, a mix of copper production in our total production is very important. And for that, we are looking for many, many opportunities in different countries. Regarding the TCs, we normally don’t publish TCs. What we can say is that, at the end of this year and the beginning of this year that TCs were going up because of this bottlenecking production in Europe, because of the energy crises in Europe. So most smelters [indiscernible] were not producing. Today energy prices are going down, and today China is sort of opening right now to the world. So the TC levels, we all know what will happen with them. So I would say that, it was - they were a little bit higher towards the end of the year and this year, it might go down. We don’t know at which level during the rest of 2023. Regarding the third question, I don’t know. Could you repeat.

It was about the capital allocation. Extra spending - sorry, the ramp up of Aripuanã, because you start with the third one there.

Yes. It is very close to what we expected. I guess, some factor that is important to mention in measuring Aripuanã is the rainy season, January and February and part of March in Aripuanã the rainy season is very strong. So sometimes it is difficult for us to project the progress curve that is a similar to what we have or achieved. We had in our plans to reach 70% in February, we are close to that, we are more than 60%. And as I was saying, we don’t see any further flow going forward. So we are very confident that during the second half of this year, we will be at full capacity.

Next question comes from [indiscernible] from Scotiabank. Can you please update us on the situation of Peruvian operations and if you are seeing any impact of road blockades and protests?

Yes. Peru is going through a very difficult situation in the last two or three months after this political situation has created a lot of noise and a lot of protests in the country. What I can say is that for our operations and with the relationships that we have with entire communities, we don’t see any problems in production interruption in the coming months. Having said that, a blockages in the main highways in the country could affect production of some of the important miners in Peru. In our case, this hasn’t been the case, only I would say, it could be the case. But given the context of where the government is managing all these conflicts in a given the context of what has happened in the country. If there are some blockages, I would say that they shouldn’t be material in the projection of our production for the 2023. So we don’t expect any material changes in that. As I was saying, we are very close to our communities and we are trying to make sure that that is the case in the rest of 2023.

And our next question is a follow-up question from Jens Spiess from Morgan Stanley. Please go ahead with your follow-up.

Just on Aripuanã, considering that you already reached commercial production? Should we still expect ramp up and non operating expenses in the first quarter or will that drop to zero and be fully reflected in cost, because you already will have sales there. And secondly, do you foresee any impact on your tax rate due to the provisional measure on transfer pricing in Brazil?

Yes. Jose Carlos here. On the first part of your question is going forward, obviously, we will monitor how the ramp up continues to grow. We will continue to monitor the cost of the concentrates as we have done in the past and we will be adjusting to the net realizable value if needed. But we expect that the cost the unit costs will continue to go down as capacity utilization increases over time, so we will keep track of that. In terms of mining tax, we have no additional news. There is an impact for our operations in 2023. But that is based on the current information is not so material, but we don’t have any information on anything additional than that.

Okay, thank you.

Thank you.

We have another question from the web from [indiscernible]. Good morning. Has your Cerro Lindo operation has been affected by ongoing pockets in some locations in Peru? Can you please explain how logistics work around the area? How metal is transported and how consumables enter and exit the area?

Alright. Jose Carlos here again. No luckily we have not been affected directly or Cerro Lindo location has not been impacted. There have been some locates in the highway south of where Cerro Lindo is located. Transportation takes place basically by trucks that you feel go and come back from the north. So no impact whatsoever to Cerro Lindo right now. And we continue to that - we expect that to continue with a good relationship with the communities around the operation as well.

Another question from the web from [indiscernible]. What is my life do you feel comfortable with in Cerro Lindo?

The life of minus Cerro Lindo today, as you can see in the presentation is seven years. We have been replacing a year-over-year Cerro Lindo in terms of reserves, and as I was saying, we are exploring a Puka Saya Norte in Aripuanã in Cerro Lindo, sorry. And we are having good results. So, so far with this life of mine and the let’s say the findings that we are having Puka Saya Norte, we are a comfortable with what we have. However, the plan for all of our mines is that put some priorities in more infill drilling in most mines, so we can extend the life of the mines in all of them. And this is something that is reflected in the CapEx that we are investing on almost $11 million related to this.

And ladies and gentlemen, with that we will be closing today’s question-and-answer session. I would like to turn the floor back over to Ignacio for final remarks. Please go ahead.

Thank you. Thank you everyone for attending. We look forward to release our quarterly results in April. We are very confident that all of our mines and smelters are running in the right direction and we hopefully achieved the guidance to 2023. Thank you again for participating and if you need to contact us later on with some questions you can do so by reaching Ignacio Rosado. Thank you again and have a good day.

Ladies and gentlemen, that will conclude today’s conference call. We thank you for attending today’s presentation. You may now disconnect your lines.