Good morning, and welcome to the Nexa Resources First Quarter 2023 Conference Call. [Operator Instructions] This event is being recorded and is also being broadcast via webcast, and may be accessed through Nexa's Investors Relations website where the presentation is also available. [Operator Instructions] I will now like to turn the conference over to Mr. Rodrigo Cammarosano, Head of Investor Relations, for opening remarks. Please go ahead. Pardon me, Rodrigo, your line may be on mute. Pardon me, Rodrigo, your line may be on mute. Please hold for one moment as I reconnect the speaker line. Thank you. Okay. I've reconnected the line. Okay. I would now like to turn the conference to Mr. Rodrigo Cammarosano, Head of Investor Relations, for opening remarks. Please go ahead.

Good morning, everyone, and welcome to Nexa Resources First Quarter 2023 Earnings Conference Call. Thanks for joining us today. This is my first conference call with the financial community since I was appointed Head of Investor Relations and Treasurer. I want to thank Nexa's leadership team for their trust and for this opportunity, and say that I'm very excited about this new role. I would also like to thank Roberta Varella, for her contributions to Nexa's Investor Relations area over the past few years. 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 this on-screen presentation through the webcast. Before we begin, I would like to draw your attention to the Slide #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 our CEO, Ignacio Rosado; our CFO, Jose Carlos del Valle; and our Senior Vice President of Mining, Leonardo Coelho. So now I will turn the call over to Ignacio for his comments. Ignacio, please go ahead.

Thank you, Rodrigo, and thanks to everyone for joining us this morning. Please let's move now to Slide #3, where we will begin our presentation. Let me begin by saying that despite a still challenging environment, with significant volatility in commodity prices, persisting inflationary pressures and some unexpected events in Cerro Lindo, we generated solid results in the first quarter of 2023. In mid-March, we experienced unusual heavy rains in Peru, which affected our Cerro Lindo mine. Nevertheless, we were able to resume the operation at normal level capacity at the end of March, ensuring all protocols and the safety of our employees. Our net revenue for the quarter reached $667 million, 8% down year-over-year, mainly explained by lower metal prices, but partially improved by mining production and metal sales over the period. Our adjusted EBITDA was $133 million, 39% lower year-over-year, impacted by lower LME prices and byproducts contribution. When compared to the fourth quarter of 2022, our adjusted EBITDA increased by 11%. In our new mine, Aripuanã, the ramp-up continues to progress. Our core focus is on plant stabilization, increasing throughput rates and improving concentrates rates and quality. We are aiming to reach nameplate capacity in the second half of this year. In terms of exploration activities in our mines, we look with optimism to the initial results we had in the first quarter of 2023, especially in Aripuanã and Vazante, revealing results with high-grade thick intersections. I would also like to emphasize our balance sheet, which remains solid despite the investment cycle we have gone through in the past years and the temporary pressure on working capital affecting our cash flow in the first quarter. Finally, I want to highlight that we are advancing in the studies related to the integration project of the Cerro Pasco complex.…

I would like to close this presentation by reinforcing our priorities for 2023 and our short-term strategy. We are progressing with the ramp-up of Aripuanã. Currently, we are performing at a higher running rate capacity and both zinc and copper concentrate grades and quality are improving in line with our projections. Looking ahead, the Pasco complex integration project has the potential to be a robust organic strategic option for Nexa. We will keep executing our exploration program in our current operations and key projects. We continue to have very encouraging results in the first quarter of this year. I would like to point out that we are moving forward with our ESG strategy, and we intend to release our annual sustainability report in May. We will remain focused on optimizing costs, OpEx and CapEx, and once again, we remain confident on the long-term dynamics for our industry. Thank you all for attending this presentation. With that, we will be happy to take your questions.

[Operator Instructions] Our first question will come from Lawson Winder with Bank of America Merrill Lynch.

Yes. Just 2 questions for me. One, I wanted to just get a little bit more detail on the expected ramp at Aripuanã and then a little bit more detail on the issues that you experienced at the plant. So if I understood it correctly, it's really just the plant, the mining is fine. And then -- yes, actually, I'll leave it at that and then I'll follow up with my second question after you address that.

Okay. Lawson, thank you. No, Aripuanã is going as planned. We had an unplanned [indiscernible] in March because of the rainy season, it was very heavy. And we -- as we said in the presentation, we were working on the piping system and the pumping system and also on the drainage system. In April, and this is not in the call, throughput is around 70% to 75%, and quality of concentrate is very high and is ready to go to our Tres Marias [indiscernible] . So -- the second half -- the second quarter, you will see a major improvement compared to the first quarter, and this was always in the plan. And as I was saying, we are aiming to reach nameplate capacity in the second half, hopefully sooner than later. So the guidance on production, even if we are behind in this part of the year because -- I mean, it's a ramp-up, we believe that in the second half, we're going to catch up, and we will achieve a guidance. The other part that is important is that we want to make sure that on a monthly basis, we stop losing cash flow. At the ramp-up, always the sales that you have are below the CapEx and the OpEx of month. So part of the problem that we face for this cash flow of all the mining business was because Aripuanã, we invested $40 million in Aripuanã in the first quarter. And the second is going to be much less. And hopefully, the second part is going to be positive. And all the benefits of Aripuanã will come in, in 2024.

Okay. Second question I wanted to ask was just on the exploration results you put out earlier in the week. There was [indiscernible] was spectacular, it was very [indiscernible]. So my questions would be, what is the distance of that strike from the existing inferred resource? What is the distance of that from the existing underground infrastructure. So how much development would it take to get there? And could you be accessing that in 2024, for example? And then finally, is it on land, subject to the silver stream?

Yes. No. No, this is a very good question. We -- these drill calls that we are doing at surface in Pucasalla are 3 kilometers away of the main infrastructure. So it is not connected, okay? The Cerro Lindo mine today has 8 years of life of mine in the main infrastructure. And as you can see, we have [indiscernible] that year-over-year. So the Pucasalla and all the surrounding areas that we are finding that we are saying that it's open and it's helping us, this area is to develop the new Cerro Lindo, which is coming later on. So I would say, during this year and next year, we will delineate what we have in that area. And because of that, we will plan to connect these 3 kilometers in the coming years. So this is more the second wave growth of Cerro Lindo.

Okay. Clear on Pucasalla, I was actually asking about OB-8.

Yes, that's -- I mean, the OB-8, we are -- this is a part of the main infrastructure. And I was saying, we are replacing that. The mineral is opened, all the mineralized zones and the bodies are open in the in the -- I mean, in the depth of the mine. So this is good opportunities to still replace what we consume over the years. Regarding the silver stream, if I understood correctly, the silver stream is only in the current infrastructure in the OB and all these infrastructures are in that [indiscernible], the idea of Pucasalla is not involved in that silver stream. And to remind that the silver stream, the percentage that we give up is going down in the coming years.

Our next question will come from [ Pedro Nunez ] with Banco Financial.

So wanted to ask a question on your smelting EBITDA and on the $26 million positive impact of mark-to-market. Could you please give some detail as to what was the reason for the positive impact? Is this based on observable market prices that are higher than you expected? So I wanted to get more detail on that.

Yes. The -- well, the central EBITDA is very stable, yes? As a reminder, we -- the Smelting business is very straightforward. We have 4 sources of revenue. And the first one is the 15% of zinc, that [indiscernible] from the [indiscernible] value wise, and that's linked to prices. The second one is the pieces that we get. And that this is the year higher than previous years, yes? The benchmark is around $280 per ton. The third one is the premiums that also are higher this year because of the shortage of the smelters in Europe, given the energy prices, some of them are rolling back, but some of them are not. So the premiums are -- seen high today. And the fourth is our byproducts that, in our case, is mainly in sulfuric acid in Cajamarquilla. So because of this, we got very positive results in the smelting, yes? And you were talking about $26 million, Carlos ? José Carlos del Valle Castro: Yes. There's additional impact related to higher prices, which have 2 effects really. One related to the cost of the inventory because those concentrates were bought at lower prices. And also due to the higher prices due to mark-to-market every -- at the end of every month. So that also has a benefit on the result of the company. The mark-to-market is based on the latest prices on the -- at the end of each month. And that also contributed to better results that are shown in the EBITDA.

I would now like to turn it over to Rodrigo Cammarosano for questions from the webcast.

Thank you, operator. We have a question from Matias Moreira from Bradesco BBI. Actually, there are 2 questions. The first one, if you could provide a bit more color on zinc and copper demand fundamentals for 2023? And then the second question would be about Aripuanã. What is the current capacity that -- I mean, the running rate capacity of Aripuanã currently? José Carlos del Valle Castro: I'll start with the second question, which is very straightforward. Current capacity at Aripuanã is between 60% and 70%. And we're looking optimistically at the evolution of the stability of the plant. In regards to the first question, as I mentioned during the presentation, we believe that there's very strong fundamentals, both for copper and zinc. Definitely, copper more visibility and it's more talked out. But zinc is also a very important metal, obviously, in relation to infrastructure, just as copper, but also in the energy transition, as it is used for energy storage for solar power, for wind power. So it's more under-the-radar metal that is also very important in the energy transition, together with copper. On the demand side, therefore, there are very strong fundamental. And on the supply side, as you know, copper grades continue to decline in general. It takes longer to bring up a new mining operation, whether it's copper or zinc due to environmental standards, social consultation that has to be carried out ahead of time. So it takes longer. It's more costly because prices -- or the costs have gone up as well. So you require higher prices to have the right incentives to invest in new projects. So taking all those into consideration, we continue to believe that these are very strong fundamentals. Obviously, there can be temporary volatility. But overall, the medium to long term, we are very comfortable.

Yes. Just to add to what Jose Carlos was saying, from a practical point of view, you know that we sell 600,000 tons of zinc -- of metal in the market, 45% that goes into the Brazilian and Latin American markets. And the rest is going to Europe, Asia and the U.S. The -- what we see in that specific front is that demand is weaker, but it's not that weaker. It's still strong. So my comment is around that in terms of fundamentals, the demand and supply, we are -- the fundamentals are very strong -- are still strong. The problem is that all this noise that the economy because around the China, the Ukraine and Russia crisis and the recessions in Europe and in the States and what's going to happen in the States with the increasing rates of power, et cetera. So the fundamental value short term is strong. And we see this on a monthly basis. So hopefully, during the coming months, that is going to reflect on prices. Today, you can see that the zinc prices are low. And we are waiting to see the evolution -- the positive evolution of that in the coming months.

Okay. Thank you for the questions. Now we will have a question from [ Orlando Barigga ] from CrediCorp Capital. Can you please provide an update regarding the new mining tax in Mato Grosso state?

Yes. I guess this is a new tax in Mato Grosso. It doesn't have a lot of exposure in terms of mining. And the -- this tax that we have been -- that has been provided in the last 2 months is new, new to us. And I can say that is -- the rate is much higher than the average in the industry in Brazil. So we are trying to stick to the government of Mato Grosso to make sure that we are -- we face market practices there. Having said that, in the short term, there's nothing we can do. We have to pay the tax. It's around -- our calculations are around $3 million or $4 million per year. And we expect that to evolve to the market practices in the coming months or years, but this is work in progress.

Okay. Now we have a question also from the webcast from [ Jose Maria Suva ] from BTG Pactual. Should we expect a reversal of the working capital negative effect in the coming quarters? And what would drive that working capital reversal? José Carlos del Valle Castro: Yes. Here, this negative working capital variation in the first quarter is something that we planned. It has to do with the seasonality. Typically, there are a lot of expenses and cash disbursements towards the end of the year -- sorry, there are a lot of accounts payable at the end of the year, which are paid in the first quarter. So that makes the accounts payable and confirming payables to go down, representing a negative impact on working capital. Additionally, there has been an increase in accounts receivable related to a higher sales and higher LME prices, which also have a negative impact on the working capital variation. This is seasonal, and it's in line with what we planned for the first quarter. So this will gradually reverse throughout the year.

Okay. Now we have another question. It's a follow-up question from Matias Moreira from Bradesco BBI. In terms of capital allocation, is the company looking for any zinc opportunities through M&A or the focus remain on ramping up Aripuanã?

I guess, the priority in the short term is ramping up Aripuanã. This is a reality. It's only going to the process of the ramp-up. And Aripuanã is going to be a reality [indiscernible]. I would like to mention also in Aripuanã that we are drilling heavily because we want to make sure that we have a long life mine for Aripuanã. That is a new mine, so we create more opportunities to put it more profitable in the coming year. So today, we have 11 years, today we have 14. And hopefully, towards the end of this year, it's going to be much high. So this is a priority for the short term. The second one is, as I was mentioning, Cerro Pasco. And Cerro Pasco really presents an opportunity for us because if we connect the 2 mines underground, we will be able to recover some inventory of resources, especially in Atacocha that are going to give us a long life of mine. Why do we not recover these resources? Because if you do it through the restructure of Atacocha, it won't pay. So by levering the infrastructure of El Porvenir, we will be able to do that and to create a combined asset that is going to be robust and for the long term. So these are the priority for short term. From an M&A point of view and capital allocation, we are looking for opportunities. We have some early-stage projects that we are working right now. And we are active in the market for looking for zinc and copper opportunities. So we explained that before, and this is still the case. The market is not easy to win. But we are optimistic that probably in the next 12 to 14 months, we will be able to find something that is similar to the mines that we have. We want sizes such as Cerro Lindo, Vazante, Aripuanã. So we are active on that front as well.

Okay. We have one question from the phone. [indiscernible].

Yes. Ignacio, I just had a question, maybe it's a little bit of extension to working capital question that was asked before. How do you see the progression of the free cash flow? Because in most of the last several quarters, it has been negative? And I understand that Aripuanã obviously had an impact on this. But it would be interesting to see if now that Aripuanã is ramping up, despite potentially lower commodity prices and a stronger BRL, if you expect positive free cash flow to show up in the coming months or in the coming months or quarters?

Yes. No, that is very important And thank you for the question and [indiscernible] important and you're right. I would like to start first by saying that if you see a cash flow of the mining in the Smelting segment. The Smelting is very stable, as I was saying before, because of these sources of revenue. But in terms of mining, it was low. It was low because -- 2 factors. One is Cerro Lindo, [indiscernible] of the Cerro Lindo has an impact on the cash flow and Cerro Lindo is big mine and very profitable. And the second one Aripuanã. Aripuanã and Cerro Lindo, combined, were a sort of cash flow more or less of $45 million to $48 million in the quarter. The reason behind Aripuanã is that when we are ramping up, the only production that we had in the quarter was 2,500 tons. And this is changing positively in the second quarter and we will start breakeven in the next quarter. So we -- depending on prices, yes? But if we use an average price of last year, the Mining segment, we will be able to make cash towards the end of the year, including Aripuanã and including the fact that Aripuanã has been ramping up. The question around why are we not having cash flow, and this is a reflect of the previous years, the answer is Aripuanã. Because even if the CapEx of Aripuanã had been $625 million, which we informed last year, Aripuanã has working capital, has free operating expenses, has a lot of additional expenses that create a more -- a bigger amount that is linked to this line. So to give you an idea, last year, we said that it was $290 million allocated to Aripuanã, part in CapEx, part in operating expenses, et cetera. So once we is up and running, and we have the rest of the mines in positive cash flow, we don't see why the cash flow profile of the company is going to be much better and substantially better. That's mainly the view that I can give you now.

We have another question from the webcast. This question comes from Omar [indiscernible] from [indiscernible]. What is the expected CapEx for the Porvenir and Atacocha integration? And the second question would be, when do you expect to deploy this investment?

Yes. I guess, it's in early stage today, as we were saying, we have 4 projects that are advancing in [indiscernible] analysis. The number that we have -- I can give you a range between $160 million to $200 million. And this is going to be deployed between '24 and '27. So part of the idea that we have is that we deploy this -- these are very specific investments. So we deploy this while running the mine. So the idea is that with our cash flow of Porvenir and Atacocha, we finance this. And we are working towards that result. And as I was saying before, I would say towards the end of third quarter, beginning of fourth quarter, all this study will be ready. We will have a technical report on this as well, and we will submit this proposal to the Board for the approval, and we will be more specific in investments and in timetables once this is approved. Okay. So we don't have any other questions. Thank you very much, as always, to attend the call. And as you know, we have -- I would like to say that we would like to thank you, Roberta for these 5 years working with us in Investor Relations. She's a fantastic professional, and she -- we appreciate very much the work that she has done. Rodrigo Cammarosano, our new Investor Relations Manager, is available for you to take -- to make calls to team after this. And we look forward to speaking to you in the next quarter. Hopefully, a stabilized and follow demand and supply. And hopefully, we have better signals from the macroeconomic environment in the world, so we can benefit from the cash flow that we can generate a higher price. Okay. Thank you very much, and have a good weekend.

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